CHROMADEX CORP.
10-Ks and 10-Qs
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UNITED STATES
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SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
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SCHEDULE 14A
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Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment
No. )
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Filed by the Registrant [X]
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Filed by a party other than the Registrant [
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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[X]
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under §240.14a-12
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CHROMADEX CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment of Filing Fee (Check the appropriate box):
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[X]
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title of each class of securities to which transaction
applies:
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(2)
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Aggregate number of securities to which transaction
applies:
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(3)
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was
determined):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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ChromaDex Corporation
10900 Wilshire Blvd, Suite 600
Los Angeles, CA 90024
NOTICE OF 2020 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE
19, 2020
April 21, 2020
To the stockholders of ChromaDex Corporation:
Notice is hereby given that the 2020 Annual Meeting of Stockholders
(the “Annual Meeting”) of ChromaDex Corporation, a
Delaware corporation (“we,” “us,”
“our,” “ChromaDex,” or the
“Company”), will be held on June 19, 2020, at 11:30
a.m. Pacific Time. You are being asked to vote on the following
matters:
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(1)
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To elect the eight nominees for director named herein;
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(2)
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To approve an amendment to the Company’s 2017 Equity
Incentive Plan, as amended, to, among other things, increase the
aggregate number of shares of common stock authorized for issuance
under such plan by 5.5 million shares;
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(3)
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To ratify the appointment of Marcum LLP as the Company’s
independent registered public accounting firm for the year ending
December 31, 2020; and
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(4)
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To transact other business that may properly come before the
meeting and any postponement(s) or adjournment(s)
thereof.
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The accompanying proxy statement contains additional information
and should be carefully reviewed by stockholders.
Because
of the COVID-19 pandemic, the Annual Meeting will be a completely
virtual meeting of stockholders, conducted solely online via live
webcast. You will be able to attend and participate in the Annual
Meeting online and vote your shares electronically by visiting:
www.meetingcenter.io/226139824 at the meeting date and time
described in the accompanying proxy statement. The password for the
meeting is CDXC2020. There is no physical location for the Annual
Meeting. We are utilizing the latest technology to provide safe
access for our stockholders. Hosting a virtual meeting will enable
greater stockholder attendance and participation from any location.
Questions related to the Annual
Meeting or voting matters can be submitted by email to
InvestorRelations@Chromadex.com
.
We encourage you to attend online and participate. We recommend
that you log in a few minutes before the Annual Meeting start time
of 11:30 a.m. Pacific Time on June 19, 2020, to ensure you are
logged in when the Annual Meeting begins.
Pursuant to the bylaws of the Company, the Board of Directors has
fixed the close of business on April 20, 2020 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 April 27,
2020 to our beneficial owners and stockholders of record who owned
our Common Stock at the close of business on April 20, 2020.
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/ Frank L. Jaksch Jr.
Executive
Chairman of the Board
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Whether
or not you expect to attend the Annual 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 if you attend the
Annual 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 Annual Meeting, you must obtain a proxy issued in your name
from that record holder.
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TABLE OF CONTENTS
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Introduction
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1
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Questions and Answers About these Proxy Materials and
Voting
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2
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Proposal 1: Election of Directors
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7
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Information Regarding the Board of Directors and Corporate
Governance
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11
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Proposal 2: Approval of an Amendment to the 2017 Equity Incentive
Plan
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16
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Proposal 3: Ratification of the Appointment of Independent
Registered Public Accounting Firm
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29
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Executive Officers
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30
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Executive Officers and Management Compensation
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Certain Relationships and Related Transactions
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Security Ownership of Certain Beneficial Owners and
Management
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48
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Householding of Proxy Materials
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50
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Other Business
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51
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Proxy Card
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52
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Appendix A – ChromaDex Corporation Amended 2017 Equity
Incentive Plan
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A-1
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-i-
ChromaDex Corporation
10900 Wilshire Blvd, Suite 600
Los Angeles, CA 90024
PROXY STATEMENT
FOR
2020 ANNUAL MEETING OF STOCKHOLDERS
JUNE 19, 2020
INTRODUCTION
The enclosed proxy is solicited by the Board of Directors
(“Board of Directors” or “Board”) of
ChromaDex Corporation (the “Company”), in connection
with the 2020 Annual Meeting of Stockholders (the “Annual
Meeting”) of the Company, to be held on June 19, 2020, at
11:30 a.m. Pacific Time via live webcast at
www.meetingcenter.io/226139824
due to the public health impact of the COVID-19
pandemic and to support the health and well-being of our
stockholders, employees, management and
directors.
At the Annual Meeting, you will be asked to consider and vote upon
the following matters:
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(1)
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To elect the eight nominees for director named herein;
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(2)
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To approve an amendment to the Company’s 2017 Equity
Incentive Plan, as amended, to, among other things, increase the
aggregate number of shares of common stock authorized for issuance
under such plan by 5.5 million shares;
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(3)
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To ratify the appointment of Marcum LLP as the Company's
independent registered public accounting firm for the year ending
December 31, 2020; and
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(4)
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To transact other business that may properly come before the
meeting and any postponement(s) or adjournment(s)
thereof.
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The Board of Directors has fixed the close of business on April 20,
2020 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 April 27,
2020 to our beneficial owners and stockholders of record who owned
our Common Stock at the close of business on April 20, 2020.
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 19, 2020: THE NOTICE, PROXY STATEMENT, PROXY CARD AND THE
ANNUAL REPORT ARE AVAILABLE AT
WWW.CHROMADEX.COM
,
INVESTOR RELATIONS SECTION.
-1-
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS 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
April 27, 2020
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 7,
2020
.
How can I attend the Annual Meeting?
In light of the COVID-19 pandemic, to support the health and
well-being of our stockholders, employees and directors, and taking
into account recent federal, state and local guidance, the Annual
Meeting will be a completely virtual meeting of stockholders, which
will be conducted exclusively by webcast. You are entitled to
participate in the Annual Meeting only if you were a stockholder of
the Company as of the close of business on the Record Date, or if
you hold a valid proxy for the Annual Meeting. No physical meeting
will be held. You will be able to attend the Annual Meeting online
by visiting www.meetingcenter.io/226139824. You also will be able
to vote your shares online by attending the Annual Meeting by
webcast. Questions related to the Annual Meeting or voting matters
can be submitted by email to
InvestorRelations@Chromadex.com.
To participate in the Annual Meeting, you will need to review the
information included on your Notice, on your proxy card or on the
instructions that accompanied your proxy materials. The password
for the meeting is CDXC2020. If you hold your shares through an
intermediary, such as a bank or broker, you must register in
advance using the instructions below.
The online meeting will begin promptly at 11:30 a.m., Pacific Time.
We encourage you to access the meeting prior to the start time
leaving ample time for the check in. Please follow the registration
instructions as outlined in this proxy statement.
How do I register to attend the Annual Meeting virtually on the
Internet?
If you are a registered stockholder (i.e., you hold your shares
through our transfer agent, Computershare Trust Company, N.A.), you
do not need to register to attend the Annual Meeting virtually on
the Internet. Please follow the instructions on the notice or proxy
card that you received.
Registered stockholders can attend
the meeting by accessing the meeting site at
www.meetingcenter.io/226139824 and entering the 15-digit control
number that can be found on your Notice or proxy card mailed with
the proxy materials and the meeting password,
CDXC2020.
If you hold your shares through an intermediary, such as a bank or
broker, you must register in advance to attend the Annual Meeting
virtually on the Internet. To register to attend the Annual Meeting
online by webcast you must submit proof of your proxy power (legal
proxy) reflecting your ChromaDex Corporation holdings along with
your name and email address to Computershare. Requests for
registration must be labeled as “Legal Proxy” and be
received no later than 5:00 p.m., Eastern Time, on June 16, 2020.
You will receive a confirmation of your registration by email after
we receive your registration materials.
Requests for registration should be directed to us at the
following:
By email
Forward the email from your broker, or attach an image of your
legal proxy, to legalproxy@computershare.com
By mail
Computershare
ChromaDex Corporation Legal Proxy
P.O. Box 43001
Providence, RI 02940-3001
-2-
Who can vote at the Annual Meeting?
Only
stockholders of record at the close of business on
April 20, 2020
will be entitled to vote at
the Annual Meeting. On this record date, there were 59,787,897
shares of
common stock outstanding and
entitled to vote.
Stockholder of Record: Shares Registered in Your Name
If on
April 20, 2020
your shares were
registered directly in your name with
the Company
’s transfer agent,
Computershare Trust Company,
N.A.
, then you are a stockholder of record. As a stockholder
of record, you may vote 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.
Registered stockholders can attend the meeting by accessing the
meeting site at www.meetingcenter.io/226139824 and entering the
15-digit control number that can be found on your Notice or proxy
card mailed with the proxy materials and the meeting password,
CDXC2020.
Beneficial Owner: Shares Registered in the Name of a Broker or
Bank
If on
April 20, 2020 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 at the meeting unless you request and
obtain
a
valid proxy from your broker or other agent.
What am I voting on?
There
are three matters scheduled for a vote:
●
To elect the eight nominees for director named
herein
;
●
To approve an
amendment to the 2017 Equity Incentive Plan, as amended, to, among
other things, increase the number of authorized shares for issuance
under such plan by 5.5 million shares; and
●
To
ratify the appointment of Marcum LLP as the Company's independent
registered public accounting firm for the year ending December 31,
2020.
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.
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 at the Annual Meeting or
vote by proxy using the enclosed proxy card. Alternatively, you may
vote by proxy either by telephone or on the Internet. 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 even if you have already voted by proxy.
●
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.
●
To vote over the
telephone, dial toll-free
1-800-652-VOTE (8683)
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 5
:00 p.m.
,
Eastern Time
on
June 18, 2020
to be counted.
●
To vote through the
internet, go to
www.envisionreports.com/CDXC
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 5
:00 p.m.
,
Eastern Time
on
June 18, 2020
to be counted.
●
To
vote during the Annual Meeting, follow the instructions posted
at www.meetingcenter.io/226139824.
-3-
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 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.
What if I have technical difficulties or trouble accessing the
virtual Annual Meeting?
We will
have technicians ready to assist you with any technical
difficulties you may have accessing the virtual Annual Meeting. If
you encounter any difficulties accessing the virtual Annual Meeting
during the check-in or meeting time, please click on the
“Support” link in the upper right of the broadcast
screen to access: https://support.vevent.com. Technical support
will be available starting at 9:00 a.m. Pacific Time on June 19,
2020.
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 20,
2020
.
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 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 Proposal 1 or Proposal 2 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,
“For” the proposal to approve an amendment to the 2017
Equity Incentive Plan, as amended, to, among other things, increase
the number of authorized shares for issuance under such plan by 5.5
million shares,
and “For”
the proposal to ratify the appointment of Marcum LLP as the
Company's independent registered public accounting firm for the
year ending December 31, 2020.
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.
-4-
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 grant a
subsequent proxy by telephone or through the internet.
●
You may send a
timely written notice that you are revoking your proxy to
the Company’s
Secretary
at 10900 Wilshire Blvd. Suite 600, Los Angeles, CA
90024.
●
You may vote during
the Annual Meeting which will be hosted via the
Internet.
Your
most current proxy card or telephone or internet proxy is the one
that is counted.
Beneficial Owner: Shares Registered in the Name of Broker or
Bank
If your
shares are held by your broker or bank as a nominee or agent, you
should follow the instructions provided by your broker or
bank.
When are stockholder proposals and director nominations due for
next year’s Annual Meeting?
To be
considered for inclusion in the Company’s proxy materials for
next year’s annual meeting, your proposal must be submitted
in writing by December 28, 2020, to ChromaDex Corporation, Attn:
Secretary, at 10900 Wilshire Blvd. Suite 600, 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 21, 2021 nor later than the close of business
on April 20, 2021. 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 Proposal 2 and Proposal 3,
votes “For” and “Against,” and abstentions.
Abstentions will be counted towards
the vote total for Proposal 2 and Proposal 3 and will have the same
effect as “Against” votes.
Broker non-votes have
no effect and will not be counted towards the vote total for any
proposal.
What are “broker non-votes”?
As
discussed above, when a beneficial owner of shares held in
“street name” does not give instructions to the broker
or nominee holding the shares as to how to vote on matters deemed
by the NYSE to be “non-routine,” the broker or nominee
cannot vote the shares. These unvoted shares are counted as
“broker non-votes.”
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 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, as
amended, to, among other things, increase the number of authorized
shares for issuance under such plan by 5.5 million
shares
|
|
“For” votes from the holders of a majority of shares
present in person or represented by proxy and entitled to vote on
the matter
|
|
Against.
|
|
None.
|
|
Ratification of the Appointment of Marcum LLP as our Independent
Registered Public Accounting Firm for our Fiscal Year Ending
December 31, 2020
|
|
“For” votes from the holders of a majority of shares
present in person or represented by proxy and entitled to vote on
the matter
|
|
Against.
|
|
None.
|
Vote cast online during the virtual Annual Meeting will constitute
votes cast in person at the Annual Meeting for purposes of the
votes.
-5-
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. Virtual attendance at the Annual Meeting
constitutes presence in person for purposes of a quorum at the
meeting. Thus, holders representing at least
29,893,949
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
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.
-6-
PROPOSAL 1:
ELECTION OF DIRECTORS
Each director to be elected at the Annual Meeting will serve until
the next annual meeting of stockholders
and until his or her
successor is elected, or, if sooner, until such director’s
death, resignation or removal
. Unless
otherwise instructed, the persons named in the accompanying proxy
intend to vote the shares represented by the proxy for the election
of the 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, 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, including Stephen Block, Jeff
Baxter, Kurt Gustafson, Steven Rubin, Wendy Yu and Tony Lau are
independent directors within the meaning of the applicable NASDAQ
rules.
The following table sets forth the director nominees. It also
provides certain information about the nominees as of the Record
Date.
Nominees for Election to Board of Directors
|
|
|
|
|
Director
|
|
Name
|
|
Age
|
|
Since
|
|
Frank
Jaksch, Jr.
|
|
51
|
|
2000
|
|
Stephen
A. Block
|
|
75
|
|
2007
|
|
Jeff
Baxter
|
|
58
|
|
2015
|
|
Robert
Fried
|
|
60
|
|
2015
|
|
Kurt
Gustafson
|
|
52
|
|
2016
|
|
Steven
Rubin
|
|
59
|
|
2017
|
|
Wendy
Yu
|
|
44
|
|
2017
|
|
Tony
Lau
|
|
31
|
|
2017
|
Frank L. Jaksch Jr.
