CHROMADEX CORPORATION EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit
10.65
CHROMADEX CORPORATION
This Executive Employment
Agreement (the “Agreement”)
is entered into by and between ChromaDex
Corporation, a Delaware corporation (the “Company”)
and ▇▇▇▇▇▇ ▇▇▇▇▇
(the “Executive”),
effective as of the Effective Date (as defined below). The Company
and Executive are hereinafter collectively referred to as the
“Parties”,
and individually referred to as a “Party”.
Whereas,
pursuant to that certain Member Interest Purchase Agreement (the
“Purchase
Agreement”), the Company will purchase one-hundred
percent (100%) of the membership interests of Healthspan Research,
LLC, a Delaware limited liability company (“Healthspan”),
not already owned by the Company from Executive and the other
members of Healthspan (the “Transaction”);
Whereas, in
connection with the Transaction, the Company desires to hire
Executive as an employee to provide personal services to the
Company, and wishes to provide Executive with certain compensation
and benefits in return for his services; and
Whereas,
Executive desires to be employed by the Company and provide such
services to the Company as an employee in return for certain
compensation and benefits; and
Whereas, the
effective date of this Agreement will be the Closing Date as
defined in the Purchase Agreement (the “Effective
Date”).
Now,
Therefore, in consideration of the mutual promises and
covenants contained herein, it is hereby agreed by and between the
Parties hereto as follows:
Agreement
In
consideration of the foregoing Recitals and the mutual promises and
covenants herein contained, and for other good and valuable
consideration, the Parties, intending to be legally bound, agree as
follows:
1.
Employment.
1.1 Title.
Executive shall be employed as President and Chief Strategy Officer
of the Company, subject to the terms and conditions set forth in
this Agreement. Executive shall report to the Company’s Chief
Executive Officer (the “CEO”). During
the Term (as defined below), Executive will devote his best efforts
and his full business time and attention to the business of the
Company and its subsidiaries, provided, however, that
notwithstanding the foregoing the Executive shall be permitted to
perform outside business, management of personal investments, and
other activities, including without limitation business activities
in the film and entertainment industries and relating to the
Hallmark Feeln streaming video service, to the extent that the
performance of such activities would not materially diminish,
conflict with or negatively impact the performance of Services
hereunder.
1.2 Term.
The term of Executive’s employment with the Company shall
commence on the Effective Date and remain in effect until the third
(3rd)
anniversary of the Effective Date, or until such earlier date as it
may be terminated by either Party pursuant to the terms of Section
5 herein (the “Initial
Term”). Unless terminated earlier pursuant to Section
5, this Agreement shall automatically be renewed on the third
anniversary of the Effective Date and each one-year anniversary
thereafter (each a “Renewal Date”)
for an additional term of one year (each, a “Renewal Term”
and together with the Initial Term, the “Term”), unless
terminated by either Party not less than sixty (60) days prior to
the end of the Initial Term or any Renewal Term. Each Renewal Term
is subject to the termination provisions hereof.
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1.3 Duties.
Executive will be the President and Chief Strategy Officer of the
Company and shall perform the following services (the “Services”):
coordinate raising equity and/or debt capital in an amount
sufficient to enable Healthspan to scale its business development,
marketing, and sales; oversight of the Company’s corporate
strategy and the marketing, branding and distribution of
nicotinamide riboside (“NR”) to the
Direct-to-Consumer (“DTC”) market
and such other distribution channels as the Company’s Board
of Directors (the “Board”) or CEO
may assign to Executive with Executive’s prior written
consent; and such other duties as are reasonably assigned to
Executive by the CEO.
1.4 Board
Role. Following the Effective Date, Executive shall
initially continue to serve as a director of the Company. Executive
agrees to promptly resign as a director of the Company if properly
terminated for Cause (as defined in Section 5.5.1 of this
Agreement) pursuant to the terms of this Agreement. On or prior to
the Effective Date, Executive shall resign as a member of the
Nominating and Corporate Governance Committee of the
Board.
1.5 Policies
and Practices. The employment relationship between the
Parties shall be governed by this Agreement and by the policies and
practices established by the Company for all similarly situated
executive officers. In the event that the terms of this Agreement
differ from or are in conflict with the Company’s policies or
practices, this Agreement shall control.
1.6 Location
and Travel. Executive’s principal place of business
for performance of the Services shall be in Los Angeles,
California, provided,
however, that the
Company may from time to time require Executive to travel
temporarily to other locations (domestic and international) in
connection with the Company’s business including the
Company’s executive offices in Irvine, California. In
connection with travel other than travel from the Los Angeles area
to and from the Company’s executive offices in Irvine, which
will be covered by the immediately succeeding sentence, the Company
shall reimburse Executive for all travel related expenses in
accordance with Section 2.4 of this Agreement. In addition, the
Company shall reimburse Executive at the standard mileage rate as
determined by the Internal Revenue Service for all miles driven in
connection with travel from the Los Angeles area to and from the
Company’s executive offices in Irvine, California pursuant to
Section 2.4.
