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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): June 20, 2008

ChromaDex Corporation
(Exact name of registrant as specified in its charter)
         
Delaware   333-140056   20-5339393
(State or other Jurisdiction of Incorporation)   (Commission File Number)   (IRS Employer Identification No.)
     
10005 Muirlands Boulevard
Suite G, First Floor
Irvine, California
  92618
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code: (949) 419-0288
 
Cody Resources, Inc.
2915 W. Charleston Blvd., Ste. 7, Las Vegas, NV 89102
(Former name or former address if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 
 

 

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Item 1.01 Entry into a Material Definitive Agreement
Item 2.01 Completion of Acquisition or Disposition of Assets
Item 3.02 Unregistered Sales of Equity Securities
Item 4.01 Changes in Registrant’s Certifying Accountant
Item 5.01 Change in Control of Registrant
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
Item 5.03 Amendments to Certificate of Incorporation or Bylaws; Change in Fiscal Year
Item 5.06 Change in Shell Company Status
Item 9.01 Financial Statements and Exhibits
EXHIBIT INDEX
SIGNATURES
Exhibit 2.1
Exhibit 3.1
Exhibit 3.2
Exhibit 4.1
Exhibit 4.2
Exhibit 4.3
Exhibit 4.4
Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 10.14
Exhibit 10.5
Exhibit 10.6
Exhibit 10.7
Exhibit 10.8
Exhibit 10.9
Exhibit 10.10
Exhibit 10.12
Exhibit 10.13
Exhibit 10.14
Exhibit 16.1
Exhibit 21.1


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CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS
This Current Report on Form 8-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements reflect the current view about future events. When used in the filings the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan” or the negative of these terms and similar expressions as they relate to Registrant or Registrant’s management identify forward looking statements. Such statements reflect the current view of Registrant with respect to future events and are subject to risks, uncertainties, assumptions and other factors (including the risks contained in the section of this report entitled “Risk Factors”) relating to Registrant’s industry, Registrant’s operations and results of operations and any businesses that may be acquired by Registrant. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.
Although Registrant believes that the expectations reflected in the forward looking statements are reasonable, Registrant cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, Registrant does not intend to update any of the forward-looking statements to conform these statements to actual results. The following discussion should be read in conjunction with Registrant’s pro forma financial statements and the related notes filed herein.
In this Form 8-K, references to “we,” “our,” “us,” “the Company,” “our company,” the “combined companies” or the “Registrant” for periods after the closing of the Merger as defined in Section 2.01 below refer to ChromaDex Corporation, a Delaware corporation (successor by merger with Cody Resources, Inc., a Nevada corporation and referred to herein as “Cody”), and ChromaDex, Inc., a California corporation (“ChromaDex”), a wholly-owned subsidiary of Cody. All references to “we,” “our” and “us” for periods prior to the closing of the Merger refer to ChromaDex. All references to the “Registrant” prior to the closing of the Merger refer to Cody.
Item 1.01 Entry into a Material Definitive Agreement
On May 21, 2008, Cody Resources, Inc., a Nevada corporation, entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among Cody Resources, Inc., CDI Acquisition, Inc., a California corporation and wholly-owned subsidiary of Cody (“Acquisition Sub”), and ChromaDex (the “Merger”). Subsequent to the signing of the Merger Agreement, Cody Resources, Inc. merged with and into a Delaware corporation for the sole purpose of changing the domicile of Cody Resources, Inc. to the State of Delaware. Subsequent to the signing of the Merger Agreement, and to changing its domicile, Cody Resources, Inc. amended its articles of incorporation to change its name to “ChromaDex Corporation.”
Pursuant to the terms of the Merger Agreement, and upon satisfaction of specified conditions, including approval by ChromaDex shareholders on June 18, 2008, Acquisition Sub merged with and into ChromaDex, and ChromaDex, as the surviving corporation, became a wholly-owned subsidiary of Cody.
On the closing date, pursuant to the terms of the Merger Agreement, former ChromaDex shareholders received approximately 23,522,122 shares of Cody Common Stock (the “Cody Common Stock”), or approximately 83.94% of the post-merger company’s outstanding shares. The shares of Cody Common Stock were issued pursuant to Rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933. The shares are unregistered, restricted stock bearing a restrictive legend. See “Cody Shares Eligible for Future Sale” at Item 2.01 of this Form 8-K.
The material terms of the Merger Agreement are described more fully in Item 2.01 of this Current Report on Form 8-K. The information therein is hereby incorporated into this Item 1.01 by reference.
Item 2.01 Completion of Acquisition or Disposition of Assets
As described in Item 1.01 above, on June 20, 2008, Cody acquired ChromaDex, a supplier of phytochemical reference standards and reference materials, related contract services, and products for the dietary supplement, nutraceutical, food and beverage, functional food, pharmaceutical and cosmetic markets in a merger (“Merger”). CDI Acquisition, Inc., a California corporation and wholly-owned subsidiary of Cody (“Acquisition Sub”), merged with and into ChromaDex. The outstanding ChromaDex common stock was converted into 23,522,122 shares of Cody Common Stock, or approximately 83.94% of the post-merger company’s outstanding shares. See “Cody Shares Eligible for Future Sale” below.

 

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Pursuant to the Merger Agreement, the directors and executive officers of Cody, Donald Sampson and Barbara Grant, resigned from their respective positions with Cody at the closing of the Merger. The directors and executive officers of ChromaDex immediately prior to the Merger became the directors and executive officers of Cody. See “Management” below.
Change in Corporate Headquarters
In connection with the closing of the Merger, Cody relocated its corporate headquarters from 2915 W. Charleston Blvd., Ste. 7, Las Vegas, NV 89102 to 10005 Muirlands Boulevard, Suite G, First Floor, Irvine, CA 92618.
Accounting Treatment
For accounting purposes, the Merger is being accounted for as a reverse merger, which means ChromaDex will be deemed to have acquired Cody. This accounting treatment was required since the shareholders of ChromaDex now own a substantial majority of the issued and outstanding shares of common stock of the Registrant, and certain of the directors and executive officers named by ChromaDex became the directors and executive officers of the Registrant at the closing, replacing the prior directors and executive officers. No agreements exist among present or former controlling shareholders of the Registrant or present or former officers and directors of ChromaDex with respect to the future election of the members of the Registrant’s Board of Directors, and to the Registrant’s knowledge, no other agreements exist which might result in a change of control of the Registrant. See the pro forma financial information in this Form 8-K for further details.
Treatment of Options and Warrants
Cody assumed each stock option to purchase shares of ChromaDex’s common stock that was outstanding immediately prior to the Merger, whether or not then vested or exercisable (each, an “Assumed ChromaDex Option”). Each Assumed ChromaDex Option was converted into an option to acquire that number of shares of Cody Common Stock equal to the number of shares of ChromaDex common stock subject to such option, at an exercise price equal to the exercise price stated in such option, subject in all respects to all other terms and conditions of such option. At closing, Cody assumed options representing rights to purchase up to approximately 3,301,937 shares of Cody Common Stock at a weighted average exercise price of $1.35 per share of Cody Common Stock. Cody assumed both the 2000 Non-Qualified Incentive Stock Option Plan effective October 1, 2000 (the “2000 Plan”) and the Second Amended and Restated 2007 Equity Incentive Plan effective March 13, 2007 (the “2007 Plan”). The 2000 Plan and the 2007 Plan are each described below under “Equity Incentive Plans” and are included as Exhibits 10.1 and 10.2 respectively, to this Current Report on Form 8-K.
Further, Cody assumed each warrant to purchase, acquire or otherwise receive ChromaDex shares, exclusive of Assumed ChromaDex Options outstanding immediately prior to the Merger, whether or not then vested or exercisable (each, an “Assumed ChromaDex Warrant”). Each Assumed ChromaDex Warrant was converted into a warrant to acquire that number of shares of Cody Common Stock equal to the number of shares of ChromaDex capital stock subject to such warrant at a purchase price per share equal to the purchase price per share of such warrant, subject in all respects to all other terms and conditions of such warrant. At closing, Cody assumed warrants representing rights to purchase up to approximately 1,314,303 shares of Cody Common Stock at a weighted average exercise price of $2.67 per share of Cody Common Stock. Warrants were originally issued in connection with a private placement offering by ChromaDex discussed below in “Recent Sales of Unregistered Securities.” A copy of the Form of Warrant to Purchase Shares of Common Stock of ChromaDex, Inc. is included as Exhibit 4.4 to this Current Report on Form 8-K.

 

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FORM 10 DISCLOSURES
Prior to the Merger, Cody was a “shell company” as defined in Rule 12b-2 promulgated by the SEC under the Securities Exchange Act of 1934, because it had no or nominal operations, and assets consisting of cash, cash equivalents and nominal other assets. As disclosed elsewhere in this report, on June 20, 2008, we acquired ChromaDex in the Merger. Item 2.01(f) of Form 8-K states that if the registrant was a shell company, as we were immediately before the Merger disclosed under Item 2.01, then the Registrant must disclose the information that would be required if the Registrant were filing a general form for registration of securities under the Securities Exchange Act of 1934, as amended.
Cody ceased to be a shell company upon consummation of the Merger. Accordingly, we are providing the required information. Except where stated otherwise, the information provided below relates to the combined company after the Merger.
DESCRIPTION OF BUSINESS
BACKGROUND: CODY BEFORE THE MERGER
Cody was incorporated on July 19, 2006 under the laws of the State of Nevada. Until its third quarter of 2007, Cody was an exploration stage company engaged in the exploration of mineral properties. Cody acquired an option to purchase an interest in mineral claims referred to as the Vulture mineral claims. Cody’s plan of operations was to carry out exploration work on these claims in order to ascertain whether they possessed commercially exploitable quantities of copper, lead, zinc, gold, and other metallic minerals. During its third quarter of 2007, Cody commenced exploration activities on the Vulture mineral claims. Specifically, Cody conducted a soil geochemistry program under the guidance of its geological consultant, Mr. Marvin A. Mitchell. The results of this program were discouraging. In his report, Mr. Mitchell reports that the program failed to detect significant anomalous values of exploitable minerals. As such, no additional exploration was recommended at this time. On January 16, 2007, Cody filed a registration statement with the Securities and Exchange Commission to register the Company’s common stock under the Securities Exchange Act of 1934, as amended.
Based on the recommendations of its consulting geologist, during its third quarter of 2007, Cody decided to abandon its exploration program on the Vulture mineral claims. As such, Cody lost all interest in the option that it acquired on the property. It has been an inactive shell corporation since such time.
BACKGROUND: CHROMADEX BEFORE THE MERGER
ChromaDex was originally formed as a California corporation on February 19, 2000 under the name ChromaDex, Inc. On April 23, 2003, ChromaDex acquired the research and development group of natural product experienced chemists of Napro Biotherapeutics (currently Tapestry Pharmaceuticals) located in Boulder, Colorado, and placed such assets in a newly-formed, wholly-owned subsidiary of ChromaDex named ChromaDex Analytics, Inc., a Nevada corporation.
INFORMATION ABOUT CHROMADEX
Company Overview
Our business is now the business conducted by our principal subsidiaries, ChromaDex and ChromaDex Analytics. ChromaDex supplies phytochemical reference standards and reference materials, related contract services, and products for the dietary supplement, nutraceutical, food and beverage, functional food, pharmaceutical and cosmetic markets. For the calendar years ended December 29, 2007 and December 31, 2006, ChromaDex had revenues of $4,754,073 and $3,517,957, respectively. Between January and May 21, 2008, ChromaDex raised approximately $3,574,900 in a private placement and Chromadex is continuing to raise additional capital to reach a total of $6,000,000 through the offering of shares of common stock and warrants. ChromaDex’s core business strategy is to use the intellectual property harnessed by its expertise in the area of natural products and in the creation of reference materials to the industry as the basis for providing new and alternative, “green”, mass marketable products to its customers. The Company’s strategy is to license its intellectual property (“IP”) to companies who will commercialize it. The Company anticipates that the net result will be a long term flow of intellectual property milestone and royalty payments for the Company.

 

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ChromaDex is a leader in supplying phytochemical standards, reference materials and libraries. We believe these phytochemicals are the current gold standards for the quality control of natural products such as dietary supplements, cosmetics, food and beverages, and pharmaceuticals. In addition, we believe these standards are essential elements for future product development in all the above areas.
We believe there is a rapidly growing need both at the manufacturing and government regulatory level for reference standards, analytical methods and other quality assurance methods to insure that the products distributed to consumers contain not only what is claimed on the label, but are also safe and effective. This need is driven by the increased awareness at the consumer level of the lack of adequate quality controls as related to functional food, nutraceutical or dietary supplement based products. ChromaDex has taken advantage of both the supply chain needs and regulatory requirements to build its core standards business. The Company believes it is now in a position to significantly expand its current business and capitalize on additional opportunities in product development, contract research and the exploitation and commercialization of the intellectual property that it has acquired from the development of its standards.
The Company’s core product catalog and contract service business effectively becomes a filter for screening thousands of potential natural product candidates. By using the market information gathered by the Company’s business model, followed by an investment in research and development, new natural products-related IP can be brought to the market with a much lower investment cost and an increased chance of success.
Our Strategy
Our business strategy is to identify, acquire, reduce-to-practice, and commercialize innovative new natural products and “green chemistry” technologies, with an initial industry focus on the dietary supplement, cosmetic, food and beverage markets, as well as novel pharmaceuticals. We plan to utilize our experienced management team to commercialize these natural product technologies by advancing them through the proper regulatory approval processes, arranging for reliable and cost-effective manufacturing, and to ultimately either sell or license the product lines to others.
   
Expansion and growth of the core business : ChromaDex intends to continue to expand its phytochemical standards offerings, the core of its business. Currently, the Company has 3,000 defined standards. The Company expects to add 500 to 1,000 new standards each and every year.
 
   
Expansion of manufacturing capacity : ChromaDex is expanding its pilot manufacturing capacity to satisfy the growing need for customer clinical studies, new product development and early stage manufacturing.
 
   
Expansion into new markets : ChromaDex is developing business in untapped international markets and new and innovative product offerings, such as screening compound libraries.
 
   
Commercialization of intellectual property : Many current ChromaDex development products should and will spin off unique technologies that are or will be themselves, independently capable of commercialization and becoming a significant new revenue source. IP will also be developed from the Company’s expansion into new markets.
 
   
Expansion through acquisitions : ChromaDex is a leader in the phytochemical standards market. Other smaller competitors are having difficulty expanding their revenue base and are prime candidates for acquisition. We believe this roll-up strategy could eventually leave ChromaDex as the provider of choice for phytochemical standards and libraries.

 

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Overview of our Products and Services
ChromaDex is headquartered in Irvine, California, with its analytical and research laboratory facility situated in Boulder, Colorado. The Company’s wholly owned subsidiary, ChromaDex Analytics, Inc. (“ChromaDex Analytics”), based in Boulder, Colorado, operates a modern, well-equipped facility with 13,000 square feet of laboratory and office space. While ChromaDex performs many of the contract services and research for our clients, ChromaDex Analytics manufactures our products and provides all analytical services and a laboratory division of support for ChromaDex.
ChromaDex has invested in excess of $2-million in laboratory equipment along with personnel possessing over 150 years of combined pharmaceutical and natural products chemistry experience.
Current products and services provided are:
   
Supply of reference standards, materials & kits. ChromaDex, through its catalog, supplies a wide range of products which are necessary for quality control of raw materials and consumer products. Reference standard and materials and the kits created from them are used for research and quality control in dietary supplements, cosmetics, food and beverages, and the pharmaceuticals industries.
 
   
Supply of fine chemicals and phytochemicals. As the demand for new natural products and phytochemicals increases, ChromaDex can scale up and supply our core products in the gram to kilogram scale as needed by companies who require these products for research and new product development.
 
   
Bioluminex™. Bioluminex™ is a bio-analytical method which we developed pursuant to a worldwide exclusive license agreement with Bayer Ag, to identify the presence of toxic or harmful compounds in water, dietary ingredients, food products and food ingredients. In October 2004, ChromaDex received a grant from The United States Food and Drug Administration (“FDA”) of $525,000 to complete the development of Bioluminex as a commercially viable test kit. The first phase launch of Bioluminex which took place in March 2005, was a soft launch after the completion of the FDA grant. ChromaDex is planning a more aggressive formal market launch for Bioluminex at the end of 2008, or the beginning of 2009.
 
   
Contract services . ChromaDex, through ChromaDex Analytics, provides a wide range of contract services to the industry ranging from routine contract analysis to elaborate contract research.
 
   
Consulting services . ChromaDex provides a comprehensive range of consulting services such as regulatory support, new ingredient or product development, risk management and litigation support services.
 
   
Process development. Developing cost effective and efficient processes for manufacturing natural products can be very difficult and time consuming. ChromaDex can assist customers in creating processes for cost effectively manufacturing natural products, using “green chemistry”.
 
   
Intellectual property. ChromaDex will utilize its expertise in natural products and “green chemistry” to either license or develop new intellectual property which will be licensed to the industry.
Products and services in development are:
   
Process scale manufacturing . ChromaDex intends to invest in a pilot plant facility to have the capability of manufacturing at a process scale.
 
   
Phytochemical libraries. ChromaDex will continue to invest in the development of natural product based libraries by both creating these libraries internally as well as through licensing.

 

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Plant extracts libraries . ChromaDex will create an extensive library of plant extracts using its already extensive list of botanical reference materials.
 
   
Databases for cross-referencing phytochemicals . ChromaDex is working on building a database for cross referencing phytochemicals against an extensive list of plants, including links to possible references to ethnopharmacological, enthnobotanical, biological activity, and clinical evidence.
 
   
Anthocyanidins. Intellectual property based on new licensed technology for production of Anthocyanidins, which are a class of compounds with many novel uses in food, cosmetics, dietary supplements, and Pharmaceuticals.
 
   
Simmondsin . Royalty payments for intellectual property for jojoba extract (simmondsin) for weight loss.
In 2004, ChromaDex started receiving its first royalty payments for licensed intellectual property for the naturally-derived compound Sclareolide. Sclareolide, as developed by ChromaDex, is a novel diterpene isolated from Salvia sclarea (commonly known as clary sage), which was created as a partnership with Avoca. ChromaDex anticipates launching its second IP licensable product in 2008.
Sales and Marketing Strategy
ChromaDex sales model for its products and services is based on direct inside technical sales. The Company hires technical sales staff with appropriate scientific background in chemistry, biology, biochemistry or other related scientific fields. All sales staff currently operate from ChromaDex headquarters in Irvine, California and perform their sales duties by using combinations of telemarketing and e-mail. Sales staff are required to perform both sales and customer service duties. ChromaDex plans to add outside, field sales representatives in the future as needed. All sales staff are compensated under a uniform basic pay model based on salary and commission.
USA and Canada:
ChromaDex employs the use of an aggressive direct mail marketing strategy in combination with a range of other marketing activities to promote and sell both products and services.
   
Direct mail marketing (catalogs, brochures and flyers)
 
   
Tradeshows and conferences
 
   
Internet
 
   
Website
 
   
Advertising in trade publications
 
   
Press releases
ChromaDex intends to use an aggressive direct marketing approach to promote both products and services to all markets that the Company targets for direct sales.
International:
ChromaDex also uses international distributors to handle several foreign countries or markets. The use of distributors for international markets has proven to be more effective than direct sales for some countries.
Currently, ChromaDex has exclusive distribution agreements in place for the following countries or regions:
   
LGC Standards: Europe
 
   
JMC: Brazil and South America

 

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ChromaDex also uses non-exclusive distributors for several other countries including:
   
Korea
 
   
India
 
   
Japan
 
   
Australia and New Zealand
 
   
China
 
   
Indonesia, Malaysia, Singapore and Thailand
 
   
Mexico
Non-exclusive distributors who show significant productivity are considered for becoming exclusive distributors.
Business Opportunity
According to the Natural Marketing Institute, the Dietary Supplement, Functional Food and Beverage, and Natural Personal Care markets represent approximately $200+-billion in sales worldwide. The quality control and assurance of some of the products in these markets are, as noted previously, largely “under regulated,” and represent the basis of ChromaDex’s substantial growth potential — concentrating on overall content of products, active/marker components, uniformity of production, and toxicology, as is the case in the pharmaceutical industry. There is an increasing demand for new products, ingredients and ideas for natural products. The pressure for new innovative products, which are “natural” or “green” based, cuts across all markets including food, beverage, cosmetic and pharmaceutical.
While we believe that doctors and patients have become more receptive to the use of botanical/herbal-based and natural/dietary ingredients to prevent or treat illnesses and improve quality of life, the medical establishment has conditioned its acceptance on a significantly improved demonstration of efficacy, safety and quality control comparable to that imposed on pharmaceuticals. Nevertheless, little is currently known about the constituents, active compounds and safety of many botanical/herbal and natural ingredients, and few qualified chemists and technology based companies exist to supply the information and products necessary to meet the burgeoning market need. Natural products are complex mixtures of many compounds, with significant variability arising from growing and extraction conditions. Among developments, highlighting the need for standards and quality assurance/control:
   
The FDA published its draft guidance for Good Manufacturing Practices (“GMPs”) for dietary supplements on March 13, 2003. The final rule from this guidance was made effective June 2007, with a 36 month phase-in period for full compliance;
 
   
The FDA published draft guidance for the approval of “Botanical Drugs” in June 2005;
 
   
According to the Washington Post, the FDA and the FTC have recently fined four mass marketers of weight loss supplements a total of $25 million, because they could not adequately substantiate their respective weight loss claims; and
 
   
Regulatory agencies around the world have started to review the need for the regulation of herbal and natural supplements and are considering regulations that will include testing for the presence of toxic or adulterating compounds, drug/compound interactions and evidence that the products are biologically active for their intended use.

 

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Business Model
The Company’s business model is built around supplying reference standards products and services to its primary markets. This provides capital and brand positioning to allow ChromaDex access to its markets in a ‘trusted advisor’ capacity, from where the Company can develop botanical solutions with increased value to meet client needs.
ChromaDex is also unique in that it creates value throughout the supply chain of pharmaceutical, dietary supplements, functional foods and personal care markets. It does this specifically by:
   
Combining the analytical method and characterization of the material with the technical support for the sale of reference materials;
 
   
Helping companies to comply with new government regulations and therefore helping the government to regulate these industries; and
 
   
Providing value-added solutions to every layer of the supply chain therefore increasing the overall quality of products being produced.
The Company will use the market information gathered through its core products and services business to create and license intellectual property.
Government Regulation
Some of our operations are subject to regulation by various U.S. federal agencies and similar state and international agencies, including the FDA, U.S. Federal Trade Commission, U.S. Department of Commerce, the U.S. Department of Transportation, the U.S. Department of Agriculture and other comparable state and international agencies. These regulations govern a wide variety of product activities, from design and development to labeling, manufacturing, handling, sales and distribution of products.
FDA Regulation
Our primary products and services, i.e. supplying photochemical standards, reference materials, and libraries, are not directly subject to regulation by the FDA. However, companies may use these products and services to comply with FDA regulatory requirements. For example, the FDA’s final rule on Good Manufacturing Practices (GMPs) for dietary supplements was published in June 2007, and outlines a timeline of one to three years for companies to become fully compliant, depending on the size of the company. ChromaDex is in key position to benefit from the implementation and enforcement of GMPs by the FDA which, in part, require companies to evaluate products for identity, strength, purity and composition. ChromaDex provides tools necessary for dietary supplement companies to comply with GMPs. ChromaDex also offers an extensive range of contract services and consulting to assist companies with their compliance needs.
Our strategy to commercialize innovative new natural products may be subject to extensive FDA regulation. Depending on the category of product, i.e., dietary supplement, cosmetic, food, or pharmaceutical, the FDA, under the Food, Drug and Cosmetic Act (“FDCA”), can regulate:
   
product testing;
 
   
product labeling;
 
   
product manufacturing and storage;

 

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premarket clearance or approval;
 
   
advertising and promotion; and
 
   
product sales and distribution.
The FDCA has been amended several times with respect to dietary supplements, in particular by the Dietary Supplement Health and Education Act of 1994, known as DSHEA. DSHEA established a new framework governing the composition and labeling of dietary supplements. Generally, under DSHEA, dietary ingredients that were marketed in the United States before October 15, 1994 may be used in dietary supplements without notifying the FDA. However, a “new” dietary ingredient (a dietary ingredient that was not marketed in the United States before October 15, 1994) must be the subject of a new dietary ingredient (“NDI”) notification submitted to the FDA unless the ingredient has been “present in the food supply as an article used for food” without being “chemically altered.” A new dietary ingredient notification must provide the FDA evidence of a “history of use or other evidence of safety” establishing that use of the dietary ingredient “will reasonably be expected to be safe.” A new dietary ingredient notification must be submitted to the FDA at least 75 days before the initial marketing of the new dietary ingredient. There can be no assurance that the FDA will accept the evidence of safety for any new dietary ingredients that we may want to commercialize, and the FDA’s refusal to accept such evidence could prevent the marketing of such dietary ingredients. The FDA is in the process of developing guidance for the industry to clarify the FDA’s interpretation of the new dietary ingredient notification requirements, and this guidance may raise new and significant regulatory barriers for new dietary ingredients.
In order for any new ingredient developed by ChromaDex to be used in conventional food or beverage products in the United States (“US”), it would either have to be approved by the FDA as a food additive pursuant to a food additive petition (“FAP”), or be generally recognized as safe (“GRAS”). The FDA does not have to approve a company’s determination that an ingredient is GRAS, however a company can notify the FDA of its determination. There can be no assurance that the FDA will approve any FAP for any ingredient that we may want to commercialize, or agree with our determination that an ingredient is GRAS, either of which outcome could prevent the marketing of such ingredient.
We do not expect to be bearing the costs associated with NDI Notifications, FAPs, or GRAS filings with the FDA, as we will generally be licensing any technology to partner companies who have an interest in the product market segment before such filings would be necessary.
Advertising Regulation
In addition, the Federal Trade Commission (“FTC”) regulates the advertising of dietary supplements, foods, cosmetics, and over-the-counter (“OTC”) drugs. In recent years, the FTC has instituted numerous enforcement actions against dietary supplement companies for failure to adequately substantiate claims made in advertising or for the use of false or misleading advertising claims. These enforcement actions have often resulted in consent decrees and the payment of civil penalties, restitution, or both, by the companies involved. We also may be subject to regulation under various state and local laws that include provisions governing, among other things, the formulation, manufacturing, packaging, labeling, advertising and distribution of dietary supplements, foods, cosmetics and OTC drugs.
International
International sales of dietary ingredients are subject to foreign government regulations, which vary substantially from country to country. The time required to obtain approval by a foreign country may be longer or shorter than that required for FDA approval, and the requirements may differ. In addition, the export by us of certain of our products that have not yet been cleared or approved for domestic distribution may be subject to FDA export restrictions. There can be no assurance that we will receive on a timely basis, if at all, any foreign government or United States export approvals necessary for the marketing of its products abroad.

 

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The primary regulatory environment in Europe is that of the European Union, which consists of twenty-seven countries, encompassing most of the major countries in Europe. Other countries, such as Switzerland, have voluntarily adopted laws and regulations that mirror those of the European Union with respect to dietary ingredients.
Competitive Business Conditions
We believe that there are very few competitors within the standardization and quality testing niche of the natural products market. Below is a current list of some competitors. Competitors listed already have reference standards developed or are currently taking steps to develop botanical standards. Of the competitors listed, some either currently sell fine chemicals, which by default are sometimes being used as reference standards, or are closely aligned with our market niche so as to reduce any barriers to entry if these companies wished to compete.
Competitors — Chemical
   
Sigma-Aldrich(SIAL) (USA)
 
   
Phytolab (Germany)
 
   
US Pharmacopoeia(USP) (USA)
 
   
Extrasynthese (France)
Competitors — Services
   
Covance
 
   
Eurofins
 
   
INB-Hauser
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts, Including Duration
ChromaDex currently protects its IP through patents, trademarks, designs and copyrights on its products and services. The Company currently has existing patents for products such as Bioluminex and Jojoba extract (simmondsin) that require additional capital for product development and marketing.
ChromaDex’s core business strategy is to use the intellectual property harnessed in the supply of reference materials to the industry as the basis for providing new and alternative mass marketable products to its customers. The Company’s strategy is to license its intellectual property to companies who will commercialize it. The net result will be a long term flow of IP milestone and royalty payments for the Company.
ChromaDex has created a mechanism for harnessing ideas and turning them into finished products. For example, ChromaDex spent one to two years researching the viability of its Jojoba concept, but lacked the ability to finalize the development and necessary patent protection. After much scrutiny, ChromaDex selected Avoca, a subsidiary of RJ Reynolds Tobacco, as the appropriate partner for completion of this project. Avoca finalized the manufacturing process for the Jojoba extract and then the Company and Avoca jointly filed a patent to protect the intellectual property created by this joint venture. RJ Reynolds was a compatible partner for not only its manufacturing ability but also for its outstanding ability to defend the parties’ joint intellectual property and patent.

 

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The following table sets forth ChromaDex’s existing patents and those to which we have licensed rights.
                                     
            Filing     Issued            
Patent Number     Title   Date     Date     Expires     Licensor
US 6,238,928    
Analytical process for testing
    09/02/93       05/21/01       05/25/18     Licensed from Bayer
       
mixtures for toxic constituents
                          Aktiengesell-schaft
  6,673,563    
Luminous bacteria and methods for
    9/18/2001       1/6/2004       01/09/21     Licensed from L & J
       
the isolation, identification and quantification of toxicants
                          Becvar, LP (1)
  6,340,572    
Kit for the isolation, identification
    9/3/1999       1/22/2002       01/26/19     Licensed from L & J
       
and quantification of toxicants
                          Becvar, LP (1)
  6,017,722    
Luminous bacteria and methods for
    4/4/1991       1/25/2000       01/28/17     Licensed from L & J
       
the isolation, identification and quantification of toxicants
                          Becvar, LP (1)
  6,852,342    
Compounds for altering food
    3/26/2002       2/8/2005       02/12/22     Co-owned by Avoca,
       
intake in humans
                          Inc. and ChromaDex
Manufacturing
In April 2003, ChromaDex acquired the ChromaDex Analytics group in Boulder, Colorado with laboratory operations and a manufacturing facility. We currently maintain our own manufacturing equipment and have the ability to manufacture our products in limited quantities, from milligrams to kilograms. For more information on ChromaDex Analytics, see “Information about ChromaDex — Products and Services” under Section 2.01 of this Current Report on Form 8-K. We intend to contract the manufacturing of the products that are developed and enter into strategic relationships or license agreements for sales and marketing of products that we develop when quantities required exceed our capacity at our Boulder facility.
We intend to hire manufacturing companies that meet the standards imposed by the FDA, the International Organization for Standardization (ISO), and the quality standards we will require through our own internal policies and procedures. We expect to monitor and manage supplier performance through a corrective action program. We believe these manufacturing relationships can minimize our capital investment, help control costs, and allow us to compete with larger volume manufacturers of phytochemicals and ingredients.
Following the receipt of products or product components from our third-party manufacturers, we currently contemplate inspecting, packaging and labeling, as needed, at our facility. We expect to reserve the right to inspect and assure conformance of each product and product component to our specifications. We will also consider manufacturing certain products or product components internally, if we have the capacity and when demand or quality requirements make it appropriate to do so.
Sources and Availability of Raw Materials and The Names of Principal Suppliers
We have identified reliable sources and suppliers of chemicals, phytochemicals and reference materials, which we believe will provide products in compliance with ChromaDex guidelines.
Research and Development
Our research and development efforts are initially focused on developing products and services focused on our core product and service offerings. Our own laboratory group has extensive experience in developing products related to our field of interest, and works closely with our sales and marketing group to design products and services that are intended to improve revenue. To support development, we also have a number of contracts with outside labs who aid us in our research and development process.
 
     
(1)  
Improvements to information or discoveries covered by these patents are licensed from the Board of Regents of the University of Texas System until the full end of the term for which patent rights expire subject to the terms of the Patent License Agreement included as Exhibit 12.12 to this current report on Form 8-K.

 

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Environmental Compliance
We will incur significant expense in complying with good manufacturing practices and safe handling and disposal of materials used in our research and manufacturing activities. We do not anticipate incurring material additional expense in order to comply with Federal, state and local environmental laws and regulations.
Facilities
See “Description of Property” below in this Item 2.01 of this Current Report on Form 8-K.
Employees
As of May 1, 2008, ChromaDex (including ChromaDex Analytics) had 39 employees, of whom 34 were full-time and 5 were part-time employees. We consider our relationships with our employees to be satisfactory. None of our employees is covered by a collective bargaining agreement.
Legal Proceedings
We are not involved in any legal proceedings which management believes may have a material adverse effect on our business, financial condition, operations, cash flows, or prospects.
Recent Developments
On June 18, 2008, we repurchased 1,222,795 shares of our outstanding common stock from Bayer Innovation GmbH (formerly Bayer Innovation Beteiligungsgescellschaft mbH), for an aggregate purchase price of $1,002,691.90 pursuant to a Share Redemption Agreement. We funded the repurchase by issuing a non-interest bearing promissory note for such amount, and the note is due on or before December 20, 2008. If the principal amount of the promissory note, or any part thereof, is not paid in full when due, the we must pay interest on the overdue principal amount at the rate of one and one half percent (1 1/2%) per month beginning January 1, 2009. The Share Redemption Agreement and the promissory note are included as Exhibits 10.13 and 10.14 respectively, to this Current Report on Form 8-K.
RISK FACTORS
Investing in Cody Common Stock involves a high degree of risk. Owners and potential investors should consider carefully the risks and uncertainties described below together with all other information contained in this Current Report on Form 8-K before making investment decisions with respect to our Common Stock. If any of the following risks actually occur, our business, financial condition, results of operations and our future growth prospects would be materially and adversely affected. Under these circumstances, the trading price and value of our common stock could decline resulting in a loss of all or part of your investment.
Risks Related to Our Business and Industry
We will need additional financing to meet our future capital requirements.
We will require significant additional funds, either through additional equity or debt financings or collaborative agreements or from other sources to engage in research and development activities with respect to our potential new product candidates and to establish the personnel necessary to successfully implement our business strategy. We have no commitments to obtain such financing, and we may not be able to obtain any such financing on terms favorable to us, or at all. In the event we are unable to obtain additional financing, we may be unable to implement our business plan.

