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:
[ ]
Preliminary
Proxy Statement
[ ]
Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X]
Definitive Proxy Statement
[ ]
Definitive
Additional Materials
[ ]
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):
[X]
No fee required.
[ ]
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1)
Title of each class of securities to which transaction
applies:
___________________________________________________________
(2)
Aggregate number of securities to which transaction
applies:
___________________________________________________________
(3)
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):
___________________________________________________________
(4)
Proposed maximum aggregate value of transaction:
___________________________________________________________
(5)
Total fee paid:
___________________________________________________________
[ ]
Fee paid previously with preliminary materials.
[ ]
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.
(1)
Amount Previously Paid:
___________________________________________________________
(2)
Form, Schedule or Registration Statement No.:
___________________________________________________________
(3)
Filing Party:
___________________________________________________________
(4)
Date Filed:
___________________________________________________________
ChromaDex Corporation
10005 Muirlands Blvd, Suite G
Irvine, CA 92618
NOTICE OF 2018 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 22, 2018
April 27, 2018
To the stockholders of ChromaDex Corporation:
You are cordially invited to attend the 2018 Annual Meeting of
Stockholders (the “Annual Meeting”) of ChromaDex
Corporation, a Delaware corporation (the “Company”),
which will be held on June 22, 2018, at 2:00 p.m. local time, at
the Company’s office located at 10900 Wilshire Blvd, Suite
650, Los Angeles, CA 90024, for the following purposes, as more
fully described in the accompanying proxy statement (the
“Proxy Statement”):
(1)
To elect the eight nominees for director named herein;
(2)
To approve an amendment to the 2017 Equity Incentive Plan to, among
other things, increase the number of authorized shares for issuance
under such plan by 6 million shares;
(3)
To ratify the appointment of Marcum LLP as the Company's
independent registered public accounting firm for the year ending
December 31, 2018;
(4)
To approve, on an advisory basis, the compensation of the Company's
named executive officers, as disclosed in this Proxy Statement;
and
(5)
To transact other business that may properly come before the
meeting and any postponement(s) or adjournment(s)
thereof.
Pursuant to the bylaws of the Company, the Board of Directors has
fixed the close of business on April 23, 2018 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 2, 2018
to our beneficial owners and stockholders of record who owned our
Common Stock at the close of business on April 23, 2018. 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
2018 ANNUAL MEETING OF STOCKHOLDERS
JUNE 22, 2018
The enclosed proxy is solicited by the Board of Directors
(“Board of Directors” or “Board”) of
ChromaDex Corporation (the “Company”), in connection
with the 2018 Annual Meeting of Stockholders (the “Annual
Meeting”) of the Company, to be held on June 22, 2018, at
2:00 p.m. local time, at the Company’s office located at
10900 Wilshire Blvd, Suite 650, Los Angeles, CA 90024.
At the Annual Meeting, you will be asked to consider and vote upon
the following matters:
(1)
To elect the eight nominees for director named herein;
(2)
To approve an amendment to the 2017 Equity Incentive Plan to, among
other things, increase the number of authorized shares for issuance
under such plan by 6 million shares;
(3)
To ratify the appointment of Marcum LLP as the Company's
independent registered public accounting firm for the year ending
December 31, 2018;
(4)
To approve, on an advisory basis, the
compensation of the Company's named executive officers,
as disclosed in this Proxy
Statement; and
(5)
To transact other business that may properly come before the
meeting and any postponement(s) or adjournment(s)
thereof.
The Board of Directors has fixed the close of business on April 23,
2018 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 2, 2018
to our beneficial owners and stockholders of record who owned our
Common Stock at the close of business on April 23, 2018. 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 22, 2018: 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 2, 2018
to all stockholders of record
entitled to vote at the annual meeting.
Will I receive any other proxy materials by mail?
W
e may send you a proxy card, along with a second Notice, on
or after
May 14,
2018
.
How do I attend the annual meeting?
The meeting will be
held on
Friday, June 22, 2018
at
2:00 p.m.
local time at the Company’s
office located at 10900 Wilshire Blvd, Suite 650, Los Angeles, CA
90024
.
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 23, 2018
will be entitled to vote at
the annual meeting. On this record date, there were
54,866,512
shares of
common stock outstanding and entitled to
vote.
Stockholder of Record: Shares Registered in Your Name
If on
April 23, 2018
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 23, 2018 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 four matters scheduled for a vote:
●
To elect the eight nominees for director named
herein
;
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To
approve an amendment of the 2017 Equity Incentive Plan to, among
other things, increase the number of authorized shares for issuance
under such plan by 6 million shares;
●
To
ratify the appointment of Marcum LLP as the Company's independent
registered public accounting firm for the year ending December 31,
2018;
●
To approve, on an advisory basis, the compensation
of the Company's named executive officers,
as disclosed in this Proxy
Statement.
-2-
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.
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.
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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 21, 2018
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 21, 2018
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 23,
2018
.
-3-
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.
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
eight
nominees for director,
and “For” the proposals to approve an
amendment of the 2017 Equity Incentive Plan to, among other things,
increase the number of authorized shares for issuance under such
plan by 6 million shares, to ratify the appointment of Marcum LLP
as the Company's independent registered public accounting firm for
the year ending December 31, 2018 and to approve, on an advisory
basis, the compensation of the Company's named executive
officers.
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
the Company’s
Secretary
at 10900 Wilshire Blvd. Suite 650, Los Angeles, CA
90024.
●
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.
-4-
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 2, 2019, to ChromaDex Corporation, Attn:
Secretary, at 10900 Wilshire Blvd. Suite 650, Los Angeles, CA
90024. 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 24, 2019 nor later than the close of business
on April 23, 2019. 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; 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, 3 and 4 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.”
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 eight (8) members to our Board of
Directors
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Plurality of the votes cast (the eight directors receiving the most
“For” votes)
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None.
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None.
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Approval of an amendment to the 2017 Equity Incentive Plan to,
among other things, increase the number of authorized shares for
issuance under such plan by 6 million shares
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“For” votes from the holders of a majority of shares
present in person or represented by proxy and entitled to vote on
the matter
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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 31, 2018
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“For” votes from the holders of a majority of shares
present in person or represented by proxy and entitled to vote on
the matter
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Against.
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None.
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Approval, on an advisory basis, the compensation of the Company's
named executive officers
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“For” votes from the holders of a majority of shares
present in person or represented by proxy and entitled to vote on
the matter
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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
27,433,257 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
. The
Board of Directors presently has nine members, but Stephen Allen
has elected not to stand for re-election at the Annual Meeting, and
the authorized size of the Board of Directors will be reduced to
eight members immediately following the Annual Meeting. Unless
otherwise instructed, the persons named in the accompanying proxy
intend to vote the shares represented by the Proxy for the election
of the eight 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 director to the 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, Steven Rubin, Wendy Yu and Tony Lau. The Board of
Directors has determined that a majority of its members, being
Stephen Allen, Stephen Block, Jeff Baxter, Kurt Gustafson, Steven
Rubin, Wendy Yu and Tony Lau are independent directors within the
meaning of the applicable NASDAQ rules. Stephen Allen has elected
not to stand for re-election at the Annual Meeting.
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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49
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2000
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Stephen
A. Block
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73
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2007
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Jeff
Baxter
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56
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2015
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Robert
Fried
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58
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2015
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Kurt
Gustafson
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50
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2016
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Steven
Rubin
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57
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2017
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Wendy
Yu
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42
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2017
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Tony
Lau
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29
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2017
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Frank L. Jaksch Jr.
, 49
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 the Chief Executive Officer. In April 2018, the Board of
Directors approved a future transition of Mr. Jaksch whereby Mr.
Jaksch will transition from his role as Chief Executive Officer,
effective as of the conclusion of the Annual Meeting, to serve as
Executive Chairman of the Company, contingent and effective upon
Mr. Jaksch’s re-election at the Annual Meeting. Mr. Jaksch
brought the Company public in June 2008, listing 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
, 73, 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), where he has served on the board of directors since
2005. He also is, and since September 2015 has been, a director of
myLAB Box, Inc., a privately held company. 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.
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. He is also a Managing Director of K5
Venture Partner, LLC’s affiliated accelerator K5 Launch 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.
Jeff Baxter,
56, 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
, 58, 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. Mr.
Fried was appointed President and Chief Strategy Officer of the
Company in March 2017 (which Chief Strategy Officer title he held
until March 2018) and also became its Chief Operating Officer in
January 2018. In April 2018, the Board of Directors approved a
future transition of Mr. Fried whereby Mr. Fried will transition
from his role as President and Chief Operating Officer to serve as
Chief Executive Officer of the Company, each effective as of the
conclusion of the Annual Meeting. 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
, 50, has been a director of the Company
and Chair of the Audit Committee since October 2016 and a member of
the
Compensation
Committee since March 2017. In April 2018, the Board of Directors
appointed Mr. Gustafson as lead independent director of the Board
of Directors, contingent and effective upon Mr. Gustafson’s
re-election at the Annual Meeting. 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. 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
, 57, has been a director of the Company and
a member of the Nominating and Corporate Governance Committee since
March 2017 and Chair of Nominating and Corporate Governance
Committee since March 2018. Mr. Rubin has served as OPKO Health,
Inc.’s (NASDAQ: OPK) Executive Vice President –
Administration since May 2007 and as a director 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; 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; Cocrystal Pharma, Inc. (OTCBB:COCP), a
biotechnology company developing new treatments for viral diseases;
Eloxx Pharmaceuticals (OTCMKTS: ELOX), a company committed to
treating patients suffering from rare and ultra-rare diseases
caused by premature termination codon (PTC) nonsense mutations,
prior to its merger with Sevion Therapeutics in December 2017;
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; and
Cognit, Inc. (NASDAQ:COGT), a data and analytics company providing
cloud-based mission-critical information and performance marketing
solutions.
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.
Wendy Yu
, 42, has been a
director of the Company since August 2017
and a member of
the Nominating and Corporate Governance Committee since March
2018
. Since 2012, Ms. Yu has served as
the Chief Digital Officer of Horizons Digital Group Limited
(affiliate of Horizons Ventures Limited, a Hong Kong based
investment firm), overseeing the Asia expansion of Horizons’
portfolio companies and directing public relations, communications,
marketing and events. Ms. Yu graduated from University of Toronto,
majoring in Commerce and Psychology. Ms. Yu serves as the director
nominated by Pioneer Step Holdings Limited pursuant to rights
granted to Pioneer Step Holdings Limited pursuant to that certain
Securities Purchase Agreement, dated April 26, 2017, by and among
the Company and the certain purchasers named therein (the
“April 2017 Purchase Agreement”). The Nominating and
Corporate Governance Committee believes that Ms. Yu’s
experience in management, marketing and communications bring
valuable expertise to the Board.
Tony Lau
, 29, has been a
director of the Company since August 2017
and a member of
the Compensation Committee since March 2018
. Since September 2014, Mr. Lau has been with
Horizons Ventures Limited, building the consumer and retail segment
and China market of the Hong Kong based investment firm. Prior to
joining Horizons Ventures Limited, Mr. Lau was with Goldman Sachs
Asia from June 2011 to August 2014. Mr. Lau has a Bachelor of Arts
degree in Finance from the Guanghua School of Management in Peking,
China. Mr. Lau serves as the director nominated by Champion River
Ventures Limited pursuant to rights granted to Champion River
Ventures Limited pursuant to the April 2017 Purchase Agreement. The
Nominating and Corporate Governance Committee believes that Mr.
Lau’s experience in the finance and consumer products
industry bring valuable experience to the
Board.
-8-
Family Relationships
There are no family relationships between any of our directors and
executive officers.
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.
-9-
MANAGEMENT AND CORPORATE GOVERNANCE
Executive Officers
The names of our executive officers and their ages, positions, and
biographies are set forth below. Frank Jaksch’s and Robert
Fried's backgrounds are discussed under the section Nominees for
Election to Board of Directors.
Thomas Varvaro served as
Chief Financial Officer until October 5, 2017. Kevin Farr began
serving as Chief Financial Officer on October 5, 2017. Mark
Friedman began serving as General Counsel and Corporate Secretary
on January 22, 2018.
|
Name
|
|
Age
|
|
Positions with Company During Fiscal Year 2017
|
|
Frank Jaksch, Jr.
|
|
49
|
|
Chief Executive Officer and Director
|
|
Robert Fried
|
|
58
|
|
President, Chief Strategy Officer and Director
|
|
Kevin Farr
|
|
60
|
|
Chief Financial Officer
|
|
Troy Rhonemus
|
|
45
|
|
Chief Operating Officer
|
|
Thomas Varvaro
|
|
48
|
|
Chief Financial Officer
|
The
persons listed below are our executive officers as of the date
hereof:
|
Name
|
|
Age
|
|
Positions with Company as of April 23, 2018
|
|
Frank Jaksch, Jr. (1)
|
|
49
|
|
Chief Executive Officer and Director
|
|
Robert Fried (2)
|
|
58
|
|
President, Chief Operating Officer and Director
|
|
Kevin Farr
|
|
60
|
|
Chief Financial Officer
|
|
Mark Friedman
|
|
60
|
|
General Counsel and Corporate Secretary
|
|
Troy Rhonemus
|
|
45
|
|
Executive Vice President
|
(1)
In
April 2018, the Board of Directors approved a future transition of
Mr. Jaksch whereby Mr. Jaksch will transition from his role as
Chief Executive Officer, effective as of the conclusion of the
Annual Meeting, to serve as Executive Chairman of the Company,
contingent and effective upon Mr. Jaksch’s re-election at the
Annual Meeting.
(2)
In
April 2018, the Board of Directors approved a future transition of
Mr. Fried whereby Mr. Fried will transition from his role as
President and Chief Operating Officer to serve as Chief Executive
Officer of the Company, each effective as of the conclusion of the
Annual Meeting.
Kevin Farr
, 60, has served as
the Company’s Chief Financial Officer since October 2017.