1.7 Documentation.
The Company’s obligation to employ Executive pursuant to this
Agreement is conditioned on documentation of Executive’s
authorization to work in the United States.
2.
Compensation and Benefits for Executive.
2.1 Base
Salary. For services to be rendered hereunder, Executive
shall receive an initial base salary at the rate of $300,000 per
year (the “Base Salary”),
less standard payroll deductions and withholdings and payable in
accordance with the Company’s regular payroll schedule, but
in no event less frequently than monthly. The Base Salary may be
subject to positive adjustments based on the Company’s and
Executive’s performance, at the sole discretion of the
Board.
2.2 Annual
Bonus. Commencing
in fiscal year 2017, Executive shall be eligible to earn an annual
bonus as follows:
2.2.1 Executive
shall be eligible to earn an annual bonus during each fiscal year
that Executive remains employed by the Company for the entire
fiscal year in accordance with Section 2.2.2. In the case of fiscal
year 2017, Executive will be eligible to earn an annual bonus
provided that Executive is employed by the Company from the
Effective Date through the end of fiscal year 2017. Any such annual
bonus earned shall be paid, less standard payroll deductions and
withholdings, on the same date(s) as annual bonuses are paid to
other Company executives, but in no event shall the annual bonus be
paid later than March 15 of the fiscal year following the fiscal
year for which the annual bonus is payable. Executive does not need
to be employed on the date of payment of the annual bonus in order
to receive any bonus.
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2.2.2 For
each fiscal year that Executive remains employed by the Company for
the entire fiscal year (or for fiscal year 2017 as provided in the
second sentence of Section 2.2.1 above), the annual bonus shall
equal: (a) 1% of DTC Net
Sales for that fiscal year, as determined based on the
Company’s audited financial statements for that fiscal year;
plus (b) an additional 2% of the DTC Net
Sales for that fiscal year that exceed DTC Net Sales for the prior
fiscal year, as determined based on the Company’s audited
financial statements for each such fiscal year (so, if DTC Net
Sales for the current fiscal year do not exceed DTC Net Sales for
the prior fiscal year, there will be no bonus payable pursuant to
this clause (b)) (the “NR
Threshold”); plus (c) 1% of the Gross Profit of the
Company and its subsidiaries derived from NR Ingredient Sales for
that fiscal year that exceeds such Gross Profit for the prior
fiscal year, as determined based on the Company’s audited
financial statements for each such fiscal year (so, if such Gross
Profit for the current fiscal year does not exceed such Gross
Profit for the prior fiscal year, there will be no bonus payable
pursuant to this clause (c)). For purposes of this Agreement,
“DTC Net
Sales” means all DTC gross sales by Chromadex or any
of its subsidiaries (including Healthspan) of products with NR as a
lead ingredient (“Products”)
less any (1) trade, quantity and cash discounts on Products
actually provided to third parties in connection with arms-length
transactions, (2) credits, allowances or refunds, not to exceed the
original invoice amount, for actual claims, damaged goods,
rejections or returns of Products, (3) actual freight and insurance
costs incurred in transporting Products to such customers, and (4)
excise, sale, use, value added or other taxes. For purposes of this
Agreement, “NR Ingredient
Sales” means (A) sales by the Company and its
subsidiaries of NR to producers of products (“Dietary Supplement
Products”) labeled as “dietary
supplements” that include NR as an ingredient, are taken
orally, and bear or contain a vitamin, a mineral, an herb or other
botanical, an amino acid or a dietary substance to supplement the
product consumer’s diet, less
any (1) trade, quantity and cash discounts on such sales actually
provided to third parties in connection with arms-length
transactions, (2) credits, allowances or refunds, not to exceed the
original invoice amount, for actual claims, damaged goods,
rejections or returns of ingredient for such sales, (3) actual
freight and insurance costs incurred in transporting ingredient to
such customers, and (4) excise, sale, use, value added or other
taxes, plus (B) amounts received by the Company and its
subsidiaries from non-subsidiary entities in which the Company or
any of its subsidiaries has a direct or indirect ownership, equity,
or similar interest based on sales of NR by those non-subsidiary
entities to producers of Dietary Supplement Products pursuant to
contractual agreements between the Company or any of its
subsidiaries and those non-subsidiary entities. For purposes
of this Agreement, “Gross Profit”
means NR Ingredient Sales less the applicable cost of goods
sold.