, 51,
is a Co-Founder of the Company and has
served as a member of the 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. In June 2018,
Mr. Jaksch transitioned from Chief Executive Officer to Executive
Chairman of the Board. Mr. Jaksch oversees research, strategy and
operations for the Company with a focus on scientific and novel
products for pharmaceutical and nutraceutical markets. From 1993 to
1999, Mr. Jaksch served as International Subsidiaries Manager of
Phenomenex, a life science supply company where he managed the
international subsidiary and international business development
divisions. Mr. Jaksch earned a B.S. in Chemistry and Biology from
Valparaiso University. 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.
Stephen A. Block
, 75, 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. Until November 2018, when
Senomyx, Inc. was sold to Firmenich, Inc., an unaffiliated third
party, Mr. Block was a director and chair of the nominating and
corporate governance committee and a member of the audit committee
of Senomyx, Inc., where he had 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
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.
-7-
Jeff Baxter,
58, 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 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 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. 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
, 60, became Chief Executive Officer in June
2018. He has served as a director of the Company since July 2015,
President and Chief Operating Officer from January to June 2018 and
President and Chief Strategy Officer from March 2017 to January
2018. Mr. Fried also served as a member of the Nominating and
Corporate Governance Committee from July 2015 to March 2017. Mr.
Fried has served as Chairman of the Board of Directors of Tiger
Media, Inc., which is now Fluent, Inc. (NASDAQ: FLNT), an
information solutions provider focused on data-driven digital
marketing services, from 2011 until June 2015. From 2007 to 2017,
Mr. Fried was the founder and Chief Executive Officer of
Spiritclips LLC, now called Hallmark Movies Now, a subscription
streaming video service, which was acquired by Hallmark Cards Inc.
in 2012. Mr. Fried is 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. 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 is a member of the Board of
Directors of the Council for Responsible Nutrition and 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 brings financial expertise and industry knowledge to the
Board.
Kurt A. Gustafson
, 52, 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. 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 Inc. (Nasdaq: AMGN), holding various
financial roles as vice president finance, chief financial officer
of Amgen International and treasurer. Prior to joining Amgen Inc.,
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. Mr. Gustafson serves as Chair of Xencor,
Inc.’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.
-8-
Steven D. Rubin
, 59, 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 currently serves 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: 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; Neovasc, Inc. (NASDAQ:NVCN), a company developing and
marketing medical specialty vascular devices; and Red Violet, Inc.,
a software and services company that specializes in big data
analysis providing cloud-based mission-critical information
solutions to enterprises in a variety of industries. Red Violet,
Inc. serves customers in the United States. 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: Castle Brands,
Inc. (NYSE:ROX), a developer and marketer of premium brand spirits;
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; VBI Vaccines Inc. (NASDAQ CM: VBIV), a
commercial-stage biopharmaceutical company developing a next
generation of vaccines; 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
, 44, 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
, 31, 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.
2019 Director Compensation
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
$40,000 for serving on the Board and, if applicable, an additional
annual retainer of $30,000 for serving as the Lead Independent
Director. 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 $5,000, respectively, per year for service on
such committee.
Any
non-employee director who is first elected to the Board will be
granted an option to purchase 40,000 shares of our common stock on
the date of his or her initial election to the Board. In addition,
on the date of each annual meeting, each person who continues to
serve as a non-employee member of the Board following such annual
meeting will be granted a stock option to purchase 20,000 shares of
our common stock. All option grants will have an exercise price per
share equal to the fair market value of our common stock on the
date of grant. Each initial grant for a non-employee director will
vest over a three year period, and each annual grant for a
non-employee director will vest over a one year period, in each
case subject to the director’s continuing service on our
Board.
-9-
The
following table provides information concerning compensation of our
non-employee directors who were directors during the fiscal year
ended December 31, 2019. The compensation reported is for services
as directors for the fiscal year ended December 31,
2019.
Director Compensation Table
|
Name
|
Fees
Earned or
Paid in
Cash ($)
|
Stock Awards($)
|
Option Awards($)(1)
|
Non-Equity Incentive Plan Compensation ($)
|
Non-Qualified Deferred
Compensation
Earnings ($)
|
All Other Compensation($)
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
Stephen
Block (2)
|
65,000
|
-
|
44,727
|
-
|
-
|
-
|
109,727
|
|
Jeff
Baxter (3)
|
55,000
|
-
|
44,727
|
-
|
-
|
-
|
99,727
|
|
Kurt
Gustafson (4)
|
97,500
|
-
|
44,727
|
-
|
-
|
-
|
142,227
|
|
Steven
Rubin (5)
|
50,000
|
-
|
44,727
|
-
|
-
|
-
|
94,727
|
|
Wendy
Yu (6)
|
45,000
|
-
|
44,727
|
-
|
-
|
-
|
89,727
|
|
Tony
Lau (7)
|
47,500
|
-
|
44,727
|
-
|
-
|
-
|
92,227
|
(1) The
amounts in the column titled “Option Awards” above
reflect the aggregate grant date fair value of stock option awards
for the fiscal year ended December 31, 2019. See Note 14 of the
ChromaDex Corporation Consolidated Financial Report included in the
Form 10-K for the year ended December 31, 2019, filed with the SEC
on March 10, 2020, for a description of certain assumptions in the
calculation of the fair value of the Company’s stock options.
The
options have an exercise price of
$3.80 and vest 100% on June 21, 2020.
(2) On June 21, 2019, Mr. Block was awarded the option to purchase
20,000 shares of the Company’s common stock.
(3) On June 21, 2019, Mr. Baxter was awarded the option to purchase
20,000 shares of the Company’s common stock.
(4) On June 21, 2019, Mr. Gustafson was awarded the option to
purchase 20,000 shares of the Company’s common
stock.
(5) On June 21, 2019, Mr. Rubin was awarded the option to purchase
20,000 shares of the Company’s common stock.
(6) On June 21, 2019, Ms. Yu was awarded the option to purchase
20,000 shares of the Company’s common stock.
(7) On June 21, 2019, Mr. Lau was awarded the option to purchase
20,000 shares of the Company’s common stock.
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.
-10-
INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE
GOVERNANCE
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 Investor
Relations section of 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 the Investor Relations section of 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 four meetings during 2019. 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 an Executive Chairman, Frank Jaksch,
who
has authority, among other things, to call and preside over
meetings of the Board of Directors, to set meeting agendas and to
determine materials to be distributed to the Board of
Directors
. 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. Kurt
Gustafson serves as lead independent director.
The Board of Directors has determined that the 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
serves as the liaison between the Executive Chairman and the
independent directors and his responsibilities, 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, 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 its 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.
-11-
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 31, 2019
for each of our Board
committees:
|
Name
|
|
Audit
|
|
Compensation
|
|
Nominating and Corporate Governance
|
|
Jeff
Baxter
|
|
X
|
|
|
|
X
|
|
Stephen
Block
|
|
X
|
|
X(1)
|
|
|
|
Kurt
Gustafson
|
|
X(1)
|
|
X
|
|
|
|
Tony
Lau
|
|
|
|
X
|
|
|
|
Steven
Rubin
|
|
|
|
|
|
X(1)
|
|
Wendy
Yu
|
|
|
|
|
|
X
|
|
Total
meetings in fiscal year ended December 31, 2019
|
|
5
|
|
5
|
|
3
|
(1)
Committee
Chairperson.
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 five times
during the last fiscal year. The Board of Directors has adopted a
written Audit Committee charter that is available to stockholders
on the Investor Relations section of 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 2019.
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).
-12-
The Board of Directors has also determined that Mr. Gustafson also
qualifies as an “audit committee financial expert,” as
defined in applicable SEC rules. The Board made a qualitative
assessment of Mr. Gustafson’s level of knowledge and
experience based on a number of factors, including his formal
education and experience as a chief financial officer for public
reporting companies.
Report of the Audit Committee of the Board of
Directors
This report of the audit committee is required by the SEC and, in
accordance with the SEC's rules, will not be deemed to be part of
or incorporated by reference by any general statement incorporating
by reference this proxy statement into any filing under the
Securities Act, or under the Exchange Act, except to the extent
that we specifically incorporate this information by reference, and
will not otherwise be deemed "soliciting material" or "filed" under
either the Securities Act or the Exchange Act.
The Audit Committee has reviewed and discussed the audited
financial statements for the fiscal year ended December 31, 2019
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 the applicable
requirements of the Public Company Accounting Oversight Board
(“PCAOB”) and the SEC. The Audit Committee has also
received the written disclosures and the letter from the
independent registered public accounting firm required by
applicable requirements of the PCAOB regarding the independent
accountants’ communications with the audit committee
concerning independence, and has discussed with the independent
registered public accounting firm the accounting firm’s
independence. Based on the foregoing, the Audit Committee has
recommended to the Board of Directors that the audited financial
statements be included in the Company’s Annual Report on Form
10-K for the fiscal year ended December 31, 2019.
Submitted by:
The Audit Committee of
The Board of Directors
Kurt
Gustafson (Chairman)
Stephen Block
Jeff Baxter
Compensation Committee
Our Compensation Committee currently consists of three directors:
Stephen Block (chairman), Kurt Gustafson and Tony Lau. 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 five times during
fiscal year 2019. The Board has adopted a written Compensation
Committee charter that is available to stockholders on the Investor
Relations section of 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
2019.
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.
If applicable, the Compensation Committee will review with
management the Company’s Compensation Discussion and Analysis
and will consider whether to recommend that it be included in proxy
statements and other filings.
-13-
The
Compensation Committee has the 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 has paid and will pay cash bonuses to its executive
officers in 2020 for 2019 performance based upon achievements of
certain goals. For additional information regarding the performance
bonus amounts, see “Executive Officers and Management
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 31,
2019.
Submitted
by:
The
Compensation Committee of
The
Board of Directors
Stephen
Block, Chairman
Kurt
Gustafson
Tony
Lau
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee currently
consists of three directors: Steven Rubin (chairman), Jeff Baxter
and Wendy Yu. 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 three times
during the last fiscal year. The Board has adopted a written
Nominating and Corporate Governance Committee charter that is
available to stockholders on the Investor Relations section of 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 2019.
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.
-14-
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 600, 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.
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
600, 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. Eight directors
attended the Company’s most recent annual meeting of
stockholders held on June 21, 2019.
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 Block, Jeff Baxter, Kurt Gustafson,
Steven Rubin, Wendy Yu and Tony Lau. Frank L. Jaksch Jr. and Robert
Fried do not meet the independence standards because of their
employment with the Company
.
-15-
PROPOSAL 2:
APPROVAL OF AN AMENDMENT TO THE 2017 EQUITY INCENTIVE
PLAN
Overview
On
April 16, 2020, 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 5.5 million shares. We refer to
the 2017 Plan, as amended on April 16, 2020, 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 5.5 million
shares may be issued pursuant to
stock awards granted under the Amended 2017 Plan.
●
The Amended 2017
Plan provides that an additional 5.5 million
shares may be issued pursuant to
the exercise of incentive stock options under the Amended 2017
Plan.
●
The Amended 2017
Plan adds a fungible share counting provisions that assign a higher
share deduction from the pool for full value awards, effective for
awards granted on or after the date of the Annual
Meeting.
●
The Amended 2017
Plan removes certain liberal share recycling provisions that
provided for the Company to recycle shares that were used for tax
withholding or the payment of the exercise price of awards,
effective on or after the date of the Annual Meeting.
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 5.5 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, 2020, stock awards covering an aggregate of 12,194,125
shares were outstanding under our 2007 Equity Incentive Plan (the
“2007 Plan”), our 2000 Non-Qualified Incentive Stock
Option Plan (the “2000 Plan”) and the 2017 Plan. In
addition, 1,205,698
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, 2020
|
|
Total number of
shares of common stock subject to outstanding stock
options
|
12,194,125
|
|
Weighted-average
exercise price of outstanding stock options
|
$
3.86
|
|
Weighted-average
remaining term of outstanding stock options
|
7.0 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
|
1,205,698
|
|
Total number of
shares of common stock available for grant under other equity
incentive plans
|
0
|
|
Total number of
shares of common stock outstanding
|
59,787,897
|
|
Per-share closing
price of common stock as reported on NASDAQ Global Select
Market
|
$
3.26
|
-16-
The Size of Our Share Reserve Increase Request Is
Reasonable
If our
request to increase the share reserve of the Amended 2017 Plan by
5.5 million shares is approved, we will have approximately 6.7
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 next two years. We anticipate
seeking approval from our stockholders in 2022 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 2019, 2018 and 2017.
|
As
of December 31
|
2019
|
2018
|
2017
|
|
Full
Dilution(1)
|
18.6
%
|
20.6
%
|
12.9
%
|
|
Gross Burn
Rate(2)
|
4.9
%
|
6.2
%
|
6.2
%
|
(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
2019, 2018 and 2017.
|
Fiscal
Year
|
2019
|
2018
|
2017
|
|
Total number of
shares of common stock subject to stock options
granted
|
2,603,070
|
3,070,747
|
2,285,404
|
|
Total number of
shares of common stock subject to full value awards
granted
|
166,666
|
333,334
|
500,000
|
|
Weighted-average
number of shares of common stock outstanding
|
57,056,379
|
55,005,949
|
44,598,879
|
|
Burn
Rate
|
4.9
%
|
6.2
%
|
6.2
%
|
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;
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.
-17-
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. On April 24, 2018, our Board of
Directors approved an additional 6,000,000 shares to be issued
under the 2017 Plan and our stockholders approved on June 22, 2018.
On April 16, 2020, our Board of Directors approved an additional
5,500,000 shares to be issued under the 2017 Plan.
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 Amended
2017 Plan is not a “liberal” definition. A change in
control transaction must actually occur in order for the change in
control provisions in the Amended 2017 Plan to be
triggered.
-18-
●
No liberal share counting provisions
.