 

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Our ability to protect our intellectual property and proprietary technology through patents and other means is uncertain and may be inadequate, which would have a material and adverse effect on us.
Our success depends significantly on our ability to protect our proprietary rights to the technologies used in our products. We rely on patent protection, as well as a combination of copyright, trade secret and trademark laws and nondisclosure, confidentiality and other contractual restrictions to protect our proprietary technology, including our licensed technology. However, these legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. For example, our pending United States and foreign patent applications may not issue as patents in a form that will be advantageous to us or may issue and be subsequently successfully challenged by others and invalidated. In addition, our pending patent applications include claims to material aspects of our products and procedures that are not currently protected by issued patents. Both the patent application process and the process of managing patent disputes can be time consuming and expensive. Competitors may be able to design around our patents or develop products which provide outcomes which are comparable or even superior to ours. Although we have taken steps to protect our intellectual property and proprietary technology, including entering into confidentiality agreements and intellectual property assignment agreements with some of our officers, employees, consultants and advisors, such agreements may not be enforceable or may not provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements. Furthermore, the laws of foreign countries may not protect our intellectual property rights to the same extent as do the laws of the United States.
In the event a competitor infringes upon our licensed or pending patent or other intellectual property rights, enforcing those rights may be costly, uncertain, difficult and time consuming. Even if successful, litigation to enforce our intellectual property rights or to defend our patents against challenge could be expensive and time consuming and could divert our management’s attention. We may not have sufficient resources to enforce our intellectual property rights or to defend our patents rights against a challenge. The failure to obtain patents and/or protect our intellectual property rights could have a material and adverse effect on our business, results of operations, and financial condition.
We may become subject to claims of infringement or misappropriation of the intellectual property rights of others, which could prohibit us from developing our products, require us to obtain licenses from third parties or to develop non-infringing alternatives, and subject us to substantial monetary damages.
Third parties could, in the future, assert infringement or misappropriation claims against us with respect to products we develop. Whether a product infringes a patent or misappropriates other intellectual property involves complex legal and factual issues, the determination of which is often uncertain. Therefore, we cannot be certain that we have not infringed the intellectual property rights of others. Our potential competitors may assert that some aspect of our product infringes their patents. Because patent applications may take years to issue, there also may be applications now pending of which we are unaware that may later result in issued patents upon which our products could infringe. There also may be existing patents or pending patent applications of which we are unaware upon which our products may inadvertently infringe.
Any infringement or misappropriation claim could cause us to incur significant costs, place significant strain on our financial resources, divert management’s attention from our business and harm our reputation. If the relevant patents in such claim were upheld as valid and enforceable and we were found to infringe, we could be prohibited from selling any product that is found to infringe unless we could obtain licenses to use the technology covered by the patent or are able to design around the patent. We may be unable to obtain such a license on terms acceptable to us, if at all, and we may not be able to redesign our products to avoid infringement. A court could also order us to pay compensatory damages for such infringement, plus prejudgment interest and could, in addition, treble the compensatory damages and award attorney fees. These damages could be substantial and could harm our reputation, business, financial condition and operating results. A court also could enter orders that temporarily, preliminarily or permanently enjoin us and our customers from making, using, or selling products, and could enter an order mandating that we undertake certain remedial activities. Depending on the nature of the relief ordered by the court, we could become liable for additional damages to third parties.

 

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Our patents and licenses may be subject to challenge on validity grounds, and our patent applications may be rejected.
We rely on our patents, patent applications, licenses and other intellectual property rights to give us a competitive advantage. Whether a patent is valid, or whether a patent application should be granted, is a complex matter of science and law, and therefore we cannot be certain that, if challenged, our patents, patent applications and/or other intellectual property rights would be upheld. If one or more of those patents, patent applications, licenses and other intellectual property rights are invalidated, rejected or found unenforceable, that could reduce or eliminate any competitive advantage we might otherwise have had.
The prosecution and enforcement of patents licensed to us by third parties are not within our control, and without these technologies, our product may not be successful and our business would be harmed if the patents were infringed or misappropriated without action by such third parties.
We have obtained licenses from third parties for patents and patent application rights related to the products we are developing, allowing us to use intellectual property rights owned by or licensed to these third parties. We do not control the maintenance, prosecution, enforcement or strategy for many of these patents or patent application rights and as such are dependent in part on the owners of the intellectual property rights to maintain their viability. Without access to these technologies or suitable design-around or alternative technology options, our ability to conduct our business could be impaired significantly.
We may be subject to damages resulting from claims that we, our employees, or our independent contractors have wrongfully used or disclosed alleged trade secrets of others.
Some of our employees were previously employed at other dietary supplement, nutraceutical, food and beverage, functional food, analytical laboratories, pharmaceutical and cosmetic companies. We may also hire additional employees who are currently employed at other dietary supplement, nutraceutical, food and beverage, functional food, analytical laboratories, pharmaceutical and cosmetic companies, including our competitors. Additionally, consultants or other independent agents with which we may contract may be or have been in a contractual arrangement with one or more of our competitors. Although no claims against us are currently pending, we may be subject to claims that these employees or independent contractors have used or disclosed any party’s trade secrets or other proprietary information. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management. If we fail to defend such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent our ability to market existing or new products, which could severely harm our business.
Litigation may harm our business.
Substantial, complex or extended litigation could cause us to incur significant costs and distract our management. For example, lawsuits by employees, stockholders, collaborators, distributors, customers, or competitors or others could be very costly and substantially disrupt our business. Disputes from time to time with such companies, organizations or individuals are not uncommon, and we cannot assure you that we will always be able to resolve such disputes or on terms favorable to us. Unexpected results could cause us to have financial exposure in these matters in excess of recorded reserves and insurance coverage, requiring us to provide additional reserves to address these liabilities, therefore impacting profits.
We face significant competition, including changes in pricing.
The markets for our products and services are both competitive and price sensitive. Many of our competitors have significant financial, operations, sales and marketing resources and experience in research and development. Competitors could develop new technologies that compete with our products and services or even render our products obsolete. If a competitor develops superior technology or cost-effective alternatives to our products and services, our business could be seriously harmed.

 

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The markets for some of our products are also subject to specific competitive risks because these markets are highly price competitive. Our competitors have competed in the past by lowering prices on certain products. If they do so again, we may be forced to respond by lowering our prices. This would reduce sales and possibly profits. Failure to anticipate and respond to price competition may also impact sales and profits.
We believe that customers in our markets display a significant amount of loyalty to their supplier of a particular product. To the extent we are not the first to develop, offer and/or supply new products, customers may buy from our competitors or make materials themselves, causing our competitive position to suffer.
Many of our competitors are larger and have greater financial and other resources than we do.
Our products compete and will compete with other similar products produced by our competitors. These competitive products could be marketed by well-established, successful companies that possess greater financial, marketing, distribution, personnel and other resources than we possess. Using these resources, these companies can implement extensive advertising and promotional campaigns, both generally and in response to specific marketing efforts by competitors, and enter into new markets rapidly to introduce new products. In certain instances, competitors with greater financial resources also may be able to enter a market in direct competition with us, offering attractive marketing tools to encourage the sale of products that compete with our products or present cost features which consumers may find attractive.
We depend on key personnel.
We depend greatly on Frank L. Jaksch, Jr. and Thomas C. Varvaro, who are our Chief Executive Officer and Chief Financial Officer, respectively. We also depend greatly on other key employees, including key scientific personnel. In general, only highly qualified and trained scientists have the necessary skills to develop and market our products and provide our services. In addition, some of our manufacturing, quality control, safety and compliance, information technology, sales, and e-commerce related positions are highly technical as well. Also, we face intense competition for these professionals from our competitors, customers, marketing partners and other companies throughout the industries in which we compete. Our success will depend, in part, upon our ability to attract and retain additional skilled personnel, which will require substantial additional funds. There can be no assurance that we will be able to find and attract additional qualified employees or retain any such personnel. Our inability to hire qualified personnel, the loss of services of our key personnel, or the loss of services of executive officers or key employees that that may be hired in the future may have a material and adverse effect on our business.
Partnering for technological capabilities and new products and services.
Our ability to remain competitive may depend, in part, on our ability to continue to seek partners that can offer technological improvements and improve existing products and services that are offered to our customers. We are committed to attempting to keep pace with technological change, to stay abreast of technology changes, and to look for partners that will develop new products and services for our customer base. We cannot assure prospective investors that we will be successful in finding partners or be able to continue to incorporate new developments in technology, to improve existing products and services, or to develop successful new products and services, nor can the Company be certain that its newly-developed products and services will perform satisfactorily or be widely accepted in the marketplace or that the costs involved in these efforts will not be substantial.
Our operating results may fluctuate significantly as a result of a variety of factors, many of which are outside of our control.
We are subject to the following factors, among others, that may negatively affect our operating results:
   
the announcement or introduction of new products by our competitors;
 
   
our ability to upgrade and develop our systems and infrastructure to accommodate growth;
 
   
our ability to attract and retain key personnel in a timely and cost effective manner;

 

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technical difficulties;
 
   
the amount and timing of operating costs and capital expenditures relating to the expansion of our business, operations and infrastructure;
 
   
regulation by federal, state or local governments; and
 
   
general economic conditions as well as economic conditions specific to the healthcare industry.
As a result of our limited operating history and the nature of the markets in which we compete, it is extremely difficult for us to forecast accurately. We have based our current and future expense levels largely on our investment plans and estimates of future events although certain of our expense levels are, to a large extent, fixed. Assuming our products reach the market, we may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Accordingly, any significant shortfall in revenues relative to our planned expenditures would have an immediate adverse effect on our business, results of operations and financial condition. Further, as a strategic response to changes in the competitive environment, the Company may from time to time make certain pricing, service or marketing decisions that could have a material and adverse effect on our business, results of operations and financial condition. Due to the foregoing factors, our revenues and operating results are and will remain difficult to forecast.
We may never develop any additional products to commercialize.
We have invested a substantial amount of our time and resources in developing various new products. Commercialization of these products will require additional development, clinical evaluation, regulatory approval, significant marketing efforts and substantial additional investment before it can provide us with any revenue. Despite our efforts, these products may not become commercially successful products for a number of reasons, including:
   
we may not be able to obtain regulatory approvals for our products, or the approved indication may be narrower than we seek;
 
   
our products may not prove to be safe and effective in clinical trials;
 
   
we may experience delays in our development program;
 
   
any products that are approved may not be accepted in the marketplace;
 
   
we may not have adequate financial or other resources to complete the development or to commence the commercialization of our products and will not have adequate financial or other resources to achieve significant commercialization of our products;
 
   
we may not be able to manufacture any of our products in commercial quantities or at an acceptable cost;
 
   
rapid technological change may make our products obsolete;
 
   
we may be unable to effectively protect our intellectual property rights or we may become subject to a claim that our activities have infringed the intellectual property rights of others; and
 
   
we may be unable to obtain or defend patent rights for our products.

 

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We face the risk of product liability claims or recalls and may not be able to obtain or maintain adequate product liability insurance.
Our business exposes us to the risk of product liability claims that are inherent in the testing, manufacturing and marketing of phytochemical products. We may be subject to such claims if our products cause, or appear to have caused, an injury. Defending a lawsuit, regardless of merit, could be costly, divert management attention and result in adverse publicity, which could result in the withdrawal of, or reduced acceptance of, our product in the market.
Although we have product liability insurance that we believe is adequate, this insurance is subject to deductibles and coverage limitations and we may not be able to maintain this insurance. If we are unable to maintain product liability insurance at an acceptable cost or on acceptable terms with adequate coverage or otherwise protect ourselves against potential product liability claims, we could be exposed to significant liabilities, which may harm our business. A product liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities could result in significant costs and significant harm to our business.
If we are unable to establish or maintain sales, marketing and distribution capabilities or enter into and maintain arrangements with third parties to sell, market and distribute our products, our business may be harmed.
To achieve commercial success for our products, we must sell rights to our product lines at favorable prices, develop a sales and marketing force, or enter into arrangements with others to market and sell our products. In addition to being expensive, developing and maintaining such a sales force is time consuming, and could delay or limit the success of any product launch. We may not be able to develop this capacity on a timely basis or at all. Qualified direct sales personnel with experience in the phytochemical industry are in high demand, and there is no assurance that we will be able to hire or retain an effective direct sales team. Similarly, qualified independent sales representatives both within and outside the United States are in high demand, and we may not be able to build an effective network for the distribution of our product through such representatives. We have no assurance that we will be able to enter into contracts with representatives on terms acceptable to us. Furthermore, there is no assurance that we will be able to build an alternate distribution framework should we attempt to do so.
We may also need to contract with third parties in order to market our products. To the extent that we enter into arrangements with third parties to perform marketing and distribution services, our product revenue could be lower and our costs higher than if we directly marketed our products. Furthermore, to the extent that we enter into co-promotion or other marketing and sales arrangements with other companies, any revenue received will depend on the skills and efforts of others, and we do not know whether these efforts will be successful. If we are unable to establish and maintain adequate sales, marketing and distribution capabilities, independently or with others, we will not be able to generate product revenue, and may not become profitable.
We rely on a limited number of third-party suppliers for the raw materials required for the production of our products. Furthermore, in some cases we rely on a single supplier.
Our dependence on a limited number of third-party suppliers or on a single supplier, and the challenges we may face in obtaining adequate supplies of raw materials, involve several risks, including limited control over pricing, availability, quality, and delivery schedules. We cannot be certain that our current suppliers will continue to provide us with the quantities of these raw materials that we require or satisfy our anticipated specifications and quality requirements. Any supply interruption in limited or sole sourced raw materials could materially harm our ability to manufacture our products until a new source of supply, if any, could be identified and qualified. Although we believe there are other suppliers of these raw materials, we may be unable to find a sufficient alternative supply channel in a reasonable time or on commercially reasonable terms. Any performance failure on the part of our suppliers could delay the development and commercialization of our products, or interrupt production of then existing products that are already marketed, which would have a material adverse effect on our business.

 

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We rely on a limited number of third-party manufacturers to manufacture our products.
Manufacturers often experience difficulties in scaling-up production, including problems with production yields and quality control and assurance. If our third-party manufacturers are unable to manufacture our products to keep up with demand, we will not meet expectations for growth of our business.
Our sales and results of operations depend on our customers’ research and development efforts and their ability to obtain funding for these efforts.
Our customers include researchers at pharmaceutical and biotechnology companies, chemical and related companies, academic institutions, government laboratories and private foundations. Fluctuations in the research and development budgets of these researchers and their organizations could have a significant effect on the demand for our products. Our customers determine their research and development budgets based on several factors, including the need to develop new products, the availability of governmental and other funding, competition and the general availability of resources. As we continue to expand our international operations, we expect research and development spending levels in markets outside of the U.S. will become increasingly important to us.
Research and development budgets fluctuate due to changes in available resources, spending priorities, general economic conditions, institutional and governmental budgetary limitations and mergers of pharmaceutical and biotechnology companies. Our business could be seriously harmed by any significant decrease in life science and high technology research and development expenditures by our customers. In particular, a small portion of our sales have been to researchers whose funding is dependent on grants from government agencies such as the U.S. National Institute of Health, the National Science Foundation, the National Cancer Institute and similar agencies or organizations. Government funding of research and development is subject to the political process, which is often unpredictable. Other programs, such as Homeland Security or defense, or general efforts to reduce the U.S. federal budget deficit could be viewed by the government as a higher priority. Any shift away from funding of life science and high technology research and development or delays surrounding the approval of governmental budget proposals may cause our customers to delay or forego purchases of our products and services, which could seriously damage our business.
Some of our customers receive funds from approved grants at a particular time of year, many times set by government budget cycles. In the past, such grants have been frozen for extended periods or have otherwise become unavailable to various institutions without advance notice. The timing of the receipt of grant funds may affect the timing of purchase decisions by our customers and, as a result, cause fluctuations in our sales and operating results.
Demand for our products and services are subject to the commercial success of our customers’ products, which may vary for reasons outside our control.
Even if we are successful in securing utilization of our products in a customer’s manufacturing process, sales of many of our products and services remain dependent on the timing and volume of the customer’s production, over which we have no control. The demand for our products depends on regulatory approvals and frequently depends on the commercial success of the customer’s supported product. Regulatory processes are complex, lengthy, expensive, and can often take years to complete.
We may bear financial risk if we under-price our contracts or overrun cost estimates.
In cases where our contracts are structured as fixed price or fee-for-service with a cap, we bear the financial risk if we initially under-price our contracts or otherwise overrun our cost estimates. Such under-pricing or significant cost overruns could have a material adverse effect on our business, results of operations, financial condition, and cash flows.

 

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We will need to increase the size of our organization, and we may be unable to manage rapid growth effectively.
Our failure to manage growth effectively could have a material and adverse effect on our business, results of operations and financial condition. We anticipate that a period of significant expansion will be required to address possible acquisitions of business, products, or rights, and potential internal growth to handle licensing and research activities. This expansion will place a significant strain on management, operational and financial resources. To manage the expected growth of our operations and personnel, we must both improve our existing operational and financial systems, procedures and controls and implement new systems, procedures and controls. We must also expand our finance, administrative, and operations staff. Our current personnel, systems, procedures and controls may not adequately support future operations. Management may be unable to hire, train, retain, motivate and manage necessary personnel or to identify, manage and exploit existing and potential strategic relationships and market opportunities.
Our future capital needs are uncertain and we may need to raise additional funds in the future and such funds may not be available on acceptable terms or at all.
We believe that our current cash and cash equivalents will be sufficient to meet our projected operating requirements for at least the next ten months. However, obtaining the required regulatory approvals and clearances and the planned expansion of our business will be expensive and we will in the future seek funds from public and private stock or debt offerings, borrowings under lines of credit or other sources. Our capital requirements will depend on many factors, including:
   
the revenues generated by sales of our products, if any;
 
   
the costs associated with expanding our sales and marketing efforts, including efforts to hire independent agents and sales representatives;
 
   
the expenses we incur in developing and commercializing our products, including the cost of obtaining and maintaining regulatory approvals; and
 
   
unanticipated general and administrative expenses.
As a result of these factors, we may seek to raise additional funds and such funds may not be available on favorable terms, or at all. Furthermore, if we issue equity or debt securities to raise additional funds, our existing shareholders may experience dilution and the new equity or debt securities we issue may have rights, preferences and privileges senior to those of our existing shareholders. In addition, if we raise additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to our products or proprietary technologies, or grant licenses on terms that are not favorable to us. If we cannot raise funds on acceptable terms, we may not be able to develop or enhance our products, obtain the required regulatory clearances or approvals, execute our business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated customer requirements. Any of these events could adversely affect our ability to achieve our development and commercialization goals, which could have a material and adverse effect on our business, results of operations and financial condition.
Acquisitions.
We plan to acquire other entities in the future and these acquisitions are material to our business, plans and projections. We may be unable to consummate these acquisitions on favorable terms or at all. Even if we consummate one or more of these acquisitions, the integration of large numbers of new employees, technology and businesses will subject us to numerous risks.

 

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If we fail to maintain adequate quality standards for our products and services, our business may be adversely affected and our reputation harmed.
Dietary supplement, nutraceutical, food and beverage, functional food, analytical laboratories, pharmaceutical and cosmetic customers are often subject to rigorous quality standards to obtain and maintain regulatory approval of their products and the manufacturing processes that generate them. A failure to maintain, or, in some instances, upgrade our quality standards to meet our customers’ needs, could cause damage to our reputation and potentially substantial sales losses.
We heavily rely on third party air cargo carriers and other package delivery services, and a significant disruption in these services or significant increases in prices may disrupt our ability to ship products or import materials, increase our costs and lower our profitability and harm our reputation.
We emphasize our prompt service and shipment of products as a key element of our sales and marketing strategy. We ship a significant number of products to our customers through independent package delivery companies. In addition, we transport materials between our worldwide facilities and import raw materials from worldwide sources. Consequently, we heavily rely on air cargo carriers and other third party package delivery providers. If any of our key third party providers were to experience a significant disruption such that any of our products, components or raw materials could not be delivered in a timely fashion or we would incur additional costs that we could not pass on to our customers, our costs may increase and our relationships with certain customers may be adversely affected. In addition, if these third party providers increase prices, and we are not able to find comparable alternatives or make adjustments to our selling prices, our profitability could be adversely affected.
If we experience a significant disruption in our information technology systems or if we fail to implement new systems and software successfully, our business could be adversely affected.
We depend on information systems throughout our Company to control our manufacturing processes, process orders, manage inventory, process and bill shipments to and collect cash from our customers, respond to customer inquiries, contribute to our overall internal control processes, maintain records of our property, plant and equipment, and record and pay amounts due vendors and other creditors. If we were to experience a prolonged disruption in our information systems that involve interactions with customers and suppliers, it could result in the loss of sales and customers and/or increased costs, which could adversely affect our business.
Risks Related to Regulatory Approval of Our Products and Other Government Regulations
We are subject to regulation by various federal, state and foreign agencies that require us to comply with a wide variety of regulations, including those regarding the manufacture of products, the distribution of our products and environmental matters.
Some of our operations are subject to regulation by various U.S. federal agencies and similar state and international agencies, including the U.S. Department of Commerce, the FDA, the U.S. Department of Transportation, the U.S. Department of Agriculture and other comparable state and international agencies. These regulations govern a wide variety of product activities, from design and development to labeling, manufacturing, handling, sales and distribution of products. If we fail to comply with any or all of these regulations, we may be subject to fines or penalties, have to recall products and/or cease their manufacture and distribution, which would increase our costs and reduce our sales.
We are subject to regulations that govern the handling of hazardous substances.
We are subject to various federal, states, local and international laws and regulations that govern the handling, transportation, manufacture, use and sale of substances that are or could be classified as toxic or hazardous substances. Some risk of environmental damage is inherent in our operations and the products we manufacture, sell, or distribute. Any failure by us to comply with the applicable government regulations could also result in product recalls or impositions of fines and restrictions on our ability to carry on with or expand in a portion or possibly all of our operations. If we fail to comply with any or all of these regulations, we may be subject to fines or penalties, have to recall products and/or cease their manufacture and distribution, which would increase our costs and reduce our sales.

 

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Government regulations of our customer’s business is extensive and is constantly changing.
The process by which our customer’s industries are regulated is controlled by government agencies and depending on the market segment can be very expensive, time-consuming, and uncertain. Changes in regulations or the enforcement practices of current regulations could have negative impact on our customers and, in turn, our business.
Changes in government regulation or in practices relating to the pharmaceutical, dietary supplement, food and cosmetic industry could decrease the need for the services we provide.
Governmental agencies throughout the world, including in the United States, strictly regulate these industries. Our business involves helping pharmaceutical and biotechnology companies navigate the regulatory drug approval process. Changes in regulation, such as a relaxation in regulatory requirements or the introduction of simplified drug approval procedures, or an increase in regulatory requirements that we have difficulty satisfying or that make our services less competitive, could eliminate or substantially reduce the demand for our services. Also, if the government makes efforts to contain drug costs and pharmaceutical and biotechnology company profits from new drugs, our customers may spend less, or reduce their spending on research and development. If health insurers were to change their practices with respect to reimbursements for pharmaceutical products, our customers may spend less, or reduce their spending on research and development.
Risks Related to the Securities Markets and Ownership of Cody Common Stock
The concentrated common stock ownership by certain of our executive officers and directors will limit your ability to influence corporate matters.
The directors and executive officers of Cody together beneficially own approximately 28.59% of Cody outstanding capital stock after the Merger. This group has significant influence over our management and affairs and overall matters requiring shareholder approval, including the election of directors and significant corporate transactions, such as a merger or sale of our company or our assets, for the foreseeable future. This concentrated control will limit the ability of other shareholders to influence corporate matters and, as a result, Cody may take actions that some of its shareholders do not view as beneficial. In addition, such concentrated control could discourage others from initiating changes of control. As a result, the market price of Cody shares could be adversely affected.
Since Cody Common Stock was only minimally publicly traded before the Merger, and will likely remain so for some time, the price may be subject to wide fluctuations.
Before the Merger, there was a minimal public market for Cody Common Stock. The market price of Cody Common Stock after the Merger is likely to be highly volatile and subject to wide fluctuations in response to the following factors, which are generally beyond the control of Cody. These factors may include:
   
the ability to develop, obtain regulatory approvals for and market products on a timely basis;
 
   
volume, price and timing of orders for products, if Cody is able to sell them;
 
   
the introduction of new products or products enhancements by competitors;
 
   
disputes or other developments with respect to intellectual property rights;
 
   
products liability claims or other litigation;
 
   
quarterly variations in Cody’s results of operations and those of competitors;

 

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sales of large blocks of Cody Common Stock, including sales by its executive officers and directors;
 
   
changes in governmental regulations or in the status of regulatory approvals, clearances or applications;
 
   
changes in the availability of third party reimbursement in the United States or other countries;
 
   
changes in earnings estimates or recommendations by securities analysts; and
 
   
general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of competitors.
Cody Common Stock is and likely will remain subject to the SEC’s “Penny Stock” rules, which may make its shares more difficult to sell.
Because the price of Cody Common Stock is currently and is likely to remain less than $5.00 per share, it is expected to be classified as a “penny stock.” The SEC rules regarding penny stocks may have the effect of reducing trading activity in Cody shares, making it more difficult for investors to sell. Under these rules, broker-dealers who recommend such securities to persons other than institutional accredited investors must:
   
make a special written suitability determination for the purchaser;
 
   
receive the purchaser’s written agreement to a transaction prior to sale;
 
   
provide the purchaser with risk disclosure documents which identify certain risks associated with investing in “penny stocks” and which describe the market for these “penny stocks” as well as a purchaser’s legal remedies;
 
   
obtain a signed and dated acknowledgment from the purchaser demonstrating that the purchaser has received the required risk disclosure document before a transaction in a “penny stock” can be completed; and
 
   
give bid and offer quotations and broker and salesperson compensation information to the customer orally or in writing before or with the confirmation.
These rules make it more difficult for broker-dealers to effectuate customer transactions and trading activity in our securities and may result in a lower trading volume of our common stock and lower trading prices.
Cody Common Stock may be thinly traded.
There is a very minimal public market for Cody Common Stock. Cody cannot be certain that more of a public market for its Common Stock will develop, or if developed, will be sustained. Following the Merger, only 4,500,012 shares of approximately 28,022,134 outstanding shares will be able to be publicly traded for up to one year after the Merger. Accordingly, Cody Common Stock will likely be thinly traded compared to larger more widely known companies that lack such restrictions. Cody cannot predict the extent to which an active public market for its Common Stock will develop or be sustained at any time in the future. If Cody is unable to develop or sustain a market for its Common Stock, investors may be unable to sell the Common Stock they own, and may lose the entire value of their investment.

 

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Securities analysts may elect not to report on the Cody Common Stock or may issue negative reports that adversely affect the stock price.
At this time, no securities analysts provide research coverage of the Cody Common Stock, and securities analysts may not elect not to provide such coverage in the future. It may remain difficult for a company such as Cody, with a small market capitalization, to attract independent financial analysts that will cover the Cody Common Stock. If securities analysts do not cover the Cody Common Stock, the lack of research coverage may adversely affect its actual and potential market price. The trading market for the Cody Common Stock may be affected in part by the research and reports that industry or financial analysts publish about its business. If one or more analysts elect to cover Cody and then downgrade the stock, the stock price would likely decline rapidly. If one or more of these analysts cease coverage of Cody, Cody could lose visibility in the market, which in turn could cause its stock price to decline. This could have a negative effect on the market price of Cody shares.
When a significant number of shares will become eligible for future sale by Cody shareholders the sale of those shares could adversely affect the stock price.
Prior to the Merger, up to 4,500,012 shares of Cody’s then-outstanding Common Stock could be sold without restriction under the Securities Act of 1933, as amended (the “Securities Act”), and approximately 11,538,461 outstanding shares of Cody Common Stock were not eligible for resale under the Securities Act without restriction. Immediately following the issuance of 23,522,122 shares of Cody Common Stock, or approximately 83.94% of the outstanding shares of the Cody Common Stock pursuant to the terms of the Merger Agreement, such shares will be restricted from sale until approximately one year after the Merger pursuant to Rule 144 of the Securities Act as detailed in “Shares Eligible for Future Sale.” Most of the outstanding shares which are not currently eligible for resale, as well as those issued in the Merger, will become eligible for resale over a time period beginning one year after Cody files this Current Report on Form 8-K.
If the Cody shareholders whose shares are either registered for resale or become eligible for resale as described do sell, or indicate an intention to sell, substantial amounts of Cody Common Stock in the public market after the legal restrictions on resale discussed in this filing lapse, the trading price of Cody Common Stock could decline.
Cody will incur increased costs as a result of the Merger and as a result of being a public company.
Cody’s new management team will now be responsible for its operations and reporting. Because Cody is a public company, and because operations of the Company will be significantly more complex after the Merger, the new management team will require outside assistance from legal, accounting, investor relations, or other professionals that could be more costly than planned. Cody may also be required to incur additional costs to comply with additional SEC reporting requirements and compliance under the Sarbanes-Oxley Act of 2002. For example, Section 404 of the Sarbanes-Oxley Act of 2002 requires management to report on internal controls, and for the year ending 2008, our independent registered public accounting firm will be required to attest to the effectiveness of its internal control over financial reporting. Cody must establish an ongoing program to perform the system and process evaluation and testing necessary to comply with these requirements as they apply to its post-Merger business. This program will require that Cody incur significant expenses and to devote resources to Section 404 compliance on an ongoing basis. Cody’s failure to comply with reporting requirements and other provisions of securities laws could negatively affect its stock price and adversely affect its results of operations, cash flow and financial condition.
In addition, these rules could make it more difficult or more costly to obtain certain types of insurance, including directors’ and officers’ liability insurance and Cody may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult to attract and retain qualified persons to serve on the Board of Directors, on Board committees or as executive officers.
Operating as a small public company also requires Cody to make forward-looking statements about future operating results and to provide some guidance to the public markets. The new management has limited experience as a management team in a public company and as a result projections may not be made timely or set at expected performance levels and could materially affect the price of Cody shares. Any failure to meet published forward-looking statements that adversely affect the stock price could result in losses to investors, shareholder lawsuits or other litigation, sanctions or restrictions issued by the SEC or the stock market upon which Cody stock is traded.

 

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Cody does not intend to pay cash dividends.
Cody has never declared or paid cash dividends on its capital stock. It currently expects to use available funds and any future earnings in the development, operation and expansion of its business and does not anticipate paying any cash dividends in the foreseeable future. In addition, the terms of any future debt or credit facility Cody may obtain may preclude it from paying any dividends. As a result, capital appreciation, if any, of Cody Common Stock will be an investor’s only source of potential gain from Cody Common Stock for the foreseeable future.
Shareholders may experience significant dilution if future equity offerings are used to fund operations or acquire complementary businesses.
If future operations or acquisitions are financed through the issuance of equity securities, shareholders could experience significant dilution. In addition, securities issued in connection with future financing activities or potential acquisitions may have rights and preferences senior to the rights and preferences of Cody Common Stock. The issuance of shares of Cody Common Stock upon the exercise of options may result in dilution to our shareholders.
We cannot be certain that Cody’s internal control over financial reporting will be effective or sufficient in the future.
Cody’s ability to manage its operations and growth requires it to maintain effective operations, compliance and management controls, as well as internal control over financial reporting. After the Merger, management may not be able to implement necessary improvements to internal control over financial reporting in an efficient and timely manner and may discover deficiencies and weaknesses in existing systems and controls, especially when such systems and controls are tested by an increased rate of growth or the impact of acquisitions. In addition, upgrades or enhancements to computer systems could cause internal control weaknesses.
It may be difficult to design and implement effective internal control over financial reporting for combined operations as Cody integrates ChromaDex, and perhaps other acquired businesses in the future. In addition, differences in existing controls of acquired businesses may result in weaknesses that require remediation when internal controls over financial reporting are combined.
If Cody fails to maintain an effective system of internal control or if management or Cody’s independent registered public accounting firm were to discover material weaknesses in internal control systems Cody may be unable to produce reliable financial reports or prevent fraud. If Cody is unable to assert that its internal control over financial reporting is effective at any time in the future, or if its independent registered public accounting firm is unable to attest to the effectiveness of internal controls, is unable to deliver a report at all or can deliver only a qualified report, Cody could be subject to regulatory enforcement and investors may lose confidence in its ability to operate in compliance with existing internal control rules and regulations, either of which could result in a decline in Cody’s share price.
Cody may become involved in securities class action litigation that could divert management’s attention and harm its business.
The stock market in general and the stocks of early stage technology companies in particular have experienced extreme price and volume fluctuations. These fluctuations have often been unrelated or disproportionate to the operating performance of the companies involved. If these fluctuations occur in the future, the market price of Cody’s shares could fall regardless of its operating performance. In the past, following periods of volatility in the market price of a particular company’s securities, securities class action litigation has been brought against that company. If the market price or volume of Cody’s shares suffers extreme fluctuations, then it may become involved in this type of litigation which would be expensive and divert management’s attention and resources from managing the business.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION: CODY
Prior to the Merger, Cody was a “shell company” which had no or nominal operations and assets consisting of cash, cash equivalents, and nominal other assets. Cody hereby incorporates herein by reference Item 6 — Management’s Discussion and Analysis of Plan of Operation from its 10-KSB for the fiscal year ended November 30, 2007.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION: CHROMADEX
You should read the following discussion and analysis of financial condition and results of operations of ChromaDex, which now represent our ongoing business operations, together with the financial statements and the related notes appearing at the end of this report. Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to our plans and related financing, includes forward-looking statements that involve risks and uncertainties. You should read the “Risk Factors” section of this report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
The discussion and analysis of our financial conditions and results of operations are based on the ChromaDex financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues, if any, and expenses during the reporting periods. On an ongoing basis, we evaluate such estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
The following discussion and analysis excludes the impact of Cody’s financial condition and results of operations prior to the Merger because they were not material for any of the periods presented.
ChromaDex has generated Net Sales of $4,754,073 for the fiscal year ending December 29, 2007 and $3,517,957 for the fiscal year ending December 31, 2006. ChromaDex incurred a net loss of $189,275 for the fiscal year ending December 29, 2007 and a net loss of $1,284,260 for the fiscal year ending December 31, 2006.
Over the next twelve months our business plan calls for us to expand our service capacity and implement accreditation and certification programs related to quality initiatives. In addition, we plan on expanding our chemical library program and establishing a Good Manufacturing Practices (“GMP”) compliant pilot plant to support small to medium scale production of target compounds.

 

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Three-month periods ended March 29, 2008 and March 31, 2007
Results of Operations
For the three months ending March 29, 2008, ChromaDex’s net sales decreased as compared to the first three months of 2007, as a result of reduced demand for analytical services. In addition, the consolidation of our laboratory facilities into our Boulder location reduced our direct costs and corresponding overhead associated with our services business.
                         
    Three Months Ending  
    March 29, 2008     March 31, 2007     Change  
 
                       
Net Sales
    1,059,716       1,206,893       -12 %
Cost of Goods Sold
    660,272       664,286       -1 %
Gross Profit
    399,444       542,607       -26 %
Operating expenses-Sales & Marketing
    171,984       100,556       71 %
-General and Admin
    342,738       319,324       7 %
Non-Operating Expenses -Interest Expense
    7,616       9,633       -20 %
-Interest Income
    (404 )     (622 )     -35 %
-Other
    416       723       -42 %
Net Income (Loss)
    (122,906 )     112,993       -208 %
Net Sales
Net sales consist of Reference Standards and Contract Service sales. Net sales for the three-month period ended March 29, 2008 were $1,059,716, a 12% decrease as compared to net sales of $1,206,893 for the corresponding period in 2007. This decrease was caused by a reduced demand for regular testing services and reduced foreign demand for reference standards.
Cost of Goods Sold
Costs of goods sold include Raw Materials, Labor, and Overhead. Cost of goods sold for the three-month period ended March 29, 2008 was $660,612, a 1% decrease as compared to cost of goods sold of $664,286 for the corresponding period in 2007. The percentage decrease in cost of goods sold is smaller as compared to that of net sales because fixed labor and overhead costs make up the majority of our expenses, and direct and indirect labor and overhead costs remained fixed as compared to 2007.
Gross Profit
Gross profit is net revenues less the cost of sales and is affected by a number of factors including product mix, competitive pricing and costs of products and services. Our gross profit decreased 26% to $399,444 for the three-month period ended March 29, 2008 from $542,607 for the corresponding period in 2007. The combination of decreased sales, and our fixed labor and corresponding overhead costs all contributed to this decrease.
Operating Expenses-Sales and Marketing
Sales and Marketing Expenses consist of salaries, commissions to employees and advertising and marketing. Sales and marketing expenses for the three-month period ended March 29, 2008 were $171,984 as compared to $100,556 for the corresponding period in 2007. This increase was primarily due to the delivery of our annual catalog and other direct mail expenses.
Operating Expenses-General and Administrative
General and Administrative Expenses consist of research and development, general company administration, IT, accounting and executive management. General and Administrative Expenses for the three-month period ended March 29, 2008 were $342,738 as compared to $319,324 for the corresponding period in 2007. This increase was primarily the result of increased legal and accounting costs related to the Private Placement and the Merger transaction.