From February 2000 through September 2017, Mr. Farr was Chief
Financial Officer of Mattel, Inc. (NASDAQ: MAT), and prior to that
held multiple leadership roles at Mattel since 1991. Before joining
Mattel, Mr. Farr spent 10 years at PricewaterhouseCoopers. Mr. Farr
serves on the Corporate Advisory Board of the Marshall School of
Business at the University of Southern California, and as a board
member of Polaris Industries Inc. (NYSE:PII) Mr. Farr received his
Master of Business Administration from Northwestern University's J.
L. Kellogg Graduate School of Business, and his B.S. in Accounting
from Michigan State University.
Mark Friedman
, 60, has served
as the Company’s General Counsel and Corporate Secretary
since January 2018. From 2013 to 2018, Mr. Friedman held various
positions at Herbalife Ltd. (NYSE:HLF) including Executive Vice
President, General Counsel and Counsel to the Executive Chairman.
Mr. Friedman served as General Counsel and Senior Vice President of
Business Development and Human Resources at Pinkberry from 2008 to
2013, Senior Vice President and General Counsel at American Golf
Corporation from 2003 to 2008 and Senior Counsel and Associate
Corporate Secretary for BP (NYSE: BP) and Atlantic Richfield
Company from 1994 to 2003. Mr. Friedman received his Juris Doctor
degree from the University of Southern California and his Bachelor
of Arts degree from the University of California,
Davis.
-10-
Troy Rhonemus
, 45, has served
as the Company’s Executive Vice President since January 2018,
Chief Operating Officer from March 2014 to January 2018 and
Director of New Technology and Supply Chain from January 2013 to
February 2014. Mr. Rhonemus has served on the board of directors of
Mazza Innovation Ltd., a Canadian company specializing in the
extraction of plant-based ingredients, since 2016. Mr. Rhonemus is
responsible for overseeing all of the 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 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.
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 14 meetings during 2017. Each director attended at
least 75% of Board meetings and meetings of the committees on which
he or she 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 currently 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
. Mr. Allen has informed the Company
that he will retire from the Board of Directors at the end of his
current term and will not stand for re-election at the Annual
Meeting.
-11-
In April 2018, the Board of Directors approved the appointment of
Mr. Jaksch as Executive Chairman, contingent and effective upon Mr.
Jaksch’s re-election to the Board of Directors at the Annual
Meeting, and of Mr. Gustafson as lead independent director,
contingent and effective upon Mr. Gustafson’s re-election to
the Board of Directors at the Annual Meeting. As Executive
Chairman, Mr. Jaksch will serve as Chairman of the Board and will
continue to serve as an employee and executive officer of the
Company. The Board of Directors has determined that the future
leadership structure, in which there is an Executive Chairman and
an independent director acting as lead independent director,
ensures that the appropriate level of oversight, independence, and
responsibility is applied to all Board decisions, including risk
oversight, and is in the best interests of the Company and those of
the Company’s stockholders. The lead independent director
will serve as the liaison between the Executive Chairman and the
independent directors and his responsibilities will, among other
things, include facilitating communication with the Board and
presiding over regularly conducted executive sessions of the
independent directors and establishing the agenda for meetings of
the independent directors. The Board of Directors believes that its
strong corporate governance policies and practices, including the
substantial percentage of independent directors on the Board of
Directors, and the robust duties that will be delegated to the lead
independent director, will empower the Board of Directors to
effectively oversee the Company’s Chief Executive Officer and
Executive Chairman and provide an effective and appropriately
balanced Board of Directors governance structure.
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 membership and meeting information for
the
fiscal year ended December 30, 2017
for each of our Board
committees:
|
Name
|
|
Audit
|
|
Compensation
|
|
Nominating and Corporate Governance
|
|
Stephen
Allen (1)
|
|
|
|
X
|
|
X(7)
|
|
Jeff
Baxter
|
|
X
|
|
|
|
X
|
|
Stephen
Block
|
|
X
|
|
X(7)
|
|
|
|
Robert
Fried (2)
|
|
|
|
|
|
X
|
|
Kurt
Gustafson (3)
|
|
X(7)
|
|
X
|
|
|
|
Tony
Lau (4)
|
|
|
|
|
|
|
|
Steven
Rubin (5)
|
|
|
|
|
|
X
|
|
Wendy
Yu (6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
meetings in fiscal year ended December 30, 2017
|
|
4
|
|
1
|
|
1
|
(1)
Mr.
Allen will not stand for re-election at the Annual Meeting. Mr.
Allen served as members of the Compensation Committee and
Nominating and Corporate Governance Committee until March 13,
2018.
(2)
On
March 12, 2017, Mr. Fried was appointed as President and Chief
Strategy Officer of the Company and resigned as a member of the
Nominating and Corporate Governance Committee.
(3)
On
March 14, 2017, the Board appointed Mr. Gustafson as a member of
the Compensation Committee.
(4)
On
March 13, 2018, Mr. Lau was appointed as a member of the
Compensation Committee.
(5)
On
March 16, 2018, the Board appointed Mr. Rubin as Chairperson of the
Nominating and Corporate Governance Committee.
(6)
On
March 13, 2018, Ms. Yu was appointed as a member of the Nominating
and Corporate Governance Committee.
(7)
Committee
Chairperson.
-12-
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.”
The Audit Committee currently consists of three directors: 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
2017.
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 30, 2017
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 30,
2017.
Submitted by:
The Audit Committee of
The Board of Directors
Kurt
Gustafson (Chairman)
Stephen Block
Jeff Baxter
-13-
Compensation Committee
Our Compensation Committee currently consists of three directors:
Stephen Block (chairman), Kurt Gustafson and Tony
Lau. Stephen Allen served on the Compensation Committee
until March 13, 2018. 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 one time during fiscal year 2017. 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
2017.
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 (or recommend to the Board of Directors for 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. In March 2018, the Compensation Committee
retained a consulting firm, Exequity LLP (“Exequity”)
directly, although in carrying out assignments, the consulting firm
may interact with Company management when necessary and
appropriate. Exequity is a nationally recognized provider of
executive compensation advisory services and was deemed independent
pursuant to SEC rules.
The
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.
The
Company paid cash bonuses to its executive officers in 2018 for
2017 performance based upon achievements of certain goals. For
additional information regarding the performance bonus amounts, see
“Executive Compensation.”
Compensation Committee Interlocks and Insider
Participation
None of
the members of the Compensation Committee is an officer or employee
of the Company. None of the 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 the 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 30, 2017.
Submitted by:
The Compensation Committee of
The Board of Directors
Stephen Block, Chairman
Kurt Gustafson
Tony Lau
-14-
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee currently
consists of three directors: Steven Rubin (chairman), Jeff Baxter
and Wendy Yu. Stephen Allen served on the Nominating and Corporate
Governance Committee during fiscal year 2017, but stepped down from
the Nominating and Corporate Governance Committee in March 2018 in
connection with his decision to not stand for re-election at the
Annual Meeting. 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 met one time during
the 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 the website is not incorporated by reference into
this Proxy Statement or the Annual Report for fiscal year
2017.
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 nominees 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 10900
Wilshire Blvd. Suite 650, Los Angeles, CA 90024
, 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.
-15-
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, 10900 Wilshire Blvd. Suite
650, Los Angeles, CA 90024. 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.
Policy Regarding Attendance at Annual Meetings of
Stockholders
The Company does not have a policy with regard to Board
members’ attendance at annual meetings. Seven directors
attended the Company’s most recent annual meeting of
stockholders held on June 20, 2017.
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, Steven Rubin, Wendy Yu and Tony Lau. Mr. Allen has
elected not to stand for re-election at the Annual Meeting. Frank
L. Jaksch Jr. and Robert Fried do not meet the independence
standards because of their employment with the
Company
.
Please
see “Proposal 1: Election of Directors” for more
information regarding our Board of Directors.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The following discussion and analysis of compensation arrangements
of our named executive officers for 2017 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. Our compensation philosophy also provides that
compensation for executive officers should be structured such that
between base salary and cash incentives, a meaningful portion of
the executive officer's total cash compensation is at risk. 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.
-16-
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.
Compensation Program and Forms of Compensation
We provide our executive officers with a compensation package
consisting of base salary, annual 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.
Base salary is
designed to provide predictable level of compensation and provides
a competitive level of pay that reflects the executive's
experience, role and responsibilities. Base 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.
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 typically achieve overall
corporate annual 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
Company’s performance and, with input from management and the
Board, determines the amount to be awarded to each of the executive
officers based on the achievement of the financial goals that were
set earlier in the year.
In
2018, we paid bonuses of $75,480, $163,945, $24,378 and $47,940,
respectively to our executive officers Frank Jaksch, Jr., Robert
Fried, Kevin Farr and Troy Rhonemus for services performed during
2017. Other than Mr. Fried, the 2017 bonus amounts were calculated
based upon achievements of two goals, (i) Net sales target and (ii)
the Company’s Earnings Before Interest, Taxes, Depreciation,
Amortization and Share-based compensation (“EBITDAS’)
target. Tables below illustrate how the bonus amounts were
calculated for Mr. Jaksch, Mr. Farr and Mr. Rhonemus.
-17-
Bonus calculation for Mr. Jaksch – for fiscal year 2017, paid
in 2018
|
Metric
|
Target
(in
1,000s)
|
Actual
(in
1,000’s)
|
Achievement
% (1)
|
Target
Bonus
%
(2)
|
Other
Factors (3)
|
Payout
Bonus
%
(4)
|
Base
Salary
|
Bonus
Payment
(5)
|
|
Net
Sales
|
$
22,497
|
$
21,201
|
94
%
|
25
%
|
60
%
|
14.1
%
|
$
370,000
|
$
52,170
|
|
EBITDAS
|
$
(3,726
)
|
$
(5,879
)
|
42
%
|
25
%
|
60
%
|
6.3
%
|
$
370,000
|
$
23,310
|
|
|
|
|
|
|
|
|
Total
|
$
75,480
|
Bonus calculation for Mr. Farr – for fiscal year 2017, paid
in 2018
|
Metric
|
Target
(in
1,000s)
|
Actual
(in
1,000’s)
|
Achievement
% (1)
|
Target
Bonus
%
(2)
|
Other
Factors (3)
|
Payout
Bonus
%
(4)
|
Base
Salary
|
Bonus
Payment
(5)
|
|
Net
Sales
|
$
22,497
|
$
21,201
|
94
%
|
25
%
|
23.9
%
|
5.62
%
|
$
300,000
|
$
16,850
|
|
EBITDAS
|
$
(3,726
)
|
$
(5,879
)
|
42
%
|
25
%
|
23.9
%
|
2.51
%
|
$
300,000
|
$
7,528
|
|
|
|
|
|
|
|
|
Total
|
$
24,378
|
Bonus calculation for Mr. Rhonemus – for fiscal year 2017,
paid in 2018
|
Metric
|
Target
(in
1,000s)
|
Actual
(in
1,000’s)
|
Achievement
% (1)
|
Target
Bonus
%
(2)
|
Other
Factors (3)
|
Payout
Bonus
%
(4)
|
Base
Salary
|
Bonus
Payment
(5)
|
|
Net
Sales
|
$
22,497
|
$
21,201
|
94
%
|
15
%
|
100
%
|
14.1
%
|
$
235,000
|
$
33,135
|
|
EBITDAS
|
$
(3,726
)
|
$
(5,879
)
|
42
%
|
15
%
|
100
%
|
6.3
%
|
$
235,000
|
$
14,805
|
|
|
|
|
|
|
|
|
Total
|
$
47,940
|
(1)
Achievement % for
EBITDAS calculated as 100% minus variance %.
(2)
Maximum bonuses for
Mr. Jaksch, Mr. Farr and Mr. Rhonemus are 50%, 50% and 30% of base
salary, respectively. 50% weight was allocated to each of the
metric.
(3)
Consideration by
the Compensation Committee based on numerous factors. For Kevin
Farr, 23.9% proration factor was used since Mr. Farr began serving
as Chief Financial Officer on October 5, 2017.
(4)
Payout bonus % is
calculated based on the achievement % multiplied by the target
bonus % multiplied by the other factors %.
(5)
Bonus payment is
calculated by multiplying payout bonus % to base
salary.
Tables
below illustrates how the bonus amount was calculated for Mr. Fried
pursuant to the terms of his employment agreement dated March 12,
2017.
|
Metric
|
Actual
(in
1,000’s)
|
Bonus
%
|
Bonus
Payment
|
|
1% of Consumer
Product Net Sales
|
$
5,465
|
1
%
|
$
54,648
|
|
Additional 2% of
Consumer Product Net Sales that exceeds the Prior Year
|
$
5,465
|
2
%
|
$
109,297
|
|
1% of the Gross
Profit from NIAGEN sales that exceeds the Prior Year
|
$
0
|
1
%
|
$
0
|
|
|
|
Total
|
$
163,945
|
-18-
In
2017, we paid bonuses of $122,562, $79,500 and $46,706,
respectively to our executive officers Frank Jaksch, Jr., Thomas
Varvaro and Troy Rhonemus for services performed during 2016. Also
in 2017, Mr. Jaksch, Mr. Varvaro and Mr. Rhonemus received $27,500,
$18,000 and $11,400, respectively, which are 50% of the earned
bonus for services performed during 2015. The 2016 bonus amounts
were calculated based upon achievements of four goals, (i) the
Company’s 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, 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
%
|
3.5
%
|
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
%
|
22.375
%
|
$
370,000
|
$
82,787
|
|
|
|
|
|
|
|
|
Total
|
$
122,562
|
Bonus calculation for Mr. Varvaro – for fiscal year 2016,
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
%
|
2.5
%
|
$
300,000
|
$
7,500
|
|
Net
Income
|
Positive
|
Positive
|
$
(2,928
)
|
0
%
|
2.8
%
|
0
%
|
$
300,000
|
$
0
|
|
IND & EU
Filings
|
N/A
|
N/A
|
N/A
|
50
%
|
12.2
%
|
6.1
%
|
$
300,000
|
$
18,300
|
|
Net
Sales
|
0
|
$
30,000
|
$
26,811
|
89.5
%
|
20
%
|
17.9
%
|
$
300,000
|
$
53,700
|
|
|
|
|
|
|
|
|
Total
|
$
79,500
|
Bonus calculation for Mr. Rhonemus – for fiscal year 2016,
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
%
|
2.1
%
|
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
%
|
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.