2.2.3 For
the purposes of this Agreement, and notwithstanding the foregoing,
should Executive’s oversight responsibility be expanded to a
new distribution channel for or during any fiscal year, the initial
NR Threshold for that new distribution channel for such fiscal year
shall be equal to Net Sales to that distribution channel in such
fiscal year, as determined based on the Company’s audited
financial statements, and the NR Threshold for subsequent fiscal
years for that distribution channel shall be the Net Sales to such
distribution channel for the prior fiscal year, as determined based
on the Company’s audited financial statements. For purposes
of this Agreement, “Net Sales”
means all gross sales by the Company
or any of its subsidiaries of Products or NR as an ingredient, as
applicable, less any (1) trade, quantity and cash discounts on such
Products or ingredient sales, as applicable, actually provided to
third parties in connection with arms-length transactions, (2)
credits, allowances or refunds, not to exceed the original invoice
amount, for actual claims, damaged goods, rejections or returns of
Products or ingredient, as applicable, (3) actual freight and
insurance costs incurred in transporting Products or ingredient, as
applicable, to such customers, and (4) excise, sale, use, value
added or other taxes.
2.3 Equity.
2.3.1
Stock Options. On the Effective Date,
the Company will grant Executive options (incentive stock options,
to the extent possible pursuant to the terms of the Company’s
Second Amended and Restated 2007 Equity Incentive Plan or any
subsequent equity incentive plan (together, the “Plan”) and
applicable law) (the “Options”) to
purchase 500,000 shares of the Company’s common stock for an
exercise price equal to the fair market value on the date of the
grant. The Options shall vest in equal monthly installments over
three years, subject to Executive’s Continuous Service (as
defined in the Plan) on each such vesting date.
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2.3.2
Restricted Stock.
2.3.2.1 On the Effective Date, the
Company will grant Executive 166,667 shares of restricted common
stock of the Company, which shares shall vest in equal annual
installments over three years, subject to Executive’s
Continuous Service on each vesting date.
2.3.2.2 Subject to requisite stockholder
approval, on the one-year anniversary of the Effective Date, the
Company will grant Executive 166,667 shares of restricted common
stock of the Company (subject to Executive’s Continuous
Service as an employee or consultant of the Company or any of its
subsidiaries through such grant date), which shares shall vest in
equal annual installments over two years, subject to
Executive’s Continuous Service on each vesting date. The
Company will use its reasonable efforts to obtain requisite
stockholder approval of such grant.
2.3.2.3 Subject to requisite stockholder
approval, on the two-year anniversary of the Effective Date, the
Company will grant Executive 166,666 shares of restricted common
stock of the Company (subject to Executive’s Continuous
Service as an employee or consultant of the Company or any of its
subsidiaries through such grant date), which shares shall vest
completely on the one year anniversary of such grant date, subject
to Executive’s Continuous Service on such vesting date. The
Company will use its reasonable efforts to obtain requisite
stockholder approval of such grant.
2.3.3
Accelerated Vesting of Equity. Upon the
occurrence of any of (a) a Change of Control (as defined in the
Plan), (b) Executive’s death, (c) Executive’s
Disability (as defined below), (d) termination by the Company of
the Executive’s employment without Cause or (e) resignation
by the Executive of his employment for Good Reason, and subject in
each case to the Executive’s Continuous Service as an
employee or consultant of the Company or any of its subsidiaries
through such event, all of the unvested Options and shares of such
restricted stock granted pursuant to Sections 2.3.1, 2.3.2.1,
2.3.2.2 and 2.3.2.3, as applicable, will vest
immediately.
2.3.4
Performance Stock. Subject to requisite
stockholder approval, the Executive will be granted up to 500,000
fully-vested shares of restricted common stock of the Company, upon
the achievement of and subject to the performance goals detailed on
Exhibit A, subject to
Executive’s Continuous Service as an employee or consultant
of the Company or any of its subsidiaries on such grant
dates.
2.3.5
Additional Equity. Executive shall be
eligible for additional equity grants in amounts commensurate with
Executive’s senior level position with the Company, at the
same times as equity is granted to other senior level executives of
the Company, in the discretion of the Board.
2.3.6
Tax Matters Related to Restricted Stock and
Options. Withholding for any taxes which arise in connection
with the Options or the shares of restricted common stock of the
Company granted to Executive pursuant to this Agreement shall be
governed in accordance with the applicable stock option agreement
for the Options or restricted stock award agreement for such
restricted stock.
2.4 General
Expense Reimbursements. The Company will promptly reimburse
Executive for all reasonable business expenses Executive incurs in
performing Services hereunder pursuant to the Company’s usual
expense reimbursement policies and practices, following submission
by Executive of reasonable documentation thereof.