Effective on or after the date of the Annual Meeting, the following
shares will not become available again for issuance under the 2020
Plan: (i) any shares that are reacquired or withheld (or not
issued) by us to satisfy the exercise or purchase price of an
award; (ii) any shares that are reacquired or withheld (or not
issued) by us to satisfy a tax withholding obligation in connection
with an award; and (iii) any shares repurchased by us on the open
market with the proceeds of the exercise or purchase price of an
award.
●
Fungible share counting
. Effective for
awards granted on or after the date of the Annual Meeting, the
Amended 2017 Plan contains a “fungible share counting”
structure, whereby the number of shares of our common stock
available for issuance under the Amended 2017 Plan will be reduced
by (i) one share for each share issued pursuant to a stock option
or stock appreciation right with an exercise price that is at least
100% of the fair market value of our common stock on the date of
grant (an “Appreciation Award”) granted under the
Amended 2017 Plan and (ii) 1.5 shares for each share issued
pursuant to a stock award that is not an Appreciation Award (a
“Full Value Award”) granted under the Amended 2017
Plan. As part of such fungible share counting structure, the number
of shares of our common stock available for issuance under the
Amended 2017 Plan will be increased by (i) one share for each share
that becomes available again for issuance under the terms of the
Amended 2017 Plan subject to an Appreciation Award and (ii) 1.5
shares for each share that becomes available again for issuance
under the terms of the Amended 2017 Plan subject to a Full Value
Award.
●
No discounted stock options or stock
appreciation rights
. All stock options and stock
appreciation rights granted under the Amended 2017 Plan must have
an exercise or strike price equal to or greater than the fair
market value of our common stock on the date the stock option or
stock appreciation right is granted.
●
Administration by independent
committee
. The Amended 2017 Plan will be administered by the
members of our Compensation Committee, all of whom are
“non-employee directors” within the meaning of Rule
16b-3 under the Exchange Act and “independent” within
the meaning of the NASDAQ listing standards.
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
that were added to the 2017 Plan in April 2018- and approved by our
shareholders; plus
●
5,500,000 shares
being added under this Proposal 2.
-19-
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,
2020, there
were 1,205,698 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 12,194,125 shares, collectively, and 183,335 shares or
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, 2020 was approximately $3.86 and the
weighted average remaining term of such options was approximately
7.0 years. A total of 59,787,897 shares of our common stock were
outstanding as of March 31, 2020.
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. Effective on or after the date of the Annual Meeting, 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 will not become available for issuance
under the Amended 2017 Plan.
The
Amended 2017 Plan contains a “fungible share counting”
structure, whereby the number of shares of our common stock
available for issuance under the Amended 2017 Plan will be reduced,
effective for awards granted on or after the date of the Annual
Meeting, by (i) one share for each share issued pursuant to an
Appreciation Award granted under the Amended 2017 Plan and (ii) 1.5
shares for each share issued pursuant to a stock award that is a
Full Value Award granted under the Amended 2017 Plan. As part of
such fungible share counting structure, the number of shares of our
common stock available for issuance under the Amended 2017 Plan
will be increased by (i) one share for each share that becomes
available again for issuance under the terms of the Amended 2017
Plan subject to an Appreciation Award and (ii) 1.5 shares for each
share that becomes available again for issuance under the terms of
the Amended 2017 Plan subject to a Full Value Award.
Eligibility
All of
our approximately 105 employees, approximately 10 consultants and
our 6 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.
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.
-20-
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.
The
term of stock options granted under the Amended 2017 Plan may not
exceed ten years. Unless the terms of an optionholder’s stock
option agreement provide for earlier or later termination, if an
optionholder’s service relationship with us, or any affiliate
of ours, ceases due to (i) disability, the optionholder may
exercise any vested options for up to 12 months after the date the
service relationship ends or (ii) death, the
optionholder’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 optionholder’s
award agreement, if an optionholder’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 optionholder is prohibited from
exercising any option from the time of such termination. If an
optionholder’s service relationship with us ceases for any
reason other than for cause or upon disability or death, the
optionholder 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. For example, non-employee directors have
three years from the end of their service on the Board to exercise
options that have vested as of their service termination date. 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 optionholder, payment through
a broker assisted exercise or, for NSOs only, a net exercise
feature, or other legal consideration approved by our
Board.
-21-
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 optionholder may not transfer a stock option other than by will
or the laws of descent and distribution or a domestic relations
order. However, an optionholder may designate a beneficiary who may
exercise the option following the optionholder’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 approximately 23.1
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.
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.
-22-
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.
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.
-23-
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 qualifying termination of continuous
service that occurs in connection with 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.
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
optionholder 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 optionholder is employed by us,
that income will be subject to withholding tax. The
optionholder’s tax basis in those shares will be equal to
their fair market value on the date of exercise of the option, and
the optionholder’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
optionholder.
-24-
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 optionholder
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 optionholder 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 optionholder 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 optionholder
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
optionholder 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 optionholder’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 optionholder, 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.
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.
-25-
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. The Board believes that it is important to our
growth and long-term success to be able to continue to offer these
incentives.
-26-
New Plan Benefits
Amended 2017 Plan
|
Name
and position (1)
|
Number
of units
|
|
Robert Fried, Chief
Executive Officer
|
—
|
|
Kevin Farr, Chief
Financial Officer
|
—
|
|
Frank Jaksch, Jr.,
Executive Chairman
|
—
|
|
Mark Friedman,
General Counsel and Corporate Secretary
|
—
|
|
Megan Jordan, Chief
Communications Officer and Senior Vice President of Global
Marketing
|
—
|
|
All Current
Executive Officers as a group
|
—
|
|
All Current
Non-Employee Directors as a group (2)
|
120,000
(3)
|
|
All Current
Employees as a group (excluding all current executive
officers)
|
—
|
(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)
Includes the 6
nominees for re-election at the Annual Meeting.
(3)
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.”
-27-
Amended
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, 2020.
|
Amended
2017 Equity Incentive Plan
|
|
|
|
|
|
|
Number
of shares
|
|
Name
and position
|
subject
to grant (#)
|
|
Robert Fried, Chief
Executive Officer and Director
|
2,205,154
|
|
Kevin Farr, Chief
Financial Officer
|
1,198,308
|
|
Frank Jaksch, Jr.,
Executive Chairman
|
179,088
|
|
Mark Friedman,
General Counsel and Corporate Secretary
|
698,308
|
|
Megan Jordan, Chief
Communications Officer and Senior Vice President of Global
Marketing
|
500,000
|
|
All Current
Executive Officers as a Group
|
4,780,858
|
|
All Current
Non-Executive Directors as a Group
|
440,000
|
|
All Current
Employees as a Group (including all current non-executive
officers)
|
4,264,932
|
|
Nominee for
Director
|
|
|
Frank Jaksch, Jr.,
Executive Chairman
|
179,088
|
|
Robert Fried, Chief
Executive Officer and Director
|
2,205,154
|
|
Stephen Block,
Non-Executive Director
|
60,000
|
|
Jeff Baxter,
Non-Executive Director
|
60,000
|
|
Kurt Gustafson,
Non-Executive Director
|
60,000
|
|
Steven Rubin,
Non-Executive Director
|
100,000
|
|
Wendy Yu,
Non-Executive Director
|
80,000
|
|
Tony Lau,
Non-Executive Director
|
80,000
|
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 UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
“FOR” THE APPROVAL OF THE AMENDMENT TO THE CHROMADEX
CORPORATION 2017 EQUITY INCENTIVE PLAN.
-28-
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,
2020
and our Board of Directors has further directed that
management submit the selection of its independent registered
public accountant firm for ratification by the stockholders at the
Annual Meeting. Marcum has audited the Company’s financial
statements since 2013. Representatives of Marcum are not expected
to be present at the Annual Meeting.
Stockholder
ratification of the selection of Marcum as the Company’s
independent registered public accountants is not required by
Delaware law, the Company’s certificate of incorporation, or
the Company’s bylaws. However, the Audit Committee is
submitting the selection of Marcum to the stockholders for
ratification as a matter of good corporate practice. If the
stockholders fail to ratify the selection, the Audit Committee will
reconsider whether to retain that firm. Even if the selection is
ratified, the Audit Committee in its discretion may direct the
appointment of different independent registered public accountants
at any time during the year if the Audit Committee determines that
such a change would be in the best interests of the Company and its
stockholders.
The
affirmative vote of the holders of a majority of the shares present
in person or represented by proxy and entitled to vote at the
annual meeting will be required to ratify the selection of Marcum.
Abstentions will be counted toward the tabulation of votes cast on
Proposal 3 and will have the same effect as negative votes. Broker
non-votes will be counted towards a quorum, but will not be counted
for any purpose in determining whether Proposal 3 has been
approved.
Audit Fees
The following table sets forth aggregate fees billed to us by
Marcum LLP, our independent registered public accounting firm
during the fiscal years ended December 31, 2019 and December 31,
2018.
|
|
Fiscal Year Ended
|
|
|
Marcum, LLP
|
December 31, 2019
|
December 31, 2018
|
|
Audit
Fees (1)
|
$
434,000
|
$
350,000
|
|
Audit-Related
Fees
|
$
—
|
$
—
|
|
Tax
Fees
|
$
—
|
$
—
|
|
All
Other Fees
|
$
—
|
$
—
|
|
(1)
|
Audit
fees consist of fees billed for professional services rendered by
Marcum in connection with the audit of the Company’s annual
financial statements and internal control over financial reporting
and quarterly review of financial statements included in the
Company’s Quarterly Reports on Form 10-Q, review of our
registration statements and related services that are normally
provided in connection with statutory and regulatory filings or
engagements.
|
All fees described above were pre-approved by the Audit Committee.
In connection with the audit of the financial statements for the
fiscal year ended December 31, 2019, the Company entered into an
engagement agreement with Marcum that sets forth the terms by which
Marcum will perform audit services for the Company.
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.
-29-
EXECUTIVE OFFICERS
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. The persons listed below served as
our executive officers during 2019:
|
Name
|
|
Age
|
|
Position
|
|
Frank Jaksch, Jr.
|
|
51
|
|
Executive Chairman of the Board
|
|
Robert Fried
|
|
60
|
|
Chief Executive Officer and Director
|
|
Kevin Farr
|
|
62
|
|
Chief Financial Officer
|
|
Mark Friedman
|
|
62
|
|
General Counsel and Corporate Secretary
|
|
Lisa Bratkovich (1)
|
|
53
|
|
Former Chief Marketing Officer
|
|
Matthew Roberts (2)
|
|
51
|
|
Former Chief Scientific Officer and Senior Vice President of
Innovation
|
(1)
Ms. Bratkovich served as Chief Marketing Officer until
January 10, 2020.
(2) Mr.
Roberts served as Chief Scientific Officer and Senior Vice
President of Innovation until February 7, 2020.
The
persons listed below are our executive officers as of the date
hereof:
|
Name
|
|
Age
|
|
Position
|
|
Frank Jaksch, Jr.
|
|
51
|
|
Executive Chairman of the Board
|
|
Robert Fried
|
|
60
|
|
Chief Executive Officer and Director
|
|
Kevin Farr
|
|
62
|
|
Chief Financial Officer
|
|
Mark Friedman
|
|
62
|
|
General Counsel and Corporate Secretary
|
|
Megan Jordan (1)
|
|
50
|
|
Chief Communications Officer and Senior Vice President of Global
Marketing
|
(1)
Ms. Jordan joined the Company in August 2019, but was
appointed an executive officer in March 2020.
Kevin Farr
, 62, has served as
Chief Financial Officer since October 2017. Mr. Farr previously
served as the Chief Financial Officer of Mattel, Inc. (NASDAQ:MAT)
from February 2000 through September 2017, and prior to that served
in 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, the Westside Los
Angeles Ronald McDonald House Charities and as a board member of
Polaris Industries Inc. Mr. Farr received his Master of Business
Administration from Northwestern University J. L. Kellogg Graduate
School of Business, and his B.S. in Accounting from Michigan State
University.
Mark Friedman
, 62, has served
as the Company’s General Counsel and Corporate Secretary
since January 2018. From 2013 to January 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 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.
Megan Jordan
, 50, has served as
the Company’s Chief Communications Officer and Senior Vice
President of Corporate Affairs since August 2019. In January 2020,
Ms. Jordan assumed the additional role of Senior Vice President of
Global Marketing. In her role, Ms. Jordan oversees the
Company’s internal and external communications, marketing,
social media, content strategy, thought leadership and advertising.
From May 2015 to December 2018, Ms. Jordan was the Senior Vice
President of Global Corporate Communications for Herbalife
Nutrition (NYSE:HLF), a direct selling nutrition company operating
in 94 countries. She led the company’s communications, social
media, advertising and web strategy worldwide. Prior to joining
Herbalife Nutrition, Ms. Jordan was Vice President of Corporate
Communications for Southern California Edison (“SCE”)
with responsibility for the company’s communications,
advertising, websites, social media and creative teams. Prior to
joining SCE, she provided strategic marketing and communications
counsel to Fortune 500 clients as a Senior Vice President with
leading international firms MSL Group, Cohn & Wolfe (now BCW)
and Zeno Group for clients including Hilton, General Motors,
Nestle, Philips, Bayer and Kia. Ms. Jordan is a member of the Board
of Advisors for the School of Public Relations at the University of
Southern California’s Annenberg School of Communication and
Journalism, where she has served as an adjunct professor. She is a
member of the Arthur W. Page Society, and also serves on the board
of directors of Special Olympics.
Ms.
Jordan holds a B.A. degree in Public Relations from University of
Southern California and a M.A. degree in Mass Communications from
California State University, Northridge.
-30-
EXECUTIVE OFFICERS AND MANAGEMENT COMPENSATION
Compensation Discussion and Analysis
The following discussion and analysis of compensation arrangements
of our named executive officers for 2019 should be read together
with the compensation tables and related disclosures set forth
below.
We
believe our success is driven by the leadership of our named
executive officers. Our named executive officers are primarily
responsible for many of our important business development
relationships. The growth and 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. Our Board
believes that our current executive compensation program properly
aligns the interests of our executive officers with those of our
stockholders.
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 near-term and long-term
business objectives. We also believe that a meaningful portion of
the executive officer's total cash compensation should be at risk
and dependent upon the achievement of our objectives. Among other
things, our compensation philosophy aims to reward strong
performance with competitive pay and thus better enable us to
retain executive officers who contribute to the long-term success
of the Company.