 

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Non-operating Expenses- Interest Expense
Interest expense consists of interest on capital leases. Interest expenses for the three-month period ended March 29, 2008 was $7,616 as compared to $9,633 for the corresponding period in 2007. This large decrease was due to the expiration of certain capital equipment leases.
Non-operating Expenses- Interest Income
Interest Income consists of interest earned on short term investment and notes receivable. Interest income for the three-month period ended March 29, 2008 was $404 as compared to $622 for the corresponding period in 2007. This decrease was because of the paydown of a fully reserved customer note receivable.
Non-operating Expenses- Other Income/Expense
Other Income/Expense consists of Income/Expense outside the ordinary course of business. Other Income/Expense for the three-month period ended March 29, 2008 was $416 in income as compared to expense of $723 for the corresponding period in 2007.
Depreciation and Amortization
For the three-month period ended March 29, 2008, we recorded approximately $59,664 in depreciation. We depreciate our assets on a straight-line basis, based on the estimated useful lives of the respective assets. We amortize intangible assets using a straight-line method over 10 years. In the three-month period ended March 29, 2008, we recorded amortization intangible assets of approximately $28,453. We test intangible assets for impairment based on events or changes in circumstances as they occur, at least annually.
Accounts receivable
As of March 29, 2008, we had $320,969 in accounts receivables as compared to $423,188 as of March 30, 2007. This decrease is due to a decrease in sales during the first quarter 2008 as compared to 2007.
Inventories
As of March 29, 2008, we had $557,863 in inventory as compared to $390,648 as of March 30, 2007. This large increase is due to a combination of factors. First, the increase in sales demand over 2006 forced us to stock larger quantities of higher demand items during the last two quarters of 2007. Second, we have made a company wide effort to increase in stock items during 2007, and last, with available capital we purchased larger quantities of raw materials and inventory to take advantage of vendor price discounts.
Accounts payable
As of March 29, 2008, we had $257,224 in accounts payable as compared to $512,222 as of March 31, 2007. This large decrease was due to both a large decrease in outsourced contract services during the first quarter of 2008 and timing of large inventory purchases.
Advances from Customers
As of March 29, 2008, we had $105,757 in advances from customers as compared to $91,862 as of March 31, 2007. These advances are for large scale contract services and contract research projects where the company requires a deposit before beginning work. The increase as of March 29, 2008 versus the same period in 2007 are due to the timing of delivery of certain projects.

 

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Due to officers
As of March 29, 2008 we had $1,178,206 due to officers as compared to $1,048,729 as of March 31, 2007. These consist of deferred officer salary for the two founders and are expected to be paid out at an undetermined date in the future as non-cash compensation.
Liquidity and Capital Resources
Since inception and through March 29, 2008, we have incurred aggregate losses of $5.2 million. These losses are primarily due to overhead costs and general and administrative expenses. Our operations have been financed through capital contributions and the issuance of common stock.
As of March 29, 2008, we had $1.7 million in cash. We have raised approximately $1.3 million of net proceeds after March 29, 2008 through a private placement preceding the Merger. We expect that our capital resources will permit us to meet our operational requirements through the fourth quarter of 2009. This expectation is based on our current operating plan, which may change as a result of many factors. Therefore, to execute our operating plan through fiscal year 2009, additional financing may be required and there can be no assurance that it will be available on terms favorable to us or at all. If adequate financing is not available we may have to delay, postpone or terminate product and service expansions and curtail general and administrative operations. The inability to raise additional financing may have a material adverse effect on us.
Off-Balance Sheet Arrangements
During the three months ended March 29, 2008, we had no off-balance sheet arrangements other than ordinary operating leases as disclosed in the accompanying financial statements.
Contractual Obligations
The following table summarizes our future contractual obligations as of December 29, 2007.
                                         
            Payment Due by Period  
            Less than 1                     More than 5  
    Total     Year     1-3 Years     3-5 Years     Years  
Capital Leases
                                       
Principal
  $ 224,731     $ 74,846     $ 104,020     $ 45,865     $  
Interest
    60,127       27,004       27,180       5,942        
Operating Leases
    1,409,882       396,370       841,197       172,314        
 
                             
Total
  $ 1,694,740     $ 498,221     $ 972,397     $ 224,122     $  
 
                             
Recent Developments
On June 18, 2008, we repurchased 1,222,795 shares of our outstanding common stock from Bayer Innovation GmbH (formerly Bayer Innovation Beteiligungsgescellschaft mbH), for an aggregate purchase price of $1,002,691.90 pursuant to a Share Redemption Agreement. We funded the repurchase by issuing a non-interest bearing promissory note for such amount, and the note is due on or before December 20, 2008. If the principal amount of the promissory note, or any part thereof, is not paid in full when due, the we must pay interest on the overdue principal amount at the rate of one and one half percent (1 1/2%) per month beginning January 1, 2009. The Share Redemption Agreement and the promissory note are included as Exhibits 10.13 and 10.14 respectively, to this Current Report on Form 8-K.

 

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Fiscal Years ended December 29, 2007 and December 31, 2006
Results of Operations
For the fiscal year 2007, ChromaDex’s net sales and gross profit rose substantially over the full year 2006. These increases were due to increased sales of each of our product and service offerings. In addition, the consolidation of our laboratory facilities into our Boulder location reduced our direct costs and corresponding overhead associated with our services business.
                         
    Twelve months ending  
    December 29, 2007     December 31, 2006     Change  
 
                       
Net Sales
    4,754,073       3,517,957       35 %
Cost of Goods Sold
    3,122,461       2,753,919       13 %
Gross Profit
    1,631,612       764,038       113 %
Operating expenses-Sales and Marketing
    387,816       354,560       9 %
-General And Administrative
    1,421,516       1,510,926       -5 %
Non-Operating Expenses -Interest Expense
    31,815       30,175       5 %
-Interest Income
    (17,698 )     (4,314 )     510 %
-Other
    (1,962 )     156,951       -101 %
Net Loss
    (189,875 )     (1,284,260 )     -85 %
Net Sales
Net sales consist of Reference Standards and Contract Service sales. Net sales for the twelve-month period ended December 29, 2007 were $4,754,073, a 35% increase as compared to net sales of $3,517,957 for the corresponding period in 2006. This increase was due to our additional service offerings and increased demand for our existing products and services.
Cost of Goods Sold
Costs of goods sold include Raw Materials, Labor, and Overhead. Cost of goods sold for the twelve-month period ended December 29, 2007 were $3,122,461, a 13% increase as compared to cost of goods sold of $2,753,919 for the corresponding period in 2006. The percentage increase in cost of goods sold is smaller as compared to that of net sales because of the consolidation of our laboratory facilities and the reduction of raw material costs due to increased volume purchases. In addition, direct and indirect overhead costs remained fixed as compared to 2006.
Gross Profit
Gross profit is net revenues less the cost of sales and is affected by a number of factors including product mix, competitive pricing and costs of products and services. Our Gross Profit increased 113% to $1,631,612 for the twelve-month period ended December 29, 2007 from $764,038 for the corresponding period in 2006. The combination of increased sales and a reduction in raw material costs without corresponding overhead costs all contributed to this increase.
Operating Expenses-Sales and Marketing
Sales and Marketing Expenses consist of salaries, commissions to employees and advertising and marketing. Sales and marketing expenses for the twelve-month period ended December 29, 2007 were $387,816 as compared to $354,560 for the corresponding period in 2006. This small increase as compared to the larger increase in net sales was primarily due to the delivery of our annual catalog in 2006.
Operating Expenses-General and Administrative
General and Administrative Expenses consist of research and development, general company administration, IT, accounting and executive management. General and administrative expenses for the twelve-month period ending December 29, 2007 were $1,421,516 as compared to $1,510,926 for the corresponding period in 2006. This decrease as compared to the larger increase in net sales was primarily due to reduced legal costs related to a dismissed breach of contract suit.

 

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Non-operating Expenses- Interest Expense
Interest Expense consists of interest on capital leases. Interest expense for the twelve-month period ending December 29, 2007 was $31,815 as compared to $30,175 for the corresponding period in 2006.
Non-operating Expenses- Interest Income
Interest Income consists of interest earned on short term investment and notes receivable. Interest income for the twelve-month period ending December 29, 2007 was $17,698 as compared to $4,314 for the corresponding period in 2006. This large increase was due to the agreed settlement on a note payable.
Non-operating Expenses- Other Income/Expense
Other Income/Expense consists of Income/Expense outside the ordinary course of business. Other Income/Expense for the twelve-month period ending December 29, 2007 was $1,962 in income as compared to expense of $156,951 for the corresponding period in 2006. The 2006 expense was due to the settlement of litigation in connection with a lawsuit filed by Innovative Health Products alleging breach of contract. In connection with the settlement agreement the Company recorded an obligation of $155,000.
Depreciation and Amortization
For the twelve- month period ended December 29, 2007, we recorded approximately $236,647 in depreciation. We depreciate our assets on a straight-line basis, based on the estimated useful lives of the respective assets.
We amortize intangible assets using a straight-line method over 10 years. In the twelve-month period ended December 29, 2007, we recorded amortization on intangible assets of approximately $116,000. We test intangible assets for impairment based on events or changes in circumstances as they occur, at least annually.
Cash and Cash Equivalents
As of December 29, 2007 we had $303,785 in cash and cash equivalents as compared to $424,965 as of December 31, 2006. The decrease is primarily due to increased expenditures for inventory as discussed below.
Accounts receivable
As of December 29, 2007 we had $375,233 in accounts receivables as compared to $303,062 as of December 31, 2006. This increase is due to increased sales during the fourth quarter 2007 as compared to 2006.
Inventories
As of December 29, 2007 we had $497,635 in inventory as compared to $281,044 as of December 31, 2006. This large increase is due to a combination of factors. First, the increased sales demand over 2006 forced us to stock larger quantities of high demand items. Second, we made a company wide effort to increase in stock items during 2007, and last, with available capital we purchased larger quantities of raw materials and inventory to take advantage of vendor price discounts.
Accounts payable
As of December 29, 2007 we had $500,538 in accounts payable as compared to $338,327 as of December 31, 2006. This large increase was primarily due to a large increase in outsourced contract services and on an increase in inventory purchases at year end.

 

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Advances from Customers
As of December 29, 2007 we had $117,969 in advances from customers as compared to $115,067 as of December 31, 2006. These advances are for large scale contract services and contract research projects where the company requires a deposit before beginning work.
Due to officers
As of December 29, 2007 we had $1,167,822 due to officers as compared to $1,009,029 as of December 31, 2006. These consist of deferred officer salary for the two founders and are expected to be paid out at an undetermined date in the future as non-cash compensation.
Off-Balance Sheet Arrangements
During the Fiscal Years ended December 29, 2007 and December 31, 2006, the Company had no off-balance sheet arrangements other than ordinary operating leases as disclosed in the accompanying financial statements.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with standards of the Public Company Accounting Oversight Board (United States). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures. On an ongoing basis, we evaluate these estimates, including those related to the valuation of share-based payments. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We believe that of our significant accounting policies, which are described in Note 2 to our financial statements appearing elsewhere in this report, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations.
Revenue recognition:
The Company recognizes sales and the related cost of goods sold at the time the merchandise is shipped to customers or service is performed, when each of the following conditions have been met: an arrangement exists, delivery has occurred, there is a fixed price, and collectability is reasonably assured.
Intangible assets:
Intangible assets include licensing rights and are accounted for based on Financial Accounting Standard Statement No. 142 Goodwill and Other Intangible Assets (“FAS 142”). Intangible assets with finite useful lives are amortized using the straight-line method over a period of 10 years, the remaining term of the patents underlying the licensing rights (considered to be the remaining useful life of the license).
Research and development costs:
Research and development costs consist of direct and indirect costs associated with the development of the Company’s technologies. These costs are expensed as incurred.

 

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Fair value determination of privately-held securities:
The fair values of the common stock as well as the common stock underlying options and warrants granted as part of asset purchase prices or as compensation were estimated by management. Determining the fair value of stock requires making complex and subjective judgments. The Company used the market approach to estimate the value of the enterprise at each date on which securities are issued or granted. The enterprise value was then allocated to preferred and common shares taking into account the enterprise value available to all stockholders and allocating that value among the various classes of stock based on the rights, privileges and preferences of the respective classes. There is inherent uncertainty in these estimates.
Nature of Business and Significant Accounting Policies (continued)
Stock-based compensation : The Company follows the provisions of Statement of Financial Accounting Standards No. 123R — Share-based Payments (“FAS123R”) which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (options).
The Company’s stock-based employee compensation plan is described in Note 8 of the 2007 Audited Financial Statements. Prior to 2006, the Company accounted for this plan under the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. The Company accounted for stock-based compensation to non-employees at fair value.
In addition, the Company’s subsidiary also maintained a stock-based compensation plan. The subsidiary also accounted for this plan under the recognition and measurement principles of APB 25 and related interpretations. The subsidiary accounted for stock-based compensation to non-employees at fair value.
Beginning in 2006, the Company accounted for newly issued stock-based compensation under the recognition and measurement provisions of SFAS 123(R). The standard requires entities to measure the cost of services received in exchange for stock options based on the grant-date fair value of the award, and to recognize the cost over the period the individual is required to provide services for the award.
The Company applied the measurement provisions of SFAS 123(R) prospectively to all awards granted, modified, repurchased, or cancelled after January 1, 2006 (required effective date). The Company continues to account for any portion of awards outstanding at the date of initial application using the accounting principles originally applied to those awards.
The Company recognizes compensation expense under Statement No. 123(R) over the requisite service period using the straight-line method. The Company has determined that the fair value method should be used in determining the value of its stock options. The fair value method requires that the volatility assumption used in an option-pricing model be based on the historical volatility of daily closing total returns from industry sector comparable companies.
New accounting pronouncements : The Financial Accounting Standards Board (FASB) has issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement standard for the financial statement recognition and measurement of an income tax position taken or expected to be taken in a tax return. In addition, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
The Company presently recognizes income tax positions based on management’s estimate of whether it is reasonably possible that a liability has been incurred for unrecognized income tax benefits by applying FASB Statement No. 5, Accounting for Contingencies.

 

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In February 2008, the FASB delayed the effective date of FIN 48 for certain nonpublic enterprises to annual financial statements for fiscal years beginning after December 15, 2007. The Company will be required to adopt FIN 48 in their 2008 annual financial statements. The provisions of FIN 48 are to be applied to all tax positions upon initial application of this standard. Only tax positions that meet the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized upon adoption.
In March, 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities”. The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The new standard also improves transparency about the location and amounts of derivative instruments in an entity’s financial statements; how derivative instruments and related hedged items are accounted for under Statement 133; and how derivative instruments and related hedged items affect its financial position, financial performance, and cash flows. FASB Statement No. 161 achieves these improvements by requiring disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. It also provides more information about an entity’s liquidity by requiring disclosure of derivative features that are credit risk-related. Finally, it requires cross-referencing within footnotes to enable financial statement users to locate important disclosure information. Based on current conditions, the Company does not expect the adoption of SFAS 161 to have a significant impact on its results of operations or statements of financial position.
In December 2007, FASB issued FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51. This Statement applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but will affect only those entities that have an outstanding non-controlling interest in one or more subsidiaries or that deconsolidate a subsidiary. Not-for-profit organizations should continue to apply the guidance in Accounting Research Bulletin No. 51, Consolidated Financial Statements, before the amendments made by this Statement, and any other applicable standards, until the Board issues interpretative guidance. This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends). Earlier adoption is prohibited. The effective date of this Statement is the same as that of the related Statement 141(R). This Statement shall be applied prospectively as of the beginning of the fiscal year in which this Statement is initially applied, except for the presentation and disclosure requirements. The presentation and disclosure requirements shall be applied retrospectively for all periods presented. This statement has no effect on the financial statements as the Company does not have any outstanding non-controlling interest.
In September 2006, FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures for fiscal years beginning after November 15, 2007. The adoption of this statement has no impact effect of the financial statements of the Company.
DESCRIPTION OF PROPERTY
ChromaDex currently leases less than 8,000 square feet of office space in Irvine, California with four years remaining on the lease and laboratory manufacturing space of less than 13,000 square feet of space in Boulder, Colorado with three years remaining on the lease. We do not own any real estate.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of June 20, 2008, the day of the Merger, 28,022,134 shares of Common Stock were issued and outstanding. In addition, at June 20, 2008 there were options representing rights to purchase up to approximately 3,301,937 shares of Cody Common Stock at a weighted average exercise price of $1.35 per share of Cody Common Stock and warrants representing rights to purchase up to approximately 1,314,303 shares of Cody Common Stock at a weighted average exercise price of $2.67 per share of Cody Common Stock. The following table sets forth certain information regarding our capital stock, beneficially owned after the Merger as of June 20, 2008, by each person known to us to beneficially own more than 5% of our Common Stock, each executive officer and director, and all directors and executive officers as a group. We calculated beneficial ownership according to Rule 13d-3 of the Securities Exchange Act as of that date. Shares issuable upon exercise of options or warrants that are exercisable or convertible within 60 days after June 20, 2008 are included as beneficially owned by the holder. Beneficial ownership generally includes voting and investment power with respect to securities. Unless otherwise indicated below, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned.
                 
    Shares of Common Stock     Aggregate Percentage  
Name of Beneficial Owner (1)   Beneficially Owned (2)     Ownership  
 
               
Frank Louis Jaksch Jr.(3)
    7,654,155       27.47 %
Margie Chassman
    4,407,640       15.73 %
Strategic Biotech Advisors, Inc.
    2,086,884       7.45 %
Margery Germain
    2,053,995       7.33 %
Jaksch Family Trust (4)
    1,429,000       5.10 %
Directors
               
Stephen Block
          *  
Reid Dabney
          *  
Hugh Dunkerley (5)
    75,000       *  
Mark S. Germain
          *  
Kevin M. Jaksch
          *  
Frank Louis Jaksch Jr.
  (See above )        
Tom Varvaro
    300,000       1.07 %
Named Executive officers
               
Frank Louis Jaksch Jr., Chief Executive Officer
  (See above )        
Tom Varvaro, Chief Financial Officer
  (See above )        
All directors and executive officers as a group (7 Individuals)
    8,029,155       28.59 %
DIRECTORS AND EXECUTIVE OFFICERS
Our business and affairs are managed by our Board of Directors. Prior to the completion of the Merger, we had two directors and executive officers, Donald Sampson and Barbara Grant. Pursuant to the Merger, and effective as of the closing of the Merger, Mr. Sampson and Ms. Grant each resigned as a director and officer of Cody. By actions of the prior Board of Directors, the directors and executive officers were replaced by directors and officers of ChromaDex individuals named by ChromaDex, who are identified below.
 
     
(1)  
Addresses for the Beneficial Owners listed are: Frank Louis Jaksch Jr., 8 Garzoni Aisle, Irvine, California 92606; Margie Chassman, 445 West 23rd Street, Apt. 16E, New York, NY 10011; Strtegic Biotech Advisors, Inc., 4417 Downing Place Way, Mt. Pleasant SC 29466; Margery Germain, 15 Bank Street, White Plains, NY 10606; Jaksch Family Trust, 70 Pienza, Laguna Niguel, CA 92677; Bayer Innovation Beteiligungsgescellschaft mbH, 51368 Leverkusen, Federal Republic of Germany.
 
(2)  
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to shares beneficially owned. Unless otherwise specified, reported ownership refers to both voting and investment power. Shares of Common Stock issuable upon the conversion of stock options within the next 60 days are deemed to be converted and beneficially owned by the individual or group identified in the Aggregate Percentage Ownership column.
 
(3)  
Includes 1,429,000 shares owned by the Jaksch Family Trust, beneficially owned by Frank L. Jaksch Jr. because Mr. Jaksch Jr. has shared voting power for such shares. Includes 60,000 stock options exercisable within 60 days.
 
(4)  
These shares are the same shares that are factored into Frank L. Jaksch Jr’s beneficially owned shares in (2) above. Frank Louis Jaksch, Sr. and Maria Jaksch are trustees of the Jaksch Family Trust.
 
(5)  
Includes 75,000 stock options exercisable within 60 days.

 

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The following table sets forth information regarding current directors, director nominees, and executive officers, including their ages, as of June 20, 2008. The composition of the committees of the Board of Directors will be determined as soon as practicable. Executive officers serve at the request of the Board of Directors.
             
Name   Age   Position
 
           
Frank L. Jaksch, Jr.
    39     Co-Chairman of the Board, Chief Executive Officer, President, Director
Tom Varvaro
    38     Chief Financial Officer, Secretary and Director
Stephen Block
    63     Director
Reid Dabney
    56     Director
Hugh Dunkerley
    34     Director
Mark S. Germain
    57     Co-Chairman of the Board, Director
Kevin M. Jaksch
    37     Director
The directors and executive officers were appointed to their positions on June 20, 2008, upon consummation of the Merger.
Biographies
Frank L. Jaksch Jr ., age 39, is a co-founder of ChromaDex and has served as Chairman of the Board since 2000 and as Chief Executive Officer since 2000. He has also served as a director of ChromaDex since 2000. Mr. Jaksch oversees strategy operations and marketing for the Company with a focus on scientific products and pharmaceutical and nutraceutical markets. From 1993 to 1999 Mr. Jaksch served as International Subsidiaries Manager of Phenomenex where he managed the international subsidiary and international business development divisions. Mr. Jaksch earned a BS in Chemistry and Biology from Valparaiso University. Frank L. Jaksch Jr. is the brother of Kevin Jaksch.
Tom Varvaro , age 38, has served as Chief Financial Officer since 2004 and Secretary of ChromaDex since 2006. He has also served as a director since 2006. Mr. Varvaro oversees operations, accounting, information technology, inventory, distribution, and human resources management for the Company. Mr. Varvaro has developed skills in process mapping, information technology custom application design, enterprise risk systems deployment, plant automation and reporting and bar code tracking implementation from his prior business experiences. From 1998 to 2004, Mr. Varvaro was employed by Fast Heat Inc., a Chicago, Illinois based global supplier to the plastics, HVAC, packaging, and food processing industries, where he began as Controller and rose to CIO and then CFO during his tenure. From 1993 to 1998, Mr. Varvaro was employed by Maple Leaf Bakery, USA, a Chicago, Illinois based company during its rise to a national leader in specialty food products, where he began as Staff Accountant and rose to Assistant Controller during his tenure. He earned a BS in Accounting from University of Illinois, Urbana, and has been certified as a CPA.
Stephen Block , age 63, has been a director of the ChromaDex since 2007 and on the Audit Committee since 2007. Mr. Block is also a director and Chair of the Corporate Governance and Nominating Committee and serves on the Audit Committee of Senomyx, Inc., a public biotech company. He has served on the board of Senomyx, Inc. since 2005. He also serves as the Chairman of the Board of Blue Pacific Flavors and Fragrances, Inc., and as director of Allylix, Inc. and XSCapacity.com, all privately held companies. He has served on these boards since 2008, 2007, and 2007 respectively. Mr. Block is also a member of the Executive Committee of the Orange County network of Tech Coast Angels, the country’s largest angel investor group, and is a partner in Venture Farm, LLC, an early stage fund providing capital, mentoring and education to entrepreneurs. Mr. Block also serves on the board of directors of AirBee Wireless, Inc., a wireless communications software company. For the 11 years prior to 2004, Mr. Block was the Senior Vice President, General Counsel and Secretary and one of nine senior executives at International Flavors & Fragrances Inc., a New York Stock Exchange listed corporation with more $2.0 billion in revenue. Mr. Block has experience in domestic and international mergers and acquisitions and joint ventures and financings, government affairs and lobbying, and corporate, product liability and regulatory law. He has served on the Board of Governors, and in one case, as President, of domestic and international trade associations. Mr. Block has a B.A. cum laude from Yale University and a J.D. from Harvard Law School.

 

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Reid Dabney , age 56, has served as a Director of the ChromaDex and has chaired the Audit Committee since October 2007. Since March 2005, he has also served as Foldera, Inc.’s (and its predecessor company’s) Senior Vice President and Chief Financial Officer. From July 2003 to November 2005, Mr. Dabney was engaged by CFO911 as a business and financial consultant. From January 2003 to August 2004, Mr. Dabney served as Vice President of National Securities, a broker-dealer firm specializing in raising equity for private operating businesses that have agreed to become public companies through reverse merger transactions with a publicly traded shell companies. From June 2002 to January 2003, Mr. Dabney was the chief financial officer of House Ear Institute in Los Angeles, California. Mr. Dabney received a B.A. degree from Claremont McKenna College and an M.B.A. in Finance from the University of Pennsylvania’s Wharton School. Mr. Dabney also holds Series 7, 24 and 63 licenses from Financial Industry Regulatory Authority (FINRA).
Hugh Dunkerley , age 34, has served as a Director of the ChromaDex since December 2005. From October 2002 to December 2005 Mr. Dunkerley served as Director of Corporate Development at ChromaDex. Mr. Dunkerley has been President and Chief Executive Officer of Foldera, Inc. (OTCBB:FDRA.OB) since October 31, 2007. He had served as Foldera’s Chief Operating Officer from June 2007 to October 31, 2007 and as Vice President of Corporate Finance from June 2006 to June 2007. From January 2006 to July 2006, Mr. Dunkerley served as Vice President of Small-Mid Cap Equities at Hunter Wise Financial Group, LLC, specializing in investment banking advisory services to US and EU companies. Mr. Dunkerley received his undergraduate degree from the University of Westminster, London and earned a MBA from South Bank University, London. Mr. Dunkerley also holds Series 7 and 66 licenses from FINRA.
Mark S. Germain , age 57, has served as Co-Chairman of the Board of Directors since he founded ChromaDex in 2000 and on the audit committee since October 2007. Mr. Germain has extensive experience as a merchant banker in the biotech and life sciences industries. He has been involved as a founder, director, Chairman of the Board of, and/or investor in over twenty companies in the biotech field, and assisted many of them in arranging corporate partnerships, acquiring technology, entering into mergers and acquisitions, and executing financings and going public transactions. He graduated New York University School of Law in 1975, Order of the Coif, and was a partner in a New York law firm practicing corporate and securities law before leaving for the private sector in 1986. Since then, and until he entered the biotech field in 1991, he served in senior executive capacities, including as president of a public company sold in 1991. In addition to his role as Co-Chairman and director of the Company, Mr. Germain is currently a director of the following publicly traded companies: Wellford Real Properties, Inc., Stem Cell Innovations, Inc., Collexis Holdings, Inc., and Pluristem Therapeutics, Inc. He is also a co-founder and director of a number of private companies in the biotechnology field.
Kevin Jaksch , age 37, has served as a Director of ChromaDex since 2000. Since 2000, Mr. Jaksch has served as Vice President and Branch Manager at Charles Schwab & Co., Inc. (NASDAQ: SCHW). Mr. Jaksch has been a registered representative for 15 years and a registered principal for 12 years overseeing two offices with over four billion in assets. Mr. Jaksch has broad experience in the financial markets and financial advising. Mr. Jaksch earned a BA in Communications from the University of Southern California in Los Angeles. Kevin Jaksch is the brother of Frank L. Jaksch Jr.
Board of Directors and Committees of the Board
Our business and affairs are managed under the direction of our Board of Directors.
The Board of Directors is in the process of organizing several committees. We expect that the standing committees of our Board of Directors will consist of an audit committee, a compensation committee and a nominating and corporate governance committee.
Immediately following the merger, we plan to establish an audit committee for the purpose of overseeing our accounting and financial reporting processes and audits of our financial statements by our independent auditors. We believe that each of the future members of the audit committee will meet the independence requirements of Marketplace Rule 4350(d)(2) of the NASDAQ Stock Market, Inc. Each of the members of the audit committee is expected to be financially literate and will have accounting and finance experience, and we plan to have an “audit committee financial expert” on our audit committee, within the meaning of Securities and Exchange Commission regulations as defined in Item 407 of Regulation S-K. Currently, Reid Dabney is considered an audit committee financial expert.

 

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Code of Conduct and Ethics
We expect that our Board will adopt a code of conduct and ethics applicable to our directors, officers and employees, in accordance with applicable rules and regulations of the SEC. A copy of that code will be made available on our website.
Compensation of Executive Officers
ChromaDex has established executive compensation plans that link compensation with performance. We plan to periodically review our executive compensation programs to ensure they are competitive.
EXECUTIVE AND DIRECTOR COMPENSATION
Cody’s fiscal year ended November 30, 2007
During the fiscal year ended November 30, 2007, no compensation was earned by or paid to Donald Sampson or Barbara Grant, Cody’s only executive officers during that year. Accordingly, in accordance with Item 402(a)(4) of Regulation S-B, we have omitted from this report the Summary Compensation Table and Director Compensation Table otherwise required by that Item.
There were no post retirement benefit plans, medical, life, dental or other benefit plans, cash bonus or other compensation arrangements in place during fiscal 2007. There were no stock options or equity awards outstanding at November 30, 2007.
ChromaDex’s fiscal year ended December 29, 2007
The following table sets forth information concerning the annual and long-term compensation earned by ChromaDex’s Chief Executive Officer (the principal executive officer) and the only other compensated executive officer who served during the year ended December 29, 2007 (the “Named Executives”) as executive officers of ChromaDex. The compensation indicated below was paid by ChromaDex. Each Named Executive became an executive officer of the Company as of the Effective Date of the Merger.
Summary Compensation Table
                                                 
                            Option              
                            Awards     All Other     Total  
Name   Year     Salary     Bonus     (1)     Compensation     ($)  
                                               
Frank L. Jaksch
    2007     $ 150,000 (2)   $ 15,000           $ 1,920     $ 166,920  
 
    2006     $ 150,000 (3)         $ 24,652     $ 1,920     $ 176,572  
Tom Varvaro
    2007     $ 110,000     $ 10,000                 $ 120,000  
 
    2006     $ 110,000           $ 20,543           $ 130,543  
 
     
(1)  
The amounts in the column titled “Option Awards” above reflect the dollar amounts recognized for financial statement reporting purposes in accordance with FAS 123R for the fiscal years ended December 31, 2006. See Note 1 of the ChromaDex, Inc. Consolidated Financial Report dated December 29, 2007 for a description of certain assumptions in the calculation of these amounts pursuant to FAS 123R.
 
(2)  
Frank Jaksch was paid $66,181 of his salary in cash in 2007 and the remainder is owed to him as unpaid compensation. See “ChromaDex Transactions” below.
 
(3)  
Frank Jaksch was paid $66,964 of his salary in cash in 2006 and the remainder is owed to him as unpaid compensation. See “ChromaDex Transactions” below.

 

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On December 1, 2006, Frank Jaksch, Jr. was granted options to purchase 300,000 shares of ChromaDex common stock at an exercise price of $1.50. These options expire on December 1, 2016 and vest at a rate of 20% per year. On December 1, 2006, Tom Varvaro was granted options to purchase 250,000 of ChromaDex common stock at an exercise price of $1.50. These options expire on December 1, 2016 and vest at a rate of 20% per year. The bonuses granted to Mr. Jaksch and Mr. Varvaro were discretionary and not pursuant to a formula.
DIRECTOR COMPENSATION
Non-Employee Board members currently receive an annual grant of 30,000 options to buy ChromaDex common stock upon reelection by the Shareholders. These options are granted under the 2007 Plan and are granted on the same terms as those being issued to employees.
No compensation plan for directors has been formalized for services as Cody directors following the effective date of the Merger.
The following table provides information concerning compensation of the directors of Cody who (i) became directors upon consummation of the Merger and (ii) were directors of ChromaDex for the fiscal year ended December 29, 2007. The compensation reported is for services as directors for the fiscal year ended December 29, 2007.
Summary Compensation Table
                                                         
    Fees                                          
    Earned                           Non-Qualified              
    or                     Non-Equity     Deferred              
    Paid in     Stock     Option     Incentive Plan     Compensation     All Other        
    Cash     Awards     Awards     Compensation     Earnings     Compensation     Total  
Name   ($)     ($)     ($) (1)     ($)     ($)     ($)     ($)  
 
                                                       
Stephen Block(2)
                                         
Reid Dabney(3)
                                         
Hugh Dunkerley(4)
                                         
Mark S. Germain(5)
                                         
Frank L. Jaksch(6)
                                         
Kevin M. Jaksch(7)
                                         
Tom Varvaro(8)
                                         
 
     
(1)  
The amounts in the column titled “Option Awards” above reflect the dollar amounts recognized for financial statement reporting purposes in accordance with FAS 123R for the fiscal years ended December 29, 2007. See Note 1 of the ChromaDex, Inc. Consolidated Financial Report dated December 29, 2007 for a description of certain assumptions in the calculation of these amounts pursuant to FAS 123R.
 
(2)  
Stephen Block held an aggregate of 30,000 option awards as of December 29, 2007.
 
(3)  
Reid Dabney held an aggregate of 30,000 option awards as of December 29, 2007.
 
(4)  
Hugh Dunkerley held an aggregate of 230,000 option awards as of December 29, 2007.
 
(5)  
Mark S. Germain held an aggregate of 30,000 option awards as of December 29, 2007.
 
(6)  
Frank L. Jaksch held an aggregate of 300,000 option awards as of December 29, 2007.
 
(7)  
Kevin M. Jaksch held an aggregate of 30,000 option awards as of December 29, 2007.
 
(8)  
Tom Varvaro held an aggregate of 500,000 option awards as of December 29, 2007.
Independence
We believe that four of our directors, Stephen Block, Reid Dabney, Hugh Dunkerley and Mark Germain, meet the independence requirements of Marketplace Rule 4350(d)(2) of the NASDAQ Stock Market, Inc.

 

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Employment and Consulting Agreements
The material terms of employment agreements with the Named Executives previously entered into by ChromaDex are described below.
Employment Agreement with Frank L. Jaksch Jr.
ChromaDex entered into a two-year, employment agreement dated April 14, 2008 with Frank L. Jaksch Jr. its Chief Executive Officer. Pursuant to this agreement, Mr. Jaksch is entitled to receive a base salary of $150,000 per year, subject to certain milestones. Following the Merger, Mr. Jaksch will receive a base salary of $175,000. Mr. Jaksch is also eligible for bonuses as determined by our Board of Directors.
Pursuant to the employment agreement, Mr. Jaksch is eligible to be granted stock options for purchase of our shares, such options to be granted solely at the discretion of our Board of Directors. Mr. Jaksch is also entitled to receive the standard benefits generally available to other members of senior management.
In the event Mr. Jaksch’s employment with us is terminated voluntarily by Mr. Jaksch, he shall be entitled to his accrued but unpaid base salary and any stock vested through the date of his termination. In addition, if Mr. Jaksch provides good reason (as defined in the employment agreement) he shall also be entitled to severance (as defined in the employment agreement), whatever bonus he would have been entitled to for the year in which such termination occurs, and he shall be deemed to have been employed for the entirety of such year. As used herein, “Good Reason” means any of the following: (A) the assignment of duties materially inconsistent with those of other employees in similar employment positions, and Mr. Jaksch provides written notice to ChromaDex within 60 days of such assignment that such duties are materially inconsistent with those duties of such similarly-situated employees and ChromaDex fails to release Mr. Jaksch from his obligation to perform such inconsistent duties and to re-assign Mr. Jaksch to his customary duties within 20 business days after ChromaDex’s receipt of such notice; or (B) if, without the consent of Mr. Jaksch, Mr. Jaksch’s normal place of work is or becomes situated more than 50 linear miles from Mr. Jaksch’s personal residence as of the effective date of the employment agreement, or (C) a failure by ChromaDex to comply with any other material provision of the employment agreement which has not been cured within 60 days after notice of such noncompliance has been given by Mr. Jaksch to ChromaDex, or if such failure is not capable of being cured in such time, a cure shall not have been diligently initiated by ChromaDex within such 60 day period. Severance will then consist of 16 weeks of pay, unless Mr. Jaksch signs a release, in which case he will receive compensation for the remainder of the contract, or up to 12 months whichever is less.
In the event Mr. Jaksch is terminated as a result of his death or disability he shall be entitled to his accrued but unpaid base salary, stock vested through the date of his termination and, notwithstanding any policy of ChromaDex to the contrary, any bonus that would be due to him for the fiscal year in which termination pursuant to death or disability will, at the option of the Board, be either prorated or paid in full to him (or his estate, as the case may be) at the time he would have received such bonus had he remained an employee of ChromaDex.
In the event that Mr. Jaksch is terminated by us for good reason (as defined in the employment agreement), he shall only be entitled to his accrued but unpaid base salary, and any stock vested through the date of his termination.
In the event we terminate Mr. Jaksch’s employment without cause (as defined in the employment agreement), Mr. Jaksch is entitled to severance in the form of any stock vested through the date of his termination and continuation of his base salary, together with applicable fringe benefits as provided to other executive employees for the term of his employment agreement.
Employment Agreement with Thomas C. Varvaro CFO
ChromaDex entered into a two-year, employment agreement dated April 14, 2008 with Thomas C. Varvaro its Chief Financial Officer. Pursuant to this agreement, Mr. Varvaro is entitled to receive a base salary of $110,000 per year, subject to certain milestones. Following the Merger, Mr. Varvaro will receive a base salary of $130,000. Mr. Varvaro is also eligible for bonuses as determined by our Board of Directors.