2.5 Benefits.
Executive shall, in accordance with Company policy and the terms
and conditions of the applicable Company benefit plan documents, be
eligible for participation in and shall be covered by any and all
medical, dental, life and other voluntary insurance plans,
retirement and profit sharing plans, and such other benefits
generally available to other employees of the Company in similar
employment positions, on the same terms as such employees, subject
to eligibility requirements. Any such benefits shall be subject to
the terms and conditions of the governing benefit plans and
policies and may be changed by the Company in its discretion,
provided, however, that any such benefit plan or policy change that
materially and adversely affects Executive disproportionately and
specifically compared to other similarly situated executives of the
Company shall require the written consent of Executive. Executive
shall be entitled to 4 weeks of vacation per calendar
year.
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2.6 Directors
and Officers Insurance. The Company shall procure directors
and officers insurance with coverage of not less than $5 million,
and shall maintain such insurance in full force and effect during
the Term of this Agreement and for a period of seven years
thereafter.
3.
Proprietary Information Obligations.
3.1 Proprietary
Information Agreement. As a condition of employment,
Executive agrees to execute and abide by the Company’s
current form of Employee Confidential Information and Invention
Assignment Agreement (“Inventions
Assignment Agreement”).
3.2
Third Party Agreements and Information.
Executive hereby confirms that Executive’s employment by the
Company does not and will not conflict with any prior agreement
with any third party, and that Executive will perform the Services
in a manner that does not violate any such agreement. By entering
into this Agreement, Executive represents that he has previously
disclosed to the Company any agreement that he has signed that may
restrict his activities on behalf of the Company in any manner.
Executive represents and warrants that, except as gained in
connection with Healthspan, Executive does not possess confidential
or proprietary information arising out of prior employment,
consulting, or other third party relationships, which would be used
in connection with Executive’s employment by the Company,
except as expressly authorized by such third party. During
Executive’s employment by the Company, Executive will be
expected not to make any unauthorized use or disclosure of any
information or materials, including trade secrets, of any former
employer or other third party (excluding Healthspan). Executive
shall use, in the performance of the Services, only information
generally known and used by persons with training and experience
comparable to his own, which is common knowledge in the industry or
otherwise legally in the public domain, or which is otherwise
provided or developed by the Company or obtained or developed by
Executive on behalf of the Company.
4.
Outside Activities During Employment.
4.1
Outside Activities. Executive agrees not
to acquire, assume or participate in, directly or indirectly, any
position, investment or interest known by him to be adverse or
antagonistic to the Company, its business or prospects, financial
or otherwise during the Term of Executive’s employment with
the Company. Except with the prior
written consent of the Board, Executive will not during the Term of
this Agreement undertake or engage in any other employment,
occupation or business enterprise, provided, however, that
notwithstanding the foregoing the Executive shall be permitted to
perform outside business, management of personal investments, and
other activities, including without limitation business activities
in the film and entertainment
industries and relating to the Hallmark Feeln streaming video
service, to the extent that the performance of such activities
would not materially diminish, conflict with or negatively impact
the performance of Services hereunder.
4.2
Duty of Loyalty During
Employment. During the Term of
his employment with the Company, except on behalf of the Company or
Healthspan, Executive will not directly or indirectly, whether as
an officer, director, stockholder, partner, proprietor, associate,
representative, employee, consultant, debtholder or in any capacity
whatsoever engage in, become financially interested in, participate
in, be employed by or have any business connection with any other
person, corporation, firm, partnership or other entity whatsoever
which competes with the Company, anywhere throughout the world, in
any line of business engaged in (or which the Company has publicly
announced that it plans to be engaged in) by the Company
other than de minimis stock holdings in public
companies.
5.
At-Will Employment; Termination of Employment.
5.1 At-Will
Employment. Executive’s employment relationship with
the Company is employment at-will and may be terminated by the
Company or by Executive at any time and for any reason during the
Term. At the time of termination, Executive will receive (a) all
accrued base salary, and all accrued and unused paid time off,
through the termination date, and (b) any annual bonus amount
earned during the completed fiscal year preceding the year in which
Executive’s employment termination occurred, but not yet paid
as of the termination date (the “Accrued
Benefits”).
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5.2 Severance
Benefits for Qualifying Termination. If, prior to the
expiration of the Term of this Agreement, (a) Executive’s
employment is terminated by the Company without Cause, for death or
Disability, or Executive resigns his employment for Good Reason, or
(b) (i) a Change of Control occurs and (ii) within one month prior
to the date of such Change of Control or twelve months after the
date of such Change in Control Executive’s employment is
terminated by the Company other than for Cause, and (c) Executive
satisfies the Release Requirement, then Executive will receive the
following “Severance
Benefits” as set forth in this Section
5.2.
5.2.1 Severance
Payments. Executive will receive severance pay in the form
of continuation of Executive’s then-current base salary at
the time of Executive’s termination for a period of twelve
(12) months, less standard payroll deductions and withholdings (the
“Severance
Payments”), to be paid on the Company’s regular
payroll schedule in effect following Executive’s employment
termination date; provided, however that the Company shall not be
required to make any payments before the Release Effective
Date.