Executive
officers typically are engaged through employment agreements that
establish initial base salaries and may include objectives and
benchmarks for the calculation of future bonuses and equity
incentive awards.
We
attempt to pay our executive officers competitively in order to
retain the most capable people in the industry. In making executive
and employee compensation decisions, the Compensation Committee
considers achievement of certain goals and criteria, some of which
relate to the Company’s performance and others to the
performance of the individual employee.
The
Compensation Committee periodically evaluates our compensation
policies to determine whether we remain competitive among industry
peers and continue to attract, retain and motivate key personnel.
To meet these objectives, the Compensation Committee may from time
to time increase salaries, award additional equity grants or
provide other short and long-term incentive compensation. Our Board
of Directors values the perspective of our stockholders, and the
Compensation Committee will continue to consider the outcome of
future say-on-pay votes, as well as any other shareholder feedback,
when making compensation decisions for the named executive
officers.
The
Compensation Committee generally seeks input from our executive
officers when discussing the performance and compensation levels
for executives and other Company leadership. The Compensation
Committee also works with our Chief Executive Officer and Chief
Financial Officer to evaluate the financial, accounting, tax and
retention implications of our various compensation programs. No
executive participates in deliberations relating to his or her own
compensation.
Results of Most Recent Stockholder Advisory Vote on Executive
Compensation
Over 92% of the votes cast in the stockholder advisory vote on the
compensation of our named executive officers in 2018 approved our
executive compensation. At the Company’s 2015 Annual Meeting
of Stockholders, the stockholders 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.
-31-
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 establishing total compensation, the Compensation
Committee considers individual and company performance, as well as
market information regarding compensation paid by other companies
in our peer group.
Base
salaries are calculated to be competitive within our industry and
to reflect the capabilities and experience of our executives. The
annual bonus is intended to motivate and reward our executives for
the achievement of certain strategic and measurable objectives. The
equity awards incentivize executives to deliver long-term
shareholder value, while serving as a retention vehicle for our
executive talent.
The
Compensation Committee conducts a thorough risk assessment of the
Company’s compensation practices to analyze whether they
encourage employees to take excessive or inappropriate risks. After
completing the review, the Compensation Committee has concluded
that the Company’s compensation programs are, on balance,
consistent with market practices and do not present material risks
to the Company.
Base Salary
Base
salary is designed to provide a predictable level of compensation
and provide 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 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. 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.
Short-Term Incentives
We
design our bonus programs to be competitive in relation to the
market. Our goal is to instill a “pay for performance”
culture throughout the Company. These bonus programs are designed
to avoid entitlements, to align actual payouts with the actual
results achieved and to be easy to understand and administer. Upon
completion of the fiscal year, the Compensation Committee assesses
the Company’s performance and determines the amount to be
awarded to each of the executive officers based on the achievement
of the financial and strategic goals that were set earlier in the
year. Our compensation plan is reviewed on at least an annual basis
to determine that it is operating as intended.
2019 Bonuses
In
2020, we have paid and will pay bonuses of $190,404, $98,058,
$120,938, $98,508 and $0, respectively, to our executive officers
Robert Fried, Kevin Farr, Frank Jaksch Jr., Mark Friedman and Lisa
Bratkovich for services performed during 2019. For 2019, the bonus
goals for named executive officers mainly consisted of three
categories, (i) net sales, (ii) operating income / (loss) with
certain adjustments and (iii) qualitative corporate goals.
Qualitative corporate goals consisted of (i) continuing to build
TRU NIAGEN as a Global Brand, (ii) execution of certain business
deals with strategic partners, (iii) strengthening the
company’s balance sheet, (iv) getting stronger health claims
related to TRU NIAGEN products and (v) achieving successful outcome
on pending litigation matters. The Compensation Committee
determined that 60% of these qualitative corporate goals were
achieved. The weight factor of the goals, the threshold, target and
maximum threshold and the actual bonus payouts were as
follows:
-32-
|
Executive Bonus Targets
|
Weight
Factor
|
2019
Threshold
|
2019
Target
|
2019
Max-out
|
2019
Actual
|
Payout
%
|
Base
Salary
|
Target
Bonus %
|
Bonus
Payment
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Fried, Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
Total
Company - Net Sales
|
50
%
|
$
35,382
|
$
47,176
|
$
58,971
|
$
46,291
|
48
%
|
$
500,000
|
60
%
|
$
145,404
|
|
Total
Company - Operating Income / (Loss)
|
25
%
|
(24,608
)
|
(21,351
)
|
(18,093
)
|
(25,193
)
|
0
%
|
500,000
|
60
%
|
-
|
|
Qualitative
Corporate Goals
|
25
%
|
N/A
|
N/A
|
N/A
|
60
%
|
15
%
|
500,000
|
60
%
|
45,000
|
|
Total
|
100
%
|
|
|
|
|
63
%
|
|
|
$
190,404
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin Farr, Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
Total
Company - Net Sales
|
50
%
|
35,382
|
47,176
|
58,971
|
46,291
|
48
%
|
309,000
|
50
%
|
74,883
|
|
Total
Company - Operating Income / (Loss)
|
25
%
|
(24,608
)
|
(21,351
)
|
(18,093
)
|
(25,193
)
|
0
%
|
309,000
|
50
%
|
-
|
|
Qualitative
Corporate Goals
|
25
%
|
N/A
|
N/A
|
N/A
|
60
%
|
15
%
|
309,000
|
50
%
|
23,175
|
|
Total
|
100
%
|
|
|
|
|
63
%
|
|
|
$
98,058
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank Jaksch, Executive Chairman
|
|
|
|
|
|
|
|
|
|
|
Total
Company - Net Sales
|
50
%
|
35,382
|
47,176
|
58,971
|
46,291
|
48
%
|
381,100
|
50
%
|
92,356
|
|
Total
Company - Operating Income / (Loss)
|
25
%
|
(24,608
)
|
(21,351
)
|
(18,093
)
|
(25,193
)
|
0
%
|
381,100
|
50
%
|
-
|
|
Qualitative
Corporate Goals
|
25
%
|
N/A
|
N/A
|
N/A
|
60
%
|
15
%
|
381,100
|
50
%
|
28,583
|
|
Total
|
100
%
|
|
|
|
|
63
%
|
|
|
$
120,938
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark Friedman, General Counsel
|
|
|
|
|
|
|
|
|
|
|
Total
Company - Net Sales
|
50
%
|
35,382
|
47,176
|
58,971
|
46,291
|
48
%
|
309,000
|
50
%
|
74,883
|
|
Total
Company - Operating Income / (Loss)
|
25
%
|
(24,608
)
|
(21,351
)
|
(18,093
)
|
(25,193
)
|
0
%
|
309,000
|
50
%
|
-
|
|
Qualitative
Corporate Goals
|
25
%
|
N/A
|
N/A
|
N/A
|
60
%
|
15
%
|
309,000
|
50
%
|
23,175
|
|
Total
|
100
%
|
|
|
|
|
63
%
|
|
|
$
98,058
|
|
|
|
|
|
|
|
|
|
|
|
|
LisaBratkovich, Chief Marketing Officer
(1)
|
|
|
|
|
|
|
|
|
|
|
Ecommerce
- Net Sales
|
50
%
|
20,693
|
27,591
|
34,488
|
26,659
|
0
%
|
350,000
|
40
%
|
-
|
|
Ecommerce
- Advertising Expense
|
10
%
|
(3,859
)
|
(5,145
)
|
(6,431
)
|
(6,660
)
|
0
%
|
350,000
|
40
%
|
-
|
|
Ecommerce
- Operating Income / (Loss)
|
15
%
|
2,726
|
4,539
|
6,351
|
1,691
|
0
%
|
350,000
|
40
%
|
-
|
|
Qualitative
Corporate Goals
|
25
%
|
N/A
|
N/A
|
N/A
|
60
%
|
0
%
|
350,000
|
40
%
|
-
|
|
Total
|
100
%
|
|
|
|
|
0
%
|
|
|
$
-
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Lisa Bratkovich no longer serves as the Chief Marketing Officer
effective January 10, 2020. As a result, 2019 bonus is not
paid.
-33-
Long-Term Incentives
We
design our equity programs to be competitive in relation to the
market and industry peer group. We monitor the market and
applicable accounting, corporate, securities and tax laws and
regulations and adjust our equity programs as appropriate.
Currently, our long-term incentive plan is entirely equity-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 reward strong, individual performance
over a clearly defined timeline. Stock options provide 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.
Timing of Equity Awards
Only
the Compensation Committee of the Board of Directors may approve
stock option grants to our executive officers. Stock options to
employees, including our executive officers, are generally granted
once a year at predetermined meetings of the Compensation
Committee. On limited occasions, grants may occur upon unanimous
written consent of the Compensation Committee, 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 and our peer group while conforming to
local laws and practices. We monitor the market, local laws and
practices and adjust our benefits programs as appropriate. We
design our benefits programs to provide an element of core
benefits, and to the extent possible, offer alternatives for
additional benefits, be tax-effective for employees in each country
and balance costs and cost sharing between us and our employees.
For our retirement program, we sponsor a 401(k) plan for our
employees. The 401(k) plan is a retirement savings defined
contribution plan established in accordance with the Internal
Revenue Code that provides each of our eligible employees with the
opportunity to defer a portion of his or her eligible compensation
on statutorily prescribed annual limits, and to have this amount
contributed to an account under the 401(k) plan in his or her name.
Other than the benefits and compensation disclosed herein, the
Company does not otherwise provide perquisites to its executive
officers.
-34-
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. These agreements are aimed
to reduce distractions by letting our executives focus on the
business, and are described in greater detail below under the
heading “Employment Agreements”.
Clawback Policy
The
Company has established a Clawback Policy, which, among other
things, permits the Compensation Committee to require forfeiture or
reimbursement of certain cash and equity award that was paid,
granted, or vested based upon the achievement of financial results
that, when recalculated to include the impact of a material
financial restatement, were not achieved, whether or not fraud or
misconduct was involved. The Clawback policy is applicable to all
current or former officer of the Company who is or was designated
as an “officer” for purposes of Section 16 of the
Securities Exchange Act of 1934, as amended.
Hedging Policy
The
Company has established an Insider Trading Policy, which, among
other things, prohibits trading in securities with material
nonpublic information including through hedging activities.
Further, none of the Company’s employees, directors,
consultants and contractors may trade in options, warrants, puts
and calls or similar instruments on our securities or sell our
securities “short”. Engaging in any transactions
relating to our common stock must be pre-cleared by our Chief
Financial Officer.
Stock Ownership Policy
The
Company has established a Stock Ownership Policy, which, among
other things, aligns the interests of the Chief Executive Officer,
other named executive officers and the members of the Board, with
the interests of the Company’s stockholders and to further
promote the Company’s commitment to sound corporate
governance. The stock ownership guidelines are determined as a
multiple of each person’s base salary/retainer as
follows:
|
Title
|
Ownership
Guideline
|
|
Chief
Executive Officer
|
Six
times annual base salary
|
|
All
other Named Executive Officers
|
Three
times annual base salary
|
|
Members
of the Board
|
Two
times annual base retainer
|
Subject
to potential extension, the Chief Executive Officer, other named
executive officers and the members of the Board are required to
achieve the applicable level of ownership by the fifth year from
the date of his or her appointment.
Tax and Accounting Considerations
Limitation on Deductibility of Executive Compensation
Under
Section 162(m) of the Internal Revenue Code (“Section
162(m)”), compensation paid to any publicly held
corporation’s “covered employees” that exceeds $1
million per taxable year for any covered employee is generally
non-deductible.
Prior
to the enactment of the Tax Cuts and Jobs Act, Section 162(m)
provided a performance-based compensation exception, pursuant to
which the deduction limit under Section 162(m) did not apply to any
compensation that qualified as “performance-based
compensation” under Section 162(m). Pursuant to the Tax Cuts
and Jobs Act, the performance-based compensation exception under
Section 162(m) was repealed with respect to taxable years beginning
after December 31, 2017, except that certain transition relief is
provided for compensation paid pursuant to a written binding
contract which was in effect on November 2, 2017 and which is not
modified in any material respect on or after such
date.
Compensation
paid to each of the Company’s “covered employees”
in excess of $1 million per taxable year generally will not be
deductible unless it qualifies for the performance-based
compensation exception under Section 162(m) pursuant to the
transition relief described above. Because of certain ambiguities
and uncertainties as to the application and interpretation of
Section 162(m), as well as other factors beyond the control of the
Compensation Committee, no assurance can be given that any
compensation paid by the Company will be eligible for such
transition relief and be deductible by the Company in the future.
Although the Compensation Committee will continue to consider tax
implications as one factor in determining executive compensation,
the Compensation Committee also looks at other factors in making
its decisions and retains the flexibility to provide compensation
for the Company’s NEOs in a manner consistent with the goals
of the Company’s executive compensation program and the best
interests of the Company and its stockholders, which may include
providing for compensation that is not deductible by the Company
due to the deduction limit under Section 162(m). The Compensation
Committee also retains the flexibility to modify compensation that
was initially intended to be exempt from the deduction limit under
Section 162(m) if it determines that such modifications are
consistent with the Company’s business needs.
-35-
Accounting Treatment
Under
Financial Accounting Standard Board ASC Topic 718, or ASC 718, the
Company is required to estimate and record an expense for each
award of equity compensation over the vesting period of the award.
We record share-based compensation expense on an ongoing basis
according to ASC 718. The accounting impact of our compensation
programs are one of many factors that the Compensation Committee
considers in determining the structure and size of our executive
compensation programs.