-19-
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. Currently, our long term
incentive plan is entirely stock-based to facilitate ownership and
to align executive interests with those of our stockholders. Stock
options and other forms of equity compensation are designed to
reflect and reward a high level of sustained individual performance
over time. Stock options provide strong incentives to grow
shareholder value since our executive officers can realize value
only if our stock price appreciates over the exercise price, which
is the closing market price on the date of grant.
During
the year ended December 30, 2017, the Company granted to Robert
Fried 500,000 shares of restricted stock, which vested during the
year ended December 30, 2017. During the year ended December 30,
2017, the Company's former Chief Financial Officer, Thomas Varvaro
entered into a transition and separation agreement and received
vesting of his unvested restricted stock of 166,668 shares
effective January 27, 2018. 83,334 of these shares were awarded in
2012 and the remaining 83,334 shares were awarded in
2014.
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 closing 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 that 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
As a result of the Tax Cuts and Jobs Act, for taxable years
beginning January 1, 2018 and except for certain grandfathered
arrangements, under Section 162(m) of the Code, any compensation
over $1,000,000 paid to the covered employees is not deductible by
the Company and the limitation on deductibility generally was
expanded to include all NEOs. The Committee will be assessing the
impact of the amendments to Section 162(m) to determine what
adjustments to our executive compensation practices, if any, it
considers 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 and stock award 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, President 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 own compensation
.
-20-
Hedging Policy
The Company has established an Insider Trading Policy, which, among
other things, prohibits trading in securities with material
non-public information including through hedging activities.
Engaging any transactions relating to our common stock must be
pre-cleared by our Trading Compliance Officer.
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), President and Chief Operating
Officer, Chief Financial Officer (the principal financial officer),
and Executive Vice President, each of whom served during the year
ended December 30, 2017 as our executive officers. Thomas Varvaro
served as Chief Financial Officer until October 5, 2017. Kevin Farr
began serving as Chief Financial Officer on October 5,
2017.
|
Name
|
Year
|
Salary
|
Bonus
|
Stock Awards
(1)
|
Option Awards (2)
|
All Other Compensation
(3)
|
Total
($)
|
|
Frank
L. Jaksch Jr.
|
2017
|
$
370,000
|
$
75,480
|
-
|
-
|
$
8,100
|
$
453,580
|
|
|
2016
|
$
344,231
|
$
122,562
|
-
|
$
216,980
(4)
|
$
7,258
|
$
691,031
|
|
|
2015
|
$
275,000
|
$
55,000
|
-
|
$
114,857
(5)
|
$
8,642
|
$
453,499
|
|
Robert
N. Fried
|
2017
|
$
230,769
(6)
|
$
163,945
|
$
2,539,999
(7)
|
$
876,014
(8)
|
-
|
$
3,810,727
|
|
|
2016
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
2015
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Kevin
M. Farr
|
2017
|
$
60,000
(9)
|
$
24,378
|
-
|
$
3,040,183
(10)
|
-
|
$
3,124,561
|
|
|
2016
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
2015
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Troy
A. Rhonemus
|
2017
|
$
235,000
|
$
47,940
|
-
|
-
|
$
8,100
|
$
291,040
|
|
|
2016
|
$
222,692
|
$
46,706
|
|
$
127,635
(11)
|
$
7,023
|
$
404,056
|
|
|
2015
|
$
186,962
|
$
22,800
|
-
|
$
76,091
(12)
|
$
6,642
|
$
292,495
|
|
Thomas
C. Varvaro
|
2017
|
$
300,000
|
$
120,000
(13)
|
-
|
-
|
$
8,100
|
$
428,100
|
|
|
2016
|
$
278,846
|
$
79,500
|
-
|
$
178,689
(14)
|
$
7,463
|
$
544,498
|
|
|
2015
|
$
225,000
|
$
36,000
|
-
|
$
96,229
(15)
|
$
8,437
|
$
365,666
|
(1)
The
amounts in the column titled “Stock Awards” above
reflect the aggregate award date fair value of restricted stock
awards.
(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 30, 2017, December 31, 2016 and
January 2, 2016. See Note 11 of the ChromaDex Corporation
Consolidated Financial Report included in the Form 10-K for the
year ended December 30, 2017, filed with the SEC on March 15, 2018,
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 Jaksch 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 Jaksch 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)
Robert
Fried began serving as President and Chief Strategy Officer on
March 12, 2017.
(7)
On
March 12, 2017, Robert Fried was awarded 166,667 shares of
restricted Common Stock, which vested on December 20, 2017 in
connection with an amendment to his employment agreement. In
addition, Mr. Fried received 333,333 shares of restricted stock on
December 20, 2017, which were fully vested.
(8)
On
March 12, 2017, Robert Fried was granted options to purchase
500,000 shares of ChromaDex common stock at an exercise price of
$2.715. These options expire on March 12, 2027 and 2.78% of the
options vest monthly from the grant date.
-21-
(9)
Kevin
Farr began serving as Chief Financial Officer on October 5,
2017.
(10
)
On October 5, 2017, Kevin Farr was granted options to
purchase 1,000,000 shares of ChromaDex common stock at an exercise
price of $4.24. These options expire on October 4, 2027 and 2.78%
of the options vest monthly from the grant date.
(11
)
On August 15, 2016, Troy 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.
(12
)
On July 6, 2015, Troy 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.
(13
)
The Company plans to pay a bonus of $120,000 to Thomas
Varvaro pursuant to a transition and separation agreement we
entered into with Mr. Varvaro on December 15, 2017.
(14
)
On
August 15, 2016, Thomas Varvaro was granted options to purchase
70,000 shares of ChromaDex common stock at an exercise price of
$4.04. These options fully vested on January 27, 2018 pursuant to a
transition and separation agreement we entered into with Mr.
Varvaro on December 15, 2017.
(15
)
On July 6, 2015, Thomas Varvaro was granted options to
purchase 41,667 shares of ChromaDex common stock at an exercise
price of $3.66. These options fully vested on January 27, 2018
pursuant to a transition and separation agreement we entered into
with Mr. Varvaro on December 15, 2017.
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 “Jaksch Agreement”) with
Frank L. Jaksch Jr. The Jaksch Agreement automatically renews
unless terminated in accordance with its terms. On January 2, 2014,
the Board approved raising the annual base salary of Mr. Jaksch to
$275,000 per year and setting the annual cash bonus target 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 $370,000 as the
Company’s common stock was listed on Nasdaq Stock
Market.
If Mr. Jaksch is terminated without cause, Mr. Jaksch is entitled
to eight weeks of base salary. If Mr. Jaksch is terminated without
cause, subject to executing a release, or if Mr. Jaksch resigns for
good reason, he is entitled to (i) continued payment of his current
base salary for 24 months; (ii) a cash bonus equal to the maximum
bonus he would have otherwise been eligible to receive; (iii)
payment of COBRA premiums for 24 months; and (iv) acceleration of
vesting of all outstanding equity awards previously granted to Mr.
Jaksch.
Employment Agreement with Robert N. 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
2007 Plan, subject to monthly vesting over a three-year period,
which option grant Mr. Fried received on March 12, 2017; and (iv)
166,667 shares of restricted Common Stock, which vested on December
20, 2017 in connection with an amendment to the Fried Agreement
(the "Fried Amendment") by and between the Company and Mr. Fried,
dated December 20, 2017. In addition, Mr. Fried received 333,333
shares of restricted stock on December 20, 2017, which were
immediately vested in connection with the Fried
Amendment.
-22-
Subject to Mr. Fried’s continuous service through such date,
Mr. Fried is also eligible to receive up to 500,000 shares of
fully-vested restricted Common Stock that will be granted upon the
achievement of certain performance goals. The Fried Amendment also
provides that Mr. Fried will be granted these shares of
performance-based restricted Common Stock immediately prior to the
consummation of a change in control of the Company, subject to Mr.
Fried's continuous service through such change in
control.
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 Mr.
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.
Employment Agreement with Kevin M. Farr
On October 5, 2017, the Company entered into an Employee Agreement
(the "Farr Agreement") with Kevin M. Farr who was appointed by the
Board to serve as Chief Financial Officer, principal accounting
officer and principal financial officer. Mr. Farr is entitled to
receive certain severance payments per the terms of the Farr
Agreement. The key terms of the Farr Agreement, including the
severance terms are as follows:
Mr. Farr is entitled to: (i) an annual base salary of $300,000 and
(ii) a discretionary annual bonus based on the achievement of
certain performance goals to be determined by the Board. Pursuant
to the Farr Agreement, Mr. Farr also received an option to purchase
up to 1,000,000 shares of ChromaDex common stock under the
ChromaDex 2017 Equity Incentive Plan, subject to monthly vesting
over a three-year period, with an exercise price equal to $4.24 per
share. Any unvested options will vest in full (a) upon a change of
control of the Company, subject to Mr. Farr’s continuous
service through such change of control, (b) on the date (the
“Price Threshold Date”) that the unweighted average
closing price of the Company’s common stock as quoted on the
Nasdaq Capital Market (or such similar established stock exchange)
over the previous 20 trading days (including the date such
calculation is measured) first equals or exceeds $10.00 per share,
subject to Mr. Farr’s continuous service through such Price
Threshold Date, or (c) if Mr. Farr is terminated by the Company
without cause or if Mr. Farr resigns for good reason within 90 days
prior to such change of control or Price Threshold
Date.
If Mr. Farr’s employment is terminated by the Company without
cause or Mr. Farr resigns for good reason, then, subject to
executing a release, Mr. Farr will receive (i) continuation of his
base salary for 12 months, (ii) COBRA premiums for 12 months, (iii)
a prorated annual cash bonus, based on the good faith determination
of the Board of the actual results and period of employment during
the year of such termination, (iv) accelerated vesting of
time-based equity that would have otherwise become vested by the
one year anniversary of such termination date and (v) an extended
exercise period for his options.
Employment Agreement with Troy A. Rhonemus
On March 6, 2014, the Company entered into an Employment Agreement
(the “Rhonemus Agreement”) with Mr. Troy Rhonemus
pursuant to which Mr. Rhonemus was appointed to serve as the Chief
Operating Officer of the Company. On March 17, 2015, the Board
increased the base salary to $190,000. The Rhonemus Agreement
provides for an annual cash bonus (based on performance targets) of
up to 30% of his base salary. 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 Nasdaq Stock Market. On
February 1, 2018, the Compensation Committee increased the base
salary of Mr. Rhonemus to $250,000.
In the event of a termination, Mr. Rhonemus will be entitled to any
accrued but unpaid base salary and any accrued but unpaid welfare
and retirement benefits up to the termination date. In addition, if
Mr. Rhonemus leaves the Company for “Good Reason” (as
defined in the Rhonemus Agreement), he will also 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.
In the event 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, or, if Mr. Rhonemus enters into a standard
separation agreement, Mr. Rhonemus will receive continuation of
base salary and health benefits, together with applicable fringe
benefits as provided until the expiration of the term or renewal
term then in effect, however, that in the case of medical and
dental insurance, until the expiration of 12 months from the date
of termination.
-23-
Transition and Separation Agreement with Thomas C.
Varvaro
On December 15, 2017, the Company entered into a transition and
separation agreement with Mr. Varvaro (the “Separation
Agreement”). Pursuant to the Separation Agreement, Mr.
Varvaro resigned from the Company effective January 19, 2018 (the
“Separation Date”), and will provide certain consulting
services to the Company for three months following the Separation
Date, upon the Company’s specific request and up to a maximum
of 24 hours per month. Pursuant to the Separation Agreement, Mr.
Varvaro is entitled to receive the following compensation and other
benefits: (i) continued payment of his current base salary for 24
months following the Separation Date; (ii) a cash bonus equal to
the maximum bonus he would have otherwise been eligible to receive
for fiscal year 2017; (iii) payment of COBRA premiums through the
earlier of 24 months following the Separation Date or the date upon
which he becomes ineligible for continued coverage under COBRA, and
payment of long-term disability and life insurance premiums through
24 months following the Separation Date; and (iv) acceleration of
vesting of all outstanding options or other equity awards
previously granted to Mr. Varvaro.
2017 Director Compensation
On
November 8, 2016, the Company adopted a Non-Employee Director
Compensation Policy, effective July 3, 2016, after evaluating the
recommendations from a 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 2017, the options were granted under the Amended
2017 Equity Incentive Plan.
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 $5,000, respectively, per year for service on
such committee.
Any
non-employee director who is first elected to the Board will be
granted an option to purchase 40,000 shares of our common stock on
the date of his or her initial election to the Board. In addition,
on the date of each annual meeting, each person who continues to
serve as a non-employee member of the Board following such annual
meeting will be granted a stock option to purchase 20,000 shares of
our common stock. All option grants will have an exercise price per
share equal to the fair market value of our common stock on the
date of grant. Each initial grant for a non-employee director will
vest over a three year period, and each annual grant for a
non-employee director will vest over a one year period, in each
case subject to the director’s continuing service on our
Board.
The
following table provides information concerning compensation of our
non-employee directors who were directors during the fiscal year
ended December 30, 2017. The compensation reported is for services
as directors for the fiscal year ended December 30,
2017.