 

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Pursuant to the employment agreement, Mr. Varvaro is eligible to be granted stock options for purchase of our shares, such option grants to be solely at the discretion of our Board of Directors. Mr. Varvaro is also entitled to receive the standard benefits generally available to other members of senior management.
In the event Mr. Varvaro’s employment with us is terminated voluntarily by Mr. Varvaro he shall be entitled to his accrued but unpaid base salary, and any stock vested through the date of his termination. In addition, if Mr. Varvaro provides good reason (as defined in the employment agreement) he shall also be entitled to severance (as defined in the employment agreement), whatever bonus he would have been entitled to for the year in which such termination occurs, and he shall be deemed to have been employed for the entirety of such year. As used herein, “Good Reason” means any of the following: (A) the assignment of duties materially inconsistent with those of other employees in similar employment positions, and Mr. Varvaro provides written notice to ChromaDex within 60 days of such assignment that such duties are materially inconsistent with those duties of such similarly-situated employees and ChromaDex fails to release Mr. Varvaro from his obligation to perform such inconsistent duties and to re-assign Mr. Varvaro to his customary duties within 20 business days after ChromaDex’s receipt of such notice; or (B) if, without the consent of Mr. Varvaro, Mr. Varvaro’s normal place of work is or becomes situated more than 50 linear miles from Mr. Varvaro’s personal residence as of the effective date of the employment agreement, or (C) a failure by ChromaDex to comply with any other material provision of the employment agreement which has not been cured within 60 days after notice of such noncompliance has been given by Mr. Varvaro to ChromaDex, or if such failure is not capable of being cured in such time, a cure shall not have been diligently initiated by ChromaDex within such 60 day period. Severance will then consist of 16 weeks of pay, unless Mr. Varvaro signs a release, in which case he will receive compensation for the remainder of the contract or up to 12 months whichever is less.
In the event Mr. Varvaro is terminated as a result of his death or disability he shall be entitled to his accrued but unpaid base salary, stock vested through the date of his termination and, notwithstanding any policy of ChromaDex to the contrary, any bonus that would be due to him for the fiscal year in which termination pursuant to death or disability will, at the option of the Board, be either prorated or paid in full to him (or his estate, as the case may be) at the time he would have received such bonus had he remained an employee of ChromaDex.
In the event that Mr. Varvaro is terminated by us for good reason (as defined in the employment agreement), he shall only be entitled to his accrued but unpaid base salary, and any stock vested through the date of his termination.
In the event we terminate Mr. Varvaro’s employment without cause (as defined in the employment agreement), Mr. Varvaro is entitled to severance in the form of any stock vested through the date of his termination and continuation of his base salary, together with applicable fringe benefits as provided to other executive employees for the term of his employment agreement.

 

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Equity Awards Outstanding
The following table sets forth certain information regarding stock options granted to our named executive officers outstanding as of December 29, 2007.
Outstanding Stock Options at December 29, 2007
                                         
                    Equity Incentive              
                    Plan Awards:              
    Number of     Number of     Number of              
    Securities     Securities     Securities              
    Underlying     Underlying     Underlying              
    Unexercised     Unexercised     Unexercised              
    Options (#)     Options (#)     Unearned     Option Exercise     Option  
Name   Exercisable     Unexercisable     Options (#)     Price ($)     Expiration Date  
Frank L. Jaksch
    60,000       240,000 (1)           1.50       12/1/2016  
Tom Varvaro
    240,000                   1.00       1/19/2014  
 
    10,000                   1.00       1/19/2014  
 
    250,000       200,000 (2)           1.50       12/1/2016  
 
     
(1)  
60,000 of Mr. Jaksch’s options vest on December 1 of each year.
 
(2)  
50,000 of Mr. Varvaro’s option vest on December 1 of each year.
Equity Incentive Plans
Each of the 2000 Plan and the 2007 Plan (collectively, the “Plans”) was assumed by Cody in the Merger. The purpose of each of the Plans is to encourage and enable selected employees, directors and independent contractors of the Company and its affiliates to acquire or increase their holdings of common stock and other equity-based interests in the Company in order to promote a closer identification of their interests with ours, thereby stimulating their efforts to enhance our efficiency, soundness, profitability, growth and shareholder value. All share amounts in this section have been adjusted to reflect the Merger, and represent number of shares of Cody Common Stock.
2000 Non-Qualified Incentive Stock Option Plan
The 2000 Plan was assumed by Cody in the Merger. The 2000 Plan was terminated by ChromaDex effective March 13, 2007, but such termination did not alter or impair any of the rights or obligations under any option theretofore granted to an option holder under the 2000 Plan (each, an “Assumed 2000 Option”). All share amounts in this section have been adjusted to reflect the Merger, and represent number of shares of Cody Common Stock subject to all of the Assumed 2000 Options.
We will further adjust the number of shares reserved for issuance under the Assumed 2000 Options in the event of an adjustment in our capital stock structure or one of our affiliates due to a merger, consolidation, reorganization, stock split, stock dividend or similar event.
Administration, Amendment and Termination
Our Board of Directors, or upon its delegation, the compensation committee of our Board of Directors, will administer the Assumed 2000 Options under the 2000 Plan. Subject to certain restrictions set forth in the 2000 Plan, the administrator has full and final authority to take actions and make determinations with respect to the 2000 Plan.
The administrator may amend the 2000 Plan and any award, without participant consent and, except where required by applicable laws, without shareholder approval, in order to comply with applicable laws.
Non-Qualified Stock Options
The 2000 Plan only permitted the grant of nonqualified stock options. Under each Assumed 2000 Option, a participant may only pay the option price in cash or check. Notwithstanding the foregoing, if the Company issues or sells Cody Common Stock in an underwritten offering to the public pursuant to an effective registration statement under the Securities Act, then the Company, at no additional cost or expense to each holder of an Assumed 2000 Option, during the period commencing 30 days before and ending 30 days after the effective date of such registration (the “IPO Window”), permit such holder to simultaneously exercise his or her Assumed 2000 Option and sell the Cody Common Stock to the Company at the issue price to effect a cash-less exercise of the Assumed 2000 Option held by such participant during the IPO Window.

 

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All Assumed 2000 Options are subject to certain restrictions on exercise if the participant terminates employment or service.
Stock Dividend and Stock Splits
If (i) the shares of our common stock shall be subdivided or combined into a greater or smaller number of shares or if the Company shall issue any shares of common stock as a stock dividend on its outstanding common stock, or (ii) additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such shares of common stock, the number of shares of common stock deliverable upon the exercise or acceptance of such option or stock grant may be appropriately increased or decreased proportionately, and appropriate adjustments may be made including, in the purchase price per share, to reflect such events.
Transfer and Other Restrictions
No Assumed 2000 Option is transferable other than for estate planning purposes, by will or the laws of intestate succession or as may otherwise be permitted by the administrator, and participants may not sell, transfer, assign, pledge or otherwise encumber shares subject to such awards until the restriction period and/or performance period has expired and until all conditions to vesting the award have been met. In the event the participant exercises an Assumed 2000 Option and Cody Common Stock is issued to the participant, then, if the participant’s employment or consulting relationship with the Company terminates for any reason, the Company has the right to purchase all of such Cody Common Stock within 90 days after the effective date of such termination at the bid price of the most recent trade of the Cody Common Stock.
Certain Federal Income Tax Consequences
The following generally describes the principal federal (and not state and local) income tax consequences of Assumed 2000 Options. The following summary is general in nature and is not intended to cover all tax consequences that may apply to a particular participant or to the Company. The provisions of the Code, and related regulations and other guidance are complicated and their impact in any one case may depend upon the particular circumstances.
If a participant received an Assumed 2000 Option, each of which is a nonqualified option, the difference between the fair market value of the stock on the date of exercise and the option price will constitute taxable ordinary income to the participant on the date of exercise. The Company generally will be entitled to a deduction in the same year in an amount equal to the income taxable to the participant.
Section 409A of the Internal Revenue Code
Section 409A of the Code imposes certain requirements on deferred compensation. The Company believes, but no assurances can be given, that each Assumed 2000 Option was issued in compliance with the requirements of Section 409A of the Code. If, however, any Assumed 2000 Option is determined to not have satisfied the requirements of Section 409A of the Code during a taxable year, the participant will have ordinary income in the year of non-compliance in the amount of all deferrals subject to Section 409A of the Code to the extent that the award is not subject to a substantial risk of forfeiture. The participant will be subject to an additional tax of 20% on all amounts includible in income and may also be subject to interest charges under Section 409A of the Code. The Company generally will be entitled to an income tax deduction with respect to the amount of compensation includible as income to the participant. The Company undertakes no responsibility to take, or to refrain from taking, any actions in order to achieve a certain tax result for any participant.

 

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2007 Equity Incentive Plan
Subject to specified adjustment, the maximum number of shares that we may issue pursuant to awards granted under the 2007 Plan may not exceed the greater of: (i) four million (4,000,000) shares of Common Stock or (ii) 10% of the shares of Common Stock issued and outstanding on any date during the Plan Term, as determined in accordance with Section 13(a).
The following will not be included in calculating the share limitations set forth above:
   
dividends;
 
   
awards which by their terms are settled in cash rather than the issuance of shares; and
 
   
any shares subject to an award that is forfeited, cancelled, terminated, expires, or lapses for any reason and shares subject to an award that are repurchased or reacquired by us.
We will further adjust the number of shares reserved for issuance under the 2007 Plan and the terms of awards in the event of an adjustment in our capital stock structure or one of our affiliates due to a merger, consolidation, reorganization, stock split, stock dividend or similar event.
Administration, Amendment and Termination
Our Board of Directors, or upon its delegation, the compensation committee of our Board of Directors or an other committee appointed by the Board of Directors, will administer the 2007 Plan; provided, however, that the administration of awards granted under the 2007 Plan with respect to any Participant who is subject to Section 16 of the Exchange Act may only be administered by a committee of Independent Directors, as defined in the Plan. In this discussion, we refer to our Board of Directors, the compensation committee and any other committee appointed to Administer the Plan collectively as the “Administrator.” Subject to certain restrictions set forth in the 2007 Plan, the administrator has full and final authority to take actions and make determinations with respect to the 2007 Plan.
Subject to certain terms and conditions, the Administrator may delegate to one or more subcommittees consisting of our officers the authority to grant awards, other than to make awards with respect to other officers of the Company, and to make determinations otherwise reserved for the Administrator with respect to such awards.
Our Administrator may amend, alter, or terminate the 2007 Plan at any time, subject to certain exceptions and restrictions set forth in the 2007 Plan. Our Administrator may also amend, alter, or terminate any award, although participant consent may be required.
The Administrator may amend the 2007 Plan and any award, without participant consent and, except where required by applicable laws, so long as in the case of any award, the amendment does not impair any such award. Except to the extent otherwise required under Code Section 409A, the Administrator also may modify or extend the terms and conditions for exercise, vesting, or earning of an award and/or accelerate the date that any award may become exercisable, vested, or earned, without any obligation to accelerate any other award.
Options
The 2007 Plan authorizes the grant of both incentive stock options and nonqualified stock options. The administrator will determine the option price at which a participant may exercise an option. The option price may not be less than 100% of the fair market value on the date of grant (or 110% of the fair market value with respect to incentive stock options granted to 10% or more shareholders).
Unless an individual award agreement provides otherwise, a participant may pay the option price in cash or, to the extent permitted by the Administrator and applicable laws, (i) by delivery to the Company of other Cody Common Stock, (ii) according to a deferred payment or other similar arrangement with the participant, or (iii) in any other form of legal consideration that may be acceptable to the Administrator, or a combination of the foregoing.

 

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At the time of option grant, the Administrator will determine the terms and conditions of an option, the period or periods during which an option is exercisable, and the option term (which, in the case of incentive stock options, may not exceed 10 years, or five years with respect to 10% or more shareholder). Options are also subject to certain restrictions on exercise if the participant terminates employment or service.
Restricted Stock Awards
Subject to the limitations of the 2007 Plan, the Administrator may grant restricted stock awards to such individuals in such numbers, upon such terms, and at such times as the Administrator shall determine. Restricted stock awards may be subject to certain conditions which must be met for the restricted stock award to vest and be earned, in whole or in part, and be no longer subject to forfeiture.
Subject to certain limitations in the 2007 Plan, the Administrator will determine the restriction period during which a participant may earn a restricted award and the conditions to be met in order for it to be granted or to vest or be earned. These conditions may include:
   
payment of a stipulated purchase price;
 
   
attainment of performance objectives;
 
   
retirement;
 
   
displacement;
 
   
disability;
 
   
death; or
 
   
any combination of these conditions.
Subject to the terms of the 2007, the Administrator determines whether and to what degree restricted stock awards have vested and been earned and are payable. If a participant’s employment or service is terminated for any reason and all or any part of a restricted stock award has not vested or been earned pursuant to the terms of the 2007 Plan and the individual award, the participant will forfeit the award and related benefits unless the Administrator determines otherwise.
Corporate Transaction
Upon a “Corporate Transaction,” as defined in the 2007 Plan and subject to any Code Section 409A requirements, any surviving corporation or acquiring corporation may assume or continue any or all options or restricted stock awards outstanding under the 2007 Plan or may substitute similar options or restricted stock awards for those outstanding under the 2007 Plan. In the event that any surviving corporation or acquiring corporation does not assume or continue any or all such outstanding options or restricted stock awards or substitute similar options or restricted stock awards for such outstanding options or restricted stock awards, then with respect to options or restricted stock awards that have not been assumed, continued or substituted, the Administrator may:
   
cancel all outstanding options or restricted stock awards, and terminate the 2007 Plan, effective as of the consummation of such Corporate Transaction, provided that it will notify all participants of the proposed Corporate Transaction so that each such participant will be given an opportunity to exercise the then exercisable portion of such options or restricted stock awards prior to the cancellation thereof, and provided that the Company exercises its repurchase option with respect to outstanding stock awards, to the extent such right has not lapsed; or
 
   
deem the vesting of all or a portion of options or restricted stock awards that have not been assumed, continued or substituted prior to the Closing accelerated in full, and any reacquisition or repurchase rights held by the Company with respect to such options or restricted stock awards shall lapse.
Transfer and Other Restrictions
Awards generally are not transferable other than by will or the laws of intestate succession or as may otherwise be permitted by the Administrator, and participants may not sell, transfer, assign, pledge or otherwise encumber shares subject to such awards until the restriction period and/or performance period has expired and until all conditions to vesting the award have been met. As a condition to the issuance or transfer of common stock or the grant of any other 2007 Plan benefit, we may require a participant or other person to become a party to an agreement imposing such conditions or restrictions as we may require.

 

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Certain Federal Income Tax Consequences
The following generally describes the principal federal (and not state and local) income tax consequences of awards granted under the 2007 Plan as of this time. The summary is general in nature and is not intended to cover all tax consequences that may apply to a particular participant or to the Company. The provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and related regulations and other guidance are complicated and their impact in any one case may depend upon the particular circumstances.
Incentive Options
The grant and exercise of an incentive stock option generally will not result in taxable “compensation” income to the participant if the participant does not dispose of shares received upon exercise of such option less than one year after the date of exercise and two years after the date of grant, and if the participant has continuously been an employee of the Company from the date of grant to three months before the date of exercise (or 12 months in the event of disability). However, the excess of the fair market value of the shares received upon exercise of the option over the option price generally will constitute an item of adjustment in computing the participant’s alternative minimum taxable income for the year of exercise. Thus, certain participants may incur federal income tax liability as a result of the exercise of an incentive option under the alternative minimum tax rules of the Code.
The Company generally is not entitled to a deduction upon the exercise of an incentive option unless the employee recognizes compensation income as described below. Upon the disposition of shares acquired upon exercise of an incentive option, the participant will be taxed on the amount by which the amount realized exceeds the option price. This amount will be treated as capital gain or loss.
If the holding period requirements described above are not met, the participant will have compensation income in the year of disposition to the extent of the lesser of: (i) the fair market value of the stock on the date of exercise minus the option price or (ii) the amount realized on disposition of the stock minus the option price. The Company generally is entitled to deduct as compensation the amount of compensation income realized by the participant.
Pursuant to the Code and the terms of the 2007 Plan, in no event can there first become exercisable by a participant in any one calendar year incentive stock options granted by the Company with respect to shares having an aggregate fair market value (determined at the time an option is granted) greater than $100,000. To the extent an incentive option granted under the 2007 Plan exceeds this limitation, it will be treated as a nonqualified option.
Nonqualified Options
The grant of a nonqualified option is a non-taxable event. However, upon exercise the difference between the fair market value of the stock on the date of exercise and the option price will constitute taxable compensation income to the participant on the date of exercise. The Company generally will be entitled to a deduction in the same year in an amount equal to the income taxable to the participant.
Restricted Stock Awards
The grant of restricted stock awards will not result in taxable compensation income to the participant or a tax deduction to the Company. In the year that the restricted stock becomes vested and is no longer subject to a substantial risk of forfeiture, the fair market value of such shares at such date, less cash or other consideration paid (if any), will be taxed to the participant as compensation income. However, the participant may elect under Code Section 83(b) to include in his ordinary income at the time the restricted stock is granted, the fair market value of such shares at such time, less any amount paid for the shares. The Company generally will be entitled to a corresponding tax deduction.

 

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Section 409A of the Internal Revenue Code of 1986
Section 409A of the Code imposes certain requirements on deferred compensation. The Company intends for the 2007 Plan to comply in good faith with the requirements of Section 409A of the Code including related regulations and guidance, where applicable and to the extent practicable. If, however, Section 409A of the Code is deemed to apply to an award, and the 2007 Plan and award do not satisfy the requirements of Section 409A of the Code during a taxable year, the participant will have ordinary income in the year of non-compliance in the amount of all deferrals subject to Section 409A of the Code to the extent that the award is not subject to a substantial risk of forfeiture. The participant may be subject to additional tax liabilities under Section 409A of the Code (40% combined federal and California) on all amounts includible in income and may also be subject to interest charges if the 409A violation is discovered in a later tax year.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Cody Transactions
None of the following parties has, since Cody’s date of incorporation, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:
   
Any of our directors or officers;
 
   
Any person proposed as a nominee for election as a director;
 
   
Any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our outstanding shares of common stock;
 
   
Any of our promoters; or
 
   
Any relative or spouse of any of the foregoing persons who has the same house address as such person
ChromaDex Transactions
At December 29, 2007 and December 31, 2006, the Company owed $1,167,828 and $1,009,029, respectively, to Frank L Jaksch Jr. and Mark Germain relating to unpaid compensation. The amounts owed to officers are unsecured, non-interest bearing, and payable on demand.
The Company sold $50,000 and $11,000 worth of product development services to Pagoda Pharma Group, Inc. (BVI) formerly Can-Nan Horizon Quest, Inc. (BVI) (“Pagoda”) in 2008 and 2007, respectively. Frank L. Jaksch Jr. owns 1,500 shares of Pagoda, which is 1.27% of Pagoda’s outstanding shares and served as its director until April 2007. Frank L. Jaksch Sr. (Frank L. Jaksch Jr’s father) effectively owns 11,500.62 shares of Pagoda (4,216 through direct ownership and 7,284.62 through his ownership interest in Horizon Quest LLC), which is 9.77% of Pagoda’s outstanding shares and serves as its Executive Chairman and director. Thomas C. Varvaro is currently a director of Pagoda.
On June 20, 2007, ChromaDex and Pagoda entered into a business development agreement whereby Pagoda will market ChromaDex products in China. Each company will jointly own products that are developed and commercialized pursuant to the agreement. The business terms of the agreement vary for each product that is developed. As of May 2008, the companies had agreed to the development of one product that would lead to the sale of between $25,000 and $75,000 worth of product development services from ChromaDex to Pagoda during the remainder of 2008. The term of the agreement extends through June 20, 2010 and automatically renews each year thereafter, however, arrangements for individual products may have separate lengths of terms.

 

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DESCRIPTION OF SECURITIES
The following description is only a summary of certain significant provisions of the rights, preferences, qualifications and restrictions of Cody’s capital stock.
Authorized Capital Stock
Cody’s authorized capital stock consists of 50,000,000 shares of common stock, $0.001 par value per share.
As of June 20, 2008, 4,500,012 shares of Cody Common Stock were outstanding held of record by 43 holders. Following the Merger, there were 28,022,134 shares of Common Stock outstanding held by 124 holders.
Common Stock
We are authorized to issue 50,000,000 shares of common stock. The holders of common stock are entitled to equal dividends and distributions, per share, on the common stock when, as and if declared by the board of directors from funds legally available for that. No holder of any shares of common stock has a pre-emptive right to subscribe for any securities nor are any common shares subject to redemption or convertible into other securities. Upon liquidation, dissolution or winding up, and after payment of creditors and preferred stockholders, if any, the assets will be divided pro-rata on a share-for-share basis among the holders of the shares of common stock. All shares of common stock now outstanding are fully paid, validly issued and non-assessable. Each share of common stock is entitled to one vote on the election of any director or any other matter upon which shareholders are required or permitted to vote. Holders of our common stock do not have cumulative voting rights, so that the holders of more than 50% of the combined shares voting for the election of directors may elect all of the directors, if they choose to do so and, in that event, the holders of the remaining shares will not be able to elect any members to the board of directors. Issuance of additional common stock in the future will reduce proportionate ownership and voting power of each share outstanding. Directors can issue additional common stock without shareholder approval to the extent authorized.
Important Provisions of Certificate of Incorporation and Bylaws
Limitation of Monetary Liability
The Certificate of Incorporation of Code provides that no director or officer will be personally liable to the corporation or its stockholders for monetary damages for any breach of fiduciary duty by such person as a director or officer to the fullest extent permitted by Delaware law.
Business Combinations with Interested Shareholders.
Delaware law prohibits certain business combinations with interested shareholders, which are defined as owners of 15% or more of the outstanding voting power of the Company (or certain affiliates or associates of the Company who have held 15% or more of the outstanding shares in the past three years), for three years after the date that the person first became an interested stockholder, unless (1) prior to such time the board of directors of the Company approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder or (2) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the Company outstanding at the time the transaction commenced, subject to certain exclusions, or (3) at or subsequent to the time the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder.
Certain Bylaw Provisions
Meetings of the stockholders may be called by the Chairman of the Board, the Chief Executive Officer, or the Board of Directors. Annual meetings shall be held on such date and at such time as shall be designated from time to time by the Board of Directors. A majority of the outstanding shares entitled to vote constitutes a quorum at a meeting of the stockholders. Each outstanding share, regardless of class, is entitled to one vote on each matter at the meeting of stockholders. Cumulative voting is not permitted in the election of directors.

 

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The Board of Directors is composed of between a minimum of one and a maximum of thirteen persons, as determined by the Board of Directors. Any vacancy may be filled by the affirmative vote of a majority of the remaining directors, or the sole remaining director unless the Board of Directors determines by resolution to fill the vacancy by a vote of the stockholders. Directors may be removed, without cause, by a vote of a majority of the shares entitled to vote at the election of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director.
Officers are elected by the board at the meeting of the board next following the annual meeting of the stockholders, or at any meeting if an office is vacant. The term of office and compensation of the officers is determined by the Board of Directors. Subject to the rights, if any, of an officer under any contract of employment, officers can be removed by the board at any meeting thereof whenever in its judgment the best interests of the Company would be served thereby.
The bylaws of Cody may be amended or repealed and new bylaws adopted by the Board of Directors, or by a majority of the stockholders.
MARKET PRICE OF AND DIVIDENDS ON CODY’S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is currently quoted on the OTC Bulletin Board (“OTCBB”), which is sponsored by the NASD. The OTCBB is a network of security dealers who buy and sell stock. The dealers are connected by a computer network that provides information on current “bids” and “asks”, as well as volume information. Our shares are quoted on the OTCBB under the symbol “CDYE.OB.”
The following table sets forth the range of high and low bid quotations for our common stock for each of the periods indicated as reported by the OTCBB. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
                 
Fiscal Year Ending November, 2007  
Quarter Ended   High $     Low $  
November 30, 2007
  $ 0     $ 0  
August 31, 2007
  $ 0     $ 0  
May 31, 2007
  $ 0     $ 0  
 
               
February 28, 2007
  $ 0     $ 0  
On June 20, 2008, the day before we announced the Merger Agreement, there were no bids for the Common Stock of Cody.
Penny Stock
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.

 

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The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer’s account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.
Holders of Our Common Stock
As of March 29, 2008, we had 38 holders of record of our common stock.
Equity Compensation Plan Information
Equity Compensation Plan Information for Cody
As of December 29, 2007, Cody had no outstanding equity compensation plans.
Equity Compensation Plan Information for ChromaDex
For a narrative description of the 2007 Plan and the 2000 Plan, see “Equity Incentive Plans” under Item 2.01 of this Current Report and Form 8-K.
The following table provides information about the equity compensation plans of ChromaDex as of December 29, 2007:
                         
    A     B     C  
                Number of  
                securities  
          Weighted     remaining  
          average     available for  
    Number of     exercise     future  
    securities     price of     issuance  
    to be issued     outstanding     under equity  
    upon     options,     compensation  
    exercise of     warrants     plans  
    outstanding     and rights     (excluding  
    options,     securities     securities  
    warrants     reflected in     reflected in  
Plan Category   and rights     column (A)     column (A))  
 
                       
Equity compensation plans approved by security holders
    1,473,950     $ 1.16       2,526,050 (1)
 
                       
Equity compensation plans not approved by security holders
                 
 
                       
Total
    1,473,950     $ 1.16       2,526,050 (1)
 
     
(1)  
The ChromaDex, Inc. 2007 Second Amended and Restated Equity Incentive Plan. The maximum number of shares authorized for issuance under this plan is the greater of 4,000,000 shares of common stock or 10% of the shares of common stock of the company issued and outstanding on any date during the Plan Term, as determined in accordance with Section 13(a), subject to specified adjustment.

 

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LEGAL PROCEEDINGS
Pre-Merger claims against Cody
Cody is not involved in any pending or threatened legal proceedings.
Claims against ChromaDex
ChromaDex is not involved in any pending or threatened legal proceedings.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
We have had no disagreements with our independent and registered public accounting firm on accounting and financial disclosure. See Item 4.01 to this Form 8-K for information regarding a change in our accountants. That information is incorporated herein by reference.
RECENT SALES OF UNREGISTERED SECURITIES
Recent Sales by Cody
None.
Recent Sales by ChromaDex
On December 31, 2005, ChromaDex issued 310,023 shares of common stock to the University of Mississippi Research Foundation (the “Foundation”) in return for cancellation of $262,500.00 in fees owed by ChromaDex to the Foundation pursuant to that certain Licensing Agreement Nutraceutical Standards effective as of December 31, 1999. These shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933.
On November 8, 2005, AAPE AAP Holdings S.A. exercised warrants to purchase 100,000 shares of common stock at a blended strike price of $1.25 per share. The warrants were issued to AAPE AAP Holdings S.A. in December, 2004 in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. On January 31, 2008, ChromaDex sold an additional 50,000 shares of common stock to AAPE AAP Holdings S.A. at a price of $1.00 per share. The warrants were issued to AAPE AAP Holdings S.A. in December, 2004 in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933.
On November 8, 2005, ChromaDex issued 338,154 shares of common stock to L & J Becvar, L.P. as partial consideration for the licensing of patented rights from L & J Becvar, L.P. pursuant to that certain License Agreement dated August 19, 2005. The fair value to ChromaDex in monetary terms of the shares was determined to be $0.87 per share. The number of shares issued was adjusted on December 31, 2005, September 19, 2006 and on June 18, 2007 to an aggregate total of 392,490 shares pursuant to the terms of the license agreement. These shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933.

 

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On September 19, 2006, ChromaDex issued 46,503 shares of common stock to Tapestry Pharmaceuticals, Inc. (formerly NaPro BioTherapeutics, Inc.) pursuant to section 1.3(f) of that certain Asset Purchase Agreement dated April 8, 2003, which provides antidilution protection for Tapestry as part of the consideration it received for the transfer of certain of its assets to ChromaDex. These shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933.
On August 28, 2007, ChromaDex sold 4,407,640 shares of common stock to Margie Chassman at a purchase price of approximately $0.255 per share. These shares were issued in reliance on the exemption from registration provided by 4(2) of the Securities Act of 1933.
On April 1, 2008, ChromaDex issued 25,502 shares of common stock to Jolley & Jolley, a professional law corporation as partial consideration for legal services provided to the company by Jolley & Jolley, pursuant to that certain Contract for Legal Services, dated September 8, 2005. The fair value to ChromaDex in monetary terms of the shares was determined to be $0.87 per share. These shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933.
During the past three years, ChromaDex has issued 632,500 stock options to 14 employees, directors and officers under the 2000 Plan. 25,000 of these options were terminated in cases where 5 employees ended their employment with the Company before their options vested. The stock options can be exercised at a price of $1.50 per share and vest at a rate of 20% per year for each of the employees. These shares were issued in reliance on the exemption from registration provided by Rule 701 of the Securities Act of 1933. For additional information on the 2000 Plan see “Equity Incentive Plans” under Item 2.01 of this Form 8-K.
During the past three years, ChromaDex has issued 2,022,987 stock options to 37 employees, directors and officers under the 2007 Plan. The stock options can be exercised at a price of $1.50 per share and vest at a rate of 20% per year for each employee. These shares were issued in reliance on the exemption from registration provided by Rule 701 of the Securities Act of 1933. For additional information on the 2007 Plan see “Equity Incentive Plans” under Item 2.01 of this Current Report and Form 8-K.
ChromaDex is currently offering up to 4,411,764 shares of common stock and warrants to purchase an additional 2,205,882 shares of common stock to investors for a price of $1.36 per share through a private placement. Concurrently with the purchase of shares of common stock, each investor receives a warrant to purchase one-half of the number of shares of common stock purchased by the investor at an exercise price of $3.00 per share, exercisable for five years. The warrants can be repurchased by ChromaDex at a price of $4.50 per share or cancelled by ChromaDex at a cancellation price of $1.50 per share. As of May 21, 2008, ChromaDex has sold 2,628,618 shares to 69 investors. These shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933 and Regulation D thereunder.
New Castle Financial Services LLC (“ New Castle ”) is acting as agent in connection with the private placement and as consideration for such service New Castle is entitled to (i) a cash payment equal to 10% of the gross proceeds raised from the sale of common stock (excluding common stock issuable upon exercise of the warrants) in the offering from qualified potential investors identified by New Castle and accepted in writing by the ChromaDex, and (ii) five-year warrants to purchase at an exercise price of $1.36 that number of shares of common stock equal to 10% of the number of shares of common stock (excluding common stock issuable upon exercise of the warrants) placed by New Castle with such investors. The five-year warrants are to be issued to New Castle upon completion of the offering. As of the date of the closing of the latest sale by New Castle on May 21, 2008, the warrants to be issued to New Castle amounted to a warrant for the purchase of 262,861 shares of common stock at $1.36 per share.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law (the “GCL”) of Delaware empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise.

 

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Depending on the character of the proceeding, a corporation may indemnify against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding if the person identified acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no cause to believe his or her conduct was unlawful. In the case of an action by or in the right of the corporation, no indemnification may be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine that despite the adjudication of liability such person is fairly and reasonably entitled to indemnity for such expenses that the court shall deem proper. Section 145 further provides that to the extent a present or former director or officer of a corporation has been successful in the defense of any action, suit or proceeding referred to above or in the defense of any claim, issue or matter herein, he or she shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him or her in connection therewith. The statute provides that indemnification pursuant to its provisions is not exclusive of other rights of indemnification to which a person may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise.
Cody’s Certificate of Incorporation and Bylaws, provide, in effect, that to the full extent and under the circumstances permitted by Section 145 of the GCL, Cody shall indemnify any person who was or is a party or is threatened to be made a party to any action, suit or proceeding of the type described above by reason of the fact that he or she is or was a director or officer or serves or served at Cody’s request as a director or officer of another corporation, joint venture, trust or other enterprise. Cody’s Certificate of Incorporation and Bylaws also provides that it shall have the power, under the circumstances permitted by Section 145 of the GCL, to indemnify any employees and other agents as permitted by the GCL.
Cody’s Certificate of Incorporation relieves its directors from monetary damages to Cody or its stockholders for breach of such director’s fiduciary duty as a director to the fullest extent permitted by the GCL. Under Section 102(b)(7) of the GCL, a corporation may relieve its directors from personal liability to such corporation or its stockholders for monetary damages for any breach of their fiduciary duty as directors except (i) for a breach of the duty of loyalty, (ii) for failure to act in good faith, (iii) for intentional misconduct or knowing violation of law, (iv) for willful or negligent violation of certain provisions of the GCL imposing certain requirements with respect to stock purchases, redemptions and dividends or (v) for any transaction from which the director derived an improper personal benefit.
CODY SHARES ELIGIBLE FOR FUTURE SALE
As of June 20, 2008, 28,022,134 shares of Cody Common Stock were outstanding, of which approximately 23,522,122 were issued to former holders of ChromaDex Common Stock, pursuant to the Merger Agreement. The following sets forth certain information regarding shares of Cody Common Stock that are, or may be in the future, eligible for resale.
Resales of Common Stock Issued Prior to the Merger
Prior to the merger, Cody had 4,500,012 shares of common stock listed on the OTCBB. These shares may be sold pursuant to the penny stock rules described in “Penny Stock” above.
Resales of Cody Common Stock received in the Merger
Former ChromaDex shareholders now own approximately 83.94% of the outstanding shares of the Cody Common Stock. Shares of Cody capital stock issued in the Merger were issued pursuant to an exemption from the registration requirements of the Securities Act. In order to be resold to the public, the resale of those shares must be either registered under the Securities Act, the shares must be sold in compliance with Rule 144, or another exemption from the registration requirements.