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), Chief Financial Officer (the
principal financial officer), Executive Chairman, General Counsel
and Corporate Secretary and Former Chief Marketing Officer, each of
whom served during the year ended December 31, 2019 as our named
executive officers. Lisa Bratkovich served as Chief Marketing
Officer until January 10, 2020.
|
Name
|
Year
|
Salary
|
Bonus
|
Stock Awards
(1)
|
Option Awards(2)
|
All Other Compensation
(3)
|
Total($)
|
|
Robert
Fried
|
2019
|
$
486,537
|
$
190,404
|
$
653,331
(4)
|
$
381,622
(5)
|
-
|
$
1,711,894
|
|
|
2018
|
$
379,121
|
$
468,330
|
$
1,255,003
(6)
|
$
3,057,990
(7)
|
-
|
$
5,160,444
|
|
|
2017
|
$
230,769
|
$
163,945
|
$
2,539,999
(8)
|
$
876,014
(9)
|
-
|
$
3,810,727
|
|
Kevin
Farr
|
2019
|
$
306,577
|
$
98,058
|
-
|
$
210,450
(10)
|
$
6,418
|
$
621,503
|
|
|
2018
|
$
300,000
|
$
93,600
|
-
|
-
|
-
|
$
393,600
|
|
|
2017
|
$
60,000
(11)
|
$
24,378
|
-
|
$
3,040,183
(12)
|
-
|
$
3,124,561
|
|
Frank
Jaksch, Jr.
|
2019
|
$
378,111
|
$
120,938
|
-
|
$
129,329
(13)
|
$
8,400
|
$
636,778
|
|
|
2018
|
$
370,000
|
$
100,000
|
-
|
$
188,960
(14)
|
$
8,650
|
$
667,610
|
|
|
2017
|
$
370,000
|
$
75,480
|
-
|
-
|
$
8,100
|
$
453,580
|
|
Mark
Friedman
|
2019
|
$
306,577
|
$
98,058
|
-
|
$
210,450
(15)
|
$
7,012
|
$
622,097
|
|
|
2018
|
$
281,967
(16)
|
$
87,974
|
-
|
$
1,768,274
(17)
|
$
6,231
|
$
2,144,446
|
|
|
2017
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Lisa
Bratkovich
|
2019
|
$
350,000
|
-
|
-
|
$
104,760
(18)
|
$
8,400
|
$
463,160
|
|
|
2018
|
$
204,645
(19)
|
$
41,023
|
-
|
$
432,989
(20)
|
-
|
$
678,657
|
|
|
2017
|
-
|
-
|
-
|
-
|
-
|
-
|
(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 31, 2019, December 31,
2018 and December 30, 2017. See Note 14 of the ChromaDex
Corporation Consolidated Financial Report included in the Form 10-K
for the year ended December 31, 2019, filed with the SEC on March
10, 2020, for a description of certain assumptions in the
calculation of the fair value of the Company’s stock
options.
(3)
The
amount in this column titled “All Other Compensation”
above reflect matching 401(k) contributions.
(4)
166,666 shares of Common Stock were awarded on
March 13, 2019 pursuant to Mr. Fried’s employment agreement
in connection with the acquisition of Healthspan Research LLC in
2017,
which provided the stock grant upon the achievement of
certain performance goals.
(5)
On February 21, 2019, Robert Fried was granted
options to purchase 162,569 shares of ChromaDex common stock at an
exercise price of $3.84. These options expire on February 21, 2029
and 1/3
rd
of the options vested on February 21,
2020 and the remaining shares vest in a series of 24 equal monthly
installments thereafter.
(6)
166,667 shares of Common Stock were awarded on
each of June 22, 2018 and November 7, 2018 pursuant to Mr.
Fried’s employment agreement in connection with the
acquisition of Healthspan Research LLC in 2017,
which
provided the stock grant upon the achievement of certain
performance goals.
-36-
(7)
On January 21, 2018, Robert Fried was granted
options to purchase 300,000 shares of ChromaDex common stock at an
exercise price of $5.85. These options expire on January 21, 2028
and 10/36
th
of the options vested on January 21,
2018 and thereafter 1/36
th
vest on 12
th
of each month for the next 26 months.
Also, on June 22, 2018, Mr. Fried was granted options to purchase
744,097 shares at an exercise price of $3.83. These options expire
on June 22, 2028 and 1/3
rd
of the options vested on June 22, 2019
and the remaining options vest in a series of 24 equal monthly
installments thereafter.
(8)
On
March 12, 2017, Robert Fried was awarded 166,667 shares
of restricted Common Stock, which vested on December 20, 2017
pursuant an amendment to his employment agreement in connection
with the acquisition of Healthspan Research LLC in 2017. In
addition, Mr. Fried received 333,333 shares of restricted stock on
December 20, 2017, which were fully vested.
(9)
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 pursuant to Mr. Fried’s employment
agreement in connection with the acquisition of Healthspan Research
LLC in 2017. These options expire on March 12, 2027 and
1/36
th
of the options vest monthly from the
grant date.
(10)
On February 21, 2019, Kevin Farr was granted
options to purchase 89,254 shares of ChromaDex common stock at an
exercise price of $3.84. These options expire on February 21, 2029
and 1/3
rd
of the options vested on February 21,
2020 and the remaining shares vest in a series of 24 equal monthly
installments thereafter.
(11)
Kevin
Farr began serving as Chief Financial Officer on October 5,
2017.
(12)
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 1/36
th
of the options vest monthly from the
grant date.
(13)
On February 21, 2019, Frank Jaksch, Jr. was
granted options to purchase 55,040 shares of ChromaDex common stock
at an exercise price of $3.84. These options expire on February 21,
2029 and 1/3
rd
of the options vested on February 21,
2020 and the remaining shares vest in a series of 24 equal monthly
installments thereafter.
(14)
On January 21, 2018, Frank Jaksch, Jr. was granted
options to purchase 50,000 shares of ChromaDex common stock at an
exercise price of $5.85. These options expire on January 21, 2028
and 1/4
th
of the options vested on January 21,
2029 and the remaining shares vest in a series of 36 equal monthly
installments thereafter.
(15)
On February 21, 2019, Mark Friedman was granted
options to purchase 89,254 shares of ChromaDex common stock at an
exercise price of $3.84. These options expire on February 21, 2029
and 1/3
rd
of the options vested on February 21,
2020 and the remaining shares vest in a series of 24 equal monthly
installments thereafter.
(16)
Mark
Friedman began serving as General Counsel and Corporate
Secretary on January 22, 2018.
(17)
On January 22, 2018, Mark Friedman was granted
options to purchase 500,000 shares of ChromaDex common stock at an
exercise price of $5.65. These options expire on January 22, 2028
and 1/3
rd
of the options vested on January 22,
2019 and the remaining shares vest in a series of 24 equal monthly
installments thereafter.
(18)
On
February 21, 2019, Lisa Bratkovich was granted options to
purchase 44,627 shares of ChromaDex common stock at an exercise
price of $3.84. Pursuant to the Separation Agreement effective
January 10, 2020, 27,272 of the options vested on January 10, 2020
and these options expire on January 10, 2023.
(19)
Lisa
Bratkovich began serving as Chief Marketing Officer on
June 4, 2018.
(20)
On
June 4, 2018, Lisa Bratkovich was granted options to
purchase 200,000 shares of ChromaDex common stock at an exercise
price of $3.45. Pursuant to the Separation Agreement effective
January 10, 2020, 172,222 of the options vested on January 10, 2020
and these options expire on January 10, 2023.
Employment Agreements
The material terms of employment agreements with the named
executive officers previously entered into by the Company are
described below.
-37-
Employment Agreement with Robert Fried
On June 22, 2018, the Company and Robert Fried, entered into an
Amended and Restated Executive Employment Agreement (the
“Fried Agreement”). The Fried Agreement amends the
Executive Employment Agreement by and between the Company and Mr.
Fried, dated March 12, 2017, as amended on December 20, 2017.
Pursuant to the Fried Agreement, Mr. Fried is entitled to: (i) an
annual base salary of $450,000; (ii) starting in fiscal year 2019,
an increased annual base salary of $500,000; (iii) an annual cash
bonus for fiscal year 2018 based on direct-to-customer net sales
for 2018 and the Company’s gross profit for 2018; (iv)
starting in fiscal year 2019, an annual cash bonus based on the
achievement of individual and corporate performance targets and
metrics to be determined by the Board of Directors of the Company
or the Compensation Committee thereof after reasonable consultation
with Mr. Fried (the “Performance Bonus”), with such
Performance Bonus set at (a) a target of 60% of base salary (based
on a performance achievement of 100%), (b) a threshold Performance
Bonus of 30% of base salary (based on a performance achievement of
75%) and (c) a maximum Performance Bonus of 90% (based on a
performance achievement of 150%); (v) an option to purchase up to
744,097 shares of Company common stock under the Amended 2017 Plan
(the “Option”); (vi) up to 333,333 shares of
fully-vested restricted Company common stock that will be granted
upon the achievement of certain performance goals and (vii)
starting in fiscal year 2019, annual equity grants in amounts
commensurate with Mr. Fried’s position with the Company, in
the discretion of the Company’s Board of Directors. In 2019,
the Compensation Committee determined that the payout structure of
Mr. Fried’s Performance Bonus will be aligned with the rest
of the executive officers, which the minimum achievement threshold
is 50% target and the maximum achievement threshold is 150% of the
target, with a target of 60% of base salary.
Any unvested shares subject to the Option will vest in full upon
termination by the Company of Mr. Fried’s employment without
cause (and other than as a result of Mr. Fried’s death or
disability) or Mr. Fried’s resignation for good reason. If
Mr. Fried’s employment is terminated by the Company without
cause (and other than as a result of Mr. Fried’s death or
disability) or Mr. Fried resigns for good reason, then subject to
executing a release, Mr. Fried will receive (i) continuation of his
base salary for 18 months, (ii) COBRA premiums for 12 months, (iii)
accelerated vesting of any unvested time-based vesting equity
awards that would have otherwise become vested had Mr. Fried
performed continuous service through the one year anniversary of
such termination date (provided that vesting for the Option shall
accelerate as described above), (iv) an extended exercise period
for his options and stock appreciation rights and (v) a prorated
Performance Bonus. In the case of Mr. Fried’s death or
disability, Mr. Fried will be eligible to receive a prorated
Performance Bonus.
Employment Agreement with Kevin 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, Secretary, 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 vesting in a
series of 36 equal monthly installments over a three-year period,
with an exercise price equal to $4.24 per share. The options will
fully vest if the Company's stock price equals or exceeds $10 per
share for over the previous 20 trading days. On March 24, 2019, Mr.
Farr’s base salary increased to $309,000.
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 Frank Jaksch, Jr.
On June 22, 2018, ChromaDex, Inc. and Frank L. Jaksch, Jr. entered
into an amendment (the “Jaksch Amendment”) to the
Amended and Restated Employment Agreement, dated April 19, 2010, by
and between ChromaDex, Inc. and Mr. Jaksch (the “Jaksch
Agreement”). The Jaksch Amendment provides that Mr. Jaksch
shall serve as Executive Chairman and shall perform such duties as
are customarily associated with the position of Executive Chairman.
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 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. On March 24, 2019, Mr.
Jaksch’s base salary increased to $381,100.
-38-
The severance terms provide that in the event Mr. Jaksch’s
employment with the Company is terminated voluntarily, he will be
entitled to any accrued but unpaid base salary, any stock vested
through the date of his termination and a pro-rated portion of 50%
of his salary for the bonus. In addition, if Mr. Jaksch leaves the
Company for “Good Reason”, (as defined in Jaksch
Agreement), he will also be entitled to severance equal to 50% of
his salary, and he will be deemed to have been employed for the
entirety of such year. Severance will then consist of 16 weeks of
paid salary, unless Mr. Jaksch signs a release, in which case he
will receive compensation up to 12 months paid salary.
In the event the Company terminates Mr. Jaksch’s employment
“without Cause” (as defined in the Jaksch Agreement),
Mr. Jaksch will be entitled to severance in the form of any stock
vested through the date of his termination and continuation of his
base salary for a period of eight weeks, or, if Mr. Jaksch enters
into a standard separation agreement, Mr. Jaksch will receive
continuation of base salary and health benefits, together with
applicable fringe benefits until 24 months from the date of
termination (the “Severance Period”), and he will
receive a bonus of 50% of his base salary as well as the full
vesting of any otherwise unvested stock awards.
Employment Agreement with Mark Friedman
On January 22, 2018, the Company entered into an Employee Agreement
(the "Friedman Agreement") with Mark Friedman, who was appointed by
the Board to serve as General Counsel and Corporate Secretary. Mr.
Friedman is entitled to receive certain severance payments per the
terms of the Friedman Agreement. The key terms of the Friedman
Agreement, including the severance terms, are as
follows:
Mr. Friedman 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 Friedman Agreement, Mr. Friedman also received an option to
purchase up to 500,000 shares of ChromaDex common stock under the
ChromaDex 2017 Equity Incentive Plan, which one-third of the shares
vested on the one year anniversary and the remaining shares will
vest in a series of 24 equal monthly installments thereafter, with
an exercise price equal to $5.65 per share. Any unvested options
will vest in full upon a change of control of the Company, subject
to Mr. Friedman’s continuous service through such change of
control or upon termination by the Company of Mr. Friedman’s
employment without cause or Mr. Friedman’s resignation for
good reason within 90 days before the change of control. On March
24, 2019, Mr. Friedman’s base salary increased to
$309,000.
If Mr. Friedman’s employment is terminated by the Company
without cause or Mr. Friedman resigns for good reason, then,
subject to executing a release, Mr. Friedman 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 Megan Jordan
On July 23, 2019, the Company entered into an Employee Agreement
(the "Jordan Agreement") with Megan Jordan, who was hired by the
Company to serve as Senior Vice President of Corporate Affairs
& Chief Communications Officer. Ms. Jordan is entitled to
receive certain severance payments per the terms of the Jordan
Agreement. The key terms of the Jordan Agreement, including the
severance terms, are as follows:
Ms. Jordan is entitled to an annual base salary of $300,000 and a
discretionary annual bonus calculated and paid commensurate with
other executive officers of the Company. Pursuant to the Jordan
Agreement, Ms. Jordan also received an option to purchase up to
320,000 shares of ChromaDex common stock under the ChromaDex 2017
Equity Incentive Plan, which one-third of the shares will vest on
the on year anniversary and the remaining shares will vest in a
series of 24 equal monthly installments thereafter, with an
exercise price equal to $4.47 per share. Any unvested options will
vest in full upon a change of control of the Company, subject to
Ms. Jordan’s continuous service through such change of
control.