-24-
Director Compensation Table
|
Name
|
Fees
Earned or
Paid in
Cash ($)
|
Stock
Awards ($)
|
Option
Awards ($)(1)
|
Non-Equity
Incentive Plan Compensation ($)
|
Non-Qualified Deferred Compensation Earnings ($)
|
All Other Compensation ($)
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
Stephen
Allen (2)
|
77,500
|
-
|
43,991
|
-
|
-
|
-
|
121,491
|
|
Stephen
Block (3)
|
55,000
|
-
|
43,991
|
-
|
-
|
-
|
98,991
|
|
Jeff
Baxter (4)
|
45,000
|
-
|
43,991
|
-
|
-
|
-
|
88,991
|
|
Robert
Fried (5)
|
6,827
|
-
|
-
|
-
|
-
|
-
|
6,827
|
|
Kurt
Gustafson (6)
|
56,016
|
-
|
43,991
|
-
|
-
|
-
|
100,007
|
|
Steven
Rubin (7)(8)
|
26,827
|
-
|
110,735
|
-
|
-
|
-
|
137,562
|
|
Wendy
Yu (9)
|
11,129
|
-
|
84,968
|
-
|
-
|
-
|
96,097
|
|
Tony
Lau (10)
|
11,129
|
-
|
84,968
|
-
|
-
|
-
|
96,097
|
(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 30, 2017. See Note 11 of the
ChromaDex Corporation Consolidated Financial Report included in the
Form 10-K for the year ended December 30, 2017, filed with the SEC
on March 15, 2018, 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 Steven
Rubin
on April 6, 2017 and Wendy Yu
and Tony Lau on August 18, 2017, the options have an exercise price
of $3.59 and vest 100% on June 20, 2018.
(2)
On
June 20, 2017, Stephen Allen was awarded the option to purchase
20,000 shares of the Company’s common stock. Mr. Allen will
not stand for re-election at the Annual Meeting.
(3)
On
June 20, 2017, Stephen Block was awarded the option to purchase
20,000 shares of the Company’s common stock.
(4)
On
June 20, 2017, Jeff Baxter was awarded the option to purchase
20,000 shares of the Company’s common stock.
(5)
Robert
Fried earned $6,827 as a Board member prior to appointment as
President and Chief Strategy Officer.
(6)
On
June 20, 2017, Kurt Gustafson was awarded the option to purchase
20,000 shares of the Company’s common stock.
(7)
On
April 6, 2017, Mr. Rubin was awarded the option to purchase 40,000
shares of the Company’s common stock. The option has an
exercise price of $2.58, vested 33% on April 6, 2018 and will vest
33% on April 6, 2019 and 34% on April 6, 2020.
(8)
On
June 20, 2017, Mr. Rubin was awarded the option to purchase 20,000
shares of the Company’s common stock.
(9)
On
August 18, 2017, Ms. Yu was awarded the option to purchase 40,000
shares of the Company’s common stock. The option has an
exercise price of $3.28 and vests 33% on August 18, 2018, 33% on
August 18, 2019 and 34% on August 18, 2020.
(10)
On
August 18, 2017, Mr. Lau was awarded the option to purchase 40,000
shares of the Company’s common stock. The option has an
exercise price of $3.28 and vests 33% on August 18, 2018, 33% on
August 18, 2019 and 34% on August 18, 2020.
-25-
Grants of Plan-Based Awards
The
following table summarizes the stock option awards granted to our
named executive officers during the year ended
December
30, 2017:
|
Name
|
Grant
Date
|
All
Other Option Awards: Number of Securities Underlying
Options
|
Exercise
or Base Price of Option Awards ($/Share)
|
Grant Date Fair Value of Stock and Option Awards
($)(1)
|
|
Frank
L. Jaksch, Jr.
|
-
|
-
|
-
|
-
|
|
Robert
N. Fried
|
3/12/2017
|
500,000
|
$
2.715
(2)
|
$
876,014
|
|
Kevin
M. Farr
|
10/5/2017
|
1,000,000
|
$
4.24
(3)
|
$
3,040,183
|
|
Troy
A. Rhonemus
|
-
|
-
|
-
|
-
|
|
Thomas
C. Varvaro
|
-
|
-
|
-
|
-
|
(1)
Based upon the aggregate grant date fair value of
stock option awards. See
Note 11
of the ChromaDex Corporation Consolidated
Financial Report included in the Form 10-K for the year ended
December 30, 2017, filed with the SEC on March 15, 2018, for a
description of certain assumptions in the calculation of the fair
value of the Company’s stock options.
(2)
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.
(3)
The exercise price of the stock options awarded
was determined in accordance with
our Amended 2017 Equity
Incentive Plan, which provides that the exercise price for an
option granted be the closing price of our common stock on the date
of grant.
The
following table summarizes the restricted stock awards granted to
our named executive officers during the year ended
December
30, 2017:
|
Name
|
Grant
Date
|
All Other Stock Awards: Number of Shares of Stock or
Units
|
Grant Date Fair Value of Stock and Option Awards ($)(1) |
|
Frank
L. Jaksch, Jr.
|
-
|
-
|
-
|
|
Robert
N. Fried
|
3/12/2017
|
166,667
(2)
|
$
453,334
|
|
Robert
N. Fried
|
12/20/2017
|
333,333
(3)
|
$
2,086,665
|
|
Kevin
M. Farr
|
-
|
-
|
-
|
|
Troy
A. Rhonemus
|
-
|
-
|
-
|
|
Thomas
C. Varvaro
|
-
|
-
|
-
|
(1)
Based
on the closing price of our common stock on the date of
grant.
(2)
Awarded under
our Second Amended and
Restated 2007 Equity Incentive Plan.
(3)
Awarded
under our Amended 2017 Equity Incentive Plan.
-26-
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 30, 2017:
|
|
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.
|
58,400
|
$
98,893
|
-
|
$
-
|
|
Robert N.
Fried
|
-
|
$
-
|
500,000
|
$
3,130,000
|
|
Kevin M.
Farr
|
-
|
$
-
|
-
|
$
-
|
|
Troy A.
Rhonemus
|
-
|
$
-
|
-
|
$
-
|
|
Thomas C.
Varvaro
|
634,742
|
$
1,901,819
|
-
|
$
-
|
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 30, 2017.
Outstanding Stock Options at 2017 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.
|
174,934
|
—
|
|
—
|
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
|
|
|
43,750
|
6,250
|
(1
)
|
—
|
3.75
|
6/18/2024
|
|
|
30,208
|
19,793
|
(2
)
|
—
|
3.66
|
7/6/2025
|
|
|
28,333
|
56,667
|
(3
)
|
—
|
4.04
|
8/15/2026
|
|
Robert N.
Fried
|
66,667
|
—
|
|
—
|
3.30
|
7/30/2025
|
|
|
20,000
|
—
|
|
—
|
2.605
|
11/16/2026
|
|
|
125,000
|
375,000
|
(4
)
|
—
|
2.715
|
3/12/2027
|
|
Kevin M.
Farr
|
55,556
|
944,444
|
(5
)
|
—
|
4.24
|
10/5/2027
|
|
Troy A.
Rhonemus
|
133,335
|
—
|
|
—
|
1.89
|
1/25/2023
|
|
|
83,334
|
—
|
|
—
|
5.25
|
2/21/2024
|
|
|
21,875
|
3,126
|
(6
)
|
—
|
3.75
|
6/18/2024
|
|
|
20,139
|
13,195
|
(7
)
|
—
|
3.66
|
7/6/2025
|
|
|
16,667
|
33,333
|
(8
)
|
—
|
4.04
|
8/15/2026
|
|
Thomas C.
Varvaro
|
868
|
5,206
|
(9
)
|
—
|
3.75
|
5/19/2018
|
|
|
868
|
16,491
|
(9
)
|
—
|
3.66
|
5/19/2018
|
|
|
1,459
|
45,208
|
(9
)
|
—
|
4.04
|
5/19/2018
|
(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)
1,771 of Mr. Jaksch’s options vest on
15
th
of every month through August
15, 2020.
(4)
13,889 of Mr. Fried’s options vest on
12
th
of every month through March 12,
2020.
(5)
27,778 of Mr. Farr’s options vest on
5
th
of every month through October
5, 2020.
(6)
521 of Mr. Rhonemus’ options vest on
18
th
of every month through June 18,
2018.
(7)
694 of Mr. Rhonemus’ options vest on
6
th
of every month through July 6,
2019.
(8)
1,042 of Mr. Rhonemus’ options vest on
15
th
of every month through August
15, 2020.
(9)
Mr. Varvaro's outstanding options vested on January 27,
2018.
-27-
Outstanding Restricted Stock at 2017 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 not 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
|
$
980,008
|
|
Robert N.
Fried
|
—
|
—
|
—
|
$
—
|
|
Kevin M.
Farr
|
—
|
—
|
—
|
$
—
|
|
Troy A.
Rhonemus
|
—
|
—
|
—
|
$
—
|
|
Thomas C.
Varvaro
|
—
|
—
|
166,668
|
$
980,008
|
(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. On January
27, 2018, Mr. Varvaro resigned and his 166,668 shares of restricted
stock fully vested.
(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 30, 2017.
Equity Compensation Plan Information
The following table provides information about our equity
compensation plans as of December 30, 2017:
|
|
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
|
6,534,167
|
$
3.59
|
1,392,211
|
|
|
|
|
|
|
Equity compensation
plans not approved by security holders
|
-
|
-
|
-
|
|
|
|
|
|
|
Total
|
6,534,167
|
$
3.59
|
1,392,211
|
-28-
Chief Executive Officer Pay Ratio
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act
and the related SEC rule (the “Rule”), the Company is
required to provide to its shareholders specified disclosure
regarding the relationship of CEO total compensation to the total
compensation of its median employee, referred to as
“pay-ratio” disclosure.
For fiscal 2017,
●
the
median of the annual total compensation of all employees of the
Company (other than the CEO) was $74,806 and
●
the
annual total compensation of the CEO, as reported in the Summary
Compensation Table included in this Proxy Statement, was
$453,580.
●
Based
on this information, the ratio of the annual total compensation of
the CEO to the median of the annual total compensation of all
employees was 6.1 to 1.
Set
forth below is a description of the methodology the Company used to
identify the median employee for purposes of the Rule.
To
determine the Company’s total population of employees as of
December 30, 2017, the Company included all of its full-time and
part-time employees, including employees of consolidated
subsidiaries. To identify the “median employee” from
the Company’s employee population as determined above, the
Company compared the aggregate amount of each employee’s 2017
base salary, incentive bonus paid, equity awards granted in 2017
and matching 401(k) contributions. In making this determination,
the Company annualized the compensation of employees who were
employed by the Company for less than the entire fiscal year. This
compensation measure was consistently applied to all employees
included in the calculation and reasonably reflects the annual
compensation of employees.
Using
this approach, the Company selected the employee at the median of
its employee population.
The Company then calculated annual
total compensation for this employee using the same methodology
used to calculate annual total compensation for the named executive
officers as set forth in the Summary Compensation Table. The
Company determined that the employee’s annual total
compensation for the fiscal year ended December 30, 2017 was
$74,806
.
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 30, 2017 except as follows: Stephen Allen,
Stephen A. Block, Jeff Baxter, Kurt A. Gustafson and Steven Rubin
were each late filing a Form 4 for option grants received on June
20, 2017.
-29-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Related Persons
The
following is a description of transactions since January 1,
2017 to which the Company has been a party, in which the amount
involved exceeded or will exceed $120,000, and in which any of the
Company’s executive officers, directors or holders of more
than 5% of its common stock, or an affiliate or immediate family
member thereof, had or will have a direct or indirect material
interest, other than compensation, termination and change of
control arrangements, which are described under "Executive
Compensation."
Asset acquisition
On
March 12, 2017, the Company acquired all of the outstanding equity
interests of Healthspan Research LLC ("Healthspan") from Robert
Fried, Jeffrey Allen and Dr. Charles Brenner (the "Sellers"). At
the time of the acquisition, Robert Fried was a member of the
Board, a position he has held since July 2015.
Upon
the closing of, and as consideration for, the acquisition, the
Company issued an aggregate of 367,648 shares of the
Company’s common stock to the Sellers. The fair value of
these shares was approximately $1.0 million based on the closing
price of $2.72 per share on March 12, 2017. Also on March 12, 2017,
the Company appointed Robert Fried as President and Chief Strategy
Officer, effective immediately. Mr. Fried continues to serve as a
member of the Board, but resigned as a member of the Nominating and
Corporate Governance Committee of the Board.
Healthspan
was formed in August 2015 to offer and sell finished bottle product
TRU NIAGEN® directly to consumers through internet-based
selling platforms. TRU NIAGEN® is currently the Company's
leading product. Prior to the acquisition, the Company has supplied
certain amount of NIAGEN® to Healthspan as a raw material
inventory in exchange for a 4% equity interest in Healthspan. An
additional 5% equity interest was received for granting certain
exclusive rights to resell NIAGEN® prior to the total
acquisition on March 12, 2017.
In
cancellation of a loan owed by Healthspan to Mr. Fried prior to the
acquisition, the Company repaid $32,500 to Mr. Fried on March 13,
2017 and also repaid $100,000 on March 9, 2018. No interest was
paid for the $100,000 repaid on March 9, 2018.
Sale of consumer products
During
July 2017, the Company entered into an exclusivity agreement (the
"Watsons Agreement") with A.S. Watson Retail (HK) Limited
(“Watsons”), whereby the Company agreed to exclusively
sell its TRU NIAGEN® dietary supplement product to Watsons in
certain territories in Asia. During the year ended December 30,
2017, the Company sold approximately $4.1 million of TRU
NIAGEN® dietary supplement product pursuant to the Watsons
Agreement. As of December 30, 2017, the trade receivable from
Watsons was approximately $1.0 million.
Li Ka
Shing, who beneficially owns more than 10% of the Company's common
stock, beneficially owns approximately 30% of an entity that
beneficially owns approximately 75% of Watsons. In accordance with
the Company's Related-Person Transactions Policy, the Audit
Committee ratified the terms of the Watsons Agreement.