 

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Registration of the Cody Common Stock received in the Merger under existing agreements.
Section 3.1(b) of that certain License Agreement, effective September 15, 2005, between L&J Becvar, L.P. (“Becvar”) and ChromaDex provides that Becvar shall have “piggy-back” registration rights, with respect to the stock transferred under this agreement, “on terms consistent with industry standards and any previous agreements granted by ChromaDex, including the NaPro asset purchase agreement.
Section 2.1 of that certain Investor’s Rights Agreement, effective as of December 31, 2005, by and between the Foundation and ChromaDex provides that if ChromaDex proposes to file a registration statement under the Securities Act with respect to an offering for its own account of any class of its equity securities (other than a registration statement on Form S-8 (or any successor form) or any other registration statement relating solely to employee benefit plans or an offering of securities solely to ChromaDex’s existing shareholder), then ChromaDex shall offer the Foundation or its assignee the opportunity to register such number of shares of restricted stock as the Foundation may request. If ChromaDex’s offering is to be an underwritten offering, ChromaDex shall, subject to the further provisions of this Agreement, use its reasonable best efforts to cause the managing underwriter or underwriters to permit the Foundation’s stock requested to be included in the registration of such offering to include such stock in such offering on the same terms and conditions as any similar securities of ChromaDex included therein. If the managing underwriter of such offering determines in its sole discretion that would be adversely affected by inclusion of the stock requested to be included, then in such managing underwriter’s discretion, the number of shares of stock to be registered and offered for the accounts of the Foundation shall be either (i) eliminated entirely from such registration and offering or (ii) reduced pro rata on the basis of the number of securities requested by the Foundation to be registered and offered to the extent necessary to reduce the total amount of securities to be included in such offering to the amount recommended by such managing underwriter (provided that if securities are being registered and offered for the account of other persons or entities in addition to ChromaDex, such reduction shall not be proportionately greater than any similar reduction imposed on such other persons or entities.)
Rule 144
In general, under the newly revised Rule 144, effective February 15, 2008, beginning one year after the filing of this Form 8-K (the “Anniversary”), a person who has beneficially owned shares of Cody Common Stock for at least six months, who is not an affiliate of Cody is entitled to resell their shares of Cody Common Stock without restriction. Beginning on the Anniversary, any person who may be deemed to be an “affiliate” of Cody (as the term “affiliate” is defined under Rule 144), is entitled to sell, within any three-month period, a number of shares that does not exceed the greater of:
   
1% of the number of shares of Cody Common Stock then outstanding (after the Merger there would be approximately 28,022,134 such shares outstanding); or
 
   
the average weekly trading volume of Cody Common Stock during the four calendar weeks preceding the sale.
However, since Cody Common Stock is quoted on the NASD’s Over-The-Counter Bulletin Board, which is not an “automated quotation system,” its shareholders cannot rely on the market-based volume limitation described in the second bullet above. If in the future Cody Common Stock is listed on an exchange or quoted on NASDAQ, then its shareholders would be able to rely on the market-based volume limitation. Unless and until Cody Common Stock is so listed or quoted, its shareholders can only rely on the percentage based volume limitation described in the first bullet above.
Under the newly revised Rule 144, effective February 15, 2008, and assuming no shares are sold pursuant to registration under the Investor’s Rights Agreement, effective as of December 31, 2005, by and between the Foundation and ChromaDex, up to approximately 23,522,122 additional shares of Cody Common Stock will become eligible for sale in the public market under the Securities Act pursuant to Rule 144 by former ChromaDex shareholders beginning on the Anniversary. In addition, 4,616,240 shares of Cody Common Stock subject to outstanding options or warrants reserved for future issuance may become eligible for sale in the public market to the extent permitted by the provisions of the related agreements and Rules 144 and 701 under the Securities Act. Shares subject to the 2000 plan and the 2007 plan may also be registered on Form S-8, and become eligible for resale. If these additional shares are sold, or if it is perceived that they will be sold, in the public market, the trading price of the Cody Common Stock, if any, could decline.

 

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Item 3.02 Unregistered Sales of Equity Securities
The information disclosed in Item 2.01 of this Form 8-K is incorporated into this Item 3.02. The issuance at the consummation of the Merger on June 20, 2008, of 23,522,122 shares of Cody Common Stock and the conversion of outstanding ChromaDex, Inc. options and warrants into options and warrants to acquire Cody common stock in connection with the Merger were made in a private placement in reliance upon exemptions from registration pursuant to Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder, and pursuant to Rule 701 promulgated under the Securities Act as to options and warrants. The class of persons who received the shares was the former holders of ChromaDex, Inc. capital stock, and holders of options and warrants to acquire such stock. As consideration for the issuance of its stock, Cody Resources, Inc. acquired 100% ownership of ChromaDex, Inc. in the Merger.
Upon closing of the Merger each share of ChromaDex common stock held by: (i) an “accredited investor” as defined in Rule 501 of Regulation D promulgated by the SEC under the Securities Act of 1933, as amended; or (ii) a person who does not qualify as an accredited investor, but who, either alone or together with such person’s purchaser representative, has such knowledge and experience in financial and business matters that such person is capable of evaluating the merits and risks of an investment in Cody stock and can bear the economic risk of such an investment, was converted into the right to receive one share of Cody Common Stock for each share of ChromaDex Common Stock. If, however, a former holder of ChromaDex capital stock does not demonstrate to Cody, in its sole discretion, that such person meets the tests, Cody may elect to pay $1.36 for each share of ChromaDex previously held by that person in lieu of Cody shares. Cody does not anticipate that it will pay cash to any former ChromaDex shareholder.
The terms of conversion or exercise of the options and warrants assumed are disclosed at Item 2.01 of this Form 8-K.
Item 4.01 Changes in Registrant’s Certifying Accountant
On June 20, 2008, by action of our Board of Directors, effective upon consummation of the Merger, we dismissed Moore & Associates Chartered as our independent accountants. Moore & Associates Chartered had previously been engaged as the principal accountant to audit our financial statements. The reason for the dismissal of Moore & Associates Chartered is that, following the consummation of the Merger on June 20, 2008, (i) the former stockholders of ChromaDex owned a significant amount of the outstanding shares of our capital stock and (ii) our primary business became the business previously conducted by ChromaDex. The independent registered public accountant of ChromaDex was the firm of McGladrey & Pullen, LLP (“McGladrey”). We believe that it is in our best interest to have McGladrey continue to work with our business, and we therefore retained McGladrey our new principal independent registered accounting firm, effective as of June 20, 2008. McGladrey is located at 20 North Martingale Rd., Ste 500, Schaumburg, IL 60173-2419. The decision to change accountants was approved by our Board of Directors on June 20, 2008.
The report of Moore & Associates Chartered on our financial statements for and during the fiscal years ending November 30, 2006 and November 30, 2007, did not contain an adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles, except that the report was qualified as to our ability to continue as a going concern.
From the date of their initial engagement through June 20, 2008, there were no disagreements with Moore & Associates Chartered on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to the satisfaction of Moore & Associates Chartered would have caused it to make reference to the matter in connection with its reports.

 

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Through June 20, 2008 Cody did not consult McGladrey regarding either: (i) the application of accounting principles to a specific completed or contemplated transaction, or the type of audit opinion that might be rendered on our financial statements; or (ii) any matter that was the subject of a disagreement as defined in Item 304(a)(1)(iv) of Regulation S-B.
We have made the contents of this Current Report on Form 8-K available to Moore & Associates Chartered and requested that Moore & Associates Chartered furnish us a letter addressed to the SEC as to whether Moore & Associates Chartered agrees or disagrees with, or wishes to clarify our expression of, our views, or containing any additional information. A copy of Moore & Associates Chartered’s letter to the SEC is included as Exhibit 16.1 to this Current Report on Form 8-K.
Item 5.01 Change in Control of Registrant
In connection with the Merger, Cody experienced a change in control. The disclosure set forth in Item 2.01 to the Current Report on Form 8-K is incorporated herein by reference.
No agreements exist among present or former controlling stockholders of the Cody or present or former officers and directors of ChromaDex with respect to the future election of the members of the Cody Board of Directors, and to Cody’s knowledge, no other agreements exist which might result in a change of control of the Cody.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Pursuant to the Merger Agreement, the directors and executive officers of Cody, Donald Sampson and Barbara Grant, resigned at the closing of the Merger and appointed the directors and executive officers of ChromaDex to become the directors and executive officers of Cody. See Item 2.01 of this Form 8-K, which is incorporated herein by reference, for additional information regarding the persons who resigned as directors and executive officers and those who now constitute the Board of Directors and executive officers of Cody, and their compensation.
Item 5.03 Amendments to Certificate of Incorporation or Bylaws; Change in Fiscal Year
Pursuant to the Merger Agreement and in connection with the Merger, the Registrant changed its name from “Cody Resources, Inc.” to “ChromaDex Corporation.”
Pursuant to the Merger Agreement and following the Effective Time of the Merger, the Registrant changed its fiscal year end from November 30 to the closest Saturday to January first of the subsequent year. The change in our fiscal year will take effect on June 20, 2008 and, therefore there will be no transition period in connection with this change of fiscal year-end. Our 2008 fiscal year will end on January 1, 2009.
Item 5.06 Change in Shell Company Status.
The transactions reported in Item 2.01 of this Current Report on Form 8-K have the effect of causing the Registrant to cease being a shell company as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934. For a discussion of the transactions, see Item 2.01 herein and the content of Exhibit 2.1 filed as an exhibit to this Current Report on Form 8-K.
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
As a result of its acquisition of ChromaDex described in Item 2.01 above, the Registrant is filing ChromaDex’s audited financial statements for the fiscal years ended December 29, 2007 and December 31, 2006, and for the quarter ended March 29, 2008, incorporated in this Current Report on Form 8-K.

 

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(b) Pro Forma Financial Information.
As a result of its acquisition of ChromaDex described in Item 2.01 above, the Registrant is filing pro forma financial information incorporated in this Current Report on Form 8-K.
(c) Shell Company Transactions
See Item 5.06
(d) Exhibits:

 

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EXHIBIT INDEX
Registration Statement on Form 8-K
Index to Exhibits Filed as Part of This Registration Statement
         
Exhibit    
Number   Description
       
 
  2.1    
Agreement and Plan of Merger, dated as of May 21, 2008, among Cody, CDI Acquisition, Inc. and ChromaDex, Inc., as amended on June 10, 2008.
  3.1    
Certificate of Incorporation of Cody Resources, Inc., a Delaware corporation and Certificate of Amendment of Cody Resources, Inc.
  3.2    
Bylaws of Cody Resources, Inc., a Delaware corporation
  4.1    
Investor’s Rights Agreement, effective as of December 31, 2005, by and between The University of Mississippi Research Foundation and ChromaDex
  4.2    
Tag-Along Agreement effective as of December 31, 2005, by and among the Company, Frank Louis Jaksch, Snr. & Maria Jaksch, Trustees of the Jaksch Family Trust, Margery Germain, Lauren Germain, Emily Germain, Lucie Germain, Frank Louis Jaksch, Jr., and the University of Mississippi Research Foundation
  4.3    
License Agreement, effective September 15, 2005 between L&J Becvar, L.P. and ChromaDex, Inc.
  4.4    
Form of Warrant to Purchase Shares of Common Stock of ChromaDex Corporation
  10.1    
ChromaDex, Inc. 2000 Non-Qualified Incentive Stock Option Plan effective October 1, 2000
  10.2    
Second Amended and Restated 2007 Equity Incentive Plan effective March 13, 2007
  10.3    
Form of Stock Option Agreement under the ChromaDex, Inc. Second Amended and Restated 2007 Equity Incentive Plan
  10.4    
Form of Restricted Stock Purchase Agreement under the ChromaDex, Inc. 2007 Equity Incentive Plan
  10.5    
Employment Agreement dated April 14, 2008, by and between Frank L. Jaksch, Jr. and ChromaDex, Inc.
  10.6    
Employment Agreement dated April 14, 2008, by and between Thomas C. Varvaro and the ChromaDex, Inc.
  10.7    
Standard Industrial/Commercial Multi-Tenant Lease – Net dated December 19, 2006, by and between the ChromaDex, Inc. and SCIF Portfolio II, LLC
  10.8    
Lease Agreement dated October 26, 2001, by and between Railhead Partners, LLC and NaPro BioTherapeutics, Inc., as assigned to ChromaDex Analytics, Inc. on April 9, 2003 and amended on September 24, 2003
  10.9    
Licensing Agreement Nutraceutical Standards effective as of December 31, 1999 between the University of Mississippi Research Foundation and ChromaDex
  10.10    
Equity Based License Agreement dated October 25, 2001, by and between the Company and Bayer Innovation Beteiligungsgesellshaft mbH, as amended as of October 30, 2003
  10.11    
License Agreement, effective September 15, 2005 between L&J Becvar, L.P. and ChromaDex, Inc. (1)
  10.12    
Option Agreement, and Patent License Agreement, both effective on August 19, 2005 and both between the Board of Regents of The University of Texas Systems and ChromaDex, Inc.
  10.13    
Stock Redemption Agreement, dated June 18, 2008 between ChromaDex, Inc. and Bayer Innovation GmbH (formerly named Bayer Innovation Beteiligungsgesellschaft mbH)
  10.14    
Promissory Note, dated June 18, 2008 between ChromaDex, Inc. as borrower and Bayer Innovation GmbH as lender
  16.1    
Letter on Change in Certifying Accountant
  21.1    
Subsidiaries of ChromaDex
     
(1)  
Incorporated by reference to Exhibit 4.3 of this Current Report on Form 8-K.

 

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
         
Dated: June 20, 2008.  ChromaDex Corporation
 
 
  By:   /s/ Tom Varvaro   
    Tom Varvaro   
    Chief Financial Officer   

 

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ChromaDex, Inc. and Subsidiary
Consolidated Financial Report
12.29.2007

 


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Contents
         
    F-1  
 
       
Financial Statement
       
 
       
    F-2  
 
       
    F-3  
 
       
    F-4  
 
       
    F-5  
 
       
    F-6 - F-16  

 

 


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Independent Auditor’s Report
To the Board of Directors
ChromaDex, Inc. and Subsidiary
Irvine, California
We have audited the accompanying consolidated balance sheets of ChromaDex, Inc. and Subsidiary as of December 29, 2007 and December 31, 2006, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated balance sheets referred to above present fairly, in all material respects, the financial position of ChromaDex, Inc. and Subsidiary as of December 29, 2007 and December 31, 2006, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/ McGladrey & Pullen LLP
Schaumburg, Illinois
April 10, 2008

 

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Table of Contents

ChromaDex, Inc. and Subsidiary
Consolidated Balance Sheets
December 29, 2007 and December 31, 2006
                 
    2007     2006  
 
               
Assets
               
 
               
Current Assets
               
Cash
  $ 303,785     $ 424,965  
Trade receivables, less allowance for doubtful accounts 2007 $70,429; 2006 $76,658
    375,233       303,062  
Inventories
    497,635       281,044  
Prepaid expenses and other
    60,264       96,973  
 
           
Total current assets
    1,236,917       1,106,044  
 
           
 
               
Leasehold Improvements and Equipment, net
    1,132,823       1,146,683  
 
           
 
   
Deposits and Other Noncurrent Assets
               
Deposits
    63,976       44,333  
Intangible Assets, less accumulated amortization 2007 $672,970; 2006 $556,970
    487,030       603,030  
 
           
 
    551,006       647,363  
 
           
 
               
 
  $ 2,920,746     $ 2,900,090  
 
           
Liabilities and Stockholders’ Equity
               
 
               
Current Liabilities
               
Accounts payable
  $ 500,538     $ 338,327  
Accrued expenses
    351,926       488,356  
Notes payable
          112,500  
Current maturities of capital lease obligations
    74,571       51,238  
Due to officers
    1,167,822       1,009,029  
Customer deposits and other
    117,969       115,067  
 
           
Total current liabilities
    2,212,826       2,114,517  
 
           
 
               
Capital Lease Obligations, less current maturities
    152,766       109,952  
 
           
 
   
Deferred Rent
    158,839       93,029  
 
           
 
               
Stockholders’ Equity
               
Preferred stock, no par value; authorized 10,000,000 shares; no shares issued and outstanding
           
Common stock, $.01 par value; authorized 100,000,000 shares; issued and outstanding 2007: 22,040,797 shares; 2006: 21,984,901 shares
    220,408       219,849  
Additional paid-in capital
    5,271,389       5,268,350  
Accumulated deficit
    (5,095,482 )     (4,905,607 )
 
           
 
    396,315       582,592  
 
           
 
               
 
  $ 2,920,746     $ 2,900,090  
 
           
See Notes to Consolidated Financial Statements.

 

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Table of Contents

ChromaDex, Inc. and Subsidiary
Consolidated Statements of Operations
Years Ended December 29, 2007 and December 31, 2006
                 
    2007     2006  
 
               
Sales
  $ 4,754,073     $ 3,517,957  
 
               
Cost of goods sold
    3,122,461       2,753,919  
 
           
 
               
Gross profit
    1,631,612       764,038  
 
           
 
               
Operating expenses:
               
Selling
    387,816       354,560  
General and administrative
    1,421,516       1,510,926  
 
           
 
    1,809,332       1,865,486  
 
           
 
               
Operating loss
    (177,720 )     (1,101,448 )
 
           
 
               
Nonoperating (income) expenses:
               
Interest expense
    31,815       30,175  
Interest income
    (17,698 )     (4,314 )
Other
    (1,962 )     156,951  
 
           
 
    12,155       182,812  
 
           
 
               
Net loss
  $ (189,875 )   $ (1,284,260 )
 
           
See Notes to Consolidated Financial Statements.

 

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Table of Contents

ChromaDex, Inc. and Subsidiary
Consolidated Statements of Stockholders’ Equity
Years Ended December 29, 2007 and December 31, 2006
                                                 
                            Unearned             Total  
    Preferred     Common     Additional     Stock-Based     Accumulated     Stockholders’  
    Stock     Stock     Paid-in Capital     Compensation     Deficit     Equity  
 
                                               
Balance, December 31, 2005
  $     $ 175,298     $ 4,303,775     $ (308,295 )   $ (3,621,347 )   $ 549,431  
 
                                               
Issuance of common stock
          44,551       1,078,528                   1,123,079  
 
                                               
Amortization of unearned stock-based compensation
                      34,200             34,200  
 
                                               
Reclassification of unearned stock- based compensation (Note 8)
                (274,095 )     274,095              
 
                                               
Stock-based compensation
                160,142                   160,142  
 
                                               
Net loss
                            (1,284,260 )     (1,284,260 )
 
                                   
 
                                               
Balance, December 31, 2006
          219,849       5,268,350             (4,905,607 )     582,592  
 
                                               
Issuance of common stock
          559       2,841                   3,400  
 
                                               
Stock-based compensation
                198                   198  
 
                                               
Net loss
                            (189,875 )     (189,875 )
 
                                   
 
                                               
Balance, December 29, 2007
  $     $ 220,408     $ 5,271,389     $     $ (5,095,482 )   $ 396,315  
 
                                   
See Notes to Consolidated Financial Statements.

 

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Table of Contents

ChromaDex, Inc. and Subsidiary
Consolidated Statements of Cash Flows
Years Ended December 29, 2007 and December 31, 2006
                 
    2007     2006  
 
               
Cash Flows from Operating Activities
               
Net loss
  $ (189,875 )   $ (1,284,260 )
Adjustments to reconcile net loss to net cash (used in) operating activities:
               
Depreciation
    236,647       215,159  
Amortization of intangibles
    116,000       116,000  
Amortization of unearned stock-based compensation
          34,200  
Loss on disposal of equipment
    267       1,069  
Stock-based compensation expense
    198       160,142  
Changes in operating assets and liabilities:
               
Accounts receivable
    (72,171 )     (9,735 )
Inventories
    (216,591 )     36,026  
Prepaid expenses and other
    17,066       (78,362 )
Accounts payable
    189,713       (114,547 )
Deferred rent
    65,810       1,268  
Accrued expenses
    (163,932 )     150,892  
Customer deposits and other
    2,902       (63,861 )
 
           
Net cash (used in) operating activities
    (13,966 )     (836,009 )
 
           
 
               
Cash Flows From Investing Activities
               
Purchases of property and equipment
    (90,134 )     (47,658 )
Proceeds from sale of equipment
          3,453  
 
           
Net cash (used in) investing activities
    (90,134 )     (44,205 )
 
           
 
               
Cash Flows From Financing Activities
               
Principal payments on long-term debt
    (112,500 )     (14,446 )
Proceeds from issuance of common stock
    3,400       1,123,079  
Principal payments on capital leases
    (66,773 )     (30,131 )
Advances from stockholders
    158,793       158,800  
 
           
Net cash (used in) provided by financing activities
    (17,080 )     1,237,302  
 
           
 
               
Net (decrease) increase in cash
    (121,180 )     357,088  
 
               
Cash:
               
Beginning
    424,965       67,877  
 
           
 
               
Ending
  $ 303,785     $ 424,965  
 
           
 
               
Supplemental Disclosures of Cash Flow Information
               
Cash payments for interest
  $ 100,603     $ 16,718  
 
               
Supplemental Schedules of Noncash Investing and Financing Activities
               
Capital lease obligation incurred for the purchase of equipment
  $ 132,920     $ 97,519  
See Notes to Consolidated Financial Statements.

 

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Table of Contents

ChromaDex, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Note 1. Nature of Business and Significant Accounting Policies
Nature of business : ChromaDex, Inc. and its wholly owned subsidiary, ChromaDex Analytics, Inc. (the Company) create and supply botanical reference standards along with related phytochemical products and services. The Company’s main priority is to create industry-accepted information, products and services to every layer of the functional food, pharmaceutical, personal care and dietary supplement markets. The Company provides these services at terms of 30 days.
Significant accounting policies are as follows:
Principles of consolidation : The consolidated financial statements include the accounts of ChromaDex, Inc. and its wholly owned subsidiary, ChromaDex Analytics, Inc. Intercompany transactions and balances have been eliminated in consolidation.
Accounting estimates : The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Fiscal year-end : The Company reports on a 52-32 week year. The fiscal years ended December 29, 2007 and December 31, 2006 each consisted of 52 weeks.
Trade accounts receivable : Trade accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a periodic review of all outstanding amounts. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Trade accounts receivable are written off when deemed uncollectible. Recoveries of trade accounts receivable previously written off are recorded when received.
Inventories : Inventories are comprised of finished goods and are stated at the lower of cost, determined by the first-in, first-out method (FIFO) method, or market.
Intangibles : Intangibles consist of licensing costs and are amortized on the straight-line method over the contract life of 10 years.
Leasehold improvements and equipment : Leasehold improvements and equipment are carried at cost and depreciated on the straight-line method over the estimated useful life of each asset. Leasehold improvements and equipment are comprised of laboratory equipment, furniture and fixtures, vehicles and computer equipment. Useful lives range from 3 to 10 years. Depreciation on equipment under capital lease is included with depreciation on owned assets.
Customer deposits : Customer deposits represent cash received from customers in advance of product shipment or delivery of services.
Deferred taxes : Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

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Table of Contents

ChromaDex, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Note 1. Nature of Business and Significant Accounting Policies (continued)
Fair value determination of privately-held securities: The fair values of the common stock as well as the common stock underlying options and warrants granted as part of asset purchase prices or as compensation were estimated by management. Determining the fair value of stock requires making complex and subjective judgments. The Company used the market approach to estimate the value of the enterprise at each date on which securities are issued or granted. The enterprise value available to all stockholders and allocating that value among the various classes of stock based on the rights, privileges and preferences of the respective classes. There is inherent uncertainty in these estimates.
Stock-based compensation : The Company’s stock-based employee compensation plan is described in Note 8. Prior to 2006, the Company accounted for this plan under the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees , and related interpretations. The Company accounted for stock-based compensation to non-employees at fair value.
In addition, the Company’s subsidiary also maintained a stock-based compensation plan. The subsidiary also accounted for this plan under the recognition and measurement principles of APB 25 and related interpretations. The subsidiary accounted for stock-based compensation to non-employees at fair value.
Beginning in 2006, the Company accounted for newly issued stock-based compensation under the recognition and measurement provisions of SFAS 123(R). The standard requires entities to measure the cost of services received in exchange for stock options based on the grant-date fair value of the award, and to recognize the cost over the period the individual is required to provide services for the award.
The Company adopted SFAS 123 (R) utilizing the prospective method and applied the measurement provisions of SFAS 123(R) prospectively to all awards granted, modified, repurchased, or cancelled after January 1, 2006 (required effective date). The Company continues to account for any portion of awards outstanding at the date of initial application using the accounting principles originally applied to those awards.
The Company recognizes compensation expense under Statement No. 123(R) over the requisite service period using the straight-line method. The Company has determined that the fair value method should be used in determining the value of its stock options. The fair value method requires that the volatility assumption used in an option-pricing model be based on the historical volatility of daily closing total returns from industry sector comparable companies.
New accounting pronouncements: The Financial Accounting Standards Board (FASB) has issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes . FIN 48 prescribes a recognition threshold and measurement standard for the financial statement recognition and measurement of an income tax position taken or expected to be taken in a tax return. In addition, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
The Company presently recognizes income tax positions based on management’s estimate of whether it is reasonably possible that a liability has been incurred for unrecognized income tax benefits by applying FASB Statement No. 5, Accounting for Contingencies .
In February 2008, the FASB delayed the effective date of FIN 48 for certain nonpublic enterprises to annual financial statements for fiscal years beginning after December 15, 2007. The Company will be required to adopt FIN 48 in its 2008 annual financial statements. The provisions of FIN 48 are to be applied to all tax positions upon initial application of this standard. Only tax positions that meet the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized upon adoption.

 

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Table of Contents

ChromaDex, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Note 1. Nature of Business and Significant Accounting Policies (continued)
In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurement. SFAS No. 157 also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and sets out a fair value hierarchy with the highest priority being quoted prices in active markets. Under SFAS No. 157, fair value measurements are disclosed by level within that hierarchy. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, except for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis for which delayed application is permitted until fiscal years beginning after November 15, 2008. The Company has not yet determined the impact of the adoption of SFAS No. 157, if any, on its financial position, results of operations and cash flows.
In February 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS No. 159”). SFAS No. 159 permits companies to elect to follow fair value accounting for certain financial assets and liabilities in an effort to mitigate volatility in earnings without having to apply complex hedge accounting provisions. The standard also establishes presentation and disclosure requirements designed to facilitate comparison between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company has not yet determined the impact of the adoption of SFAS No. 159, if any, on its financial position, results of operations and cash flows.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R), Business Combinations (SFAS 141(R)). This Statement provides greater consistency in the accounting and financial reporting for business combinations. SFAS 141(R) establishes new disclosure requirements and, among other things, requires the acquiring entity in a business combination to record contingent consideration payable, to expense transaction costs, and to recognize all assets acquired and liabilities assumed at acquisition-date fair value. This standard is effective for the beginning of the Company’s first fiscal year beginning after December 15, 2008. SFAS 141(R) will have a significant impact on the accounting for future business combinations after the effective date and will impact financial statements both on the acquisition date and subsequent periods.
Revenue recognition : The Company recognizes sales and the related cost of goods sold at the time the merchandise is shipped to customers or service is performed, when each of the following conditions have been met: an arrangement exists, delivery has occurred, there is a fixed price, and collectability is reasonably assured.
Reclassifications : Certain prior year balances have been reclassified to conform to the 2007 presentation.

 

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Table of Contents

ChromaDex, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Note 2. Intangible Assets
Intangible assets consisted of the following:
                                 
    2007     2006  
    Gross             Gross        
    Carrying     Accumulated     Carrying     Accumulated  
    Amount     Amortization     Amount     Amortization  
 
                               
Amortized intangible assets:
                               
License agreements
  $ 1,160,000     $ 672,970     $ 1,160,000     $ 556,970  
Amortized expense on amortizable intangible assets included in the consolidated statement of operations for each of the years ended December 29, 2007 and December 31, 2006 was $116,000.
Estimated aggregate amortization expense for each of the next five years is as follows:
         
Years ending December:
       
2008
  $ 116,000  
2009
    116,000  
2010
    63,500  
2011
    58,030  
2012
    36,000  
Thereafter
    97,500  
 
     
 
  $ 487,030  
 
     
Note 3. Leasehold improvements and Equipment
Leasehold improvements and equipment consisted of the following:
                 
    2007     2006  
 
               
Laboratory equipment
  $ 1,831,453     $ 1,706,101  
Leasehold Improvements
    87,070       890  
Computer equipment
    171,340       170,276  
Furniture and fixtures
    15,308       7,741  
Office equipment
    2,000        
 
           
 
    2,107,171       1,885,008  
Less accumulated depreciation
    974,348       738,325  
 
           
 
  $ 1,132,823     $ 1,146,683  
 
           

 

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Table of Contents

ChromaDex, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Note 4. Notes Payable
At December 31, 2006, notes payable totaling $112,500 consisted of two unsecured promissory notes payable upon demand with interest at 8%. These notes were repaid during 2007. Interest expense related to notes payable was $5,133 and $14,333 for the years ended December 29, 2007 and December 31, 2006, respectively.
Note 5. Capitalized Lease Obligations
The Company leases equipment under capitalized lease obligations with a total cost of $224,003 and $260,351 and accumulated amortization of $112,284 and $75,479 as of December 29, 2007 and December 31, 2006, respectively.
Minimum future lease payments under capital leases as of December 29, 2007, are as follows:
         
Year ending December:
       
2008
  $ 101,851  
2009
    95,298  
2010
    38,518  
2011
    38,518  
2012
    13,289  
 
     
Total minimum lease payments
    287,474  
Less amount representing interest
    60,137  
 
     
Present value of net minimum lease payments
    227,337  
Less current portion
    74,571  
 
     
Long-term obligations under capital leases
  $ 152,766  
 
     
Interest expense related to capital leases was $26,682 and $11,826 for the years ended December 29, 2007 and December 31, 2006, respectively.

 

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Table of Contents

ChromaDex, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Note 6. Accrued Expenses
Accrued expenses consisted of:
                 
    2007     2006  
 
               
Salaries and vacation
  $ 118,833     $ 101,304  
Professional services
    159,301       181,455  
Interest
          96,249  
Other
    73,792       109,348  
 
           
 
  $ 351,926     $ 488,356  
 
           
Note 7. Income Taxes
A reconciliation of income tax expense (benefit) computed at the statutory federal income tax rate of 34% for 2007 and 2006 compared to the Company’s income tax expense for the years ended December 29, 2007 and December 31, 2006, is as follows:
                 
    2007     2006  
 
               
Income tax expense (benefit) at statutory rate
  $ (65,000 )   $ (437,000 )
(Increase) decrease resulting from:
               
State income taxes, net of federal tax effect
    (9,000 )     (61,000 )
Nondeductible expenses
    5,000       2,000  
Change in valuation allowance
    69,000       443,000  
Stock option accounting change
          53,000  
 
           
 
  $     $  
 
           

 

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Table of Contents

ChromaDex, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Note 7. Income Taxes (continued)
The deferred income tax assets and liabilities consisted of the following components as of December 29, 2007 and December 31, 2006:
                 
    2007     2006  
 
   
Deferred tax assets:
               
Net operating loss carryforward
  $ 1,181,000     $ 1,181,000  
Inventory reserve
    88,000       68,000  
Allowance for doubtful accounts
    35,000       43,000  
Accrued expenses
    479,000       430,000  
Stock option expense
    75,000       75,000  
Intangibles
    33,000       33,000  
 
           
 
    1,891,000       1,830,000  
Less valuation allowance
    1,789,000       1,720,000  
 
           
 
    102,000       110,000  
 
           
 
               
Deferred tax liabilities:
               
Property and equipment
    (92,000 )     (93,000 )
Prepaid expenses
    (10,000 )     (17,000 )
 
           
 
    (102,000 )     (110,000 )
 
           
 
               
 
  $     $  
 
           
The Company has tax net operating loss carryforwards available to offset future federal taxable income and future state taxable income of approximately $2,987,195 and $2,500,571, respectively which expire in December 31, 2025 and 2026, respectively. A full valuation allowance has been established as the Company believes it is more likely than not that deferred tax assets as of December 29, 2007 and December 31, 2006 will not be realized in future periods.

 

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Table of Contents

ChromaDex, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Note 8. Stock Options and Unearned Stock-Based Compensation
Company’s stock option plan : At the discretion of management and with approval of the Board of Directors, the Company may grant options to purchase the Company’s common stock to certain individuals from time to time. Management and the Board of Directors determine the exercise price, vesting periods and expiration dates at the time of grant. Expiration dates are not to exceed 10 years. The Company under its 2007 option plan is authorized to issue stock options that total no more than 3,000,000 shares and was authorized to issue stock options that totaled no more than 2,198,490 under its 2000 option plan which was terminated at the beginning of 2007. The remaining amount available for issuance totaled 2,805,000 at December 29, 2007. The option awards generally vest over a five-year period following grant date after a passage of time.
During the year ended December 31, 2006, by agreement with the option holders, the Company exchanged options that were previously outstanding in the subsidiary’s plan for options in the Company’s plan. All new options were issued with vesting and terms consistent with the previously issued options. This effectively resulted in a cancellation of the previously issued options in the subsidiary’s plan and a new issuance of options in the Company’s plan and a reclassification of unearned stock based compensation to additional paid-in capital.
The Company recognized share-based compensation expense of $198 and $160,152 in general and administrative expenses in the statement of operations for the years ended December 29, 2007 and December 31, 2006, respectively.
The fair value of the Company’s stock options was estimated at the date of grant using the Black-Scholes based option valuation model. The table below outlines the weighted average assumptions for options granted during the years ended December 29, 2007 and December 31, 2006.
         
Year Ended December   2007   2006
Expected volatility
  28.81%   15.81%
Expected dividends
  0.00%   0.00%
Expected term
  6.4 years   7 - 10 years
Risk-free rate
  3.86%   4.55%
The Company uses historical data to estimate option exercise and employee termination within the valuation model. The assumption for expected future volatility is based on a benchmark volatility index of publicly held companies in similar industries. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

 

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ChromaDex, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Note 8. Stock Options and Unearned Stock-Based Compensation (continued)
A summary of option activity under the Plan as of December 29, 2007 and December 31, 2006, and changes during the years then ended is presented below:
                         
            Weighted        
            Average     Remaining  
            Exercise     Contractual  
    Units     Price     Term  
 
   
Outstanding at December 31, 2005
    494,000     $ 0.92          
 
Options Granted
    936,950       1.19          
Options Exercised
                     
Options Forfeited
    (115,000 )     0.96          
 
                     
Outstanding at December 31, 2006
    1,315,950       1.11          
 
                       
Options Granted
    195,000       1.50          
Options Exercised
    (2,600 )     1.31          
Options Forfeited
    (34,400 )     1.11          
 
                 
Outstanding at December 29, 2007
    1,473,950     $ 1.16       7.53  
 
                 
 
                       
Exercisable on December 29, 2007
    767,260     $ 0.85       6.09  
 
                 
As of December 29, 2007 and December 31, 2006, there was $3,458 and $0 of total unrecognized compensation expense, respectively, related to nonvested share based compensation arrangements granted under the plans. That cost is expected to be recognized over a weighted average period of 4.03 and 4.06 years, respectively as of December 29, 2007 and December 31, 2006. The weighted average fair value of options granted during the years ended December 29, 2007 and December 31, 2006 was $.44 and $1.19, respectively.
Note 9. Lease Commitments
The Company leases its office and research facilities in California and Colorado under operating lease agreements that expire at various dates from June 2008 through March 2012. Monthly lease payments range from $2,031 per month to $23,612 per month, and minimum lease payments escalate during the terms of the leases. Generally accepted accounting principles require total minimum lease payments to be recognized as rent expense on a straight-line basis over the term of the lease. The excess of such expense over amounts required to be paid under the lease agreement is carried as a noncurrent liability on the Company’s consolidated balance sheet.

 

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ChromaDex, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Note 9. Lease Commitments (continued)
Minimum future rental payments under all of the leases are as follows:
         
Years ending December:
       
2008
  $ 396,370  
2009
    412,372  
2010
    428,825  
2011
    142,924  
2012
    29,390  
 
     
 
  $ 1,409,881  
 
     
Rent expense was $402,577 and $368,651 for the years ended December 29, 2007 and December 31, 2006, respectively.
Note 10. Related Party Transactions
At December 29, 2007 and December 31, 2006, the Company owed $1,167,828 and $1,009,029, respectively, to two officers relating to unpaid compensation. The amounts owed to officers are unsecured, non-interest bearing, and payable on demand.
Note 11. Litigation
On August 21, 2006 the Company and Innovative Health Products Inc entered into a settlement agreement (the settlement agreement) in connection with a lawsuit filed by Innovative Health Products alleging breach of contract. In connection with the settlement agreement the Company recorded an obligation of $155,000.
From time to time the Company has and expects to have claims and pending legal proceedings that generally involve product liability, professional service and employment issues. These proceedings are, in the opinion of management, ordinary routine matters incidental to the normal business conducted by the Company. In the opinion of management, such proceedings are substantially covered by insurance and/or are without merit, and the ultimate disposition of such proceedings is not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.
Note 12. Management’s Plans for Operations and Subsequent Event
The Company has incurred a loss from operations of $177,720 and a net loss of $189,875 for the year ended December 29, 2007, and a net loss of $1,284,260 for the year ended December 31, 2006, attributable primarily to the analytical services line of business. The Company’s business plan for 2008 reflects positive earnings before income taxes, depreciation and amortization. Management has implemented strategic operational structure changes which it believes will allow the Company to achieve profitability with future growth without incurring additional overhead costs. The Company expects to grow the analytical services business and achieve break-even by mid-year 2008. Management’s anticipation of future growth is largely related to the Food and Drug Administration’s (FDA’s) guideline releases in the dietary supplement industry. The Company has implemented a comprehensive marketing plan design targeted on leveraging its capabilities concurrent with the FDA’s releases. Management believes that these changes along with information technology and process initiatives will position the Company for growth without the need for additional capital spending.