5.2.2
Health Care Continuation Coverage
Payments. If Executive timely elects continued coverage
under COBRA, the Company will pay Executive’s COBRA premiums
to continue Executive’s coverage (including coverage for
Executive’s eligible dependents, if applicable)
(“COBRA
Premiums”) through the period starting on the
employment termination date and ending twelve (12) months after the
employment termination date (the “COBRA Premium
Period”); provided, however,
that the Company’s provision of such COBRA Premium benefits
will immediately cease if during the COBRA Premium Period Executive
becomes eligible for group health insurance coverage through a new
employer or Executive ceases to be eligible for COBRA continuation
coverage for any reason, including plan termination. In the event
Executive becomes covered under another employer's group health
plan or otherwise ceases to be eligible for COBRA during the COBRA
Premium Period, Executive must promptly notify the Company of such
event. Notwithstanding the foregoing, if the Company determines, in
its sole discretion, that it cannot pay the COBRA Premiums without
potentially incurring financial costs or penalties under applicable
law (including, without limitation, Section 2716 of the Public
Health Service Act), regardless of whether Executive or
Executive’s dependents elect or are eligible for COBRA
coverage, the Company instead shall pay to Executive, on the first
day of each calendar month following the termination date, a fully
taxable cash payment equal to the applicable COBRA premiums for
that month (including the amount of COBRA premiums for
Executive’s eligible dependents), subject to applicable tax
withholdings (such amount, the “Special Cash
Payment”), for the remainder of the COBRA Premium
Period. Executive may, but is not obligated to, use such Special
Cash Payments toward the cost of COBRA premiums.
5.2.3
Prorated Bonus. Executive will receive
the prorated portion of Executive’s annual bonus, less
standard payroll deductions and withholdings, earned for the fiscal
year in which such termination or resignation occurs. Such bonus
amount shall be calculated pursuant to Section 2.2 and prorated for
the number of days Executive worked during such fiscal year, and
paid at the same time as annual bonuses for such fiscal year are
paid to other senior executives of the Company, but in no event
shall the annual bonus be paid later than March 15 of the fiscal
year following the fiscal year for which the annual bonus is
payable.
5.2.4
Extended Exercise Period for Stock
Options. With respect to any stock option grants, including
the Options, that are awarded to Executive on or after the
Effective Date, such equity awards shall, to the extent vested as
of the employment termination date, remain exercisable until the
earlier of: (a) twelve (12) months following Executive’s
employment termination date (or, such longer period as provided in
the Plan in the event of Executive’s death), (b) the
expiration of such awards’ original maximum term, or (c)
termination of such equity awards under the terms of the
Company’s equity plan in connection with a dissolution or
liquidation of the Company, a Corporate Transaction or a Change of
Control (as such terms are defined in the Plan).
5.3
Release Requirement. To be eligible for
the Severance Benefits pursuant to Section 5.2 above, Executive
must satisfy the following release requirement (the
“Release
Requirement”): return to the Company a signed and
dated general release of all known and unknown claims in a
termination agreement acceptable to the Company (the
“Release”)
within the applicable deadline set forth therein, but in no event
later than forty-five (45) calendar days following
Executive’s employment termination date, and permit the
Release to become effective and irrevocable in accordance with its
terms (such effective date of the Release, the “Release Effective
Date”). No
Severance Benefits will be paid hereunder prior to such Release
Effective Date.
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5.4
Unvested Equity. Except to the extent
set forth in Section 2.3.3, at the time of termination of
Executive’s Continuous Service, all unvested equity (whether
options, restricted stock or otherwise) will lapse and become
forfeited by Executive.
5.5
Definitions.
5.5.1
Cause. For the purposes of this
Agreement, “Cause” means
the occurrence of any one or more of the following: (a)
Executive’s conviction of or plea of guilty or nolo contendere to any felony (other
than traffic violations); (b) Executive’s consistent failure
or refusal to follow lawful and reasonable written instructions of
the CEO or lawful and reasonable policies and regulations of the
Company or its affiliates; (c) Executive’s consistent failure
to faithfully and diligently perform material assigned duties of
Executive’s employment with the Company or its affiliates
that is substantially detrimental to the business or reputation of
the Company; (d) fraudulent conduct by Executive in connection with
the performance of Executive's duties for the Company or its
affiliates; (e) conduct by Executive that materially discredits or
that causes material harm to the Company or any affiliate or that
is materially detrimental to the reputation, character and standing
of the Company or any affiliate; or (f) Executive’s material
breach of this Agreement, the Inventions Assignment Agreement, or
any applicable Company policies. An event described in clauses (b)
through (f) shall not be treated as “Cause” until after
Executive has been given written notice of such event, failure,
conduct or breach, with specific details supporting such a
determination, and Executive fails to cure such event, failure,
conduct or breach within 30 days from such written notice;
provided, however, that such 30-day cure period shall not be
required if the event, failure, conduct or breach is incapable of
being cured.