Financings
In
April 2017, the Company entered into a Securities Purchase
Agreement with certain purchasers named therein, pursuant to which
the Company agreed to sell and issue up to $25.0 million of its
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 following table sets forth the number of
shares of common stock purchased by holders of more than 5% of the
Company’s common stock or entities affiliated with
them:
|
Name
|
Shares of Common Stock
|
|
Champion River
Ventures Limited
|
5,769,230
|
|
Pioneer
Step Holdings Limited
|
3,846,155
|
-30-
In
November 2017, the Company entered into a Securities Purchase
Agreement with certain purchasers named therein, pursuant to which
the Company agreed to sell and issue up to $23.0 million of its
common stock at a purchase price of $4.10 per share. The following
table sets forth the number of shares of common stock purchased by
holders of more than 5% of the Company’s common stock or
entities affiliated with them:
|
Name
|
Shares of Common Stock
|
|
Champion River
Ventures Limited
|
731,707
|
|
Pioneer
Step Holdings Limited
|
487,805
|
|
Winsave
Resources Limited
|
1,219,512
|
Employment Arrangements
The
Company currently maintains written employment agreements with
several of its named executive officers, as described in "Executive
Compensation."
Equity Granted to Executive Officers and Directors
The
Company has granted equity to its executive officers and directors,
as more fully described in "Executive Compensation."
Indemnification Agreements
The
Company has entered, and intends to continue to enter, into
indemnification agreements with its directors and executive
officers, in addition to the indemnification provided for in the
Company’s bylaws. These agreements, among other things,
require the Company to indemnify directors and executive officers
for certain expenses incurred by a director or executive officer in
any action or proceeding arising out of their services as one of
the Company’s directors or executive officers.
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 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.
-31-
PROPOSAL 2:
APPROVAL OF AN AMENDMENT TO THE 2017 EQUITY INCENTIVE
PLAN
Overview
On
April 24, 2018, our Board of Directors amended the ChromaDex
Corporation 2017 Equity Incentive Plan, as amended (the “2017
Plan”), subject to stockholder approval, to among other
things, increase the number of shares of common stock authorized
for issuance under the 2017 Plan by 6 million
shares. We refer to the 2017 Plan,
as amended on April 24, 2018, as the “Amended 2017
Plan” throughout this proxy statement. References in this
proposal to our Board of Directors include the Compensation
Committee of the Board, where applicable.
A
description of the material terms of the Amended 2017 Plan are
summarized below. The key differences between the terms of the 2017
Plan and the Amended 2017 Plan are as follows:
●
The Amended 2017
Plan provides that an additional 6 million shares may be issued
pursuant to stock awards granted under the Amended 2017
Plan.
●
The Amended 2017
Plan eliminates references to Section 162(m) of the Internal
Revenue Code of 1986, as amended (the “Code”), and the
Amended 2017 Plan eliminates individual grant limits that applied
under the 2017 Plan to awards that were intended to comply with the
exemption for “performance-based compensation” under
Code Section 162(m).
●
The Amended 2017
Plan eliminates references to performance cash awards, because
those awards were included in the 2017 Plan in order to allow the
Company to comply with the exemption for “performance-based
compensation” under Section 162(m), which has been repealed,
effective for taxable years beginning after December 31,
2017.
In this
Proposal 2, our Board of Directors is requesting stockholder
approval of the Amended 2017 Plan, including the increase to the
number of shares of common stock authorized for issuance under the
Amended 2017 Plan by 6 million
shares. The Board of Directors
believes that the Amended 2017 Plan is an integral part of our
long-term compensation philosophy and the Amended 2017 Plan is
necessary to continue providing the appropriate levels and types of
equity compensation for our employees.
Equity Awards Are an Integral Component of Our Compensation
Program
Equity
awards have been historically and, we believe, will continue to be
an integral component of our overall compensation program for our
employees and directors. Approval of the Amended 2017 Plan will
allow us to continue to grant stock options and other equity awards
at levels we determine to be appropriate in order to attract new
employees and directors, retain our existing employees and to
provide incentives for such persons to exert maximum efforts for
the Company’s success and ultimately increase stockholder
value. The Amended 2017 Plan allows the Company to utilize a broad
array of equity incentives with flexibility in designing such
incentives, including traditional option grants, stock appreciation
rights, restricted stock awards, restricted stock unit awards,
performance stock awards, and other stock awards.
At
March 31, 2018, stock awards covering an aggregate of
7,520,804
shares were
outstanding under our 2007 Equity Incentive Plan (the “2007
Plan”) and the 2017 Plan. In addition, 922,862
shares remained available for
future grant under the 2017 Plan as of such date.
The
following table provides certain additional information regarding
our equity incentive program.
|
|
As of
March 31, 2018
|
|
Total number of
shares of common stock subject to outstanding stock
options
|
7,520,804
|
|
Weighted-average
exercise price of outstanding stock options
|
$
3.87
|
|
Weighted-average
remaining term of outstanding stock options
|
7.1
years
|
|
Total number of
shares of common stock subject to outstanding full value
awards
|
183,335
|
|
Total number of
shares of common stock available for grant under the 2017
Plan
|
922,862
|
|
Total number of
shares of common stock available for grant under other equity
incentive plans
|
0
|
|
Total number of
shares of common stock outstanding
|
54,840,210
|
|
Per-share closing
price of common stock as reported on NASDAQ Global Select
Market
|
$
4.20
|
-32-
The Size of Our Share Reserve Increase Request Is
Reasonable
If our
request to increase the share reserve of the Amended 2017 Plan by 6
million
shares is
approved, we will have approximately 6.5 million shares available
for grant after our Annual Meeting, which we anticipate being a
sufficient amount of equity for attracting, retaining, and
motivating employees for at least the two next years. We anticipate
seeking approval from our stockholders in 2020 of an additional
increase to the share reserve under the Amended 2017
Plan.
The
size of our request is also reasonable in light of the equity
granted to our employees and directors over the last three
years.
We Manage Our Equity Incentive Award Use Carefully, and Dilution Is
Reasonable
We
continue to believe that equity awards such as stock options and
other types of stock awards are a vital part of our overall
compensation program. Our compensation philosophy reflects
broad-based eligibility for equity incentive awards, and we grant
awards to substantially all of our employees. However, we recognize
that equity awards dilute existing stockholders, and, therefore, we
must responsibly manage the growth of our equity compensation
program. We are committed to effectively monitoring our equity
compensation share reserve, including our “burn rate,”
to ensure that we maximize stockholders’ value by granting
the appropriate number of equity incentive awards necessary to
attract, reward, and retain employees.
The
following table shows our historical dilution and burn rate
percentages for fiscal years 2015, 2016 and 2017.
|
As
of End of Fiscal Year
|
2017
|
2016
|
2015
|
|
Full Dilution
(1)
|
13.1
%
|
14.7
%
|
15.6
%
|
|
Gross Burn Rate
(2)
|
6.2
%
|
2.1
%
|
2.0
%
|
(1)
Full dilution is
calculated as (shares available for grant + shares subject to
outstanding equity incentive awards)/(common stock outstanding +
shares available for grant + shares subject to outstanding equity
incentive awards).
(2)
Gross Burn Rate is
calculated as (shares subject to options granted + shares subject
to other equity incentive awards granted)/weighted average common
shares outstanding.
Burn Rate
The
following table provides detailed information regarding the
activity related to our equity incentive plans for fiscal years
2015, 2016 and 2017.
|
Fiscal
Year
|
2017
|
2016
|
2015
|
|
Total number of
shares of common stock subject to stock options
granted
|
2,285,404
|
782,485
|
730,562
|
|
Total number of
shares of common stock subject to full value awards
granted
|
500,000
|
-
|
-
|
|
Weighted-average
number of shares of common stock outstanding
|
44,598,879
|
37,294,321
|
35,877,341
|
|
Burn
Rate
|
6.2
%
|
2.1
%
|
2.0
%
|
The
approval of the Amended 2017 Plan will allow us to continue to
grant stock options, and would allow us to grant other awards
described below, at levels determined appropriate by our Board of
Directors or its delegate. The Amended 2017 Plan will continue to
provide us with flexibility in designing equity incentives in an
environment where a number of companies have moved from traditional
option grants to other stock-based awards, including stock
appreciation rights, restricted stock awards, restricted stock unit
awards, performance stock awards and other stock awards. To date,
we have never made any awards other than stock option grants and
restricted stock awards; however, at the discretion of the Board of
Directors or its delegate, we may do so in the future. The Amended
2017 Plan allows us to utilize multiple types of equity incentives
in order to secure and retain the services of our employees,
consultants and directors, and to provide long-term incentives that
align the interests of our employees, consultants and directors
with the interests of our stockholders.
-33-
Important Aspects of Our Amended 2017 Plan Designed to Protect Our
Stockholders’ Interests
The
Amended 2017 Plan includes certain provisions that are designed to
protect our stockholders’ interests and to reflect corporate
governance best practices including:
●
Stockholder approval is required for
additional shares.
The Amended 2017 Plan does not contain an
annual “evergreen” provision. Thus, stockholder
approval is required each time we need to increase the share
reserve allowing our stockholders the ability to have a say on our
equity compensation programs.
●
Repricing is not allowed.
The Amended
2017 Plan prohibits the repricing of outstanding equity awards and
the cancelation of any outstanding equity awards that have an
exercise price or strike price greater than the current fair market
value of our common stock in exchange for cash or other stock
awards under the Amended 2017 Plan.
●
Submission of amendments to Amended 2017 Plan
to stockholders.
The Amended 2017 Plan requires stockholder
approval for material amendments to the Amended 2017 Plan,
including as noted above, any increase in the number of shares
reserved for issuance under the Amended 2017 Plan.
●
Flexibility in designing equity compensation
scheme.
The Amended 2017 Plan allows us to provide a broad
array of equity incentives, including traditional option grants,
stock appreciation rights, restricted stock awards, restricted
stock unit awards, performance stock awards, and other stock
awards. By providing this flexibility we can quickly and
effectively react to trends in compensation practices and continue
to offer competitive compensation arrangements to attract and
retain the talent necessary for the success of our
business.
●
Restrictions on dividends
. The Amended
2017 Plan provides that (i) no dividends or dividend
equivalents may be paid with respect to any shares of our common
stock subject to an award before the date such shares have vested,
(ii) any dividends or dividend equivalents that are credited
with respect to any such shares will be subject to all of the terms
and conditions applicable to such shares under the terms of the
applicable award agreement (including any vesting conditions), and
(iii) any dividends or dividend equivalents that are credited
with respect to any such shares will be forfeited to us on the date
such shares are forfeited to or repurchased by us due to a failure
to vest.
●
Director Compensation Limit.
The
Amended 2017 Plan contains a limit on the total annual compensation
that may be paid or granted to any non-employee director for
service as a director.
●
No liberal change in control
definition
. The change in control definition in the 2018
Plan is not a “liberal” definition. A change in control
transaction must actually occur in order for the change in control
provisions in the 2018 Plan to be triggered.
●
No discounted stock options or stock
appreciation rights
. All stock options and stock
appreciation rights granted under the 2018 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 2018 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.
General 2017 Plan Information
Our
2017 Plan was adopted by the Board of Directors on April 6, 2017
and approved by our stockholders on June 20, 2017. The 2017
Plan was the successor to and continuation of the 2007 Plan. All
outstanding stock awards granted under the 2007 Plan and the 2000
Plan (collectively, the “Prior Plans”) continue to be
subject to the terms and conditions as set forth in the agreements
evidencing such stock awards and the terms of the applicable Prior
Plan; provided, however, that any shares subject to outstanding
stock awards granted under a Prior Plan that expire or terminate
for any reason prior to exercise become available for issuance
pursuant to stock awards granted under the Amended 2017 Plan.
Following June 20, 2017, the effective date of the 2017 Plan,
no additional stock awards have been granted under the Prior Plans.
As of June 20, 2017, the share reserve of the 2017 Plan
consisted of 3,000,000 new shares and up to 5,793,960 shares
subject to stock awards under the Prior Plans that may become
available for issuance pursuant to stock awards under the 2017
Plan. In January 2018, our Board of Directors adopted an amendment
to the 2017 Plan to increase the number of shares reserved for
issuance under the 2017 Plan by 500,000 shares (the
“Inducement Shares”). The Inducement Shares were not
subject to stockholder approval and may be used for stock awards
(“Inducement Awards”) only for persons not previously
an employee of the Company, or following a bona fide period of
non-employment, as an inducement material to such persons entering
into employment with the Company.
-34-
In this
Proposal 2, stockholders are requested to approve the Amended 2017
Plan. The affirmative vote of the holders of a majority of the
shares present in person or represented by proxy and entitled to
vote on this matter at the Annual Meeting will be required to
approve the adoption of the Amended 2017 Plan. Abstentions will be
counted toward the tabulation of votes cast on Proposal 2 and will
have the same effect as negative votes. Broker non-votes are
counted toward a quorum, but are not counted for any purpose in
determining whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
Description of the Amended 2017 Plan
The
material features of the Amended 2017 Plan are outlined below. This
summary is qualified in its entirety by reference to the complete
text of the Amended 2017 Plan. Stockholders are urged to read the
actual text of the Amended 2017 Plan in its entirety, which is
appended to this proxy statement as
Appendix A
and may be accessed from the
SEC’s website at
www.sec.gov
.
Background
The
terms of the Amended 2017 Plan provide for the grant of both
nonstatutory stock options (“NSOs”) and incentive stock
options (“ISOs”), restricted stock, restricted stock
units, stock appreciation rights, performance stock awards, and
other stock awards. Inducement Awards may be in the form of any of
the above-mentioned types of stock awards, other than incentive
stock options.
Shares Available for Awards
If this
Proposal 2 is approved, the total number of shares of our common
stock reserved for issuance under the Amended 2017 Plan will
consist of:
●
the number of
shares that are subject to stock awards outstanding under the 2000
Plan and the 2007 Plan, as of June 20, 2017, that subsequently
terminate prior to exercise or are reacquired, withheld or not
issued to satisfy a tax withholding obligation in connection with
an award other than a stock option or stock appreciation right;
plus
●
3,000,000 new
shares that were added to the 2017 Plan on June 20, 2017;
plus
●
500,000 Inducement
Shares that were added to the 2017 Plan on January 21, 2018;
plus
●
6,000,000 shares
being added under this Proposal 2.