 

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Table of Contents

ChromaDex, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Note 12. Management’s Plans for Operations and Subsequent Event (continued)
The Company is currently conducting a private placement equity offering using Newcastle Financial Services, Inc. as a broker. The total offering is for 4,411,765 shares at $1.36 for a total of $6,000,000. Investors who purchase these shares will also receive one warrant to purchase an additional share of the Company at $3.00 for every two shares they purchase. The Company has the right to call these warrants at $4.50 per share. The total warrants to be issued under this placement if fully subscribed will be 2,205,882. Newcastle Financial Services, Inc., in exchange for their services as a broker will receive 10% of the cash proceeds from the offering and will also receive a warrant to purchase one share at $1.36 for every ten shares subscribed under the offering.
Subsequent to year-end, the Company received capital contributions from third party investors totaling $2,625,000 and has issued 1,930,148 shares of common stock. In addition, 193,014 warrants were issued with a strike price of $1.36 and 965,074 warrants were issued with a strike price of $3.00. The Company has paid $262,500 in brokerage fees in connection with these transactions.

 

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Table of Contents

ChromaDex, Inc. and Subsidiary
Condensed Consolidated Financial Report (Unaudited)
3.29.2008

 

 


Table of Contents

Contents
         
Financial Statement
       
 
       
    F-1  
 
       
    F-2  
 
       
    F-3  
 
       
    F-4 - F-6  
 
       

 

 


Table of Contents

ChromaDex, Inc. and Subsidiary
Condensed Consolidated Balance Sheets (Unaudited)
As of March 29, 2008 and December 31, 2007
                 
    March 29, 2008     December 29, 2007  
 
               
Assets
               
 
               
Current Assets
               
Cash
  $ 1,694,661     $ 303,785  
Trade receivables, less allowance for doubtful accounts 2008 $70,830 2007 $70,429
    320,969       375,233  
Inventories
    557,863       497,635  
Prepaid expenses and other
    94,677       60,264  
 
           
Total current assets
    2,668,170       1,236,917  
 
           
 
Property and Equipment, net
    1,264,398       1,132,823  
 
           
 
               
Deposits and Other Noncurrent Assets
               
Deposits
    49,821       63,976  
Intangible assets, less accumulated amortization 2008 $701,423; 2007 $672,970
    458,577       487,030  
 
           
 
    508,398       551,006  
 
           
 
               
 
  $ 4,440,966     $ 2,920,746  
 
           
Liabilities and Stockholders’ Equity
               
 
               
Current Liabilities
               
Accounts payable
  $ 257,224     $ 500,538  
Accrued expenses
    300,220       351,926  
Notes payable
           
Current maturities of capital lease obligations
    76,965       74,571  
Due to officers
    1,178,206       1,167,822  
Customer deposits and other
    105,757       117,969  
 
           
Total current liabilities
    1,918,372       2,212,826  
 
           
 
               
Capital Lease Obligations, less current maturities
    132,620       152,766  
 
           
 
               
Deferred Rent
    153,876       158,839  
 
           
 
               
Stockholders’ Equity
               
Common stock, $.01 par value; authorized 100,000,000 shares; issued and outstanding 2008 23,653,278 shares; 2007 22,040,797 shares
    236,533       220,408  
Additional paid-in capital
    7,217,950       5,271,389  
Retained earnings (deficit)
    (5,218,385 )     (5,095,482 )
 
           
 
    2,236,098       396,315  
 
           
 
               
 
  $ 4,440,966     $ 2,920,746  
 
           
See Notes to Condensed Consolidated Financial Statements.

 

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Table of Contents

ChromaDex, Inc. and Subsidiary
Condensed Consolidated Statements of Operations (Unaudited)
For the Three Month Periods ending March 29, 2008 and March 31, 2007
                 
    March 29, 2008     March 31, 2007  
 
               
Sales
  $ 1,059,716     $ 1,206,893  
 
               
Cost of goods sold
    660,272       664,286  
 
           
Gross profit
    399,444       542,607  
 
           
 
               
Operating expenses:
               
Selling
    171,984       100,556  
General and administrative
    342,738       319,324  
 
           
 
    514,722       419,880  
 
           
 
               
Operating (loss) income
    (115,278 )     122,727  
 
           
 
               
Nonoperating (income) expenses:
               
Interest expense
    7,616       9,633  
Interest income
    (404 )     (622 )
Other
    416       723  
 
           
 
    7,628       9,735  
 
           
 
               
Income taxes
           
 
               
Net (loss) income
  $ (122,906 )   $ 112,993  
 
           
See Notes to Condensed Consolidated Financial Statements.

 

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ChromaDex, Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Three Month Periods ending March 29, 2008 and March 31, 2007
                 
    March 29, 2008     March 31, 2007  
Cash Flows from Operating Activities
               
Net (loss) income
  $ (122,906 )   $ 112,993  
Adjustments to reconcile net (loss) income to net cash used in operating activities
               
Depreciation
    59,664       56,936  
Amortization of intangibles
    28,453       29,000  
Stock-based compensation expense
    184        
(Increase) decrease in
               
Accounts receivables
    54,264       (120,126 )
Inventories
    (60,227 )     (109,606 )
Prepaid and other expenses
    (34,412 )     10,305  
Deposits
    14,155       (49,055 )
Increase (decrease) in
               
Accounts payables
    (243,314 )     173,895  
Accrued expenses
    (51,706 )     (107,226 )
Customer deposits and other liabilities
    (12,211 )     (23,205 )
Deferred rent
    (4,963 )     (3,081 )
 
           
Net cash (used in) operating activities
    (373,019 )     (29,170 )
 
           
 
               
Cash Flows From Investing Activities
               
Purchases of property and equipment
    (191,239 )     (7,670 )
 
           
Net cash (used in) investing activities
    (191,239 )     (7,670 )
 
           
 
Cash Flows From Financing Activities
               
Principal payment on capital leases
    (17,752 )     (17,381 )
Principal payments on long-term debt
          (25,000 )
Proceeds from issuance of common stock
    1,962,502        
Advances from stockholders
    10,384       39,700  
 
           
Net cash provided by (used in) financing activities
    1,955,134       (2,681 )
 
           
 
Net increase (decrease) in cash
    1,390,876       (39,521 )
 
               
Cash:
               
Beginning
    303,785       424,965  
 
           
 
               
Ending
  $ 1,694,661     $ 385,444  
 
           
 
               
Supplemental Disclosures of Cash Flow Information
               
Cash payments for interest
  $ 7,616     $ 9,633  
 
               
Supplemental Schedules of Noncash Investing and Financing Activities
               
Capital lease obligation incurred for the purchase of equipment
  $     $ 68,000  
See Notes to Condensed Consolidated Financial Statements.

 

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Table of Contents

Note 1. Interim Financial Statements
The accompanying condensed financial statements of ChromaDex, Inc. and its wholly owned subsidiary, ChromaDex Analytics, Inc. (the “Company”) include all adjustments, consisting of normal recurring adjustments and accruals, that in the opinion of the management of the Company are necessary for a fair presentation of our financial position as of March 29, 2008 and results of operations and cash flows for the three months ended March 29, 2008 and March 31, 2007. These unaudited interim condensed financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto for the year ended December 29, 2007 appearing elsewhere in the filing. Operating results for the three months ended March 29, 2008 are not necessarily indicative of the results to be achieved for the full year of trading ending on January 3, 2009. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reports amounts of revenues and expenses during the period. Actual results could differ from those estimates.
Note 2. Nature of Business and Significant Accounting Policies
Nature of business : The Company creates and supplies botanical reference standards along with related phytochemical products and services. The Company’s main priority is to create industry-accepted information, products and services to every layer of the functional food, pharmaceutical, personal care and dietary supplement markets. The Company provides these services at terms of 30 days.
Basis of presentation: The financial statements and accompanying notes have been prepared on a consolidated basis and reflect the consolidated financial position of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated from these financial statements. The Company’s fiscal year ends on the Saturday closest to the end of December and the Company’s fiscal quarters end on the Saturday closest to calendar quarter end. Fiscal 2008 includes 53 weeks instead of the normal 52 weeks. The inclusion of an extra week occurs every fifth or sixth fiscal year due to the Company’s floating year-end date.
New accounting pronouncements : In March 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities”. The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The new standard also improves transparency about the location and amounts of derivative instruments in an entity’s financial statements; how derivative instruments and related hedged items are accounted for under Statement 133; and how derivative instruments and related hedged items affect its financial position, financial performance, and cash flows. FASB Statement No. 161 achieves these improvements by requiring disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. It also provides more information about an entity’s liquidity by requiring disclosure of derivative features that are credit risk-related. Finally, it requires cross-referencing within footnotes to enable financial statement users to locate important disclosure information Based on current conditions, the Company does not expect the adoption of SFAS 161 to have a significant impact on its results of operations or financial position.
In December 2007, FASB issued FASB Statement No. 160, Non-controlling Interests in Consolidated Financial Statements—an amendment of ARB No. 51. This Statement applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but will affect only those entities that have an outstanding non-controlling interest in one or more subsidiaries or that deconsolidate a subsidiary. Not-for-profit organizations should continue to apply the guidance in Accounting Research Bulletin No. 51, Consolidated Financial Statements, before the amendments made by this Statement, and any other applicable standards, until the Board issues interpretative guidance. This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends). Earlier adoption is prohibited. The effective date of this Statement is the same as that of the related Statement 141(R). This Statement shall be applied prospectively as of the beginning of the fiscal year in which this Statement is initially applied, except for the presentation and disclosure requirements. The presentation and disclosure requirements shall be applied retrospectively for all periods presented. This statement has no effect on the financial statements as the Company does not have any outstanding non-controlling interest.

 

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Table of Contents

In September 2006, FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures for fiscal years beginning after November 15, 2007. There was no impact effect on the Company’s March 29, 2008 quarterly financial statements resulting from the adoption of this standard.
Note 3. Property and Equipment
Property and equipment consisted of the following:
                 
    March 29, 2008     December 31, 2007  
 
               
Laboratory equipment
  $ 2,006,714     $ 1,831,453  
Leasehold improvements
    87,070       87,070  
Computer equipment
    185,873       171,340  
Furniture and fixtures
    16,753       15,308  
Office equipment
    2,000       2,000  
 
           
 
    2,298,410       2,107,171  
Less: accumulated depreciation
    1,034,012       974,348  
 
           
 
  $ 1,264,398     $ 1,132,823  
 
           
Note 4. Income Taxes
Due to the continuing operating losses, no tax benefit is being recorded. The Company continues to provide a full valuation allowance for any future tax benefits resulting from the Company’s net operating losses.
Note 5. Capital Stock
During the three month period ending March 29, 2008, the Company received net capital contributions from third party investors through a private placement offering of $1,912,502 in exchange for issuing 1,562,481 shares of common stock. In conjunction with this offering, warrants to purchase 781,250 shares of common stock were issued to such investors at $3.00 per share of which the Company has a call at $4.50 per share and the Company was obligated to issue an additional warrant for the purchase of 156,248 shares of common stock at $1.36 per share to the placement agent. The warrant to the placement agent will be issued at the conclusion of the private placement offering. Additionally, the Company sold 50,000 shares for $50,000 to one of its shareholders.
Note 6. Stock Options and Unearned Stock-Based Compensation
The Company issued 5,000 options to purchase the Company’s stock in the three month period ending March 29, 2008. These were issued under the company’s Amended and Restated 2007 Equity Incentive Plan and were considered immaterial.
Note 7. Related Party Transactions
At March 29, 2008 and December 29, 2007, the Company owed $1,178,206 and $1,167,822, respectively, to two officers relating to unpaid compensation. The amounts owed to officers are unsecured, non-interest bearing, and payable on demand.

 

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Table of Contents

Note 8. Management’s Plans for Continuing Operations and Subsequent Event
The Company has incurred a loss from continuing operations of $115,278 and a net loss of $122,906 for the three month period ended March 29, 2008, and a net Income of $112,993 for the three month period ended March 31, 2007, attributable primarily to the analytical services line of business. The Company’s business plan for 2008 reflects positive earnings before income taxes, depreciation and amortization. Management has implemented strategic operational structure changes, which it believes, will allow the Company to achieve profitability with future growth without incurring additional overhead costs. The Company expects to grow the analytical services business and achieve break-even by mid-year 2008. Management’s anticipation of future growth is largely related to the Food and Drug Administration’s (FDA’s) upcoming guideline releases in the dietary supplement industry. The Company has implemented a comprehensive marketing plan design targeted on leveraging its capabilities concurrent with the FDA’s releases.
Subsequent to three month period ending March 29, 2008, the Company received net capital contributions from third party investors through the private placement offering totaling $1,304,973. The Company issued 1,066,137 shares of common stock in connection with the private placement.
In addition, in connection with the private placement, warrants for the purchase of 533,067 shares of common stock were issued with a strike price of $3.00, of which the Company has a call at $4.50 per share. The Company is also obligated to issue an additional warrant for the purchase of 106,613 shares of common stock with a strike price of $1.36 to the placement agent. The warrant to the placement agent will be issued at the conclusion of the private placement offering.

 

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Table of Contents

Cody Resources, Inc.
Pro Forma Unaudited Financial Statements
As of March 29, 2008
For the Three Months Ended March 29, 2008 and the Year Ended December 29, 2007
The following unaudited pro forma consolidated financial statements (“pro forma statements”) give effect to the reverse acquisition of ChromaDex, Inc (“ChromaDex”) by Cody Resources, Inc (“Cody”) and are based on the estimates and assumptions set forth herein and in the notes to such Pro Forma statements.
On May 21, 2008, Cody, CDI Acquisition, Inc. and ChromaDex, entered into an Agreement and Plan of Merger (the “Agreement”). The Agreement provides for a merger of CDI Acquisition with and into ChromaDex, with ChromaDex remaining as the surviving entity after the merger (the “Merger”), whereby the stockholders of ChromaDex will receive common stock of Cody in exchange for their common stock in ChromaDex. ChromaDex is the acquirer for accounting purposes. The following unaudited financial information gives effect to the above. The unaudited pro forma financial information is derived from (1) Cody’s audited historical financial statements included in Cody’s Form 10-KSB for the period ended November 30, 2007; (2) Cody’s unaudited historical financial statements included in Cody’s amended Form 10-QSB for the period ended February 29, 2008; (3) ChromaDex’s audited historical financial statements for the year ended December 29, 2007; and, (4) ChromaDex’s unaudited historical financial statements for the three months ended March 29, 2008. The unaudited pro forma consolidated balance sheet at March 29, 2008 assumes the effects of the above merger took place on March 29, 2008. The unaudited pro forma consolidated statement of operations for the year ended December 29, 2007 combines the historical statements of operations of Cody for the year ended November 30, 2007 and of ChromaDex for the year ended December 29, 2007. The unaudited pro forma consolidated statement of operations for the three months ended March 29, 2008 combines the historical statements of operations of Cody for the three months ended February 29, 2008 and of ChromaDex for the three months ended March 29, 2008. The unaudited pro forma consolidated statements of operations assume that the above merger took place as of January 1, 2007. The unaudited pro forma consolidated financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results of financial position that would have occurred if the transaction had been completed as of the date presented. Upon the completion of the Merger, Cody adopted the fiscal year of ChromaDex as the accounting acquirer. As a result, the fiscal year presented in these pro forma condensed combined financial statements is December 29, 2007 and the interim period is the period ended March 29, 2008. You should read this information in conjunction with:
  1.  
Accompanying notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements;
 
  2.  
Separate historical consolidated financial statements of Cody as of and for the year ended November 30, 2007, included in the annual report on Form 10-KSB for the year ended November 30, 2007;
 
  3.  
Separate historical consolidated financial statements of ChromaDex as of and for year ended December 29, 2007 included elsewhere in this Current Report on Form 8-k;
 
  4.  
Separate unaudited consolidated financial statements of Cody as of and for the three months ending February 29, 2008 included in the 10-QSB for the three month period ended February 29, 2008;
 
  5.  
Separate unaudited consolidated financial statements of ChromaDex as of and for the three months ended March 29, 2008 included elsewhere in this Current Report on Form 8-k.

 

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Table of Contents

Cody Resources Inc.

Pro Forma Unaudited Balance Sheet (Unaudited)
March 29, 2008
                                 
                    Pro Forma        
    ChromaDex     Cody     Adjustments     Consolidated  
 
                               
Assets
                               
 
                               
Current Assets
                               
Cash
  $ 1,694,661     $ 580     $     $ 1,695,241  
Trade receivables
    320,969                   320,969  
Inventories
    557,863                   557,863  
Prepaid expenses and other
    94,677                   94,677  
 
                       
Total current assets
    2,668,170       580             2,668,750  
 
                       
 
                               
Property and Equipment, net
    1,264,398                   1,264,398  
 
                       
 
                               
Deposits and Other Noncurrent Assets
                               
Deposits
    49,821                   49,821  
Intangible assets
    458,577                   458,577  
 
                       
 
    508,398                   508,398  
 
                       
 
                               
 
  $ 4,440,966     $ 580     $     $ 4,441,546  
 
                       
Liabilities and Stockholders’ Equity
                               
 
                               
Current Liabilities
                               
Accounts payable
  $ 257,224     $ 3,328     $     $ 260,552  
Accrued expenses
    300,220                   300,220  
Notes payable
                       
Current maturities of capital lease obligations
    76,965                   76,965  
Due to officers
    1,178,206                   1,178,206  
Customer deposits and other
    105,757                   105,757  
 
                       
Total current liabilities
    1,918,372       3,328             1,921,700  
 
                       
 
                               
Capital Lease Obligations, less current maturities
    132,620                   132,620  
 
                       
 
                               
Deferred Rent
    153,876                   153,876  
 
                       
 
                               
Stockholders’ Equity
                               
Common stock
    236,533       1,390       3,110 (3)     241,033  
Additional paid-in capital
    7,217,950       38,610       (3,110) (3)     7,253,450  
Retained earnings (deficit)
    (5,218,385 )     (42,748 )           (5,261,133 )
 
                       
 
    2,236,098       (2,748 )           2,233,350  
 
                       
 
                               
 
  $ 4,440,966     $ 580     $     $ 4,441,546  
 
                       

 

PF-2


Table of Contents

Cody Resources Inc.

Pro Forma Condensed Combined Statement of Operations (Unaudited)
For the Three Months Ending March 29, 2008
                                 
                    Pro Forma        
    ChromaDex     Cody     Adjustments     Consolidated  
 
                               
Sales
  $ 1,059,716     $     $     $ 1,059,716  
 
                               
Cost of goods sold
    660,272                   660,272  
 
                       
Gross profit
    399,444                   399,444  
 
                       
 
                               
Operating expenses:
                               
Selling
    171,984                   171,984  
General and administrative
    342,738       2,928             345,666  
 
                       
 
    514,722       2,928             517,650  
 
                       
 
                               
Operating loss
    (115,278 )     (2,928 )             (118,206 )
 
                       
 
                               
Nonoperating (income) expenses:
                               
Interest expense
    7,616                   7,616  
Interest income
    (404 )                 (404 )
Other
    416                   416  
 
                       
 
    7,628                   7,628  
 
                       
 
                               
Net loss
  $ (122,906 )   $ (2,928 )   $     $ (125,834 )
 
                       
 
                               
Basic and Diluted Loss per Share
  $ (0.01 )   $ (0.00 )         $ (0.00 )
 
                               
Weighted average shares outstanding
    22,142,919       16,038,473 (3)     (11,538,461 )(3)     26,642,931  

 

PF-3


Table of Contents

Cody Resources Inc.

Pro Forma Condensed Combined Statement of Operations (Unaudited)
For the Year Ended December 29, 2007
                                 
                    Pro Forma        
    ChromaDex     Cody     Adjustments     Consolidated  
 
                               
Sales
  $ 4,754,073     $     $     $ 4,754,073  
 
                               
Cost of goods sold
    3,122,461                   3,122,461  
 
                       
Gross profit
    1,631,612                   1,631,612  
 
                       
 
                               
Operating expenses:
                               
Selling
    387,816                   387,816  
General and administrative
    1,421,516       38,382             1,459,898  
 
                       
 
    1,809,332       38,382             1,847,714  
 
                       
 
                               
Operating loss
    (177,720 )     (38,382 )             (216,102 )
 
                       
 
                               
Nonoperating (income) expenses:
                               
Interest expense
    31,815                   31,815  
Interest income
    (17,698 )                 (17,698 )
Other
    (1,962 )                 (1,962 )
 
                       
 
    12,155                   12,155  
 
                       
 
                               
Net loss
  $ (189,875 )   $ (38,382 )   $     $ (228,257 )
 
                       
 
                               
Basic and Diluted Loss per Share
  $ (0.01 )   $ (0.00 )         $ (0.01 )
 
                               
Weighted average shares outstanding
    22,014,235       16,038,473 (3)     (11,538,461 )(3)     26,514,247  
Notes to Pro Forma Condensed Combined Financial Statements
Note 1 — Basis of Presentation
The Unaudited Pro Forma financial statements reflect financial information, which gives effect to the acquisition of all the outstanding common stock of ChromaDex, Inc (“ChromaDex”) in exchange for approximately 23,522,122 shares of Cody Resources, Inc. (“Cody”).The acquisition has been accounted for as a reverse acquisition. The combination of the two companies (the Company) is recorded as a recapitalization of Cody pursuant to which ChromaDex is treated as the continuing entity. Because the acquisition was accounted for as a reverse acquisition, there was neither goodwill recognized nor any adjustments to the book value of the net assets of ChromaDex that would affect the Pro Forma Statement of Operations.
Note 2 — Earnings per share
Dilutive securities, consisting of options to purchase the Company’s common stock and restricted stock awards, are included in the calculation of diluted weighted average common shares. Dilutive securities for the three month period ended March 29, 2008 were 0 given the fact that it cannot be determined at this time if these shares are in the money given the lack of a market for said shares. In addition, due to the Company’s net loss, any common stock equivalents would be anti-dilutive and therefore would be excluded for this reason as well.

 

PF-4


Table of Contents

Note 3 — Adjustments
On March 28, 2008, Cody completed a forward stock split of 11.538461 Cody shares for every one share of Cody then outstanding per Cody’s 8-K/A filed April 24, 2008. Immediately prior to the merger Cody cancelled 11,538,461 shares as contemplated by the Agreement. The result of the foregoing two events led to a net increase of Cody shares from 1,390,000 to 4,500,012. The amount shown under Cody in the accompanying pro forma statement give effect to the split discussed above and vary from Cody’s previous filings.

 

PF-5


Table of Contents

EXHIBIT INDEX
         
Exhibit    
Number   Description
       
 
  2.1    
Agreement and Plan of Merger, dated as of May 21, 2008, among Cody, CDI Acquisition, Inc. and ChromaDex, Inc., as amended on June 10, 2008.
  3.1    
Certificate of Incorporation of Cody Resources, Inc., a Delaware corporation and Certificate of Amendment of Cody Resources, Inc.
  3.2    
Bylaws of Cody Resources, Inc., a Delaware corporation
  4.1    
Investor’s Rights Agreement, effective as of December 31, 2005, by and between The University of Mississippi Research Foundation and ChromaDex
  4.2    
Tag-Along Agreement effective as of December 31, 2005, by and among the Company, Frank Louis Jaksch, Snr. & Maria Jaksch, Trustees of the Jaksch Family Trust, Margery Germain, Lauren Germain, Emily Germain, Lucie Germain, Frank Louis Jaksch, Jr., and the University of Mississippi Research Foundation
  4.3    
License Agreement, effective September 15, 2005 between L&J Becvar, L.P. and ChromaDex, Inc.
  4.4    
Form of Warrant to Purchase Shares of Common Stock of ChromaDex Corporation
  10.1    
ChromaDex, Inc. 2000 Non-Qualified Incentive Stock Option Plan effective October 1, 2000
  10.2    
Second Amended and Restated 2007 Equity Incentive Plan effective March 13, 2007
  10.3    
Form of Stock Option Agreement under the ChromaDex, Inc. Second Amended and Restated 2007 Equity Incentive Plan
  10.4    
Form of Restricted Stock Purchase Agreement under the ChromaDex, Inc. 2007 Equity Incentive Plan
  10.5    
Employment Agreement dated April 14, 2008, by and between Frank L. Jaksch, Jr. and ChromaDex, Inc.
  10.6    
Employment Agreement dated April 14, 2008, by and between Thomas C. Varvaro and the ChromaDex, Inc.
  10.7    
Standard Industrial/Commercial Multi-Tenant Lease – Net dated December 19, 2006, by and between the ChromaDex, Inc. and SCIF Portfolio II, LLC
  10.8    
Lease Agreement dated October 26, 2001, by and between Railhead Partners, LLC and NaPro BioTherapeutics, Inc., as assigned to ChromaDex Analytics, Inc. on April 9, 2003 and amended on September 24, 2003
  10.9    
Licensing Agreement Nutraceutical Standards effective as of December 31, 1999 between the University of Mississippi Research Foundation and ChromaDex
  10.10    
Equity Based License Agreement dated October 25, 2001, by and between the Company and Bayer Innovation Beteiligungsgesellshaft mbH, as amended as of October 30, 2003
  10.11    
License Agreement, effective September 15, 2005 between L&J Becvar, L.P. and ChromaDex, Inc. (1)
  10.12    
Option Agreement, and Patent License Agreement, both effective on August 19, 2005 and both between the Board of Regents of The University of Texas Systems and ChromaDex, Inc.
  10.13    
Stock Redemption Agreement, dated June 18, 2008 between ChromaDex, Inc. and Bayer Innovation GmbH (formerly named Bayer Innovation Beteiligungsgesellschaft mbH)
  10.14    
Promissory Note, dated June 18, 2008 between ChromaDex, Inc. as borrower and Bayer Innovation GmbH as lender
  16.1    
Letter on Change in Certifying Accountant
  21.1    
Subsidiaries of ChromaDex
     
(1)  
Incorporated by reference to Exhibit 4.3 of this Current Report on Form 8-K.

 

 

Exhibit 2.1
 
AGREEMENT AND PLAN OF MERGER
by and among
CODY RESOURCES, INC.,
CDI ACQUISITION, INC.
and
CHROMADEX, INC.
May 21, 2008
 

 

 


 

TABLE OF CONTENTS
             
        Page  
 
           
ARTICLE I DEFINITIONS     1  
 
           
ARTICLE II THE MERGER     6  
Section 2.1
  Merger     6  
Section 2.2
  Effective Time     6  
Section 2.3
  Articles of Incorporation; By-laws; Directors and Officers     7  
Section 2.4
  Effects of the Merger     7  
Section 2.5
  Closing     7  
 
           
ARTICLE III MERGER CONSIDERATION; CONVERSION OF SECURITIES     8  
Section 3.1
  Manner and Basis of Converting Capital Stock     8  
Section 3.2
  Surrender and Exchange of Certificates     8  
Section 3.3
  Options, Warrants     10  
Section 3.4
  Parent Common Stock     10  
 
           
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY     10  
Section 4.1
  Organization     10  
Section 4.2
  Authorization; Validity of Agreement     11  
Section 4.3
  Capitalization     11  
Section 4.4
  Consents and Approvals; No Violations     11  
Section 4.5
  Financial Statements     12  
Section 4.6
  No Undisclosed Liabilities     12  
Section 4.7
  Litigation     12  
Section 4.8
  No Default; Compliance with Applicable Laws     12  
Section 4.9
  Broker’s and Finder’s Fees     12  
Section 4.10
  Assets and Contracts     13  
Section 4.11
  Tax Returns and Audits     13  
Section 4.12
  Patents and Other Intangible Assets     14  
Section 4.13
  Employee Benefit Plans; ERISA     14  
Section 4.14
  Title to Property and Encumbrances     15  
Section 4.15
  Condition of Properties     15  
Section 4.16
  Insurance Coverage     15  
Section 4.17
  Interested Party Transactions     15  
Section 4.18
  Environmental Matters     16  
 
           
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION CORP.     17  
Section 5.1
  Organization     17  
Section 5.2
  Authorization; Validity of Agreement     17  
Section 5.3
  Capitalization of Parent and Acquisition Corp.     18  
Section 5.4
  Consents and Approvals; No Violations     19  
Section 5.5
  Financial Statement and Other Information     19  

 

i


 

             
        Page  
 
           
Section 5.6
  Absence of Undisclosed Liabilities     20  
Section 5.7
  Litigation     20  
Section 5.8
  No Default; Compliance with Applicable Laws     21  
Section 5.9
  Broker’s and Finder’s Fees; Broker/Dealer Ownership     21  
Section 5.10
  Assets and Contracts     21  
Section 5.11
  Tax Returns and Audits     22  
Section 5.12
  Employee Benefit Plans; ERISA     22  
Section 5.13
  Title to Property and Encumbrances     22  
Section 5.14
  Insurance Coverage     22  
Section 5.15
  Interested Party Transactions     23  
Section 5.16
  Environmental Matters     23  
Section 5.17
  Changes     24  
Section 5.18
  Questionable Payments     24  
Section 5.19
  Employees     25  
Section 5.20
  Validity of Shares     25  
Section 5.21
  No General Solicitation     25  
Section 5.22
  Disclosure     25  
 
           
ARTICLE VI CONDUCT OF BUSINESSES PENDING THE MERGER     25  
Section 6.1
  Conduct of Business by the Company Pending the Merger     25  
Section 6.2
  Conduct of Business by Parent and Acquisition Corp. Pending the Merger     25  
 
           
ARTICLE VII ADDITIONAL AGREEMENTS     27  
Section 7.1
  Access and Information     27  
Section 7.2
  Additional Agreements     28  
Section 7.3
  Publicity     28  
Section 7.4
  Appointment of Directors     28  
Section 7.5
  Parent Name Change and Exchange Listing     28  
Section 7.6
  Shareholder Consent     28  
Section 7.7
  Parent Exchange Requirements     29  
Section 7.8
  Notifications of Certain Matters     29  
 
           
ARTICLE VIII CONDITIONS OF PARTIES’ OBLIGATIONS     29  
Section 8.1
  Company Obligations     29  
Section 8.2
  Parent and Acquisition Corp. Obligations     31  
 
           
ARTICLE IX TERMINATION PRIOR TO CLOSING     34  
Section 9.1
  Termination of Agreement     34  
Section 9.2
  Termination of Obligations     34  
 
           
ARTICLE X MISCELLANEOUS     34  
Section 10.1
  Amendments     34  
Section 10.2
  Notices     35  
Section 10.3
  Entire Agreement     36  
Section 10.4
  Expenses     36  
Section 10.5
  Severability     36  
Section 10.6
  Successors and Assigns; Assignment     36  

 

ii


 

             
        Page  
 
           
Section 10.7
  No Third Party Beneficiaries     36  
Section 10.8
  Counterparts; Delivery by Facsimile     37  
Section 10.9
  Waiver     37  
Section 10.10
  No Constructive Waivers     37  
Section 10.11
  Further Assurances     37  
Section 10.12
  Recitals     37  
Section 10.13
  Headings     37  
Section 10.14
  Governing Law     37  
Section 10.15
  Dispute Resolution     38  
Section 10.16
  Interpretation     38  
LIST OF EXHIBITS
     
Exhibits    
 
   
Exhibit A
  Articles of Incorporation of Surviving Corporation
 
   
Exhibit B
  By-laws of Surviving Corporation
 
   
Exhibit C
  Directors and Officers of Surviving Corporation
 
   
Exhibit D
  Letter of Transmittal
 
   
Exhibit E
  Written Consent
 
   
Exhibit F
  Post-Closing Directors of Parent

 

iii


 

AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is entered into as of May 21, 2008 by and among CODY RESOURCES, INC., a Nevada corporation (“ Parent ”), CDI ACQUISITION, INC., a California corporation and a wholly-owned subsidiary of Parent (“ Acquisition Corp. ”), and CHROMADEX, INC., a California corporation (the “ Company ”).
R E C I T A L S
A. The Company is primarily engaged in the business of creating and supplying botanical reference standards along with related phytochemical products and services (the “ Business ”).
B. The Board of Directors of each of Parent, Acquisition Corp. and the Company has approved, and deems it advisable and in the best interests of its stockholders to consummate, the acquisition of the Company by Parent, which acquisition is to be effected by the merger of Acquisition Corp. with and into the Company, with the Company being the surviving entity (the “ Merger ”), upon the terms and subject to the conditions set forth in this Agreement (as defined in Article I).
C. The parties intend that the Merger shall qualify as a reorganization within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the “ Code ”), by reason of Section 368(a)(2)(E) of the Code.
A G R E E M E N T
In consideration of the mutual agreements and covenants hereinafter set forth, the parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used in this Agreement shall have the following meanings:
Acquisition Corp. ” shall have the meaning given to such term in the preamble to this Agreement.
Action ” shall mean any claim, action, suit, litigation, proceeding, investigation, arbitration, mediation or other dispute.
Affiliate ” shall mean, with respect to any Person, any Person, directly or indirectly, controlling, controlled by or under common control with, such Person. For the purposes of this definition, “ control ” (including, with correlative meaning, the terms “ controlling ,” “ controlled by ” and “ under common control with ”) means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies of such Person through the ownership of voting securities, by contract or otherwise.

 

 


 

Agreement ” shall mean this Agreement and Plan of Merger, including the Company Disclosure Schedule, the Parent Disclosure Schedule and the exhibits attached hereto or referred to herein, as the same may be amended or modified from time to time in accordance with the provisions of this Agreement.
Ancillary Agreements ” means each agreement, document, instrument or certificate contemplated by this Agreement or to be executed by the Company, Parent or Acquisition Corp. in connection with the consummation of the transactions contemplated by this Agreement, in each case, only as applicable to the relevant party or parties to such Ancillary Agreement, as indicated by the context in which such term is used.
Articles of Incorporation ” shall have the meaning given to such term in Section 2.3(a) hereof.
Business ” shall have the meaning given to such term in Recital A.
By-laws ” shall have the meaning given to such term in Section 2.3(b) hereof.
CGCL ” shall mean the General Corporation Law of the State of California, as amended.
Closing ” shall have the meaning given to such term in Section 2.5 hereof.
Closing Date ” shall have the meaning given to such term in Section 2.5 hereof.
Code ” shall have the meaning given to such term in Recital C.
Commission ” shall mean the United States Securities and Exchange Commission.
Common Stock Options ” shall have the meaning given to such term in Section 3.3(a) hereof.
Company ” shall have the meaning given to such term in the preamble to this Agreement.
Company Balance Sheet ” shall have the meaning given to such term in Section 4.5 hereof.
Company Balance Sheet Date ” shall have the meaning given to such term in Section 4.5 hereof.
Company Common Stock ” shall have the meaning given to such term in Section 4.3 hereof.
Company Disclosure Schedule ” shall mean the Company’s Disclosure Schedules to this Agreement.