If Ms. Jordan’s employment is terminated by the Company
without cause or Ms. Jordan resigns for good reason, then, subject
to executing a release, Ms. Jordan will receive (i) continuation of
her base salary for 12 months, (ii) COBRA premiums for 12 months,
(iii) a prorated annual cash bonus, based on the good faith
determination of the Board of the actual results and period of
employment during the year of such termination, (iv) accelerated
vesting of time-based equity that would have otherwise become
vested by the one year anniversary of such termination date and (v)
an extended exercise period for her options.
-39-
Separation Agreement with Lisa Bratkovich
On January 7, 2020, it was agreed that Lisa Bratkovich would no
longer serve as the Chief Marketing Officer of the Company,
effective January 10, 2020. Ms. Bratkovich entered into an
agreement (the “Separation Agreement”) with the Company
regarding her separation from the Company whereby she will receive
(a) continuation of her base salary for 12 months, (b) accelerated
vesting of time-based equity that would have otherwise become
vested by the one-year anniversary of the termination date and a
period of three years after the termination date to exercise any
vested stock options and (c) payment of COBRA group health
insurance premiums for up to 12 months. The Separation Agreement
contains a mutual non-disparagement obligation and a standard
release of claims on the part of Ms. Bratkovich.
Potential Payments Upon Termination or Change of
Control
Following table describes and quantifies the severance and other
benefits potentially payable to our named executive officers as of
December 31, 2019.
Potential Payments Upon Termination Table
*
|
Name
|
Severance
($) (1)
|
Accrued
Compensation ($) (2)
|
Option
Awards ($) (3)
|
Restricted
Stock Awards ($) (4)
|
Medical
($) (5)
|
Total
($)
|
|
|
|
|
|
|
|
|
|
Robert
Fried
|
$
750,000
|
$
68,749
|
$
291,735
|
$
-
|
$
-
|
$
1,110,484
|
|
Kevin
Farr
|
$
309,000
|
$
42,487
|
$
45,080
|
$
-
|
$
-
|
$
396,567
|
|
Frank
Jaksch, Jr.
|
$
831,812
|
$
59,730
|
$
29,694
|
$
718,339
|
$
-
|
$
1,639,575
|
|
Mark
Friedman
|
$
309,000
|
$
42,111
|
$
25,636
|
$
-
|
$
21,349
|
$
398,096
|
|
Lisa
Bratkovich
|
$
350,000
|
$
40,553
|
$
70,151
|
$
-
|
$
7,041
|
$
467,745
|
*Reflects a termination without cause, or in the case of
resignation for good reason, not in connection with a change in
control.
(1)
Continuation
of base salary for 24 months for Frank Jaksch, Jr., 18 months for
Rob Fried and 12 months for Kevin Farr, Mark Friedman and Lisa
Bratkovich. The amount for Mr. Jaksch includes additional
bonus.
(2)
Accrued
compensation is comprised of any earned or accrued base salary,
vacation pay and other payments and benefits earned and payable by
law.
(3)
The
amounts in this column represent the intrinsic value of
“in-the-money” unvested options as of December 31, 2019
that would vest in accordance with the executive officer’s
employment agreement. Values were derived using the closing price
of the Company’s common stock on December 31, 2019 of
$4.31.
(4)
The
amount in this column represent the value of unvested restricted
stock award as of December 31, 2019. Value was derived using the
closing price of the Company’s common stock on December 31,
2019 of $4.31.
(5)
Medical
is comprised of health insurance premiums for the period specified
in each executive officer's employment agreement.
-40-
Potential Payments Upon Change in Control Table
*
|
Name
|
Severance
($) (1)
|
Accrued
Compensation ($) (2)
|
Option
Awards ($) (3)
|
Restricted
Stock Awards ($) (4)
|
Medical
($) (5)
|
Total
($)
|
|
|
|
|
|
|
|
|
|
Robert
Fried
|
$
750,000
|
$
68,749
|
$
291,735
|
$
-
|
$
-
|
$
1,110,484
|
|
Kevin
Farr
|
$
309,000
|
$
42,487
|
$
61,394
|
$
-
|
$
-
|
$
412,881
|
|
Frank
Jaksch, Jr.
|
$
831,812
|
$
59,730
|
$
29,694
|
$
718,339
|
$
-
|
$
1,639,575
|
|
Mark
Friedman
|
$
309,000
|
$
42,111
|
$
41,949
|
$
-
|
$
21,349
|
$
414,409
|
|
Lisa
Bratkovich
|
$
350,000
|
$
40,553
|
$
106,975
|
$
-
|
$
7,041
|
$
504,569
|
*Reflects involuntary termination benefits in the event of a
termination without cause or resignation for good reason in
connection with a change in control.
(1)
Continuation
of base salary for 24 months for Frank Jaksch, Jr., 18 months for
Rob Fried and 12 months for Kevin Farr, Mark Friedman and Lisa
Bratkovich. The amount for Mr. Jaksch includes additional
bonus.
(2)
Accrued
compensation is comprised of any earned or accrued base salary,
vacation pay and other payments and benefits earned and payable by
law.
(3)
The
amounts in this column represent the intrinsic value of
“in-the-money” unvested options as of December 31, 2019
that would vest in accordance with the executive officer’s
employment agreement. Values were derived using the closing price
of the Company’s common stock on December 31, 2019 of
$4.31.
(4)
The
amount in this column represent the value of unvested restricted
stock award as of December 31, 2019. Value was derived using the
closing price of the Company’s common stock on December 31,
2019 of $4.31.
(5)
Medical
is comprised of health insurance premiums for the period specified
in each executive officer's employment agreement.
Grants of Plan-Based Awards
The
following table summarizes the stock option awards granted to our
named executive officers during the year ended
December
31, 2019:
|
Name
|
Grant
Date
|
All
Other Option Awards: Number of Securities Underlying
Options
|
Exercise
or Base Price of Option Awards ($/Share)(1)
|
Grant
DateFair Value of Stock and Option Awards($)(2)
|
|
|
|
|
|
|
|
Robert
Fried
|
2/21/2019
|
162,569
|
$
3.84
|
$
381,622
|
|
Kevin
Farr
|
2/21/2019
|
89,254
|
$
3.84
|
$
210,450
|
|
Frank
Jaksch, Jr.
|
2/21/2019
|
55,040
|
$
3.84
|
$
129,329
|
|
Mark
Friedman
|
2/21/2019
|
89,254
|
$
3.84
|
$
210,450
|
|
Lisa
Bratkovich
|
2/21/2019
|
44,267
|
$
3.84
|
$
104,760
|
(1)
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.
(2)
Based upon the aggregate grant date fair value of
stock option awards. See
Note 14
of the ChromaDex Corporation Consolidated
Financial Report included in the Form 10-K for the year ended
December 31, 2019, filed with the SEC on March 10, 2020, for a
description of certain assumptions in the calculation of the fair
value of the Company’s stock options.
-41-
The
following table summarizes the restricted stock awards granted to
our named executive officers during the year ended December 31,
2019:
|
Name
|
Grant
Date
|
All
Other Stock Awards: Number of Shares of Stock or Units
(1)
|
Grant
Date Fair Value of Stock and Option Awards($)(2)
|
|
|
|
|
|
|
Robert
Fried
|
3/13/201
9
|
166,666
|
$
653,331
|
|
Kevin
Farr
|
-
|
-
|
-
|
|
Frank
Jaksch, Jr.
|
-
|
-
|
-
|
|
Mark
Friedman
|
-
|
-
|
-
|
|
Lisa
Bratkovich
|
-
|
-
|
-
|
(1)
Awarded
under our Amended 2017 Equity Incentive Plan.
(2)
Based
on the closing price of our common stock on the date of
grant.
Option Exercises and Stock Vested
The
following table summarizes, with respect to our named executive
officers, all options that were exercised and
restricted
stock
vested during the year ended December 31, 2019:
|
|
Option
Awards
|
Restricted
Stock Awards
|
||
|
Name
|
Number
of Shares Acquired on Exercise(#)
|
Value
Realized
on
Exercise ($)
|
Number
of Shares Vested (#)
|
Value
Realized
on
Vesting ($)
|
|
Robert
Fried
|
-
|
$
-
|
166,666
|
$
653,331
|
|
Kevin
Farr
|
-
|
$
-
|
-
|
$
-
|
|
Frank Jaksch,
Jr.
|
33,334
|
$
68,335
|
-
|
$
-
|
|
Mark
Friedman
|
-
|
$
-
|
-
|
$
-
|
|
Lisa
Bratkovich
|
-
|
$
-
|
-
|
$
-
|
Outstanding Equity Awards at Fiscal Year End
The following table sets forth certain information regarding stock
options and restricted stock granted to our named executive
officers outstanding as of December 31, 2019.
-42-
Outstanding Stock Options at 2019 Fiscal Year-End
|
Name
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
|
Equity Incentive
Plan Awards: Number ofSecurities Underlying Unexercised Unearned
Options (#)
|
Option Exercise
Price ($)
|
Option
Expiration Date
|
|
Robert
Fried
|
66,667
|
—
|
|
—
|
3.30
|
7/30/2025
|
|
|
20,000
|
—
|
|
—
|
2.605
|
11/16/2026
|
|
|
458,333
|
41,667
|
(1
)
|
—
|
2.715
|
3/12/2027
|
|
|
275,000
|
25,000
|
(2
)
|
—
|
5.85
|
1/21/2028
|
|
|
372,049
|
372,048
|
(3
)
|
—
|
3.83
|
6/22/2028
|
|
|
—
|
162,569
|
(4
)
|
—
|
3.84
|
2/21/2029
|
|
Kevin
Farr
|
722,222
|
277,778
|
(5
)
|
—
|
4.24
|
10/4/2027
|
|
|
—
|
89,254
|
(6
)
|
—
|
3.84
|
2/21/2029
|
|
Frank Jaksch,
Jr.
|
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
|
|
|
50,000
|
—
|
|
—
|
3.75
|
6/18/2024
|
|
|
50,001
|
—
|
|
—
|
3.66
|
7/6/2025
|
|
|
70,833
|
14,167
|
(7
)
|
—
|
4.04
|
8/15/2026
|
|
|
23,958
|
26,042
|
(8
)
|
—
|
5.85
|
1/21/2028
|
|
|
—
|
55,040
|
(9
)
|
—
|
3.84
|
2/21/2029
|
|
Mark
Friedman
|
319,444
|
180,556
|
(10
)
|
—
|
5.65
|
1/22/2028
|
|
|
—
|
89,254
|
(11
)
|
—
|
3.84
|
2/21/2029
|
|
Lisa
Bratkovich
|
100,000
|
100,000
|
(12
)
|
—
|
3.45
|
1/10/2023
|
|
|
—
|
44,627
|
(13
)
|
—
|
3.84
|
1/10/2023
|
|
(1)
|
13,889 of Mr. Fried’s options vest on 12
th
of every month through March 12,
2020.
|
|
(2)
|
8,333 of Mr. Fried’s options vest on 12
th
of every month through March 12,
2020.
|
|
(3)
|
1/3
rd
of Mr. Fried’s options vested on
June 22, 2019 and the remaining options vest in a series of 24
equal monthly installments thereafter.
|
|
(4)
|
1/3
rd
of Mr. Fried’s options vest on
February 21, 2020 and the remaining options vest in a series of 24
equal monthly installments thereafter.
|
|
(5)
|
27,778 of Mr. Farr’s options vest on 5
th
of every month through October 5,
2020.
|
|
(6)
|
1/3
rd
of Mr. Farr’s options vest on
February 21, 2020 and the remaining options vest in a series of 24
equal monthly installments thereafter.
|
|
(7)
|
1,771
of Mr. Jaksch’s options vest on 15
th
of every month
through August 15, 2020.
|
|
(8)
|
1/4
th
of Mr. Jaksch’s options vested on January 21, 2019 and
the remaining options vest in a series
of 36 equal monthly installments thereafter.
|
|
(9)
|
1/3
rd
of Mr. Jaksch’s options vest on February 21, 2020 and
the remaining options vest in a series
of 24 equal monthly installments thereafter.
|
|
(10)
|
1/3
rd
of Mr. Friedman’s options vested
on January 22, 2019 and the remaining options vest in a series of
24 equal monthly installments thereafter.
|
|
(11)
|
1/3
rd
of Mr. Friedman’s options vest
on February 21, 2020 and the remaining options vest in a series of
24 equal monthly installments thereafter.
|
|
(12)
|
Pursuant to the Separation Agreement effective January 10, 2020, a
total of 172,222 of Ms. Bratkovich’s options were vested as
of January 10, 2020.
|
|
(13)
|
Pursuant to the Separation Agreement effective January 10, 2020,
27,272 of Ms. Bratkovich’s options vested on January 10,
2020.
|
-43-
Outstanding Restricted Stock at 2019 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 orpayout value of unearned shares, units
or other rights that have not vested ($) (2)
|
|
Robert
Fried
|
—
|
—
|
—
|
$
—
|
|
Kevin
Farr
|
—
|
—
|
—
|
$
—
|
|
Frank Jaksch,
Jr.
|
—
|
—
|
166,668
|
$
718,339
|
|
Mark
Friedman
|
—
|
—
|
—
|
$
—
|
|
Lisa
Bratkovich
|
—
|
—
|
—
|
$
—
|
|
(1)
|
Frank L. Jaksch Jr. was awarded 83,334 shares of restricted stock
on June 6, 2012. Mr. Jaksch was awarded additional 83,334 shares of
restricted stock on January 2, 2014. 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 Mr.
Jaksch amended the restricted stock awards to provide that the
awards shall not vest upon the market price of the Company’s
stock exceeding a certain price or listing of the Company’s
stock on a national securities exchange.
|
|
(2)
|
The amounts in the column titled “Equity incentive plan
awards: Market or payout value of unearned shares, units or other
rights that have not vested” above reflect the aggregate
market value based on the closing market price of the
Company’s stock on December 31, 2019.
|
Equity Compensation Plan Information
The following table provides information about our equity
compensation plans as of December 31, 2019:
|
|
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 securitiesreflected incolumn
(A))
|
|
|
|
|
|
|
Equity compensation
plans approved by security holders (1)
|
10,051,039
|
$
3.80
|
2,891,115
|
|
|
|
|
|
|
Equity compensation
plans not approved by security holders (2)
|
500,000
|
$
5.65
|
-
|
|
|
|
|
|
|
Total
|
10,551,039
|
$
3.89
|
2,891,115
|
(1)
Includes the 2017 Equity Incentive Plan, as amended.