We call
this aggregate number the “Share Reserve”. The Share
Reserve under the Amended 2017 Plan may be exceeded so long as the
number of shares of common stock actually issued upon the vesting
or exercise of equity awards made under the Amended 2017 Plan does
not exceed the Share Reserve.
As of
March 31, 2018, there were 922,862 shares of common stock (plus any
shares that might in the future be returned to the plan as a result
of cancellation or expiration of options) available for future
grant under the 2017 Plan. In addition, as of such date, options
covering an aggregate of 7,520,804 shares, collectively, and
183,335 shares of restricted stock were outstanding under the Prior
Plans and the 2017 Plan. The weighted average exercise price of all
options outstanding as of March 31, 2018 was approximately $3.87
and the weighted average remaining term of such options was
approximately 7.1 years. A total of 54,840,210 shares of our common
stock were outstanding as of March 31, 2018.
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, such expiration,
termination or settlement will not reduce (or otherwise offset) the
number of shares of common stock that may be issued under the
Amended 2017 Plan. If we issue common stock pursuant to a stock
award and the common stock is later forfeited, then the forfeited
shares will become available for issuance under the Amended 2017
Plan. Any shares we reacquire pursuant to our withholding
obligations and any shares we reacquire as consideration for the
exercise of an option or stock appreciation right also become
available for issuance under the Amended 2017 Plan.
Eligibility
All of
our approximately 90 employees, approximately 5 consultants and our
7 non-employee directors are eligible to participate in the Amended
2017 Plan and may receive all types of awards; provided that (i)
incentive stock options may be granted under the Amended 2017 Plan
only to our employees in the United States, and (ii) Inducement
Awards may be granted under the Amended 2017 Plan only to persons
not previously employed by us, or following a bona fide period of
non-employment, as an inducement material to such persons entering
into employment with the Company.
-35-
Limit on Non-Employee Director Compensation
Under
the Amended 2017 Plan, the following limit on compensation will
apply to non-employee directors. The aggregate value of all
compensation granted or paid, as applicable, to any individual for
service as a non-employee director with respect to any period
commencing on the date of the Company’s Annual Meeting of
Stockholders for a particular year and ending on the day
immediately prior to the date of the Company’s Annual Meeting
of Stockholders for the next subsequent year, including awards
granted and cash fees paid by the Company to such non-employee
director, will not exceed (i) $600,000 in total value or
(ii) in the event such non-employee director is first
appointed or elected to the Board during such period, $900,000 in
total value, in each case calculating the value of any awards based
on the grant date fair value of such awards for financial reporting
purposes.
Administration
The
Amended 2017 Plan is administered by our Board of Directors, which
may in turn delegate authority to administer the plan to a
committee. Our Board of Directors has delegated administration of
the Amended 2017 Plan to our Compensation Committee and an
additional Non-Officer Stock Option Committee created by the Board
that has separate but concurrent jurisdiction with the Compensation
Committee to make certain discretionary equity awards under the
Amended 2017 Plan to all eligible employees other than executive
management. Subject to the terms of the Amended 2017 Plan, our
Compensation Committee may determine the recipients, numbers and
types of stock awards to be granted, and terms and conditions of
the stock awards, including the period of their exercisability and
vesting. Subject to the terms of the Amended 2017 Plan and
limitations on the size of individual and aggregate grants that are
set quarterly by our Board of Directors, our Non-Officer Stock
Option Committee may determine the recipients and numbers of stock
options to be granted, provided that the terms and conditions of
the option awards conform to pre-approved standards regarding the
period of their exercisability and vesting. The fair market value
applicable to a stock award and the exercise price of options
granted under the Amended 2017 Plan is determined in accordance
with the terms of the Amended 2017 Plan.
At the
discretion of our Board of Directors, the Compensation Committee
may consist solely of two or more “non-employee
directors” within the meaning of Rule 16b-3 of the Exchange
Act. Our Compensation Committee has the authority to delegate
certain administrative powers to a subcommittee of one or more
members. As used herein, except as explicitly stated otherwise,
with respect to the Amended 2017 Plan, the “Board”
refers to any committee the Board of Directors appoints (including
the Compensation Committee and the Non-Officer Stock Option
Committee) or, if applicable, any subcommittee, as well as to the
Board of Directors itself.
Inducement
Awards may be granted only by an “inducement committee”
that consists of the majority of the Company’s independent
directors, or that consists of the Company’s independent
compensation committee under applicable NASDAQ listing
rules.
Repricing
Under
the Amended 2017 Plan, the Board does not have the authority to
reprice any outstanding equity awards by reducing the exercise
price of the stock award or cancelling any outstanding stock awards
in exchange for cash or other stock awards under the plan without
the approval of our stockholders (which approval must be obtained
within 12 months prior to the repricing event).
Dividends and Dividend Equivalents
The
Amended 2017 Plan provides that dividends or dividend equivalents
may be paid or credited with respect to any shares of our common
stock subject to an award (other than a stock option or stock
appreciation right), as determined by the Board and contained in
the applicable award agreement; provided, however, that (i) no
dividends or dividend equivalents may be paid with respect to any
such shares before the date such shares have vested, (ii) any
dividends or dividend equivalents that are credited with respect to
any such shares will be subject to all of the terms and conditions
applicable to such shares under the terms of the applicable award
agreement (including any vesting conditions), and (iii) any
dividends or dividend equivalents that are credited with respect to
any such shares will be forfeited to us on the date such shares are
forfeited to or repurchased by us due to a failure to
vest.
Options
Options
may be granted under the Amended 2017 Plan pursuant to stock option
agreements. The Amended 2017 Plan permits the grant of options that
qualify as incentive stock options, or ISOs, and nonstatutory stock
options, or NSOs. Individual stock option agreements may be more
restrictive as to any or all of the permissible terms described in
this section.
The
exercise price of NSOs may not be less than 100% of the fair market
value of the common stock subject to the option on the date of
grant. The exercise price of ISOs may not be less than 100% of the
fair market value of the common stock subject to the option on the
date of grant and, in some cases (see “Limitations”
below), may not be less than 110% of such fair market
value.
-36-
The
term of stock options granted under the Amended 2017 Plan may not
exceed ten years. Unless the terms of an option holder’s
stock option agreement provide for earlier or later termination, if
an option holder’s service relationship with us, or any
affiliate of ours, ceases due to (i) disability, the option
holder may exercise any vested options for up to 12 months after
the date the service relationship ends or (ii) death, the
option holder’s beneficiary, may exercise any vested options
for up to 18 months after the date the service relationship ends.
Except as explicitly provided otherwise in an option holder’s
award agreement, if an option holder’s service relationship
with us is terminated for “cause” as defined in the
Amended 2017 Plan, all options terminate upon the service
termination date, and the option holder is prohibited from
exercising any option from the time of such termination. If an
option holder’s service relationship with us ceases for any
reason other than for cause or upon disability or death, the option
holder may exercise any vested options for up to three months after
the date the service relationship ends, unless the terms of the
stock option agreement provide for a longer or shorter period to
exercise the option. In no event may an option be exercised after
its expiration date. Under the Amended 2017 Plan, the option term
may be extended in the event that exercise of the option following
termination of service is prohibited by applicable securities laws
or if the sale of stock received upon exercise of an option would
violate our insider trading policy. In no event, however, may any
option be exercised beyond the expiration of its term.
Acceptable
forms of consideration for the purchase of our common stock issued
under the Amended 2017 Plan will be determined by our Board and may
include cash, check, bank draft or money order made payable to us,
common stock previously owned by the option holder, payment through
a broker assisted exercise or, for NSOs only, a net exercise
feature, or other legal consideration approved by our
Board.
Options
granted under the Amended 2017 Plan may become exercisable in
cumulative increments, or “vest”, as determined by our
Board at the rate specified in the option agreement. Shares covered
by different options granted under the Amended 2017 Plan may be
subject to different vesting schedules as our Board may determine.
Vesting can be time-based or performance-based or can be a hybrid
of performance- and time-based vesting. Our Board also has
flexibility to provide for accelerated vesting of equity awards in
certain events. Our Board and Compensation Committee intend to
continue to grant stock options to our officers with accelerated
vesting, subject to additional conditions, in the event of a change
of control of the Company as defined in the Amended 2017
Plan.
Generally,
an option holder may not transfer a stock option other than by will
or the laws of descent and distribution or a domestic relations
order. However, an option holder may designate a beneficiary who
may exercise the option following the option holder’s
death.
Limitations
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
options or portions of options that exceed this limit are treated
as NSOs. No ISO may be granted to any person who, at the time of
the 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 option exercise
price must be at least 110% of the fair market value of the stock
subject to the option on the date of grant; and
●
the term of any ISO
must not exceed five years from the date of grant.
The
aggregate maximum number of shares of common stock that may be
issued pursuant to the exercise of ISOs will be 17.6 million
under the Amended 2017 Plan. In addition, no employee may be
granted options, stock appreciation rights, or other stock awards
under the Amended 2017 Plan covering more than two million shares
of our common stock in any calendar year.
Restricted Stock Awards
Restricted
stock awards may be granted 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 recipient’s past or future services performed for us
or an affiliate of ours, or any other form of legal consideration
acceptable to the Board. Shares of our common stock acquired under
a restricted stock award may be subject to forfeiture to us in
accordance with a vesting schedule to be determined by our Board.
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.
-37-
Restricted Stock Unit Awards
Restricted
stock unit awards may be granted pursuant to restricted stock unit
award agreements. Payment of any purchase price may be made in any
legal form acceptable to the Board. We will settle a payment due to
a recipient of a restricted stock unit award by delivery of shares
of our common stock, by cash, by a combination of cash and stock as
deemed appropriate by our Board, or in any other form of
consideration determined by our Board and set forth in the
restricted stock unit award agreement. Dividend equivalents may be
credited in respect of shares of our common stock covered by a
restricted stock unit award. Restricted stock unit awards may be
subject to vesting in accordance with a vesting schedule to be
determined by our Board. Except as otherwise provided in the
applicable restricted stock unit award agreement, restricted stock
units that have not vested will be forfeited upon the
participant’s termination of continuous service for any
reason.
Stock Appreciation Rights
Stock
appreciation rights may be granted pursuant to a stock appreciation
right agreement. Each stock appreciation right is denominated in
common stock share equivalents. The strike price of each stock
appreciation right will be determined by our Board, but shall in no
event be less than 100% of the fair market value of the stock
subject to the stock appreciation right at the time of grant. Our
Board may also impose restrictions or conditions upon the vesting
of stock appreciation rights that it deems appropriate. Stock
appreciation rights may be paid in our common stock, in cash, in
any combination of the two, or any other form of legal
consideration approved by our Board and contained in the stock
appreciation right agreement. Stock appreciation rights shall be
subject to the same conditions upon termination and restrictions on
transfer as stock options under the Amended 2017 Plan.
Performance Stock Awards
The
Amended 2017 Plan provides for the grant of performance stock
awards. Performance awards may be granted, may vest or may be
exercised based upon the attainment during a certain period of time
of certain performance goals. 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 shall be determined by the
Board.
Performance
goals under the Amended 2017 Plan shall be determined by a
committee of the Board composed solely of outside directors
members, 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) other measures of performance
selected by the Board. These performance criteria can be calculated
under generally accepted accounting principles (“GAAP”)
or can be calculated using non-GAAP results as predetermined when
establishing the performance goals.
-38-
Other Stock Awards
Other
forms of stock awards valued in whole or in part with reference to
our common stock may be granted either alone or in addition to
other stock awards under the Amended 2017 Plan. Our 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 our common stock to be granted and all
other conditions of such other stock awards. Other forms of stock
awards may be subject to vesting in accordance with a vesting
schedule to be determined by our Board.
Changes to Capital Structure
In the
event that there is a specified type of change in our capital
structure not involving the receipt of consideration by us, such as
a stock split or stock dividend, the class and number of shares
reserved under the Amended 2017 Plan (including share limits) and
the class and number of shares and exercise price or strike price,
if applicable, of all outstanding stock awards will be
appropriately adjusted.
Corporate Transactions
In the
event of certain significant corporate transactions, our Board has
the discretion to take one or more of the following actions with
respect to outstanding stock awards under the Amended 2017
Plan:
●
arrange for
assumption, continuation, or substitution of a stock award by a
surviving or acquiring entity (or its parent company);
●
arrange for the
assignment of any reacquisition or repurchase rights applicable to
any shares of our common stock issued pursuant to a stock award to
the surviving or acquiring corporation (or its parent
company);
●
accelerate the
vesting and exercisability of a stock award followed by the
termination of the stock award;
●
arrange for the
lapse of any reacquisition or repurchase rights applicable to any
shares of our common stock issued pursuant to a stock
award;
●
cancel or arrange
for the cancellation of a stock award, to the extent not vested or
not exercised prior to the effective date of the corporate
transaction, in exchange for cash consideration, if any, as the
Board, in its sole discretion, may consider appropriate;
and
●
arrange for the
surrender of a stock award in exchange for a payment equal to the
excess of (a) the value of the property the holder of the
stock award would have received upon the exercise of the stock
award, over (b) any exercise price payable by such holder in
connection with such exercise.
The
Board need not take the same action for each stock
award.
For
purposes of the Amended 2017 Plan, a corporate transaction will be
deemed to occur in the event of the consummation of (i) a sale
of all or substantially all of our consolidated assets, (ii) a
sale of at least 50% of our outstanding securities, (iii) a
merger or consolidation in which we are not the surviving
corporation, or (iv) a merger or consolidation in which we are
the surviving corporation but shares of our outstanding common
stock are converted into other property by virtue of the
transaction.
A stock
award may be subject to additional acceleration of vesting and
exercisability upon or after a change in control, as provided in
the stock award agreement or in any other written agreement between
us and the participant, but in the absence of such provision, no
acceleration shall occur.