 

-2-


 

Consents ” shall mean any permits, filings, notices, licenses, consents, authorizations, certificates, franchises, qualifications, accreditation, waivers, approvals and other rights from, and filings with, any governmental authority, used in or relating to a Person’s business.
Contract ” shall mean all contracts, agreements, leases, licenses, commitments, instruments, guarantees, bids, orders, proposals and all oral understandings.
Dissenting Shares ” shall have the meaning given to such term in Section 3.2(d) hereof.
Effective Time ” shall have the meaning given to such term in Section 2.2 hereof.
Employee Benefit Plans ” shall have the meaning given to such term in Section 4.13 hereof.
Environmental Law ” shall mean the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq.; the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. §§ 136 et seq. and comparable state statutes dealing with the registration, labeling and use of pesticides and herbicides; the Clean Air Act, 42 U.S.C. §§ 7401 et seq.; the Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C. §§ 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C. §§ 300f et seq.; and the Hazardous Materials Transportation Act, 49 U.S.C. §§ 1801 et seq., as any of the above referenced statutes have been amended as of the date hereof, all rules, regulations and policies promulgated pursuant to any of the above referenced statutes, and any other foreign, federal, state or local law, statute, ordinance, rule, regulation or policy governing environmental matters, as the same have been amended as of the date hereof.
ERISA ” shall mean the Employee Retirement Income Securities Act of 1974, as amended, and the regulations issued thereunder.
Evaluation Date ” shall have the meaning given to such term in Section 5.5(d) hereof.
Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations issued thereunder.
GAAP ” shall mean generally accepted accounting principles as in effect from time to time in the United States applied on a consistent basis during the respective periods.
Hazardous Material ” means any substance or material meeting any one or more of the following criteria: (a) it is or contains a substance designated as or meeting the characteristics of a hazardous waste, hazardous substance, hazardous material, pollutant, chemical substance or mixture, contaminant or toxic substance under any Environmental Law; (b) its presence at some quantity requires investigation, notification or remediation under any Environmental Law; (c) it contains, without limiting the foregoing, asbestos, polychlorinated biphenyls, petroleum hydrocarbons, petroleum derived substances or waste, pesticides, herbicides, crude oil or any fraction thereof, nuclear fuel, natural gas or synthetic gas; or (d) mold.

 

-3-


 

Indebtedness ” shall mean any obligation of a Person that under GAAP is required to be shown on the balance sheet of such Person as a Liability. Any obligation secured by a Lien on, or payable out of the proceeds of production from, property of a Person shall be deemed to be Indebtedness even though such obligation is not assumed by the Company.
Indebtedness for Borrowed Money ” shall mean (a) all Indebtedness in respect of money borrowed including, without limitation, Indebtedness which represents the unpaid amount of the purchase price of any property and is incurred in lieu of borrowing money or using available funds to pay such amounts and not constituting an accounts payable or expense accrual incurred or assumed in the ordinary course of business of the Person; (b) all Indebtedness evidenced by a promissory note, bond or similar written obligation to pay money; or (c) all such Indebtedness guaranteed by the Company or for which the Company is otherwise contingently liable.
Intellectual Property ” shall have the meaning given to such term in Section 4.12(b) hereof.
Investment Company Act ” shall mean the Investment Company Act of 1940, as amended.
Letter of Transmittal ” shall have the meaning given to such term in Section 3.2(a) hereof.
Liability ” shall mean any and all liability, debt, obligation, deficiency, Tax, penalty, fine, claim, cause of action or other loss, cost or expense of any kind or nature whatsoever, whether asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, and whether due or to become due and regardless of when asserted.
Lien ” shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction and including any lien or charge arising by statute or other law.
Material Adverse Effect ” shall mean any change, effect or circumstance that by itself, or together with other changes, effects and circumstances is materially adverse or is reasonably likely to be materially adverse to the business, assets, liabilities, condition (financial or otherwise), operations or prospects of a Person and its subsidiaries, taken as a whole, or to the ability of such Person to perform its obligations under this Agreement or any of the Ancillary Agreements to which such Person is a party
Merger ” shall have the meaning given to such term in Recital B.
Merger Consideration ” shall have the meaning given to such term in Section 3.1(b) hereof.
Most Recent Parent SEC Documents ” shall have the meaning given to such term in Section 5.5(b) hereof.

 

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Parent ” shall have the meaning given to such term in the preamble to this Agreement. In addition, “ Parent ” shall mean the Delaware corporation for which Parent shall merge with and into on or before the Closing Date for the sole purpose of changing the domicile of Parent from the State of Nevada to the State of Delaware.
Parent Balance Sheet ” shall have the meaning given to such term in Section 5.6 hereof.
Parent Balance Sheet Date ” shall have the meaning assigned to it in Section 5.11 hereof.
Parent Common Stock ” shall mean the common stock, par value $0.001 per share, of Parent.
Parent Disclosure Schedule ” shall mean Parent’s and Acquisition Corp.’s Disclosure Schedules to this Agreement.
Parent Financial Statements ” shall have the meaning given to such term in Section 5.5(b) hereof.
Parent SEC Documents ” shall have the meaning given to such term in Section 5.5(b) hereof.
Parent SEC Reports ” shall have the meaning given to such term in Section 5.5(a) hereof.
Permitted Liens ” shall mean (a) Liens for taxes and assessments or governmental charges or levies not at the time due or in respect of which the validity thereof shall currently be contested in good faith by appropriate proceedings; (b) Liens in respect of pledges or deposits under workmen’s compensation laws or similar legislation, carriers’, warehousemen’s, mechanics’, laborers’ and materialmen’s and similar Liens, if the obligations secured by such Liens are not then delinquent or are being contested in good faith by appropriate proceedings; and (c) Liens incidental to the conduct of the business of the Person that were not incurred in connection with the borrowing of money or the obtaining of advances or credits and which do not in the aggregate materially detract from the value of its property or materially impair the use made thereof by the Company in its business.
Person ” shall mean any individual, corporation, limited liability company, partnership, joint venture, trust or other entity or organization, including any government or political subdivision or an agency or instrumentality thereof.
Securities Act ” shall mean the Securities Act of 1933, as amended, and the rules and regulations issued thereunder.
Selling Expenses ” shall mean all costs, fees and expenses of outside professionals incurred by Parent, Acquisition Corp. or any of the stockholders of Parent relating to the Merger or otherwise incurred in connection with the process of marketing Parent to potential buyers, whether incurred in connection with this Agreement or otherwise, including, without limitation, all legal fees, accounting, tax, investment banking fees and expenses and title policy and survey fees.

 

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Shareholder ” shall mean any record holder of Company Common Stock.
Subsidiary ” shall have the meaning given to such term in Section 4.1 hereof.
Surviving Corporation ” shall have the meaning given to such term in Section 2.1 hereof.
Tax ” or “ Taxes ” shall mean (a) any and all taxes, assessments, customs, duties, levies, fees, tariffs, imposts, deficiencies and other governmental charges of any kind whatsoever (including, but not limited to, taxes on or with respect to net or gross income, franchise, profits, gross receipts, capital, sales, use, ad valorem, value added, transfer, real property transfer, transfer gains, transfer taxes, inventory, capital stock, license, payroll, employment, social security, unemployment, severance, occupation, real or personal property, estimated taxes, rent, excise, occupancy, recordation, bulk transfer, intangibles, alternative minimum, doing business, withholding and stamp), together with any interest thereon, penalties, fines, damages costs, fees, additions to tax or additional amounts with respect thereto, imposed by the United States (federal, state or local) or other applicable jurisdiction; (b) any liability for the payment of any amounts described in clause (a) as a result of being a member of an affiliated, consolidated, combined, unitary or similar group or as a result of transferor or successor liability, including, without limitation, by reason of Code Section 1.1502-6; and (c) any liability for the payments of any amounts as a result of being a party to any Tax Sharing Agreement or as a result of any express or implied obligation to indemnify any other Person with respect to the payment of any amounts of the type described in either clauses (a) or (b).
Tax Return ” shall include all returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns (including Form 1099 and partnership returns filed on Form 1065)) required to be supplied to a Tax authority relating to Taxes.
Tax Sharing Agreements ” shall have the meaning given to such term in Section 4.11 hereof.
Written Consent ” shall have the meaning given to such term in Section 3.2(a) hereof.
ARTICLE II
THE MERGER
2.1 Merger . Upon the terms and subject to the conditions of this Agreement, at the Effective Time, Acquisition Corp. shall be merged with and into the Company in accordance with the CGCL. Following the Effective Time, the separate corporate existence of Acquisition Corp. shall cease, and the Company shall continue as the corporation surviving the Merger (sometimes hereinafter referred to as the “ Surviving Corporation ”).
2.2 Effective Time . The Company and Acquisition Corp. shall cause to be filed on the Closing Date (or on such other date as the Company and Parent may agree in writing) a properly executed agreement of merger, together with the appropriate officers’ certificates attached thereto, conforming to the requirements of the CGCL, with the office of the Secretary of State of the State of California, and shall make all other filings or recordings required by the CGCL in connection with the Merger. The Merger shall become effective at the later of such time as the agreement of merger is duly filed in accordance with the CGCL with the office of the Secretary of State of the State of California or such later time as specified in the agreement of merger, and such time is hereinafter referred to as the “ Effective Time .”

 

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2.3 Articles of Incorporation; By-laws; Directors and Officers .
(a) The articles of incorporation of the Company as in effect immediately prior to the Effective Time, a copy of which is attached as Exhibit A hereto, shall be the articles of incorporation of the Surviving Corporation (the “ Articles of Incorporation ”) until thereafter changed or amended as provide therein or in accordance with applicable law.
(b) The by-laws of the Company as in effect immediately prior to the Effective Time, a copy of which is attached as Exhibit B hereto, shall be the by-laws of the Surviving Corporation (the “ By-laws ”) until thereafter changed or amended as provided therein or in accordance with applicable law.
(c) The individuals identified on Exhibit C hereto under the heading “Directors” shall, from and after the Effective Time, be the directors of the Surviving Corporation until their successors shall have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Articles of Incorporation and By-laws. The individuals identified on Exhibit C hereto under the heading “Officers” shall, from and after the Effective Time, be the officers of the Surviving Corporation until their successors shall have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Articles of Incorporation and By-laws.
2.4 Effects of the Merger . The Merger shall have the effects set forth in Section 1107 of the CGCL. Without limiting the generality of the foregoing, at the Effective Time, except as otherwise provided herein, all of the property, rights, privileges, powers and franchises of the Company and Acquisition Corp. shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Acquisition Corp. shall become the debts, liabilities and duties of the Surviving Corporation.
2.5 Closing . The consummation of the transactions contemplated by this Agreement, including the Merger (the “ Closing ”), shall take place: (i) at the offices of Andrew J. Levinson, Attorney at Law, 1350 Broadway, 11 th Floor, New York, New York at 10:00 a.m. local time on the date on which all of the conditions to the Closing set forth in Article VIII hereof shall have been fulfilled or waived in accordance with this Agreement (other than conditions that can be satisfied only at the Closing, but subject to the fulfillment or waiver of those conditions at the Closing); or (ii) at such other place, time and date as the Company and Parent may agree in writing (the “ Closing Date ”).

 

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ARTICLE III
MERGER CONSIDERATION; CONVERSION OF SECURITIES
3.1 Manner and Basis of Converting Capital Stock . At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Parent or Acquisition Corp. or the holders of any outstanding shares of capital stock or other securities of the Company, Parent or Acquisition Corp.:
(a) Acquisition Corp. Stock . Each share of common stock of Acquisition Corp. issued and outstanding immediately prior to the Effective Time shall be converted into and become one fully paid and nonassessable share of common stock of the Surviving Corporation, such that, after giving effect to Section 3.1(b) hereof, Parent shall be the holder of all of the issued and outstanding shares of common stock of the Surviving Corporation immediately following the Merger.
(b) Company Common Stock . Except as provided in Section 3.1(c) hereof, each share of Company Common Stock issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive one (1) share of Parent Common Stock (the “ Merger Consideration ”).
(c) No Fractional Shares . No fractional shares of Parent Common Stock shall be issued in, or as a result of, the Merger. Any fractional share of Parent Common Stock that a record holder of Company Common Stock would otherwise be entitled to receive as a result of the Merger shall be aggregated. If a fractional share of Parent Common Stock results from such aggregation, the number of shares required to be issued to such record holder shall be rounded up to the nearest whole number of shares of Parent Common Stock.
3.2 Surrender and Exchange of Certificates .
(a) Letter of Transmittal . Promptly after the execution of this Agreement, the Company shall deliver, or cause to be delivered, to each record holder of Company Common Stock (i) a letter of transmittal in the form attached hereto as Exhibit D (“ Letter of Transmittal ”), together with instructions for use in effecting the surrender of certificate(s) representing ownership of Company Common Stock, and (ii) an execution copy of the written consent of shareholders of the Company in the form attached hereto as Exhibit E (the “ Written Consent ”).
(b) Exchange Procedures . Parent shall issue to each former record holder of Company Common Stock, upon delivery to Parent (or a duly authorized agent of Parent) of (i) certificate(s) formerly representing ownership of Company Common Stock endorsed in blank or accompanied by duly executed stock powers (or an affidavit of lost certificate and indemnification in form and substance reasonably acceptable to Parent stating that, among other things, the former record holder has lost its, his or her certificate(s) or that such certificate(s) have been destroyed) and (ii) a properly completed and duly executed Letter of Transmittal, a certificate or certificates registered in the name of such former record holder representing the number of shares of Parent Common Stock that such former record holder is entitled to receive in accordance with Section 3.1 hereof. Subject to Section 3.2(d) hereof, until the certificate(s) (or affidavit) is delivered together with the Letter of Transmittal in the manner contemplated by this Section 3.2(b) , each certificate (or affidavit) previously representing ownership of Company Common Stock shall be deemed at and after the Effective Time to represent only the right to receive Parent Common Stock and the former record holders thereof shall cease to have any other rights with respect to its, his or her Company Common Stock.

 

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(c) Termination of Exchange Process . Any Parent Common Stock that remains unclaimed by a former record holder of Company Common Stock at the first anniversary of the Effective Time may be deemed “abandoned property” subject to applicable abandoned property, escheat and other similar laws in the State in which the former record holder resides. None of the Company, Parent, Acquisition Corp. or the Surviving Corporation shall be liable to any person in respect of any Parent Company Stock delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.
(d) Dissenting Shares . Notwithstanding any provision of this Agreement to the contrary, shares of Company Common Stock issued and outstanding immediately prior to the Effective Time and held by a Shareholder who has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal for such shares of Company Common Stock in accordance with Chapter 13 of the CGCL (“ Dissenting Shares ”) shall not be entitled to vote for any purpose or receive dividends, shall not be converted into the right to receive Parent Common Stock in accordance with Section 3.1 hereof, and shall only be entitled to receive such consideration as shall be determined pursuant to any such applicable law; provided , however , that if, after the Effective Time, such Shareholder fails to perfect or withdraws or loses its, his or her right to appraisal or otherwise fails to establish the right to be paid the value of such Shareholder’s shares of Company Common Stock under such applicable law, such shares of Company Common Stock shall be treated as if they had converted as of the Effective Time into the right to receive Parent Common Stock in accordance with Section 3.1 hereof, and such shares of Company Common Stock shall no longer be Dissenting Shares. All negotiations with respect to payment for Dissenting Shares shall be handled jointly by Parent and the Company prior to the Closing and exclusively by Parent thereafter.
(e) Stock Transfer Books . At the Effective Time, the stock transfer books of the Company will be closed and there will be no further registration of transfers of shares of Company Common Stock thereafter on the records of the Company. If, after the Effective Time, certificates formerly representing Company Common Stock are presented to the Surviving Corporation, these certificates shall be canceled and exchanged for the number of shares of Parent Common Stock to which the former record holder may be entitled pursuant to Section 3.1 hereof.

 

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3.3 Options, Warrants .
(a) Common Stock Options . The Company has issued and outstanding warrants and options to purchase shares of Company Common Stock (collectively, the “ Common Stock Options ”). At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Parent or Acquisition Corp. or the holders of any outstanding Common Stock Options, Parent shall assume all of the Company’s liabilities, obligations and commitments under each Common Stock Option, including any equity incentive plans of the Company pertaining thereto, and, as a result thereof, each Common Stock Option shall be converted into the right to acquire one (1) share of Parent Common Stock at an exercise price equal to the exercise price stated in the Common Stock Option, subject in all respects to all other terms and conditions of the Common Stock Option. Except for the change in security underlying the Common Stock Options from Company Common Stock to Parent Common Stock, it is the intent of the parties hereto that the Common Stock Options shall continue after the Effective Time, and that the terms and conditions of the Common Stock Options shall otherwise remain unchanged.
(b) No Fractional Shares . Notwithstanding anything to the contrary in this Section 3.3 , no fractional shares of Parent Common Stock shall be issued in, or as a result of, the Merger. Any fractional share of Parent Common Stock that a Person would otherwise be entitled to receive as a result of the transactions referenced in this Section 3.3 shall be rounded up to the nearest whole number of shares of Parent Common Stock.
3.4 Parent Common Stock . Parent shall reserve a sufficient number of shares of Parent Common Stock to complete the conversion and exchange of Company Common Stock into Parent Common Stock contemplated by Sections 3.1 and 3.2 hereof and the issuance of any Parent Common Stock in accordance with Section 3.3 hereof. Parent covenants and agrees that immediately prior to the Effective Time there will be no more than 4,500,000 shares of Parent Common Stock issued and outstanding, and that no other common or preferred stock or equity securities of Parent, or any options, warrants, rights or other agreements or instruments convertible, exchangeable or exercisable into common or preferred stock or equity securities of Parent, shall be issued or outstanding at the Effective Time.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as otherwise set forth in Company Disclosure Schedule to be delivered by the Company to Parent and Acquisition Corp. concurrently with the execution of this Agreement, the Company represents and warrants as follows:
4.1 Organization . The Company (i) is duly organized, validly existing and in good standing under the laws of the State of California, (ii) has all Consents necessary to own, lease and operate its properties and assets and to carry on its business as it is now being conducted and (iii) has all requisite corporate power and corporate authority to own, lease and operate its properties and assets and to carry on its business as it is now being conducted, except with respect to the foregoing clauses (i) and (ii) where such failure could not reasonably be expected to have a Material Adverse Effect. The Company is duly qualified or authorized to conduct business and is in good standing (or its equivalent) as a foreign corporation or other entity in all jurisdictions in which the ownership or use of its assets or nature of the business conducted by it makes such qualification or authorization necessary, except where the failure to be so duly qualified, authorized and in good standing could not reasonably be expected to have a Material Adverse Effect. The Company has no subsidiaries other than ChromaDex Analytics, Inc., a Nevada corporation (“ Subsidiary ”).

 

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4.2 Authorization; Validity of Agreement . The Company has the requisite corporate power and corporate authority to execute and deliver this Agreement and each of the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by the Company of this Agreement and the Ancillary Agreements and the consummation by the Company of the transactions contemplated hereby and thereby, have been duly authorized by the Board of Directors of the Company and no other corporate action (except the approval of the Shareholders with respect to the approval of the principal terms of the Merger) on the part of the Company or any of its Shareholders is necessary to authorize the execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby. This Agreement has been, and at Closing each of the Ancillary Agreements will have been, duly executed and delivered by the Company (and assuming due and valid authorization, execution and delivery hereof by Parent and Acquisition Corp.) is, or at Closing shall be, a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforcement is limited by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.
4.3 Capitalization . As of the date hereof, the authorized capital stock of the Company consists of 110,000,000 shares, of which (i) 100,000,000 shares have been designated “Common Stock” (“ Company Common Stock ”), of which 24,744,917 shares are issued and outstanding, and (ii) 10,000,000 shares have been designated “Preferred Stock,” of which no shares are issued or outstanding. All of the outstanding shares of Company Common Stock are duly authorized, validly issued, fully paid and non-assessable. As of the date hereof, there are issued and outstanding Company Stock Options to purchase up to 4,616,240 shares of Company Common Stock.
4.4 Consents and Approvals; No Violations . Except for (i) approval of the principal terms of the Merger by the Shareholders and (ii) filing of an agreement of merger, together with the appropriate officers’ certificates thereto, with the office of the Secretary of State of the State of California, neither the execution, delivery or performance of this Agreement or any of the Ancillary Agreements by the Company, nor the consummation of the transactions contemplated hereby and thereby will, (a) violate any provision of the Articles of Incorporation or By-laws; (b) violate, conflict with or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, require the consent of or result in the creation of any encumbrance upon any of the properties of the Company or Subsidiary under, Contract to which the Company or Subsidiary or any of their respective properties may be bound; (c) require the Consent of any governmental entity by or with respect to the Company or Subsidiary; or (d) violate any order, writ, judgment, injunction, decree, law, statute, rule or regulation applicable to the Company or Subsidiary or any of their respective properties or assets.

 

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4.5 Financial Statements . The Company has delivered or made available as of the date hereof or shall, prior to the Closing Date, deliver or make available to Parent, (i) the Company’s audited consolidated balance sheet for the fiscal year ended December 29, 2007, and the related consolidated and consolidating statements of income, shareholders’ equity and cash flows for the fiscal year ended December 29, 2007, and (ii) the Company’s internally prepared balance sheet (the “ Company Balance Sheet ”) for the fiscal quarter ended March 29, 2008, and the related consolidated and consolidating statements of income, shareholders’ equity and cash flows for the fiscal quarter ended March 29, 2008 (the “ Company Balance Sheet Date ”). The foregoing financial statements (including any notes thereto) (i) have been prepared based upon the books and records of the Company, (ii) except in the case of the Company’s March 29, 2008 financial statements for the absence of footnote disclosure and the customary year-end accruals and adjustments, have been prepared in accordance with GAAP (except as otherwise noted therein), and (iii) present fairly, in all material respects, the financial position, results of operations and cash flows of the Company as at their respective dates and for the periods then ended.
4.6 No Undisclosed Liabilities . Except for (i) Liabilities reflected on the Company Balance Sheet or the notes thereto, (ii) trade payables and accrued or accruable expenses incurred since the Company Balance Sheet Date in the ordinary course of the Business, consistent with past practices, (iii) contract obligations under the Contracts listed in the Company Disclosure Schedule, and (iv) the additional Liabilities set forth in the Company Disclosure Schedule, the Company does not have any material Liabilities (whether accrued, absolute, or contingent, and whether or not of a nature required to be reflected or reserved against in a balance sheet in accordance with GAAP).
4.7 Litigation . There is no Action pending or, to the knowledge of the Company, threatened, involving the Company or Subsidiary or affecting any of the officers, directors or employees of the Company or Subsidiary with respect to the Company’s or any Subsidiary’s business by or before any governmental entity or by any third party. Neither the Company nor Subsidiary is in default under any judgment, order or decree of any governmental entity applicable to its business which could reasonably be expected to result in a Material Adverse Effect.
4.8 No Default; Compliance with Applicable Laws . The Company is not in default or violation of any material term, condition or provision of (i) the Articles of Incorporation or By-laws or (ii) to the knowledge of the Company, any law applicable to the Company or its property and assets, and the Company has not received notice of any violation of or Liability under any of the foregoing (whether material or not).
4.9 Broker’s and Finder’s Fees . Except as set forth in the Company Disclosure Schedule, no Person has, or as a result of the transactions contemplated or described herein will have, any right or valid claim against the Company, Parent, Acquisition Corp. or any Shareholder for any commission, fee or other compensation as a finder or broker, or in any similar capacity in connection with the negotiations relating to, and the consummation of, the transactions contemplated by this Agreement or any of the Ancillary Agreements.

 

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4.10 Assets and Contracts . Except for this Agreement and except as described in the Company Disclosure Schedule, the Company is not a party to any Contract not made in the ordinary course of business that is material to the Company. Without limiting the generality of the foregoing, the Company is not a party to any contract (i) with a labor union, (ii) for the purchase of fixed assets or for the purchase of materials, supplies or equipment in excess of normal operating requirements, (iii) for the employment of any officer, individual employee or other Person on a full-time basis, (iv) with respect to bonus, pension, profit sharing, retirement, stock purchase, deferred compensation, medical, hospitalization or life insurance or similar plan, contract or understanding any or all of the employees of the Company or any other Person, (v) relating to or evidencing Indebtedness for Borrowed Money or subjecting any asset or property of the Company to any Lien or evidencing any Indebtedness, (vi) guaranteeing any Indebtedness, (vii) under which the Company is lessee of or holds or operates any property, real or personal, owned by any other Person under which payments to such Person exceed $100,000 per year and with an unexpired term (including any period covered by an option to renew exercisable by any other party) of more than 60 days, (viii) under which the Company is lessor or permits any Person to hold or operate any property, real or personal, owned or controlled by the Company, (ix) granting any preemptive right, right of first refusal or similar right to any Person, (x) with any Affiliate of the Company or any present or former officer, director or shareholder of the Company, (xi) obligating the Company to pay any royalty or similar charge for the use or exploitation of any tangible or intangible property, (xii) containing a covenant not to compete or other restriction on the Company’s ability to conduct a business or engage in any other activity, (xiii) with respect to any distributor, dealer, manufacturer’s representative, sales agency, franchise or advertising contract or commitment, (xiv) regarding registration of securities under the Securities Act, (xv) characterized as a collective bargaining agreement, or (xvi) with any Person continuing for a period of more than three months from the Closing Date which involves an expenditure or receipt by the Company in excess of $100,000. The Company has made available to Parent and Acquisition Corp. true and complete copies of all Contracts and other documents requested by Parent or Acquisition Corp.
4.11 Tax Returns and Audits . All required federal, state and local Tax Returns of the Company have been duly and timely filed, and all federal, state and local Taxes required to be paid with respect to the periods covered by such returns have been paid. The Company is not and has not been delinquent in the payment of any Tax. The Company has not had a Tax deficiency proposed or assessed against it and has not executed a waiver of any statute of limitations on the assessment or collection of any Tax. None of the Company’s federal income Tax Returns nor any state or local income or franchise Tax Returns has been audited by governmental authorities. The reserves for Taxes reflected on the Balance Sheet are and will be sufficient for the payment of all unpaid Taxes payable by the Company as of the Balance Sheet Date. Since the Balance Sheet Date, the Company has made adequate provisions on its books of account for all Taxes with respect to its business, properties and operations for such period. The Company has withheld or collected from each payment made to each of its employees the amount of all Taxes (including, but not limited to, federal, state and local income taxes, Federal Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes) required to be withheld or collected therefrom, and has paid the same to the proper Tax receiving officers or authorized depositaries. There are no federal, state, local or foreign Actions relating to Taxes or any Tax Returns of the Company now pending, and the Company has not received any notice of any proposed Actions relating to Taxes or any Tax Returns. The Company is not obligated to make a payment, nor is it a party to any agreement that under certain circumstances could obligate it to make a payment, that would not be deductible under Section 280G of the Code. The Company has not agreed nor is required to make any adjustments under Section 481(a) of the Code (or any similar provision of state, local and foreign law) by reason of a change in accounting method or otherwise for any Tax period for which the applicable statute of limitations has not yet expired. The Company is not a party to, is not bound by and does not have any obligation under, any Tax sharing agreement, Tax indemnification agreement or similar contract or arrangement, whether written or unwritten (collectively, “ Tax Sharing Agreements ”), nor does it have any potential liability or obligation to any Person as a result of, or pursuant to, any Tax Sharing Agreements.

 

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4.12 Patents and Other Intangible Assets .
(a) Except as set forth in the Company Disclosure Schedule, the Company (i) owns or has the right to use, free and clear of all Liens, all patents, trademarks, service marks, trade names, copyrights, licenses and rights with respect to the foregoing used in or necessary for the conduct of the Business as now conducted without infringing upon or otherwise acting adversely to the right or claimed right of any Person under or with respect to any of the foregoing and (ii) is not obligated or under any obligation to make any payments by way of royalties, fees or otherwise to any owner or licensor of, or other claimant to, any patent, trademark, service mark, trade name, copyright or other intangible asset, with respect to the use thereof or in connection with the conduct of its business or otherwise.
(b) To the knowledge of the Company, the Company owns and has the unrestricted right to use all trade secrets, if any, including know-how, negative know-how, formulas, patterns, programs, devices, methods, techniques, inventions, designs, processes, computer programs and technical data and all information that derives independent economic value, actual or potential, from not being generally known or known by competitors (collectively, “ Intellectual Property ”) required for or incident to the development, operation and sale of all products and services sold by the Company, free and clear of any right, Lien or claim of others. All Intellectual Property can and will be transferred by the Company to the Surviving Corporation as a result of the Merger and without the consent of any Person other than the Company.
4.13 Employee Benefit Plans; ERISA .
(a) All “employee benefit plans” (within the meaning of Section 3(3) of ERISA) of the Company and other employee benefit or fringe benefit arrangements, practices, contracts, policies or programs of every type, other than programs merely involving the regular payment of wages, commissions, or bonuses established, maintained or contributed to by the Company, whether written or unwritten and whether or not funded (collectively, “ Employee Benefit Plans ”), are in material compliance with the applicable requirements of ERISA, the Code and any other applicable state, federal or foreign law.
(b) There are no pending claims or lawsuits that have been asserted or instituted against any Employee Benefit Plan of the Company, the assets of any of the trusts or funds under the Employee Benefit Plans of the Company, the plan sponsor or the plan administrator of any of the Employee Benefit Plans of the Company or against any fiduciary of an Employee Benefit Plan of the Company with respect to the operation of such plan, nor does the Company have any knowledge of any incident, transaction, occurrence or circumstance which might reasonably be expected to form the basis of any such claim or lawsuit.

 

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(c) There is no pending or, to the knowledge of the Company, contemplated investigation, or pending or possible enforcement action by the Pension Benefit Guaranty Corporation, the Department of Labor, the Internal Revenue Service or any other government agency with respect to any Employee Benefit Plan and the Company has no knowledge of any incident, transaction, occurrence or circumstance which might reasonably be expected to trigger such an investigation or enforcement action.
(d) No actual or, to the knowledge of the Company, contingent Liability exists with respect to the funding of any Employee Benefit Plan or for any other expense or obligation of any Employee Benefit Plan, except as disclosed on the Company Balance Sheet, and no contingent Liability exists under ERISA with respect to any “multi-employer plan,” as defined in Section 3(37) or Section 4001(a)(3) of ERISA.
(e) No events have occurred or are reasonably expected to occur with respect to any Employee Benefit Plan that would cause a material change in the costs of providing benefits under such Employee Benefit Plan or would cause a material change in the cost of providing such Employee Benefit Plan.
4.14 Title to Property and Encumbrances . The Company has good and marketable title to all properties and assets used in the conduct of the Business (except for property held under valid and subsisting leases or licenses which are in full force and effect and which are not in default) free of all Liens except Permitted Liens and such ordinary and customary imperfections of title, restrictions and encumbrances that would not reasonably be expected to result in a Material Adverse Effect.
4.15 Condition of Properties . All facilities, machinery, equipment, fixtures and other properties owned, leased or used by the Company are in operating condition, subject to ordinary wear and tear, and are adequate and sufficient for the Company’s existing business.
4.16 Insurance Coverage . There is in full force and effect one or more policies of insurance issued by insurers of recognized responsibility insuring the Company and its properties, products and business against such losses and risks, and in such amounts, as are reasonable under the circumstances. The Company has not been refused any insurance coverage sought or applied for, and the Company has no reason to believe that it will be unable to renew its existing insurance coverage as and when the same shall expire upon terms at least as favorable to those currently in effect, other than possible increases in premiums that do not result from any act or omission of the Company. No Action or, to the knowledge of the Company, threat of Action has been asserted or made against the Company due to alleged bodily injury, disease, medical condition, death or property damage arising out of the function or malfunction of a product, procedure or service designed, manufactured, sold or distributed by the Company.
4.17 Interested Party Transactions . Except as disclosed in the Company Disclosure Schedule, no officer, director or shareholder of the Company or any Affiliate of any such Person or the Company has or has had, either directly or indirectly, (i) an interest in any Person that (a) furnishes or sells services or products that are furnished or sold or are proposed to be furnished or sold by the Company or (b) purchases from or sells or furnishes to the Company any goods or services, or (ii) a beneficial interest in any Contract to which the Company is a party or by which it may be bound or affected.

 

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4.18 Environmental Matters .
(a) To the knowledge of the Company, the Company has never generated, used, handled, treated, released, stored or disposed of any Hazardous Materials on any real property on which it now has or previously had any leasehold or ownership interest, except in compliance with all applicable Environmental Laws.
(b) To the knowledge of the Company, the historical and present operations of the Business are in compliance with all applicable Environmental Laws, except where any non-compliance has not had and would not reasonably be expected to have a Material Adverse Effect.
(c) There are no material pending or, to the knowledge of the Company, threatened, demands, claims, information requests or notices of noncompliance or violation against or to the Company relating to any Environmental Law; and, to the knowledge of the Company, there are no conditions or occurrences on any of the real property used by the Company in connection with the Business that would reasonably be expected to lead to any such demands, claims or notices against or to the Company, except such as have not had, and would not reasonably be expected to have, a Material Adverse Effect.
(d) To the knowledge of the Company, (i) the Company has not, sent or disposed of, otherwise had taken or transported, arranged for the taking or disposal of (on behalf of itself, a customer or any other party) or in any other manner participated or been involved in the taking of or disposal or release of a Hazardous Material to or at a site that is contaminated by any Hazardous Material or that, pursuant to any Environmental Law, (A) has been placed on the “National Priorities List”, the “CERCLIS” list, or any similar state or federal list, or (B) is subject to or the source of a claim, an administrative order or other request to take “removal”, “remedial”, “corrective” or any other “response” action, as defined in any Environmental Law, or to pay for the costs of any such action at the site; (ii) the Company is not involved in (and has no basis to reasonably expect to be involved in) any Action and has not received (and has no basis to reasonably expect to receive) any notice, request for information or other communication from any governmental authority or other third party with respect to a release or threatened release of any Hazardous Material or a violation or alleged violation of any Environmental Law, and has not received (and has no basis to reasonably expect to receive) notice of any claims from any Person relating to property damage, natural resource damage or to personal injuries from exposure to any Hazardous Material; and (iii) the Company has timely filed every report required to be filed, acquired all necessary certificates, approvals and permits, and generated and maintained all required data, documentation and records under all Environmental Laws, in all such instances except where the failure to do so would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION CORP.
Except as otherwise set forth in the Parent SEC Documents or in the Parent Disclosure Schedule to be delivered by Parent and Acquisition Corp. to the Company concurrently with the execution of the Agreement, Parent and Acquisition Corp., jointly and severally, represent and warrant to the Company as follows:
5.1 Organization . Each of Parent and Acquisition Corp. (i) is duly organized, validly existing and in good standing under the laws of its State of incorporation or organization, (ii) has all Consents necessary to own, lease and operate its properties and assets and to carry on its business as it is now being conducted and (iii) has all requisite corporate power and corporate authority to own, lease and operate its properties and assets and to carry on its business as it is now being conducted, except with respect to the foregoing clauses (i) and (ii) where such failure could not reasonably be expected to have a Material Adverse Effect. Each of Parent and Acquisition Corp. is duly qualified or authorized to conduct business and is in good standing as a foreign corporation in all jurisdictions in which the ownership or use of its assets or nature of the business conducted by it makes such qualification or authorization necessary, except where the failure to be so duly qualified, authorized and in good standing could not reasonably expected to result in a Material Adverse Effect.
5.2 Authorization; Validity of Agreement . Each of Parent and Acquisition Corp. has the requisite corporate power and corporate authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by each of Parent and Acquisition Corp. of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by the Board of Directors of each of Parent and Acquisition Corp. and the sole shareholder of Acquisition Corp., and no other action on the part of either of Parent and Acquisition Corp. is necessary to authorize the execution and delivery of this Agreement and the Ancillary Agreements and the consummation by either of Parent or Acquisition Corp. of the transactions contemplated hereby or thereby. This Agreement has been, and at Closing each of the Ancillary Agreements shall have been, duly executed and delivered by Parent and Acquisition Corp. (and assuming due and valid authorization, execution and delivery hereof by the Company) is, or at Closing shall be, a valid and binding obligation of each of Parent and Acquisition Corp., enforceable against each of them in accordance with its terms, except as such enforcement is limited by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.