5.5.2
Change of Control. For the purposes of
this Agreement, “Change of
Control” shall have the meaning described in the
Plan.
5.5.3
Disability. For purposes of this
Agreement, “Disability”
means that Executive is unable to perform the essential functions
of his position (notwithstanding the provision of any reasonable
accommodation) by reason of any medically determinable physical or
mental impairment which has lasted or can reasonably be expected to
last for a period of ninety (90) or more consecutive days or one
hundred and twenty (120) days during any consecutive six (6) month
period, as determined by a physician to be selected by the Company
in good faith and reasonably acceptable to Executive.
5.5.4
Good Reason. For purposes of this
Agreement, Executive shall have “Good Reason” for resignation from
employment with the Company if any of the following actions are
taken by the Company without Executive’s prior written
consent: (a) a material reduction in Executive’s Base Salary,
unless pursuant to a salary reduction program applicable generally
to the Company’s senior executives; (b) a material reduction
in Executive’s duties (including responsibilities and/or
authorities) or reporting structure, provided,
however, that a
change in job position (including a change in title) shall not be
deemed a “material reduction” in and of itself unless
Executive’s new duties are materially reduced from the prior
duties; or (c) relocation of Executive’s principal place of
employment to a place that increases Executive’s one-way
commute by more than thirty (30) miles as compared to
Executive’s then-current principal place of employment
immediately prior to such relocation, unless Executive requests or
agrees in writing to such relocation. An event described in clauses
(a) through (c) shall not be treated as “Good Reason”
until after the Company has been given written notice of such
event, failure, conduct, or breach, with specific details
supporting such a determination, the Company fails to cure such
event, failure, conduct, or breach within 30 days from such written
notice (unless such event, failure, conduct, or breach is incapable
of being cured, in which case the 30-day cure period shall not be
required), and the Executive resigns from all positions Executive
then holds with the Company not later than 30 days after the
expiration of the cure period (or 30 days from the date of the
Executive’s notice if the applicable event, failure, conduct
or breach is incapable of being cured).
5.6
Termination for Cause or Resignation Without
Good Reason. Except for Accrued Benefits and any other
benefits required by applicable law, Executive will not be eligible
for, or entitled to any severance benefits, including (without
limitation) the Severance Benefits listed in Section 5.2, if the
Company terminates Executive’s employment for Cause or
Executive resigns Executive’s employment without Good Reason
at any time. Similarly, Executive will not be eligible for any
severance benefits if the Executive’s employment is
terminated as the result of the expiration of the Term. In
addition, if Executive materially breaches any continuing
obligations to the Company or its affiliates (including but not
limited to any material breach of this Agreement, any material
breach of the Inventions Assignment Agreement, or material breach
of Section 5.4(a) or Section 5.4(b)
of the Purchase Agreement) during the period of time that
Executive is receiving any Severance Benefits, Executive will
forfeit Executive’s entitlement to any then unpaid Severance
Benefits, and the Company’s obligation to continue to pay or
provide such Severance Benefits will immediately terminate as of
the date of Executive’s material breach.
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6.
Section 409A.
All
payments provided hereunder are intended to constitute separate
payments for purposes of Treasury Regulation Section
1.409A-2(b)(2). If the Company determines that any benefits
provided under this Agreement constitute “deferred
compensation” under Section 409A of the Internal Revenue Code
of 1986 as amended (“Section
409A”), such benefits will not commence in connection
with Executive’s termination of employment unless such
termination also qualifies as a “separation from
service” with the Company within the meaning of Treasury
Regulation Section 1.409A-1(h) (without regard to any permissible
alternative definition thereunder) (“Separation from
Service”). If the Company determines that any benefits
provided under this Agreement constitute “deferred
compensation” under Section 409A and Executive is a
“specified employee” of the Company or any affiliate
thereof (or any successor entity thereto) within the meaning of
Section 409A(a)(2)(B)(i) of the Code on the date of the Separation
from Service, then the payment of any such benefits shall be
delayed until the earlier of: (a) the date that is six (6) months
and one (1) day after the date of Executive’s Separation from
Service, or (b) the date of Executive’s death (such date, the
“Delayed
Payment Date”), and the Company (or the successor
entity thereto, as applicable) shall (i) pay to Executive a lump
sum amount equal to the sum of the benefit payments that otherwise
would have been paid to Executive on or before the Delayed Payment
Date, without any adjustment on account of such delay, and (ii)
continue the benefit payments in accordance with any applicable
payment schedules set forth for the balance of the period specified
herein. In addition to the above, to the extent required to comply
with Section 409A and the applicable regulations and guidance
issued thereunder, if the applicable deadline for Executive to
execute (and not revoke) the applicable Release spans two calendar
years, Executive’s Severance Benefits shall commence to be
paid in installments on the first regularly scheduled payroll date
that occurs in the second calendar year. To the extent that any
reimbursement, fringe benefit or other similar plan or arrangement
in which the Executive participates during the term of
Executive’s employment under this Agreement or thereafter
provides for a “deferral of compensation” within the
meaning of Section 409A of the Code, (i) the amount eligible for
reimbursement or payment under such plan or arrangement in one
calendar year may not affect the amount eligible for reimbursement
or payment in any other calendar year (except that a plan providing
medical or health benefits may impose a generally applicable limit
on the amount that may be reimbursed or paid), and (ii) subject to
any shorter time periods provided herein or the applicable plans or
arrangements, any reimbursement or payment of an expense under such
plan or arrangement must be made on or before the last day of the
calendar year following the calendar year in which the expense was
incurred.