Plan Amendments
Our
Board will continue to have the authority to amend or terminate the
Amended 2017 Plan. However, no amendment, including the one put
forth in this Proposal 2, or termination of the plan will adversely
affect any rights under awards already granted to a participant
unless agreed to by the affected participant. We will obtain
stockholder approval of any amendment to the Amended 2017 Plan as
required by applicable law.
U.S. Federal Income Tax Consequences
The
information set forth below is a summary only and does not purport
to be complete. 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 recipient may
depend on his or her particular situation, each recipient should
consult the recipient’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 as a result of an
award. The Amended 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.
-39-
Nonstatutory Stock Options
Generally,
there is no taxation upon the grant of an NSO where the option is
granted with an exercise price equal to the fair market value of
the underlying stock on the grant date. On exercise, an option
holder will recognize ordinary income equal to the excess, if any,
of the fair market value on the date of exercise of the stock over
the exercise price. If the option holder is employed by us, that
income will be subject to withholding tax. The option
holder’s tax basis in those shares will be equal to their
fair market value on the date of exercise of the option, and the
option holder’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
option holder.
Incentive Stock Options
The
Amended 2017 Plan provides for the grant of stock options that
qualify as “incentive stock options”, as defined in
Section 422 of the Code. Under the Code, an option holder
generally is not subject to ordinary income tax upon the grant or
exercise of an ISO, subject to alternative minimum tax obligations
upon exercise of an ISO. If the option holder holds a share
received on 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 holder’s tax basis in that share will be long-term
capital gain or loss.
If,
however, an option holder disposes of a share acquired on exercise
of an ISO before the end of the required holding period, which is
referred to as a disqualifying disposition, the option holder
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 the ISO was exercised 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
option holder 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 on exercise of
an ISO exceeds the exercise price of that stock option generally
will be an adjustment included in the option holder’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 on
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 an income tax deduction with respect to the grant or
exercise of an ISO or the disposition of a share acquired on
exercise of an ISO after the required holding period. If there is a
disqualifying disposition of a share, however, we are allowed a
deduction in an amount equal to the ordinary income includible in
income by the option holder, subject to Section 162(m) of the
Code and provided that amount constitutes an ordinary and necessary
business expense for us and is reasonable in amount, and either the
employee includes that amount in income or we timely satisfy our
reporting requirements with respect to that amount.
Restricted Stock Awards
Generally,
the recipient of a restricted stock award will recognize ordinary
compensation 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 compensation 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 of his or her
receipt of the stock award, to recognize ordinary compensation
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 in
exchange for the stock.
The
recipient’s tax basis for the determination of gain or loss
upon the subsequent disposition of shares acquired from stock
awards 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 stock award.
-40-
Stock Appreciation Rights
We may
grant under the Amended 2017 Plan stock appreciation rights
separate from any other award or in tandem with other awards under
the Amended 2017 Plan.
Where
the rights are granted with a strike price equal to the fair market
value of the underlying stock on the grant date and where the
recipient may only receive the appreciation inherent in the stock
appreciation rights in shares of our common stock, the recipient
will recognize ordinary compensation income equal to the fair
market value of the stock received upon such exercise. If the
recipient may receive the appreciation inherent in the stock
appreciation rights in cash or other property and the stock
appreciation right has been structured to conform to the
requirements of Section 409A of the Code, then the cash will
be taxable as ordinary compensation income to the recipient at the
time that the cash is received.
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.
Restricted Stock Units
Generally,
the recipient of a stock unit structured to conform to the
requirements of Section 409A of the Code or an exception to
Section 409A of the Code will recognize ordinary compensation
income at the time the stock is delivered equal to the excess, if
any, of the fair market value of the shares of our common stock
received over any amount paid by the recipient in exchange for the
shares of our common stock. To conform to the requirements of
Section 409A of the Code, the shares of our common stock
subject to a 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 stock units
otherwise comply with or qualify for an exception to the
requirements of Section 409A of the Code, 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 tax basis for the determination of gain or loss
upon the subsequent disposition of shares acquired from stock units
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 stock award.
Section 162 Limitations
Compensation
of persons who are “covered employees” of the Company
is subject to the tax deduction limits of Section 162(m) of the
Code. The exemption from Section 162(m)’s deduction limit for
performance-based compensation has been repealed, effective for
taxable years beginning after December 31, 2017, such that
compensation paid to our covered employees in excess of $1 million
will not be deductible unless it qualifies for transition relief
applicable to certain arrangements in place as of November 2,
2017.
Interest of Certain Persons in the Amended 2017 Plan
Stockholders
should understand that our directors, executive officers and other
employees may be considered as having an interest in the approval
of the Amended 2017 Plan because they may, in the future, receive
awards under it. If approved, the annual grants made to our
non-employee directors in connection with our Annual Meeting,
beginning with the 2018 Annual Meeting of Stockholders, would be
issued under the Amended 2017 Plan. This would include an option
for 20,000 shares for each non-employee director. The Board
believes that it is important to our growth and long-term success
to be able to continue to offer these incentives.
-41-
New Plan Benefits
Amended 2017 Plan
|
Name
and position (1)
|
Number of units
|
|
Frank Jaksch, Jr.,
Chief Executive Officer(2)
|
—
|
|
Robert Fried,
President and Chief Operating Officer(3)
|
—
|
|
Kevin Farr, Chief
Financial Officer
|
—
|
|
Mark Friedman,
General Counsel and Secretary
|
—
|
|
Troy Rhonemus,
Executive Vice President
|
—
|
|
All Current
Executive Officers as a group
|
—
|
|
All Current
Non-Employee Directors as a group(4)
|
120,000
(5)
|
|
All Current
Employees as a group (excluding all current executive
officers)
|
100,000
|
(1)
Except as listed in
the table, no other awards that may be made under the Amended 2017
Plan are currently determinable, as there are no guaranteed or
contractually required awards. Future grants are subject to
approval of our Board or the applicable committee.
(2)
In April 2018, the
Board of Directors approved a future transition of Mr. Jaksch
whereby Mr. Jaksch will transition from his role as Chief Executive
Officer, effective as of the conclusion of the Annual Meeting, to
serve as Executive Chairman of the Company, contingent and
effective upon Mr. Jaksch’s re-election at the Annual
Meeting.
(3)
In April 2018, the
Board of Directors approved a future transition of Mr. Fried
whereby Mr. Fried will transition from his role as President and
Chief Operating Officer to serve as Chief Executive Officer of the
Company, each effective as of the conclusion of the Annual
Meeting.
(4)
Includes the 6
nominees for re-election at the Annual Meeting.
(5)
As described in the
paragraph preceding the table, this amount reflects the NSO grants
to be made pursuant to our non-employee director compensation plan
at the Annual Meeting as described under “Director
Compensation” below.
-42-
2017
Equity Incentive Plan Benefits
The
following table shows, for each of the named executive officers and
the various groups indicated, the number of stock awards underlying
shares of the Company’s common stock that have been granted
(even if not currently outstanding) under the Amended 2017 Plan
since its approval by the stockholders in 2017 and through March
31, 2018.
|
2017
Equity Incentive Plan, as Amended
|
|
|
|
|
|
|
Number
of shares
|
|
Name
and position
|
subject
to grant (#)
|
|
Frank Jaksch, Jr.,
Chief Executive Officer and Director(1)
|
50,000
|
|
Robert Fried,
President, Chief Operating Officer and Director(2)
|
633,333
|
|
Kevin Farr, Chief
Financial Officer
|
1,000,000
|
|
Mark Friedman,
General Counsel and Secretary
|
500,000
|
|
Troy Rhonemus,
Executive Vice President
|
120,000
|
|
All Current
Executive Officers as a Group
|
2,303,333
|
|
All Current
Non-Executive Directors as a Group
|
220,000
|
|
All Current
Employees as a Group (including all current non-executive
officers)
|
2,892,405
|
|
Nominee for
Director
|
|
|
Frank Jaksch Jr.,
Chief Executive Officer and Director(1)
|
50,000
|
|
Robert Fried,
President, Chief Operating Officer and Director(2)
|
633,333
|
|
Stephen Block,
Non-Executive Director
|
20,000
|
|
Jeff Baxter,
Non-Executive Director
|
20,000
|
|
Kurt Gustafson,
Non-Executive Director
|
20,000
|
|
Steven Rubin,
Non-Executive Director
|
60,000
|
|
Wendy Yu,
Non-Executive Director
|
40,000
|
|
Tony Lau,
Non-Executive Director
|
40,000
|
(1)
In April 2018, the
Board of Directors approved a future transition of Mr. Jaksch
whereby Mr. Jaksch will transition from his role as Chief Executive
Officer, effective as of the conclusion of the Annual Meeting, to
serve as Executive Chairman of the Company, contingent and
effective upon Mr. Jaksch’s re-election at the Annual
Meeting.
(2)
In April 2018, the
Board of Directors approved a future transition of Mr. Fried
whereby Mr. Fried will transition from his role as President and
Chief Operating Officer to serve as Chief Executive Officer of the
Company, each effective as of the conclusion of the Annual
Meeting.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
“FOR” THE APPROVAL OF THE CHROMADEX CORPORATION AMENDED
2017 EQUITY INCENTIVE PLAN.
-43-
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 31,
2018
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 30, 2017 and December 31,
2016.
|
|
Fiscal Year Ended
|
|
|
Marcum, LLP
|
December 30, 2017
|
December 31, 2016
|
|
Audit
Fees (1)
|
$
435,000
|
$
331,000
|
|
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 30, 2017, 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.
-44-
PROPOSAL 4:
ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act of
2010 and Section 14A of the Exchange Act entitle the
Company’s stockholders to vote to approve, on an advisory
basis, the compensation of the Company’s named executive
officers as disclosed in this Proxy Statement (including the
compensation tables, and the narrative disclosures that accompany
the compensation tables) pursuant to the SEC’s rules. At the
Company’s 2015 Annual Meeting of Stockholders, the
stockholders indicated their preference that the Company solicit a
non-binding advisory vote on the compensation of the named
executive officers, commonly referred to as a “say-on-pay
vote,” every three years. The Board of Directors has adopted
a policy that is consistent with that preference. In accordance
with that policy, this year, the Company is again asking the
stockholders to approve, on an advisory basis, the compensation of
the Company’s named executive officers as disclosed in this
Proxy Statement in accordance with SEC rules.
The Company’s executive compensation programs are designed to
(1) motivate and retain executive officers, (2) reward
the achievement the Company’s short-term and long-term
performance goals, (3) establish an appropriate relationship
between executive pay and short-term and long-term performance and
(4) align executive officers’ interests with those of
the Company’s stockholders. Under these programs, the
Company’s executive officers are rewarded for the achievement
of specific financial operating goals established by the
Compensation Committee and the realization of increased stockholder
value. Please read the section herein entitled “Executive
Compensation” for additional details about the
Company’s executive compensation programs, including
information about the fiscal year 2017 compensation of the
Company’s named executive officers.
The Compensation Committee continually reviews the compensation
programs for the Company’s executive officers to ensure they
achieve the desired goals of aligning the Company’s executive
compensation structure with the Company’s stockholders’
interests and current market practices.
The Company is asking its stockholders to indicate their support
for the Company’s named executive officer compensation as
disclosed in this Proxy Statement. This proposal, commonly known as
a “say-on-pay” proposal, gives the Company’s
stockholders the opportunity to express their views on the
Company’s executive compensation. This vote is not intended
to address any specific item of compensation, but rather the
overall compensation of the Company’s named executive
officers described in this Proxy Statement. Accordingly, the
Company will ask its stockholders to vote “FOR” the
following resolution at the Annual Meeting:
“RESOLVED, that the compensation paid to ChromaDex
Corporation’s named executive officers, as disclosed in the
Company’s Proxy Statement for the 2018 Annual Meeting of
Stockholders pursuant to Item 402 of Regulation S-K,
including the Compensation Discussion and Analysis, compensation
tables and narrative discussion, is hereby
APPROVED.”
The say-on-pay vote is advisory, and therefore not binding on the
Company, the Compensation Committee or the Company’s Board of
Directors. The Company’s Board of Directors
and Compensation Committee value the opinions of the
Company’s stockholders and to the extent there is any
significant vote against the named executive officer compensation
as disclosed in this Proxy Statement, the Company will consider its
concerns and the Compensation Committee will evaluate whether any
actions are necessary to address those concerns. Unless the Board
of Directors decides to modify its policy regarding the frequency
of soliciting advisory votes on the compensation of the
Company’s named executives, the next scheduled say-on-pay
vote will be at the 2021 Annual Meeting of
Stockholders.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL OF THE
COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS, AS
STATED IN THE ABOVE NON-BINDING RESOLUTION, AND PROXIES SOLICITED
BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A STOCKHOLDER
HAS INDICATED OTHERWISE ON THE PROXY.
-45-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As of April 23, 2018, there were approximately 54,866,512 shares of
our Common Stock outstanding. The following table
sets forth certain information regarding the ownership of our
Common Stock as of April 23, 2018 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 23, 2018 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. Unless otherwise
indicated, the address for the following shareholders is c/o
ChromaDex Corporation, 10005 Muirlands Blvd, Suite G, Irvine, CA
92618.
|
Name of Beneficial Owner (1)
|
Shares of Common Stock Beneficially Owned (2)
|
Aggregate Percentage Ownership
|
|
|
|
|
|
Champion
River Ventures (3)
|
6,500,937
|
11.85
%
|
|
Pioneer
Step Holdings (4)
|
4,333,960
|
7.90
%
|
|
Dr.