(2)
The Board of Directors approved an inducement grant to our General
Counsel and Corporate Secretary as an inducement material to
entering into employment with the Company pursuant to Rule
5635(c)(4) of the NASDAQ Listing Rules. The inducement grant
consists of a stock option to purchase up to 500,000 shares of our
common stock with a per share exercise price or $5.65, which was
the adjusted closing price of our common stock on the January 22,
2018 grant date. The inducement grant vests over three years, with
one-third of the underlying shares vesting on the first anniversary
of the date of grant, and the remaining shares will vest monthly
thereafter, at the rate of 1/36th of the shares subject to the
option, until fully vested.
-44-
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 2019,
●
the
median of the annual total compensation of all employees of the
Company (other than the CEO) was $104,057 and
●
the
annual total compensation of the CEO, as reported in the Summary
Compensation Table included in this Proxy Statement, was
$1,711,894.
●
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 approximately 16 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 31, 2019, 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 2019
base salary, 2019 incentive bonus, equity awards granted in 2019
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 31, 2019 was
$104,057
.
-45-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Related Persons
The
following is a description of transactions since January 1,
2019 to which the Company has been a party, in which the amount
involved exceeded or will exceed the lesser of $120,000 or one
percent of the average of the Company’s total assets at
year-end for the last two completed fiscal years, 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."
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 years ended December 31,
2018 and December 31, 2019, the Company sold approximately $2.9
million and $7.3 million, respectively, of TRU NIAGEN® dietary
supplement product pursuant to the Watsons Agreement. As of
December 31, 2018 and December 31, 2019, the trade receivable from
Watsons were approximately $0.7 million and $0.8 million,
respectively.
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.
Financing
In May 2019, the Company closed a financing transaction and issued
convertible promissory notes (the “Notes”) in the
aggregate principal amount of $10.0 million to Winsave Resources
Limited and Pioneer Step Holdings Limited. The maturity date of the
Notes was originally July 1, 2019 and was subsequently extended to
August 15, 2019. The Notes accrued interest at a rate of 5.0% per
annum for a total of approximately $123,000 through the maturity
date. On the maturity date, the Notes automatically converted into
approximately 2.3 million shares of the Company’s common
stock at a price of $4.465 per share.
The following table sets forth the number of shares of common stock
that were issued to holders of more than 5% of the Company’s
common stock or entities affiliated with them:
|
Name
|
Shares of
Common Stock
|
|
Pioneer
Step Holdings Limited
|
1,133,627
|
|
Winsave
Resources Limited
|
1,133,627
|
In addition, 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.
Employment Arrangements
The
Company currently maintains written employment agreements with its
named executive officers, as described in "Executive
Compensation."
Equity Granted to Executive Officers and Directors
The
Company has granted equity to its named executive officers and
directors, as more fully described in "Executive
Compensation."
-46-
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.
-47-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As of April 20, 2020, there were approximately
59,787,897
shares of our Common Stock
outstanding. The following table sets forth
certain information regarding the ownership of our Common Stock as
of April 20, 2020 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 20, 2020 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, 10900 Wilshire
Blvd., Suite 600, Los Angeles, CA 90024.
|
Name of Beneficial Owner (1)
|
Shares of Common Stock Beneficially Owned (2)
|
Aggregate Percentage Ownership
|
|
|
|
|
|
Champion
River Ventures (3)
|
6,500,937
|
10.87
%
|
|
Pioneer
Step Holdings (4)
|
5,467,587
|
9.14
%
|
|
Dr.
Phillip Frost (5)
|
3,251,521
|
5.44
%
|
|
Directors
|
|
|
|
Stephen
Block (6)
|
269,996
|
*
|
|
Jeff
Baxter (7)
|
149,167
|
*
|
|
Kurt
Gustafson (8)
|
80,000
|
*
|
|
Steven
Rubin (9)
|
80,000
|
*
|
|
Wendy
Yu (10)
|
46,667
|
*
|
|
Tony
Lau (11)
|
46,667
|
*
|
|
Frank
L. Jaksch Jr. (12)
|
3,321,257
|
5.46
%
|
|
Robert
Fried (13)
|
2,886,860
|
4.72
%
|
|
Executive Officers
|
|
|
|
Frank
L. Jaksch Jr.
|
(See above)
|
|
|
Robert
Fried
|
(See above)
|
|
|
Kevin
Farr (14)
|
962,703
|
1.59
%
|
|
Mark
Friedman (15)
|
429,078
|
*
|
|
Lisa
Bratkovich (16)
|
199,494
|
*
|
|
All directors and current executive officers as a
group
|
|
|
|
(11 persons)
(17)
|
|
|
|
|
8,302,395
|
12.92
%
|
*
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; and Dr. Phillip Frost, 4400 Biscayne Blvd., Suite 1500,
Miami, FL 33137.
(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.
-48-
(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 2,353,139
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 August 16, 2019, (i) Pioneer Step Holdings Limited
(“Pioneer Step”) beneficially owned and had sole voting
and dispositive power with respect to 5,467,587 shares (the
“Pioneer Shares”) and (ii) Chau Hoi Shuen Solina Holly
(“Solina Chau”), 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 Suites PT. 2909 & 2910, Harbour Centre, 25
Harbour Road, Wanchai, Hong Kong. The business address of Solina
Chau is c/o Suites PT. 2909 & 2910, Harbour Centre, 25 Harbour
Road, Wanchai, Hong Kong.
(5)
Based on beneficial ownership reported on form
Schedule 13D/A filed with SEC on February 14, 2019.
Includes
1,321,979 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)
Includes 16,667 shares of common stock directly
owned by Mr. Block. Includes 253,329 stock options exercisable
within 60
days of April 20,
2020.
(7)
Includes
149,167 stock options exercisable within 60 days of April 20,
2020.
(8)
Includes
80,000 stock options exercisable within 60 days of April 20,
2020.
(9)
Includes
80,000 stock options exercisable within 60 days of April 20,
2020.
(10)
Includes
46,667 stock options exercisable within 60 days of April 20,
2020.
(11)
Includes
46,667 stock options exercisable within 60 days of April 20,
2020.
(12)
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 220,501 shares directly
owned by Mr. Jaksch. Includes 1,025,704 stock options exercisable
within 60 days of April 20, 2020.
(13)
Includes 1,392,314
shares of common stock directly owned by Mr. Fried. Includes 52,001
shares of common stock held by Fried-Travis Revocable Trust U/A
dated June 2, 1999, beneficially owned by Mr. Fried because he has
shared voting power and shared dispositive power for such shares.
Includes 6,745 shares held by Jeremy Fried and 6,001 shares held by
Benjamin Fried, who are both sons of Robert Fried. Includes
1,429,799 stock options exercisable within 60 days
of April 20, 2020
.
(14)
Includes
36,625 shares of common stock directly owned by Mr. Farr. Includes
926,078 stock options exercisable within 60 days of April 20,
2020.
(15)
Includes
3,000 shares of common stock directly owned by Mr. Friedman.
Includes 426,078 stock options exercisable within 60 days of April
20, 2020.
(16)
Includes
199,494 stock options exercisable within 60 days of April 20,
2020.
(17)
In
cludes
the shares and stock options included above in footnotes (6)
through (15) and held by Ms. Jordan.
-49-
HOUSEHOLDING OF PROXY MATERIALS
The SEC
has adopted rules that permit companies and intermediaries (e.g.,
brokers) to satisfy the delivery requirements Notices of Internet
Availability of Proxy Materials or other Annual Meeting materials
with respect to two or more shareholders sharing the same address
by delivering a single Notice of Internet Availability of Proxy
Materials or other Annual Meeting materials addressed to those
shareholders. This process, which is commonly referred to as
“householding,” potentially means extra convenience
for
stockholders
and cost savings for
companies.
This
year, a number of brokers with account holders who are Company
stockholders will be “householding” the Company’s
proxy materials. A single Notice of Internet Availability of Proxy
Materials will be delivered to multiple shareholders sharing an
address unless contrary instructions have been received from the
affected shareholders. Once you have received notice from your
broker that they will be “householding” communications
to your address, “householding” will continue until you
are notified otherwise or until you revoke your consent. If, at any
time, you no longer wish to participate in
“householding” and would prefer to receive a separate
Notice of Internet Availability of Proxy Materials, please notify
your broker or the Company. Direct your written request to
ChromaDex Corporation, ATTN: Secretary, 10900 Wilshire Blvd. Suite
600, Los Angeles, CA 90024 or contact the Secretary at
310-388-6706. Stockholders who currently receive multiple copies of
the Notices of Internet Availability of Proxy Materials at their
addresses and would like to request “householding” of
their communications should contact their brokers.
-50-
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/ Frank Jaksch
Executive
Chairman of the Board
April
21, 2020
-51-
PROXY CARD
-52-
-53-
Appendix A
ChromaDex Corporation
AMENDED 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
Approved by the Stockholders June 22, 2018
Amended by the Board of Directors: April 16, 2020
Approved by the Stockholders: __________, 2020
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.
A-1
(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.
(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).
A-2
(c)
Delegation
to Committee.
(i)
General.
The Board may delegate some or
all of the administration of the Plan to a Committee or Committees.
If administration of the Plan is delegated to a Committee, the
Committee will have, in connection with the administration of the
Plan, the powers theretofore possessed by the Board that have been
delegated to the Committee, including the power to delegate to a
subcommittee of the Committee any of the administrative powers the
Committee is authorized to exercise (and references in this Plan to
the Board will thereafter be to the Committee or subcommittee, as
applicable). Any delegation of administrative powers will be
reflected in resolutions, not inconsistent with the provisions of
the Plan, adopted from time to time by the Board or Committee (as
applicable). The Committee may, at any time, abolish the
subcommittee and/or revest in the Committee any powers delegated to
the subcommittee. The Board may retain the authority to
concurrently administer the Plan with the Committee and may, at any
time, revest in the Board some or all of the powers previously
delegated.
(ii)
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(z)(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 20,793,960
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) an
additional 5,500,000 shares approved by the Board in April 2020 and
subsequently approved by the Company’s stockholders, plus (D)
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), (C), and (D)
above, the “
Share
Reserve
”), plus (E) 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.
A-3
(ii)
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. Notwithstanding the foregoing, any Inducement
Shares that become available for issuance under the Plan pursuant
to this subsection 3(a) will only become available for issuance
pursuant to Inducement Awards.
(iii)
Effective for
awards granted on or after June 19, 2020, the number of shares of
Common Stock available for issuance under the Plan will be reduced
by: (A) one share for each share of Common Stock issued pursuant to
an Appreciation Award granted under the Plan and (B) 1.5 shares for
each share of Common Stock issued pursuant to a Full Value Award
granted under the Plan. The number of shares of Common Stock
available for issuance under the Plan will be increased by: (A) one
share for each Returning Share subject to an Appreciation Award and
(B) 1.5 shares share for each Returning Share subject to a Full
Value Award.
(iv)
For clarity, the
Share Reserve limit in Section 3(a) is a limit on the number of
shares of Common Stock that may be issued pursuant to Stock Awards
and does not limit the granting of Awards, except that the Company
will keep available at all times the number of shares of Common
Stock reasonably required to satisfy its obligations to issue
shares pursuant to such Awards. Shares may be issued in connection
with a merger or acquisition as permitted by, as applicable, NASDAQ
Listing Rule 5635(c), NYSE Listed Company Manual Section 303A.08,
NYSE American Company Guide Section 711 or other applicable rule,
and such issuance will not reduce the number of shares available
for issuance under the Plan.
(b)
Shares Not Available For Subsequent
Issuance.
Effective on or after June 19, 2020, the following
shares of Common Stock will not become available again for issuance
under the Plan: (i) any shares that are reacquired or withheld (or
not issued) by the Company to satisfy the exercise or purchase
price of an Appreciation Award or a Full Value Award (including any
shares subject to such award that are not delivered because such
award is exercised through a reduction of shares subject to such
award (i.e., “net exercised”)); (ii) any shares that
are reacquired or withheld (or not issued) by the Company to
satisfy a tax withholding obligation in connection with an
Appreciation Award or a Full Value Award; and (iii) any shares
repurchased by the Company on the open market with the proceeds of
the exercise or purchase price of an Appreciation Award or a Full
Value Award.
(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 23,087,920 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.
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4.
Eligibility.
(a)
Eligibility for Specific Stock Awards.
Incentive Stock Options may be granted only to employees of the
Company or a “parent corporation” or “subsidiary
corporation” thereof (as such terms are defined in Sections
424(e) and 424(f) of the Code). Stock Awards other than Incentive
Stock Options may be granted to Employees, Directors and
Consultants;
provided,
however
, that Stock Awards may not be granted to Employees,
Directors and Consultants who are providing Continuous Service only
to any “parent” of the Company, as such term is defined
in Rule 405, unless (i) the stock underlying such Stock Awards is
treated as “service recipient stock” under Section 409A
of the Code (for example, because the Stock Awards are granted
pursuant to a corporate transaction such as a spin off transaction)
or (ii) the Company, in consultation with its legal counsel, has
determined that such Stock Awards are otherwise exempt from or
alternatively comply with Section 409A of the Code.
(b)
Ten Percent Stockholders.
A Ten Percent
Stockholder will not be granted an Incentive Stock Option unless
the exercise price of such Option is at least one hundred ten
percent (110%) of the Fair Market Value on the date of grant and
the Option is not exercisable after the expiration of five (5)
years from the date of grant.
Each
Option or SAR Agreement will be in such form and will contain such
terms and conditions as the Board deems appropriate. All Options
will be separately designated Incentive Stock Options or
Nonstatutory Stock Options at the time of grant, and, if
certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on exercise of
each type of Option. If an Option is not specifically designated as
an Incentive Stock Option, or if an Option is designated as an
Incentive Stock Option but some portion or all of the Option fails
to qualify as an Incentive Stock Option under the applicable rules,
then the Option (or portion thereof) will be a Nonstatutory Stock
Option. The terms and conditions of separate Option or SAR
Agreements need not be identical;
provided, however
, that each Award
Agreement will conform to (through incorporation of the provisions
hereof by reference in the applicable Award Agreement or otherwise)
the substance of each of the following provisions:
(a)
Term.