7.
Section 280G; Limitations on Payment
7.1
If any payment or
benefit Executive will or may receive from the Company or otherwise
(a “280G
Payment”) would (a) constitute a “parachute
payment” within the meaning of Section 280G of the Code, and
(b) but for this sentence, be subject to the excise tax
imposed by Section 4999 of the Code (the “Excise Tax”),
then any such 280G Payment provided pursuant to this Agreement (a
“Payment”)
shall be equal to the Reduced Amount. The “Reduced
Amount” shall be either (x) the largest portion
of the Payment that would result in no portion of the Payment
(after reduction) being subject to the Excise Tax or (y) the
largest portion, up to and including the total, of the Payment,
whichever amount (i.e., the amount determined by clause (x) or by
clause (y)), after taking into account all applicable federal,
state and local employment taxes, income taxes, and the Excise Tax
(all computed at the highest applicable marginal rate), results in
Executive’s receipt, on an after-tax basis, of the greater
economic benefit notwithstanding that all or some portion of the
Payment may be subject to the Excise Tax. If a reduction in a
Payment is required pursuant to the preceding sentence and the
Reduced Amount is determined pursuant to clause (x) of the
preceding sentence, the reduction shall occur in the manner (the
“Reduction
Method”) that results in the greatest economic benefit
for Executive. If more than one method of reduction will result in
the same economic benefit, the items so reduced will be reduced pro
rata (the “Pro Rata Reduction
Method”).
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7.2
Notwithstanding any
provision of Section 7.1 to the contrary, if the Reduction
Method or the Pro Rata Reduction Method would result in any portion
of the Payment being subject to taxes pursuant to Section 409A that
would not otherwise be subject to taxes pursuant to Section 409A,
then the Reduction Method and/or the Pro Rata Reduction Method, as
the case may be, shall be modified so as to avoid the imposition of
taxes pursuant to Section 409A as follows: (A) as a first
priority, the modification shall preserve to the greatest extent
possible, the greatest economic benefit for Executive as determined
on an after-tax basis; (B) as a second priority, Payments that
are contingent on future events (e.g., being terminated without Cause),
shall be reduced (or eliminated) before Payments that are not
contingent on future events; and (C) as a third priority,
Payments that are “deferred compensation” within the
meaning of Section 409A shall be reduced (or eliminated) before
Payments that are not deferred compensation within the meaning of
Section 409A.
7.3
Unless Executive
and the Company agree on an alternative accounting firm or law
firm, the accounting firm engaged by the Company for general tax
compliance purposes as of the day prior to the effective date of
the Change of Control transaction shall perform the foregoing
calculations. If the accounting firm so engaged by the Company is
serving as accountant or auditor for the individual, entity or
group effecting the Change of Control transaction, the Company
shall appoint a nationally recognized accounting or law firm to
make the determinations required by this Section 7. The Company
shall bear all expenses with respect to the determinations by such
accounting or law firm required to be made hereunder. The Company shall use commercially reasonable
efforts to cause the accounting or law firm engaged to make the
determinations hereunder to provide its calculations, together with
detailed supporting documentation, to Executive and the Company within fifteen (15) calendar days
after the date on which Executive’s right to a 280G Payment becomes reasonably likely
to occur (if requested at that time by Executive
or the Company) or such other time as
requested by Executive or the
Company.
7.4
If Executive
receives a Payment for which the Reduced Amount was determined
pursuant to clause (x) of Section 7.1 and the Internal Revenue
Service determines thereafter that some portion of the Payment is
subject to the Excise Tax, Executive agrees to promptly return to
the Company a sufficient amount of the Payment (after reduction
pursuant to clause (x) of Section 7.1) so that no portion of the
remaining Payment is subject to the Excise Tax. For the avoidance
of doubt, if the Reduced Amount was determined pursuant to clause
(y) of Section 7.1, Executive shall have no obligation to return
any portion of the Payment pursuant to the preceding
sentence.
8.
Assignment and Binding Effect.