Phillip Frost (5)
|
3,340,410
|
6.08
%
|
|
Michael
Brauser (6)
|
3,055,467
|
5.56
%
|
|
Black
Sheep, FLP (7)
|
2,075,052
|
3.78
%
|
|
Directors
|
|
|
|
Stephen
Allen (8)
|
175,334
|
*
|
|
Stephen
Block (9)
|
259,996
|
*
|
|
Jeff
Baxter (10)
|
129,167
|
*
|
|
Kurt
Gustafson (11)
|
33,333
|
*
|
|
Steven
Rubin (12)
|
33,333
|
*
|
|
Wendy
Yu
|
-
|
*
|
|
Tony
Lau
|
-
|
*
|
|
Frank
L. Jaksch Jr. (13)
|
3,399,008
|
6.07
%
|
|
Robert
Fried (14)
|
1,349,318
|
2.44
%
|
|
Named Executive Officers
|
|
|
|
Frank
L. Jaksch Jr.
|
(See above)
|
|
|
Robert
Fried
|
(See above)
|
|
|
Kevin
Farr (15)
|
222,222
|
*
|
|
Troy
Rhonemus (16)
|
301,693
|
*
|
|
Thomas
Varvaro (17)
|
70,100
|
*
|
|
All directors and executive officers as a group
|
|
|
|
(12 persons)
(18)
|
|
|
|
|
5,903,404
|
10.26
%
|
*
Represents less than 1%.
(1)
Addresses
for the beneficial owners listed are: Champion River Ventures, 7/F,
Cheung Kong Center, 2 Queen's Road Central, Hong Kong; Pioneer Step
Holdings, 29th Floor, Harbour Centre, 25 Harbour Road, Wanchai,
Hong Kong; Dr. Phillip Frost, 4400 Biscayne Blvd., Suite 1500,
Miami, FL 33137; Michael Brauser, 4400 Biscayne Blvd., Suite 850,
Miami, FL 33137; 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.
-46-
(3)
Based
on beneficial ownership reported on Schedule 13D/A filed with SEC
on November 21, 2017, (i) Champion River Ventures Limited
(“Champion River”) beneficially owned and had sole
voting and dispositive power with respect to 6,500,937 shares (the
“Champion Shares”), (ii) Prime Tech Global Limited
(“Prime Tech”), by virtue of being the sole shareholder
of Champion River, may be deemed to beneficially own and have sole
voting and dispositive power with respect to the Champion Shares,
(iii) Mayspin Management Limited (“Mayspin”), by virtue
of being the sole shareholder of Prime Tech, may be deemed to
beneficially own and have sole voting and dispositive power with
respect to the Champion Shares, and (iv) Li Ka Shing, by virtue of
being the sole shareholder of Mayspin, may be deemed to
beneficially own and have sole voting and dispositive power with
respect to the Champion Shares. Champion River has exercised its
right to designate for appointment one director to our Board of
Directors and has designated, and our Board of Directors has
appointed, Tony Lau to fill such seat. In addition, Mr. Li is one
of 14 directors of Li Ka Shing (Overseas) Foundation
(“LKSOF”), which is the sole stockholder of Winsave
Resources Limited (“Winsave”), which holds 1,219,512
shares of common stock. However, Mr. Li does not report as having
Section 13(d) beneficial ownership over any of the shares owned by
Winsave. Investment decisions by LKSOF are made by the majority
vote of a board of directors currently consisting of 14 persons, of
which Li Ka Shing (“Mr. Li”) is the Chairman.
Investment decisions by Winsave are made by the majority vote of a
board of directors currently consisting of five persons. Mr. Li is
not a director or officer of Winsave. The registered office address
for Champion River and Mayspin is Vistra Corporate Services Centre,
Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands
and the registered office address for PrimeTech is P.O. Box 901,
East Asia Chambers, Road Town, Tortola, British Virgin Islands, and
the correspondence address for each of Champion River, PrimeTech,
and Mayspin is c/o 7/F, Cheung Kong Center, 2 Queen’s Road
Central, Hong Kong.
(4)
Based
on beneficial ownership reported on Schedule 13D/A filed with SEC
on November 21, 2017, (i) Pioneer Step Holdings Limited
(“Pioneer Step”) beneficially owned and had sole voting
and dispositive power with respect to 4,333,960 shares (the
“Pioneer Shares”) and (ii) Chau Hoi Shuen Solina Holly,
by virtue of being the sole shareholder of Pioneer Step, may be
deemed to beneficially own and have sole voting and dispositive
power with respect to the Pioneer Shares. Pioneer Step has
exercised its right to designate for appointment one director to
our Board of Directors and has designated, and our Board of
Directors has appointed, Wendy Yu to fill such seat. The registered
office address for Pioneer Step is Vistra Corporate Services
Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin
Islands and its correspondence address is c/o 29th Floor, Harbour
Centre, 25 Harbour Road, Wanchai, Hong Kong. The business address
of Solina Chau is c/o 29th Floor, Harbour Centre, 25 Harbour Road,
Wanchai, Hong Kong.
(5)
Based
on beneficial ownership reported on form Schedule 13D/A filed with
SEC on December 29, 2017. Includes 1,321,979 shares of common stock
and warrants to purchase 88,889 shares of 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 shareholder of Frost Gamma, Inc. is Frost-Nevada
Corporation. Dr. Frost is also the sole shareholder of Frost-Nevada
Corporation. Includes 1,929,542 shares held by Phillip and Patricia
Frost Philanthropic Foundation, Inc. of which Dr. Phillip Frost is
President.
(6)
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.
(7)
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.
(8)
Includes
168,334 stock options exercisable within 60 days of April 23, 2018.
Mr. Allen will not stand for re-election at the Annual
Meeting.
(9)
Includes
243,329 stock options exercisable within 60 days of April 23,
2018.
(10)
Includes
129,167 stock options exercisable within 60 days of April 23,
2018.
(11)
Includes
33,333 stock options exercisable within 60 days of April 23,
2018.
-47-
(12)
Includes
33,333 stock options exercisable within 60 days of April 23,
2018.
(13)
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 1,122,399 stock options exercisable
within 60 days of April 23, 2018.
(14)
Includes 916,574
shares of common stock directly owned by Mr. Fried. Includes 6,744
shares held by Jeremy Fried and 6,000 shares held by Benjamin
Fried, who are both sons of Robert Fried. Includes 420,000 stock
options exercisable within 60 days
of
April 23, 2018
.
(15)
Includes
222,222 stock options exercisable within 60 days of April 23,
2018.
(16)
Includes
6,667 shares of common stock directly owned by Mr. Rhonemus.
Includes 6,134 shares owned by Toni Rhonemus IRA. Includes 288,892
stock options exercisable within 60 days of April 23,
2018.
(17)
Includes
70,100 stock options exercisable within 60 days of April 23,
2018.
(18)
Includes
the shares and stock options included above in footnotes (8)
through (16).
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
April
27, 2018
|
-48-
Appendix A
ChromaDex Corporation
2017 Equity Incentive Plan
Adopted by the Board of Directors: April 6, 2017
Approved by the Stockholders: June 20, 2017
Amended by the Board of Directors: January 21, 2018
Amended by the Board of Directors: April 24, 2018
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. The
persons eligible to receive Inducement Awards are Employees who
meet the criteria set forth in Section 3(f).
(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) Inducement 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)
. Notwithstanding anything to the contrary
set forth herein, only an Inducement Committee has the power to
grant Inducement Awards.
(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.
(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, in a manner and to the
extent it will deem necessary or expedient to make the Plan or
Award fully effective.
A-1
(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, or (E) 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 422 of the Code regarding
incentive stock options or (B) 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.
(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.
A-2
(ii)
Rule
16b-3 Compliance.
The Committee
may consist solely of two (2) or more Non-Employee Directors, in
accordance with Rule 16b-3.
(iii)
Inducement
Awards.
Notwithstanding any
other provision of the Plan to the contrary, all Inducement Awards
must be granted by an Inducement Committee.
(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.
(g)
Dividends and Dividend Equivalents.
Dividends or dividend equivalents may be paid or credited, as
applicable, with respect to any shares of Common Stock subject to a
Stock Award, as determined by the Board and contained in the
applicable Stock Award Agreement;
provided, however
, that (i) no
dividends or dividend equivalents may be paid with respect to any
such shares before the date such shares have vested under the terms
of such Stock Award Agreement, (ii) any dividends or dividend
equivalents that are credited with respect to any such shares will
be subject to all of the terms and conditions applicable to such
shares under the terms of such Stock Award Agreement (including,
but not limited to, any vesting conditions), and (iii) any
dividends or dividend equivalents that are credited with respect to
any such shares will be forfeited to the Company on the date, if
any, such shares are forfeited to or repurchased by the Company due
to a failure to meet any vesting conditions under the terms of such
Stock Award Agreement.
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 15,293,960
shares, which is the sum of (A) 3,000,000 shares approved by the
Board in April 2017 and subsequently approved by the
Company’s stockholders, plus (B) an additional 6,000,000
shares approved by the Board in April 2018 and subsequently
approved by the Company’s stockholders, plus (C) 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), (B) and (C) above, the “
Share
Reserve
”), plus (D) 500,000 shares approved by the
Board in January 2018 that may be issued pursuant to Inducement
Awards granted under Section 3(f) of the Plan.
(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.
A-3
(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.
Notwithstanding the foregoing, any Inducement
Shares that become available for issuance under the Plan pursuant
to this subsection 3(b) will only become available for issuance
pursuant to Inducement Awards.
(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)
Reserved.
(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)
Inducement Shares.
This subsection 3(f)
will apply with respect to the shares reserved under this Plan by
action of the Board (or a committee thereof) to be used exclusively
for the grant of Inducement Awards in compliance with NASDAQ
Listing Rule 5635(c)(4) (the “
Inducement
Shares
”). Notwithstanding anything to the contrary in
this Plan, an Inducement Award may be granted only to an Employee
who has not previously been an Employee or a non-Employee Director
of the Company or an Affiliate, or following a bona fide period of
non-employment, as an inducement material to the individual’s
entering into employment with the Company within the meaning of
Rule 5635(c)(4) of the NASDAQ Listing Rules.
(g)
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-4
(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.
(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.
(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 restrictions set forth in this Section 5(e) on the
transferability of Options and SARs will apply. Notwithstanding the
foregoing or anything in the Plan or a Stock Award Agreement to the
contrary, no Option or SAR may be transferred to any financial
institution without prior stockholder approval.
(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.
A-5
(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.
(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.
A-6
(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.
(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. Notwithstanding the foregoing or
anything in the Plan or a Restricted Stock Award Agreement to the
contrary, no Restricted Stock Award may be transferred to any
financial institution without prior stockholder
approval.
A-7
(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
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 Board, in its sole discretion. In addition, to
the extent permitted by applicable law and the applicable Award
Agreement, the Board may determine that cash may be used in payment
of Performance Stock Awards.
(ii)
Board
Discretion.
With respect to any Performance Stock Award, the
Board 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 Board,
in its sole discretion, may determine and (B) define the manner of
calculating the Performance Criteria it selects to use for a
Performance Period.
A-8
(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.
(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.
A-9
(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).
(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-10
(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) and 3(f);
(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 Non-Employee Director
pursuant to Section 3(e); and (iv) 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.
(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);
A-11
(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.
(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.
A-12
(c)
“
Award
”
or
“
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.
(d)
“
Award
Agreement
” or
“
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.
(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.
(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;
A-13
(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
(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-14
(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)
[
Reserved.]
(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.
(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.
A-15
(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)
“Inducement
Award”
means a Stock
Award, other than an Incentive Stock Option, granted pursuant to
Section 3(f) of the Plan.
(bb)
“Inducement
Committee”
means a Committee
consisting of the majority of the Company’s independent
directors or the Company’s independent compensation
committee, in either case in accordance with NASDAQ Listing Rule
5635(c)(4).
(cc)
“
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.
(dd)
“
Nonstatutory
Stock Option
” means an option granted pursuant to
Section
5
that does not qualify as an
Incentive Stock Option.
(ee)
“
Officer
”
means a person who is an officer of the Company within the meaning
of Section 16 of the Exchange Act.
(ff)
“
Option
”
means an Incentive Stock Option or a Nonstatutory Stock Option to
purchase shares of Common Stock granted pursuant to the
Plan.
(gg)
“
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.
(hh)
“
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).
(ii)
“
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.
(jj)
“
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.
(kk)
“
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.
A-16
(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) other measures of performance
selected by the Board.
(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.
A-17
(nn)
“
Performance
Period
” means the period of time selected by the Board
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. 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)
.
(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)
“
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%).
(aaa)
“
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-18
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 Frank L. Jaksch, Jr. and Kevin Farr 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, 10900 Wilshire Blvd, Suite 650, Los Angeles, CA 90024,
at 2:00 p.m., local time on June 22, 2018, and at any and all
postponements or adjournments thereof.
|
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1.
|
Election of Directors
|
|
☐
FOR ALL
|
|
☐
FOR ALL
EXCEPT*[ ]
|
|
☐
WITHHOLD AUTHORITY FOR
ALL
|
|
01
|
Frank L. Jaksch, Jr.
|
02
|
Stephen Block
|
03
|
Jeff Baxter
|
04
|
Robert Fried
|
|
05
|
Kurt Gustafson
|
06
|
Steven Rubin
|
07
|
Wendy Yu
|
08
|
Tony Lau
|
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.
|
|
2.
|
Approval of the Amendment to the 2017 Equity Incentive
Plan
|
||||
|
☐
FOR
|
|
☐
AGAINST
|
|
☐
ABSTAIN
|
||
|
|
3.
|
Ratification of Marcum LLP As Independent Registered Public
Accounting Firm For the Year Ending December 31, 2018
|
||||
|
☐
FOR
|
|
☐
AGAINST
|
|
☐
ABSTAIN
|
||
|
|
4.
|
Approval, on an Advisory Basis, of the Compensation of Our Named
Executive Officers
|
||||
|
☐
FOR
|
|
☐
AGAINST
|
|
☐
ABSTAIN
|
||
5.
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.
|
|
|
|
|
|
|
DATED: __________, 2018
|
|
|
|
(Name)
|
|
|
|
|
|
|
|
|
|
|
|
(Signature)
|
|
|
|
|
|
|
|
|
|
|
|
(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 602, 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 22, 2018.
The proxy statement and annual report
to security holders are available at
http://investors.chromadex.com
TABLE OF CONTENTS