Subject to the provisions of
Section 4(b) regarding Ten Percent Stockholders, no Option or SAR
will be exercisable after the expiration of ten (10) years from the
date of its grant or such shorter period specified in the Award
Agreement.
(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;
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(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.
(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.
A-6
(h)
Extension of Termination Date.
Except
as otherwise provided in the applicable Award Agreement or other
written agreement between a Participant and the Company or an
Affiliate,
if the
exercise of an Option or SAR following the termination of a
Participant’s Continuous Service (other than for Cause and
other than upon the Participant’s death or Disability) would
be prohibited at any time solely because the issuance of shares of
Common Stock would violate the registration requirements under the
Securities Act, then the Option or SAR will terminate on the
earlier of (i) the expiration of a total period of time (that need
not be consecutive) equal to the applicable post-termination
exercise period after the termination of the Participant’s
Continuous Service during which the exercise of the Option or SAR
would not be in violation of such registration requirements, or
(ii) the expiration of the term of the Option or SAR as set forth
in the applicable Award Agreement. In addition, except as otherwise
provided in the applicable Award Agreement or other written
agreement between a Participant and the Company or an Affiliate, if
the sale of any Common Stock received upon exercise of an Option or
SAR following the termination of a Participant’s Continuous
Service (other than for Cause) would violate the Company’s
insider trading policy, then the Option or SAR will terminate on
the earlier of (i) the expiration of a total period of time (that
need not be consecutive) equal to the applicable post-termination
exercise period after the termination of the Participant’s
Continuous Service during which the sale of the Common Stock
received upon exercise of the Option or SAR would not be in
violation of the Company’s insider trading policy, or (ii)
the expiration of the term of the Option or SAR as set forth in the
applicable Award Agreement.
(i)
Disability of Participant.
Except as
otherwise provided in the applicable Award Agreement or other
written agreement between a Participant and the Company or an
Affiliate, if a Participant’s Continuous Service terminates
as a result of the Participant’s Disability, the Participant
may exercise his or her Option or SAR (to the extent that the
Participant was entitled to exercise such Option or SAR as of the
date of termination of Continuous Service), but only within such
period of time ending on the earlier of (i) the date that is twelve
(12) months following such termination of Continuous Service (or
such longer or shorter period specified in the Award Agreement),
and (ii) the expiration of the term of the Option or SAR as
set forth in the Award Agreement. If, after such termination of
Continuous Service, the Participant does not exercise his or her
Option or SAR (as applicable) within the applicable time frame, the
Option or SAR (as applicable) will terminate.
(j)
Death of Participant.
Except as
otherwise provided in the applicable Award Agreement or other
written agreement between a Participant and the Company or an
Affiliate, if (i) a Participant’s Continuous Service
terminates as a result of the Participant’s death, or (ii) a
Participant dies within the period (if any) specified in the Award
Agreement for exercisability after the termination of the
Participant’s Continuous Service (for a reason other than
death), then the Participant’s Option or SAR may be exercised
(to the extent that the Participant was entitled to exercise such
Option or SAR as of the date of death) by the Participant’s
estate, by a person who acquired the right to exercise the Option
or SAR by bequest or inheritance, or by a person designated to
exercise the Option or SAR upon the Participant’s death, but
only within such period of time ending on the earlier of (i) the
date that is eighteen (18) months following the date of death (or
such longer or shorter period specified in the Award Agreement),
and (ii) the expiration of the term of the Option or SAR as set
forth in the Award Agreement. If, after the Participant’s
death, the Option or SAR (as applicable) is not exercised within
the applicable time frame, the Option or SAR (as applicable) will
terminate.
(k)
Termination for Cause.
Except as
explicitly provided otherwise in the applicable Award Agreement or
other individual written agreement between a Participant and the
Company or an Affiliate, if a Participant’s Continuous
Service is terminated for Cause, the Participant’s Option or
SAR will terminate immediately upon such termination of Continuous
Service, and the Participant will be prohibited from exercising his
or her Option or SAR from and after the time of such termination of
Continuous Service.
(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-7
6.
Provisions
of Stock Awards Other than Options and SARs.
(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.
(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.
At 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.
A-8
(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.
(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.
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8.
Miscellaneous.
(a)
Use of Proceeds from Sales of Common
Stock.
Proceeds from the sale of shares of Common Stock
issued pursuant to Stock Awards will constitute general funds of
the Company.
(b)
Corporate Action Constituting Grant of
Awards.
Corporate action constituting a grant by the Company
of an Award to any Participant will be deemed completed as of the
date of such corporate action, unless otherwise determined by the
Board, regardless of when the instrument, certificate or letter
evidencing the Award is communicated to, or actually received or
accepted by, the Participant. In the event that the corporate
records (
e.g
., Board
consents, resolutions or minutes) documenting the corporate action
constituting the grant contain terms (
e.g
., exercise price, vesting schedule
or number of shares) that are inconsistent with those in the Award
Agreement or related grant documents as a result of a clerical
error in the papering of the Award Agreement or related grant
documents, the corporate records will control and the Participant
will have no legally binding right to the incorrect term in the
Award Agreement or related grant documents.
(c)
Stockholder Rights.
No Participant will
be deemed to be the holder of, or to have any of the rights of a
holder with respect to, any shares of Common Stock subject to an
Award unless and until (i) such Participant has satisfied all
requirements for exercise of, or the issuance of shares of Common
Stock under, the Award pursuant to its terms, and (ii) the issuance
of the Common Stock subject to such Award has been entered into the
books and records of the Company.
(d)
No Employment or Other Service Rights.
Nothing in the Plan, any Award Agreement or any other instrument
executed thereunder or in connection with any Award granted
pursuant thereto will confer upon any Participant any right to
continue to serve the Company or an Affiliate in the capacity in
effect at the time the Award was granted or will affect the right
of the Company or an Affiliate to terminate (i) the employment of
an Employee with or without notice and with or without cause, (ii)
the service of a Consultant pursuant to the terms of such
Consultant’s agreement with the Company or an Affiliate, or
(iii) the service of a Director pursuant to the bylaws of the
Company or an Affiliate, and any applicable provisions of the
corporate law of the state in which the Company or the Affiliate is
incorporated, as the case may be.
(e)
Change in Time Commitment.
In the event
a Participant’s regular level of time commitment in the
performance of his or her services for the Company or any Affiliate
is reduced (for example, and without limitation, if the Participant
is an Employee of the Company and the Employee has a change in
status from a full-time Employee to a part-time Employee or takes
an extended leave of absence) after the date of grant of any Award
to the Participant, the Board has the right in its sole discretion
to (i) make a corresponding reduction in the number of shares or
cash amount subject to any portion of such Award that is scheduled
to vest or become payable after the date of such change in time
commitment, and (ii) in lieu of or in combination with such a
reduction, extend the vesting or payment schedule applicable to
such Award. In the event of any such reduction, the Participant
will have no right with respect to any portion of the Award that is
so reduced or extended.
(f)
Incentive Stock Option Limitations.
To
the extent that the aggregate Fair Market Value (determined at the
time of grant) of Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by any Participant
during any calendar year (under all plans of the Company and any
Affiliates) exceeds one hundred thousand dollars ($100,000) (or
such other limit established in the Code) or otherwise does not
comply with the rules governing Incentive Stock Options, the
Options or portions thereof that exceed such limit (according to
the order in which they were granted) or otherwise do not comply
with such rules will be treated as Nonstatutory Stock Options,
notwithstanding any contrary provision of the applicable Option
Agreement(s).
(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.
A-10
(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.
(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.
A-11
(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);
(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 qualifying termination of Continuous Service that
occurs in connection with 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.
A-12
10.
Termination
or Suspension of the Plan.
(a)
The Board may
suspend or terminate the Plan at any time. No Incentive Stock
Option may be granted after
the tenth (10th) anniversary of
the earlier of (i) the Adoption Date or (ii) the date the Plan is
approved by the stockholders of the Company. No Awards may be
granted under the Plan while the Plan is suspended or after it is
terminated.
(b)
No Impairment of Rights.
Suspension or
termination of the Plan will not materially impair rights and
obligations under any Award granted while the Plan is in effect
except with the written consent of the affected Participant or as
otherwise permitted in the Plan (including Section 2(b)(viii)) or
an Award Agreement.
11.
Effective
Date of Plan.
This
Plan will become effective on the Effective Date.
12.
Choice
of Law.
The
laws of the State of California will govern all questions
concerning the construction, validity and interpretation of this
Plan, without regard to that state’s conflict of laws
rules.
13.
Definitions.
As used in the Plan, the following definitions will apply to the
capitalized terms indicated below:
(a)
“
Adoption Date
”
means April 6, 2017, which is the date the Plan was adopted by the
Board.
(b)
“
Affiliate
”
means, at the time of determination, any “parent” or
“subsidiary” of the Company as such terms are defined
in Rule 405. The Board will have the authority to determine the
time or times at which “parent” or
“subsidiary” status is determined within the foregoing
definition.
(c)
“
Appreciation
Award
” means an Option or SAR granted under the Plan
or the Prior Plans, in each case with respect to which the exercise
or strike price is at least 100% of the Fair Market Value of the
Common Stock subject to the Option or SAR, as applicable, on the
date of grant.
(d)
“
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.
(e)
“
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.
(f)
“
Board
” means
the Board of Directors of the Company.
(g)
“
Capital Stock
”
means each and every class of common stock of the Company,
regardless of the number of votes per share.
(h)
“
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.
(i)
“
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.
(j)
“
Change in
Control
” means the occurrence, in a single transaction
or in a series of related transactions, of any one or more of the
following events:
(i)
any Exchange Act
Person becomes the Owner, directly or indirectly, of securities of
the Company representing more than fifty percent (50%) of the
combined voting power of the Company’s then outstanding
securities other than by virtue of a merger, consolidation or
similar transaction. Notwithstanding the foregoing, a Change in
Control will not be deemed to occur (A) on account of the
acquisition of securities of the Company directly from the Company,
(B) on account of the acquisition of securities of the Company by
an investor, any affiliate thereof or any other Exchange Act Person
that acquires the Company’s securities in a transaction or
series of related transactions the primary purpose of which is to
obtain financing for the Company through the issuance of equity
securities, or (C) solely because the level of Ownership held by
any Exchange Act Person (the “
Subject
Person
”) exceeds the designated percentage threshold
of the outstanding voting securities as a result of a repurchase or
other acquisition of voting securities by the Company reducing the
number of shares outstanding, provided that if a Change in Control
would occur (but for the operation of this sentence) as a result of
the acquisition of voting securities by the Company, and after such
share acquisition, the Subject Person becomes the Owner of any
additional voting securities that, assuming the repurchase or other
acquisition had not occurred, increases the percentage of the then
outstanding voting securities Owned by the Subject Person over the
designated percentage threshold, then a Change in Control will be
deemed to occur;
(ii)
there is
consummated a merger, consolidation or similar transaction
involving (directly or indirectly) the Company and, immediately
after the consummation of such merger, consolidation or similar
transaction, the stockholders of the Company immediately prior
thereto do not Own, directly or indirectly, either (A) outstanding
voting securities representing more than fifty percent (50%) of the
combined outstanding voting power of the surviving Entity in such
merger, consolidation or similar transaction or (B) more than fifty
percent (50%) of the combined outstanding voting power of the
parent of the surviving Entity in such merger, consolidation or
similar transaction, in each case in substantially the same
proportions as their Ownership of the outstanding voting securities
of the Company immediately prior to such transaction;
(iii)
there is
consummated a sale, lease, exclusive license or other disposition
of all or substantially all of the consolidated assets of the
Company and its Subsidiaries, other than a sale, lease, license or
other disposition of all or substantially all of the consolidated
assets of the Company and its Subsidiaries to an Entity, more than
fifty percent (50%) of the combined voting power of the voting
securities of which are Owned by stockholders of the Company in
substantially the same proportions as their Ownership of the
outstanding voting securities of the Company immediately prior to
such sale, lease, license or other disposition; or
(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.
A-13
(k)
“
Code
” means
the Internal Revenue Code of 1986, as amended, including any
applicable regulations and guidance thereunder.
(l)
“
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).
(m)
“
Common Stock
”
means the common stock of the Company.
(n)
“
Company
” means
ChromaDex Corporation, a Delaware corporation.
(o)
“
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.
(p)
“
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.
(q)
“
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.
(r)
“
Director
”
means a member of the Board.
A-14
(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.
(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)
“
Full Value
Award
” means an Award granted under the Plan or an
award granted under the Prior Plans in each case that is not an
Appreciation Award.
(aa)
“
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.
(bb)
“Inducement
Award”
means a Stock Award,
other than an Incentive Stock Option, granted pursuant to
Section 3(f) of the Plan.
(cc)
“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).
A-15
(dd)
“
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.
(ee)
“
Nonstatutory Stock
Option
” means an option granted pursuant to Section 5
that does not qualify as an Incentive Stock Option.
(ff)
“
Officer
” means
a person who is an officer of the Company within the meaning of
Section 16 of the Exchange Act.
(gg)
“
Option
” means
an Incentive Stock Option or a Nonstatutory Stock Option to
purchase shares of Common Stock granted pursuant to the
Plan.
(hh)
“
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.
(ii)
“
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).
(jj)
“
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.
(kk)
“
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.
(ll)
“
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
(mm)
“
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.
(nn)
“
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
(oo)
“
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).
(pp)
“
Performance Stock
Award
” means a Stock Award granted under the terms and
conditions of Section 6(c)(i).
(qq)
“
Plan
” means
this ChromaDex Corporation Amended 2017 Equity Incentive
Plan.
(rr)
“
Restricted Stock
Award
” means an award of shares of Common Stock which
is granted pursuant to the terms and conditions of Section
6(a).
(ss)
“
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.
(tt)
“
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).
(uu)
“
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.
(vv)
“
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.
(ww)
“
Rule 405
”
means Rule 405 promulgated under the Securities Act.
(xx)
“
Securities
Act
” means the Securities Act of 1933, as
amended.
(yy)
“
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.
(zz)
“
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.
(aaa)
“
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%).
(bbb)
“
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.
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