This
Agreement shall be binding upon and inure to the benefit of
Executive and Executive’s heirs, executors, personal
representatives, assigns, administrators and legal representatives.
Because of the unique and personal nature of Executive’s
duties under this Agreement, neither this Agreement nor any rights
or obligations under this Agreement shall be assignable by
Executive. This Agreement shall be binding upon and inure to the
benefit of the Company and its successors, assigns and legal
representatives. Any such successor or assign of the Company will
be deemed substituted for the Company under the terms of this
Agreement for all purposes. For this purpose,
“successor” means any person, firm, corporation or
other business entity which at any time, whether by purchase,
merger or otherwise, directly or indirectly acquires all or
substantially all of the assets or business of the
Company.
9.
Choice of Law.
This Agreement shall be construed and interpreted
in accordance with the internal laws of the State of California
without regard to its conflict of laws principles.
10.
Integration.
This
Agreement, including Exhibit A and each document referred to or
described herein, the Purchase Agreement, with respect to Section
5.4(a) and Section 5.4(b) therein only, the Inventions Assignment
Agreement, and the Indemnification Agreement contain the complete,
final and exclusive agreement of the Parties relating to the terms
and conditions of Executive’s employment and the termination
of Executive’s employment, and supersede all prior and
contemporaneous oral and written employment agreements or
arrangements between the Parties.
-9-
11.
Amendment.
This
Agreement cannot be amended or modified except by a written
agreement signed by Executive and the Company.
12.
Waiver.
No
term, covenant or condition of this Agreement or any breach thereof
shall be deemed waived, except with the written consent of the
Party against whom the wavier is claimed, and any waiver or any
such term, covenant, condition or breach shall not be deemed to be
a waiver of any preceding or succeeding breach of the same or any
other term, covenant, condition or breach.
13.
Severability.
The
finding by a court of competent jurisdiction of the
unenforceability, invalidity or illegality of any provision of this
Agreement shall not render any other provision of this Agreement
unenforceable, invalid or illegal. Such court shall have the
authority to modify or replace the invalid or unenforceable term or
provision with a valid and enforceable term or provision, which
most accurately represents the Parties’ intention with
respect to the invalid or unenforceable term, or
provision.
14.
Interpretation; Construction.
The
headings set forth in this Agreement are for convenience of
reference only and shall not be used in interpreting this
Agreement. This Agreement has been drafted by legal counsel
representing the Company, but the Executive has been encouraged to
consult with, and has consulted with, Executive’s own
independent counsel and tax advisors with respect to the terms of
this Agreement. The Parties acknowledge that each Party and its
counsel has reviewed and revised, or had an opportunity to review
and revise, this Agreement, and any rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of this
Agreement.
15.
Counterparts.
This
Agreement may be executed in two counterparts, each of which shall
be deemed an original, all of which together shall contribute one
and the same instrument.
16.
Notices.
Any
and all notices, demands, requests, or other communications
hereunder shall be in writing and shall be deemed duly given when
personally delivered to or transmitted by overnight express
delivery to and received by the Party to whom such notice is
intended thereof, or in lieu of such personal delivery or overnight
express delivery, upon receipt when deposited in the United States
mail, first-class, certified or registered, postage prepaid, return
receipt requested, addressed to the applicable Party at the address
set forth below such Party’s signature to this Agreement
(which may be omitted in any public filing). Any Party may change
its respective address for the purposes of this Section 16 by
giving notice of such change to the other Party in the manner
provided in this Section 16.
-10-
17.
Arbitration.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
-11-
In
Witness Whereof, the Parties
have executed this Agreement as of the dates written
below.
ChromaDex Corporation
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By: /s/
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇.
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Its: Chief Executive
Officer
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Dated: March 12, 2017
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Executive:
|
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/s/
▇▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇
▇▇▇▇▇
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Dated: March 12, 2017
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-12-
EXHIBIT A
Performance Goals(1)(2)
|
Performance
Goal
|
Number of fully-vested
shares of restricted common stock of ChromaDex to be granted to
Executive based upon achievement of such Performance
Goal
|
|
1. Net Sales to all
distribution channels from and after the Effective Date exceeds Net
Sales to all distribution channels in fiscal year 2016 by not less
than $10,000,000
|
166,667
|
|
2. Net Sales to all
distribution channels from and after the Effective Date exceeds Net
Sales to all distribution channels in fiscal year 2016 by not less
than $20,000,000
|
166,667
|
|
3. Net Sales to all
distribution channels from and after the Effective Date exceeds Net
Sales to all distribution channels in fiscal year 2016 by not less
than $30,000,000
|
166,666
|
TOTAL:
500,000
shares
(1) All determinations of Net Sales for purposes of
determining whether any of the Performance Goals have been achieved
shall be based on the Company’s audited financial statements
for the applicable fiscal years.
(2) Each Performance Goal may be achieved only
once.
A-1