 

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5.3 Capitalization of Parent and Acquisition Corp .
(a) The authorized capital stock of Parent consists of 50,000,000 shares of Parent Common Stock, of which 16,038,473 shares are issued and outstanding. All of the issued and outstanding shares of Parent Common Stock have been duly authorized and validly issued, are fully paid and non-assessable and, were issued in compliance with all applicable federal and state securities Laws and any preemptive rights or rights of first refusal of any Person. Except as set forth in the Parent Disclosure Schedule, there are no outstanding options, warrants, rights, calls, subscriptions, claims of any character, agreements, obligations, convertible or exchangeable securities or other commitments, contingent or otherwise, of any kind obligating Parent to issue, directly or indirectly, any additional shares of its capital stock or other equity securities. Except as set forth in the Parent Disclosure Schedule, (i) there are no contracts relating to the issuance, sale, transfer or voting of any equity securities or securities convertible into equity securities of the Company and (ii) there is no obligation, contingent or otherwise, of the Company to repurchase, redeem or otherwise acquire any share of the capital stock or other equity interests of the Company or provide funds to, or make any investment in (in the form of a loan, capital contribution or otherwise), or provide any guarantee with respect to the obligations of any other Person. Except for Acquisition Corp., the Company has no direct or indirect subsidiaries.
(b) The authorized capital stock of Acquisition Corp. consists of 1,000,000 shares of “Common Stock,” of which 1,000 shares are issued and outstanding. All of the issued and outstanding shares of capital stock of Acquisition Corp. are owned by Parent and have been duly authorized and validly issued, are fully paid and non-assessable and were issued in compliance with all applicable federal and state securities laws and any preemptive rights or rights of first refusal of any Person. There are no outstanding options, warrants, rights, calls, subscriptions, claims of any character, agreements, obligations, convertible or exchangeable securities or other commitments, contingent or otherwise, of any kind obligating Acquisition Corp. to issue, directly or indirectly, any additional shares of its capital stock or other equity securities of Acquisition Corp.. There are no contracts relating to the issuance, sale, transfer or voting of any equity securities or securities convertible into equity securities of Acquisition Corp. and (ii) there is no obligation, contingent or otherwise, of Acquisition Corp. to repurchase, redeem or otherwise acquire any share of the capital stock or other equity interests of Acquisition Corp. or provide funds to, or make any investment in (in the form of a loan, capital contribution or otherwise), or provide any guarantee with respect to the obligations of any other Person. Acquisition Corp. has no direct or indirect subsidiaries.
(c) Acquisition Corp. is a California corporation and a wholly-owned subsidiary of Parent that was formed specifically for the purpose of merging with and into the Company in connection with the Merger and has not conducted any business or acquired any property, and will not conduct any business or acquire any property prior to the Closing Date, except in preparation for and as may otherwise be necessary in connection with the transactions contemplated by this Agreement and the Ancillary Agreements.

 

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5.4 Consents and Approvals; No Violations . Except for (a) approval of the Merger by Parent (in its capacity as the sole shareholder of Acquisition Corp.) and (b) filing of the agreement of merger, together with the appropriate officers’ certificates attached thereto, with the office of the Secretary of State of the State of California, neither the execution, delivery or performance of this Agreement or any of the Ancillary Agreements by Parent or Acquisition Corp. nor the consummation of the transactions contemplated hereby and thereby will (i) violate any provision of its charter or by-laws; (ii) violate, conflict with or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, require the consent of or result in the creation of any encumbrance upon any of the properties of Parent or Acquisition Corp. or any subsidiary of Parent or Acquisition Corp under, any Contract to which Parent or Acquisition Corp or any subsidiary of Parent or Acquisition Corp or any of their respective properties may be bound; (iii) require any Consent with any governmental entity by or with respect to Parent or Acquisition Corp or any subsidiary of Parent or Acquisition Corp; or (iv) violate any order, writ, judgment, injunction, decree, law, statute, rule or regulation applicable to Parent or Acquisition Corp or any subsidiary of Parent or Acquisition Corp or any of their respective properties or assets.
5.5 Financial Statements and Other Information .
(a) Parent is an “issuer” under the Exchange Act, that is required to file reports with the Commission under Section 13 of the Exchange Act (the “ Parent SEC Reports ”). Parent has filed all Parent SEC Reports required to be filed by it during the 12 months immediately preceding the date of this Agreement with the SEC. The Parent SEC Reports (i) were prepared in all material respects in accordance with all applicable requirements of the Securities Act or the Exchange Act, as applicable; (ii) except as disclosed on the Parent Disclosure Schedule, were timely filed within the requirements of the Securities Act or the Exchange Act, as applicable; (iii) included all necessary certifications of the principal executive officer, principal accounting officer and principal financial officer as required to be filed pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002; and (iv) did not, at the time they were filed, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; the representation in clause (iv) of the preceding sentence does not apply to any misstatement or omission in any Parent SEC Report that has since been superseded by subsequent Parent SEC Reports.
(b) Parent has furnished or made available to the Company copies of its annual report and Form 10-K for the fiscal year ended November 30, 2007, as well as its Form 10-Q for the quarter ended February 29, 2008 (collectively, the “ Parent SEC Documents ”). The financial statements (the “ Parent Financial Statements ”) set forth in the Parent SEC Documents dated April 14, 2008 (the “ Most Recent Parent SEC Documents ”) have been prepared in accordance with GAAP and fairly present the financial condition and results of operations of Parent as of, and for the periods ended on, the dates set forth in such Parent SEC Documents.
(c) Parent has complied in all material respects with all applicable securities laws pertaining to the issuance of all of its currently outstanding capital stock and has fully and timely filed all material reports and filings required by applicable securities laws. Parent is not an “investment company” within the meaning of Section 3 of the Investment Company Act.

 

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(d) Parent maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Parent has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for Parent and designed such disclosure controls and procedures to ensure that material information relating to Parent, including Acquisition Corp, is made known to the certifying officers by others within those entities, particularly during the period in which Parent’s Form 10-KSB or 10-QSB, as the case may be, is being prepared. Parent’s certifying officers have evaluated the effectiveness of Parent’s controls and procedures in accordance with Item 307 of Regulation S-B under the Exchange Act for Parent’s most recently ended fiscal quarter or fiscal year-end (such date, the “ Evaluation Date ”). Parent presented in the Most Recent Parent SEC Documents the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no significant changes in Parent’s internal controls (as such term is defined in Item 308(c) of Regulation S-B under the Exchange Act) or in other factors that could significantly affect Parent’s internal controls.
(e) As of the date hereof, shares of Parent Common Stock are eligible for quotation on the Over-the-Counter (OTC) Bulletin Board under the symbol CDYE.OB and, as of the date hereof and the Closing Date, Parent is and will be in compliance in all material respects with all rules and regulations of the OTC Bulletin Board applicable to it and Parent Common Stock.
5.6 Absence of Undisclosed Liabilities . Neither Parent nor Acquisition Corp. has any Liability arising out of any transaction entered into at or prior to the Closing, except (i) as disclosed in the Parent SEC Documents; (ii) to the extent set forth on or reserved against in the balance sheet of Parent set forth in the Most Recent Parent SEC Documents (the “ Parent Balance Sheet ”) or the notes thereto; and (iii) by the specific terms of any written agreement, document or arrangement attached as an exhibit to the Parent SEC Documents.
5.7 Litigation . There is no Action pending or, to the knowledge of Parent and Acquisition Corp., threatened, involving Parent or Acquisition Corp., any subsidiary of Parent or Acquisition Corp., or affecting the officers, directors or employees of Parent or Acquisition Corp. or any subsidiary of Parent or Acquisition Corp., with respect to Parent’s and Acquisition Corp.’s, or any of Parent’s or Acquisition Corp.’s subsidiaries, business by or before any governmental entity or by any third party and neither Parent or Acquisition Corp. nor any subsidiary of Parent or Acquisition Corp. has received notice that any such Action is threatened. Neither Parent or Acquisition Corp. nor any subsidiary of Parent or Acquisition Corp. is in default under any judgment, order or decree of any governmental entity applicable to its business.

 

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5.8 No Default; Compliance with Applicable Laws . Neither Parent, Acquisition Corp. nor any subsidiary of Parent or Acquisition Corp. is in default or violation of any material term, condition or provision of (i) their respective charter, by-laws or similar organizational documents or (ii) any law applicable to Parent, Acquisition Corp. or any subsidiary of Parent or Acquisition Corp. or any of their respective property and assets and neither Parent, Acquisition Corp. nor any subsidiary of Parent or Acquisition Corp. has received notice of any violation of or Liability under any of the foregoing (whether material or not).
5.9 Broker’s and Finder’s Fees; Broker/Dealer Ownership . No person, firm, corporation or other entity is entitled by reason of any act or omission of Parent or Acquisition Corp. to any broker’s or finder’s fees, commission or other similar compensation with respect to the execution and delivery of this Agreement and the Ancillary Agreements or with respect to the consummation of the transactions contemplated hereby and thereby.
5.10 Assets and Contracts . Except for this Agreement and except as attached as exhibits to the Parent SEC Documents, neither Parent nor Acquisition Corp. is a party to any Contract not made in the ordinary course of business that is material to Parent or Acquisition Corp.. Without limiting the generality of the foregoing, neither Parent nor Acquisition Corp. is a party to any Contract (i) with a labor union, (ii) for the purchase of fixed assets or for the purchase of materials, supplies or equipment in excess of normal operating requirements, (iii) for the employment of any officer, individual employee or other Person on a full-time basis, (iv) with respect to bonus, pension, profit sharing, retirement, stock purchase, deferred compensation, medical, hospitalization or life insurance or similar plan, contract or understanding any or all of the employees of Parent or Acquisition Corp. or any other Person, (v) relating to or evidencing Indebtedness for Borrowed Money or subjecting any asset or property of Parent or Acquisition Corp. to any Lien or evidencing any Indebtedness, (vi) guaranteeing any Indebtedness, (vii) under which Parent or Acquisition Corp. is lessee of or holds or operates any property, real or personal, owned by any other Person under which payments to such Person exceed $100,000 per year and with an unexpired term (including any period covered by an option to renew exercisable by any other party) of more than 60 days, (viii) under which Parent or Acquisition Corp. is lessor or permits any Person to hold or operate any property, real or personal, owned or controlled by Parent or Acquisition Corp., (ix) granting any preemptive right, right of first refusal or similar right to any Person, (x) with any Affiliate of Parent or Acquisition Corp. or any present or former officer, director or stockholder of Parent or Acquisition Corp., (xi) obligating Parent or Acquisition Corp. to pay any royalty or similar charge for the use or exploitation of any tangible or intangible property, (xii) containing a covenant not to compete or other restriction on Parent’s or Acquisition Corp.’s ability to conduct a business or engage in any other activity, (xiii) with respect to any distributor, dealer, manufacturer’s representative, sales agency, franchise or advertising contract or commitment, (xiv) regarding registration of securities under the Securities Act, (xv) characterized as a collective bargaining agreement, or (xvi) with any Person continuing for a period of more than three months from the Closing Date which involves an expenditure or receipt by Parent or Acquisition Corp. in excess of $100,000. Parent has made available to the Company true and complete copies of all Contracts and other documents requested by the Company.

 

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5.11 Tax Returns and Audits . All required federal, state and local Tax Returns of Parent and Acquisition Corp. have been duly and timely filed, and all federal, state and local Taxes required to be paid with respect to the periods covered by such returns have been paid. Neither Parent nor Acquisition Corp. is or has been delinquent in the payment of any Tax. Neither Parent nor Acquisition Corp. has had a Tax deficiency proposed or assessed against it and has not executed a waiver of any statute of limitations on the assessment or collection of any Tax. None of Parent’s or Acquisition Corp.’s federal income Tax Returns nor any state or local income or franchise Tax Returns has been audited by governmental authorities. The reserves for Taxes reflected on the Parent Balance Sheet are and will be sufficient for the payment of all unpaid Taxes payable by Parent and Acquisition Corp. as of February 29, 2008 (the “ Parent Balance Sheet Date ”). Since the Parent Balance Sheet Date, each of Parent and Acquisition Corp. have made adequate provisions on its books of account for all Taxes with respect to its business, properties and operations for such period. Each of Parent and Acquisition Corp. have withheld or collected from each payment made to each of its employees the amount of all Taxes (including, but not limited to, federal, state and local income taxes, Federal Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes) required to be withheld or collected therefrom, and has paid the same to the proper Tax receiving officers or authorized depositaries. There are no federal, state, local or foreign Actions relating to Taxes or any Tax Returns of Parent or Acquisition Corp. now pending, and neither Parent nor Acquisition Corp. has received any notice of any proposed Actions relating to Taxes or any Tax Returns. Neither Parent nor Acquisition Corp. is obligated to make a payment, nor is it a party to any agreement that under certain circumstances could obligate it to make a payment, that would not be deductible under Section 280G of the Code. Neither Parent nor Acquisition Corp. has agreed nor is it required to make any adjustments under Section 481(a) of the Code (or any similar provision of state, local and foreign law) by reason of a change in accounting method or otherwise for any Tax period for which the applicable statute of limitations has not yet expired. Neither Parent nor Acquisition Corp. is a party to, is bound by or has any obligation under, any Tax Sharing Agreement, nor does it have any potential liability or obligation to any Person as a result of, or pursuant to, any Tax Sharing Agreements.
5.12 Employee Benefit Plans; ERISA . Neither Parent nor Acquisition Corp. has any Employee Benefit Plans.
5.13 Title to Property and Encumbrances . Each of Parent and Acquisition Corp. has good and marketable title to all properties and assets used by it in the conduct of its business (except for property held under valid and subsisting leases which are in full force and effect and which are not in default) free of all Liens except Permitted Liens and such ordinary and customary imperfections of title, restrictions and encumbrances that would not reasonably be expected to result in a Material Adverse Effect.
5.14 Insurance Coverage . There is in full force and effect one or more policies of insurance issued by insurers of recognized responsibility insuring Parent, Acquisition Corp. and their respective properties, products and business against such losses and risks, and in such amounts, as are reasonable under the circumstances. Neither Parent nor Acquisition Corp. has been refused any insurance coverage sought or applied for, and neither Parent nor Acquisition Corp. has reason to believe that it will be unable to renew its existing insurance coverage as and when the same shall expire upon terms at least as favorable to those currently in effect, other than possible increases in premiums that do not result from any act or omission of Parent or Acquisition Corp. No Action or, to the knowledge of Parent and Acquisition Corp., threat of Action has been asserted or made against Parent or Acquisition Corp. due to alleged bodily injury, disease, medical condition, death or property damage arising out of the function or malfunction of a product, procedure or service designed, manufactured, sold or distributed by Parent or Acquisition Corp..

 

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5.15 Interested Party Transactions . Except as disclosed in the Parent SEC Documents, no officer, director or stockholder of Parent or Acquisition Corp. or any Affiliate of any such Person has or has had, either directly or indirectly, (i) an interest in any Person that (a) furnishes or sells services or products that are furnished or sold or are proposed to be furnished or sold by Parent or Acquisition Corp. or (v) purchases from or sells or furnishes to Parent or Acquisition Corp. any goods or services, or (ii) a beneficial interest in any Contract to which Parent or Acquisition Corp. is a party or by which it may be bound or affected.
5.16 Environmental Matters .
(a) Neither Parent nor Acquisition Corp. has ever generated, used, handled, treated, released, stored or disposed of any Hazardous Materials on any real property on which it now has or previously had any license, leasehold or ownership interest, except in compliance with all applicable Environmental Laws.
(b) The historical and present operations of Parent’s and Acquisition Corp.’s business are in compliance with all applicable Environmental Laws, except where any non-compliance has not had and would not reasonably be expected to have a Material Adverse Effect.
(c) There are no material pending or, to the knowledge of Parent and Acquisition Corp., threatened, demands, claims, information requests or notices of noncompliance or violation against or to Parent or Acquisition Corp. relating to any Environmental Law; and, to the knowledge of Parent and Acquisition Corp., there are no conditions or occurrences on any of the real property used by Parent or Acquisition Corp. in connection with its business that would reasonably be expected to lead to any such demands, claims or notices against or to Parent or Acquisition Corp., except such as have not had, and would not reasonably be expected to have, a Material Adverse Effect.
(d) (i) Neither Parent nor Acquisition Corp. has sent or disposed of, otherwise had taken or transported, arranged for the taking or disposal of (on behalf of itself, a customer or any other party) or in any other manner participated or been involved in the taking of or disposal or release of a Hazardous Material to or at a site that is contaminated by any Hazardous Material or that, pursuant to any Environmental Law, (A) has been placed on the “National Priorities List”, the “CERCLIS” list, or any similar state or federal list, or (B) is subject to or the source of a claim, an administrative order or other request to take “removal”, “remedial”, “corrective” or any other “response” action, as defined in any Environmental Law, or to pay for the costs of any such action at the site; (ii) neither Parent nor Acquisition Corp. is involved in (and has no basis to reasonably expect to be involved in) any Action and has not received (and has no basis to reasonably expect to receive) any notice, request for information or other communication from any governmental authority or other third party with respect to a release or threatened release of any Hazardous Material or a violation or alleged violation of any Environmental Law, and has not received (and has no basis to reasonably expect to receive) notice of any claims from any Person relating to property damage, natural resource damage or to personal injuries from exposure to any Hazardous Material; and (iii) each of Parent and Acquisition Corp. has timely filed every report required to be filed, acquired all necessary certificates, approvals and permits, and generated and maintained all required data, documentation and records under all Environmental Laws, in all such instances except where the failure to do so would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

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5.17 Changes . Since Parent Balance Sheet Date, except as disclosed in the Parent SEC Documents, neither Parent nor Acquisition Corp. has (i) incurred any debts, obligations or Liabilities, absolute, accrued or, to Parent’s and Acquisition Corp.’s knowledge, contingent, whether due or to become due; (ii) discharged or satisfied any Liens; (iii) mortgaged, pledged or subjected to Lien any of its assets, tangible or intangible; (iv) sold, transferred or leased any of its assets; (v) cancelled or compromised any debt or claim, or waived or released any right of material value; (vi) suffered any physical damage, destruction or loss (whether or not covered by insurance) that could reasonably be expected to have a Material Adverse Effect; (vii) encountered any labor union difficulties; (viii) made or granted any wage or salary increase or made any increase in the amounts payable under any profit sharing, bonus, deferred compensation, severance pay, insurance, pension, retirement or other employee benefit plan, agreement or arrangement, or entered into any employment agreement; (ix) issued or sold any shares of capital stock, bonds, notes, debentures or other securities or granted any options (including employee stock options), warrants or other rights with respect thereto; (x) declared or paid any dividends on or made any other distributions with respect to, or purchased or redeemed, any of its outstanding capital stock; (xi) suffered or experienced any change in, or condition affecting, the financial condition of Parent or Acquisition Corp.; (xii) made any change in the accounting principles, methods or practices followed by it or depreciation or amortization policies or rates theretofore adopted; (xiii) made or permitted any amendment or termination of any material Contract, agreement or license to which it is a party; (xiv) suffered any material loss not reflected in the Parent Balance Sheet or its statement of income for the year ended on the Parent Balance Sheet Date; (xv) paid, or made any accrual or arrangement for payment of, bonuses or special compensation of any kind or any severance or termination pay to any present or former officer, director, employee, stockholder or consultant; (xvi) made or agreed to make any charitable contributions or incurred any non-business expenses in excess of $1,000 in the aggregate; or (xvii) entered into any Contract, agreement or license, or otherwise obligated itself, to do any of the foregoing.
5.18 Questionable Payments . Neither Parent, Acquisition Corp. nor to the knowledge of Parent or Acquisition Corp., any director, officer, agent, employee or other Person associated with or acting on behalf of Parent or Acquisition Corp., has used any corporate funds for (i) unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, (ii) made any direct or indirect unlawful payments to government officials or employees from corporate funds, (iii) established or maintained any unlawful or unrecorded fund of corporate monies or other assets, (iv) made any false or fictitious entries on the books of record of any such corporations, or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment.

 

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5.19 Employees . Except as set forth in the Parent SEC Documents, there are no employment or consulting contracts or arrangements, including pensions, bonus or profit sharing plans, or other severance or termination contracts or arrangements which constitute contractual obligations of Parent or Acquisition Corp. Neither Parent nor Acquisition Corp. is a party to or bound by any collective bargaining agreement, nor has Parent or Acquisition Corp. experienced any strike or material grievance, claim of unfair labor practices, or other collective bargaining dispute. Neither Parent nor Acquisition Corp. has committed any material unfair labor practice.
5.20 Validity of Shares . The shares of Parent Common Stock to be issued to the Shareholders in accordance with Article III hereof, when issued and delivered in accordance with the terms hereof, shall be duly and validly issued, fully paid and nonassessable.
5.21 No General Solicitation . In issuing Parent Common Stock in the Merger hereunder, neither Parent nor Acquisition Corp. nor anyone acting on their behalf has offered to sell Parent Common Stock by any form of general solicitation or advertising.
5.22 Disclosure . There is no fact relating to Parent or Acquisition Corp. that Parent and Acquisition Corp. has not disclosed to the Company in writing that has had or is having a Material Adverse Effect. No representation or warranty by Parent or Acquisition Corp. herein or exhibits hereto by Parent or Acquisition Corp. contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein misleading.
ARTICLE VI
CONDUCT OF BUSINESSES PENDING THE MERGER
6.1 Conduct of Business by the Company Pending the Merger . Prior to the Effective Time, unless Parent or Acquisition Corp. shall otherwise agree in writing or as otherwise contemplated by this Agreement:
(a) the business of the Company shall be conducted only in the ordinary course consistent with the past practice; and
(b) the Company shall use its reasonable best efforts to preserve intact the Business, to keep available the service of its present officers and key employees, and to preserve the good will of those having business relationships with it.
6.2 Conduct of Business by Parent and Acquisition Corp. Pending the Merger . Prior to the Effective Time, unless the Company shall otherwise agree in writing or as otherwise contemplated expressly permitted by this Agreement:
(a) the business of Parent and Acquisition Corp. shall be conducted only in the ordinary course consistent with past practice;

 

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(b) neither Parent nor Acquisition Corp. shall (i) directly or indirectly redeem, purchase or otherwise acquire or agree to redeem, purchase or otherwise acquire any shares of its capital stock; (ii) amend its articles of incorporation or by-laws; or (iii) split, combine or reclassify its capital stock or declare, set aside or pay any dividend payable in cash, stock or property or make any distribution with respect to such stock;
(c) neither Parent nor Acquisition Corp. shall (i) issue or agree to issue any additional shares of, or options, warrants or rights of any kind to acquire shares of, its capital stock; (ii) acquire or dispose of any assets; (iii) incur additional Indebtedness or any other Liabilities; (iv) enter into any Contract, agreement, commitment or arrangement with respect to any of the foregoing except this Agreement; or (v) except as contemplated by this Agreement, enter into any Contract, agreement, commitment or arrangement to dissolve, merge; consolidate or enter into any other material business contract or enter into any negotiations in connection therewith;
(d) Each of Parent and Acquisition Corp. shall use its best efforts to preserve intact the business of Parent and Acquisition Corp., to keep available the service of its present officers and key employees, and to preserve the good will of those having business relationships with Parent and Acquisition Corp.;
(e) neither Parent nor Acquisition Corp. will, nor will they authorize any director or authorize or permit any officer or employee or any attorney, accountant or other representative retained by them to, directly or indirectly, solicit, initiate or encourage any inquiries, offers or proposals from, discuss, assist or negotiate with, provide any information to, or consider the merits of any inquiries, offers or proposals from, any Person (other than the Company) relating to (i) the liquidation, dissolution, sale of assets of Parent or Acquisition Corp.; (ii) a merger or recapitalization involving Parent or Acquisition Corp.; (iii) a sale of capital stock of Parent or Acquisition Corp., or (iv) any similar transaction or business combination involving Parent or Acquisition Corp. Parent and Acquisition Corp. agree to immediately notify the Company of the substance of any transaction inquiry, proposal or offer concerning Parent or Acquisition Corp. that either Parent or Acquisition Corp. may receive.
(f) neither Parent nor Acquisition Corp. will enter into any new employment agreements with any of its officers or employees or grant any increases in the compensation or benefits of their officers and employees;
(g) except as otherwise expressly contemplated by this Agreement, neither Parent nor Acquisition Corp. shall undertake or permit any action that would (i) require any additional disclosure under Section 5.10 hereof; (ii) result in a breach of the representations and warranties contained in Article V ; or (iii) likely result in a Material Adverse Effect on Parent or Acquisition Corp;

 

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(h) Parent shall have merged with and into a Delaware corporation, in form and substance reasonably satisfactory to the Company, and in accordance with applicable laws of the State of Nevada and the State of Delaware, for the sole purpose of changing the domicile of Parent from the State of Nevada to the State of Delaware, and Parent shall have taken any and all action reasonably necessary in connection therewith such that Parent’s Common Stock shall continue to be quoted on the OTC Bulletin Board;
(i) Parent shall have filed a registration statement under the Exchange Act such that Parent’s Common Stock will be registered under the Exchange Act; and
(j) Subject to Section 10.4 hereof, Parent shall have paid, or caused to be paid, to the Persons entitled thereto, all of the Selling Expenses.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Access and Information . The Company, Parent and Acquisition Corp. shall each afford to the other and to the other’s accountants, counsel and other representatives reasonable access during normal business hours throughout the period prior to the Closing Date of all of its properties, books, Contracts, commitments and records (including but not limited to Tax Returns) and during such period, each shall furnish promptly to the other all information concerning its business, properties and personnel as such other party may reasonably request, provided that no investigation pursuant to this Section 7.1 shall affect any representations or warranties made herein. Each party shall hold, and shall cause its employees and agents to hold, in confidence all such information (other than such information that (i) becomes generally available to the public other than as a result of a disclosure by such party or its directors, officers, managers, employees, agents or advisors, or (ii) becomes available to such party on a non-confidential basis from a source other than a party hereto or its advisors, provided that such source is not known by such party to be bound by a confidentiality agreement with or other obligation of secrecy to a party hereto or another party until such time as such information is otherwise publicly available; provided , however , that: (a) any such information may be disclosed to such party’s directors, officers, employees and representatives of such party’s advisors who need to know such information for the purpose of evaluating the transactions contemplated hereby (it being understood that such directors, officers, employees and representatives shall be informed by such party of the confidential nature of such information); (b) any disclosure of such information may be made as to which the party hereto furnishing such information has consented in writing; and (c) any such information may be disclosed pursuant to a judicial, administrative or governmental order or request provided , that the requested party will promptly so notify the other party so that the other party may have a reasonable opportunity to seek a protective order or appropriate remedy and/or waive compliance with this Agreement and if such protective order or other remedy is not obtained or the other party waives compliance with this provision, the requested party will furnish only that portion of such information which is legally required and will exercise its best efforts to obtain a protective order or other reliable assurance that confidential treatment will be accorded the information furnished. If this Agreement is terminated, each party will deliver to the other all documents and other materials (including copies) obtained by such party or on its behalf from the other party as a result of this Agreement or in connection herewith, whether so obtained before or after the execution hereof.

 

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7.2 Additional Agreements . Subject to the terms and conditions herein provided, each of the parties agrees to use its commercially reasonable best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including using its commercially reasonable best efforts to satisfy the conditions precedent to the obligations of any of the parties to obtain all necessary waivers, and to lift any injunction or other legal bar to the Merger (and, in such case, to proceed with the Merger as expeditiously as possible). In order to obtain any necessary governmental or regulatory action or non-action, waiver, Consent, extension or approval, each of Parent, Acquisition Corp. and the Company agrees to take all reasonable actions and to enter into all reasonable agreements as may be necessary to obtain timely governmental or regulatory approvals and to take such further action in connection therewith as may be necessary. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and/or directors of Parent, Acquisition Corp. and the Company shall take all such necessary action.
7.3 Publicity . No party shall issue any press release or public announcement pertaining to the Merger that has not been agreed upon in advance by Parent and the Company, except as Parent reasonably determines to be necessary in order to comply with the rules of the Commission; provided that in such case Parent will use its best efforts to allow Company to review and reasonably approve any same prior to its release.
7.4 Appointment of Directors . Immediately upon the Effective Time, Parent shall accept the resignations of the current officers and directors of Parent as provided by Section 8.2(f)(v) hereof, and shall cause the persons listed as directors in Exhibit F hereto to be elected to the Board of Directors of Parent.
7.5 Parent Name Change and Exchange Listing . At the Effective Time, Parent shall take all required legal actions to change its corporate name from “Cody Resources, Inc.” to “ChromaDex Corporation.”
7.6 Shareholder Consent .
(a) The Board of Directors of the Company may at any time prior to approval of the Shareholders (i) decline to make, withdraw, modify or change any recommendation or declaration regarding this Agreement or the Merger or (ii) recommend and declare advisable any other offer or proposal, to the extent the Board of Directors of the Company determines in good faith, based upon advice of legal counsel, that withdrawing, modifying, changing or declining to make its recommendation regarding this Agreement or the Merger or recommending and declaring advisable any other offer or proposal is necessary to comply with its fiduciary duties under applicable law (which declinations, withdrawal, modification or change shall not constitute a breach by the Company of this Agreement). The Company shall provide written notice to Parent promptly upon the Company taking any action referred to in the foregoing proviso.
(b) Pursuant to the CGCL, at any time before the agreement of merger, together with the appropriate officers’ certificates, is filed with the office of the Secretary of State of the State of California, including any time after the Merger is authorized by the Shareholders, the Merger may be abandoned and this Agreement may be terminated in accordance with the terms hereof, without further action by the Shareholders.

 

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7.7 Parent Exchange Requirements . Between the date hereof and the Closing Date, (i) Parent shall continue to satisfy the filing requirements of the Exchange Act and all other requirements of applicable securities laws and the OTC Bulletin Board, and (ii) Parent will provide to the Company copies of any and all amendments or supplements to Parent SEC Documents filed with the Commission since the date of this Agreement and all subsequent registration statements and reports filed by Parent subsequent to the filing of Parent SEC Documents with the Commission and any and all subsequent information statements, proxy statements, reports or notices filed by Parent with the Commission or delivered to the stockholders of Parent.
7.8 Notification of Certain Matters . The Company, on the one hand, and Parent and Acquisition Corp., on the other hand, agree to give prompt notice to the other of (i) the occurrence, or failure to occur, of any event the occurrence or failure to occur of which would be likely to cause any of its representations or warranties contained in this Agreement to be untrue or inaccurate at any time in any material respect from the date of this Agreement to the Closing Date; (ii) any failure on its part to comply in any material respect with or satisfy any covenant or agreement to be complied with or satisfied by it hereunder; and (iii) the occurrence of any event that may make the satisfaction of the conditions in Article VIII impossible or unlikely. The Company, on the one hand, and Parent and Acquisition Corp, on the other hand, shall have the continuing obligation until the Closing promptly to supplement or amend the Company Disclosure Schedule and the Parent Disclosure Schedule, respectively, with respect to any matter hereafter arising or discovered that, if existing or known at the date of this Agreement, would have been required to be set forth or described in the Company Disclosure Schedule and the Parent Disclosure Schedule, respectively; provided , however , that for the purpose of the rights and obligations of the parties under this Agreement, except to the extent waived in writing by the affected party, no such supplement or amendment to the Company Disclosure Schedule and the Parent Disclosure Schedule shall have any effect for the purpose of determining the satisfaction of the conditions set forth in Article VIII .
ARTICLE VIII
CONDITIONS OF PARTIES’ OBLIGATIONS
8.1 Company Obligations . The obligations of Parent and Acquisition Corp. under this Agreement are subject to the fulfillment at or prior to the Closing of the following conditions, any of which may be waived in whole or in part by Parent.
(a) No Errors, etc. Each of the representations and warranties made by the Company contained in this Agreement that are qualified by materiality will be true and correct in all respects and all of the representations and warranties made by the Company contained in this Agreement that are not so qualified will be true and correct in all material respects, in each case, as if such representations or warranties were made on and as of the date of this Agreement and as of the Closing Date (except to the extent such representations and warranties speak as of a specific date or as of the date of this Agreement, in which case such representations and warranties will be so true and correct or so true and correct in all material respects, as the case may be, as of such specific date or as of the date of this Agreement, respectively).
(b) Compliance with Agreement . The Company shall have performed and complied in all material respects with all agreements and conditions required by this Agreement to be performed or complied with by it on or before the Closing Date.

 

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(c) No Company Material Adverse Effect . Since the date of this Agreement, there shall not have been any event or circumstance that has resulted in a Material Adverse Effect on the Company, and no event has occurred or circumstance exists that would reasonably be expected to result in a Material Adverse Effect on the Company.
(d) Certificate of Officers . The Company shall have delivered to Parent and Acquisition Corp. a certificate dated the Closing Date, executed on its behalf by the Chief Executive Officer of the Company, certifying the satisfaction of the conditions specified in paragraphs (a), (b) and (c) of this Section 8.1 .
(e) No Restraining Action . No Action or proceeding before any court, governmental body or agency shall have been threatened, asserted or instituted to restrain or prohibit, or to obtain substantial damages in respect of, this Agreement or the carrying out of the transactions contemplated by this Agreement.
(f) Supporting Documents . Parent and Acquisition Corp. shall have received the following:
(i) Copies of resolutions of the Board of Directors and the shareholders of the Company, certified by the Secretary of the Company, authorizing and approving the Merger and the execution, delivery and performance of this Agreement, the Ancillary Agreements and all other documents and instruments to be delivered pursuant hereto and thereto.
(ii) A certificate of incumbency executed by the Secretary of the Company certifying the names, titles and signatures of the officers of the Company authorized to execute any documents referred to in this Agreement and further certifying that the Articles of Incorporation and By-laws of the Company delivered to Parent and Acquisition Corp. at the time of the execution of this Agreement have been validly adopted and have not been amended or modified since the date hereof.
(iii) Evidence as of a recent date of the good standing and corporate existence of the Company issued by the office of the Secretary of State of the State of California.
(iv) An agreement of merger, together with an appropriate officer’s certificate of the Company attached thereto, duly executed by the Company.
(g) Capitalization of the Company . The number of issued and outstanding shares of Company Common Stock at Closing shall not exceed 26,500,000.

 

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8.2 Parent and Acquisition Corp. Obligations . The obligations of the Company under this Agreement are subject to the fulfillment at or prior to the Closing of the following conditions any of which may be waived in whole or in part by the Company:
(a) No Errors, etc. Each of the representations and warranties made by Parent and Acquisition Corp. contained in this Agreement that are qualified by materiality will be true and correct in all respects and all of the representations and warranties made by Parent and Acquisition Corp. contained in this Agreement that are not so qualified will be true and correct in all material respects, in each case, as if such representations or warranties were made on and as of the date of this Agreement and as of the Closing Date (except to the extent such representations and warranties speak as of a specific date or as of the date of this Agreement, in which case such representations and warranties will be so true and correct or so true and correct in all material respects, as the case may be, as of such specific date or as of the date of this Agreement, respectively).
(b) Compliance with Agreement . Each of Parent and Acquisition Corp. shall have performed and complied in all material respects with all agreements and conditions required by this Agreement to be performed or complied with by it on or before the Closing Date.
(c) No Company Material Adverse Effect . Since the date of this Agreement, there shall not have been any event or circumstance that has resulted in a Material Adverse Effect on Parent or Acquisition Corp., and no event has occurred or circumstance exists that would reasonably be expected to result in a Material Adverse Effect on Parent or Acquisition Corp.
(d) Certificate of Officers . Each of Parent and Acquisition Corp. shall have delivered to the Company a certificate dated the Closing Date, executed on its behalf by its Chief Executive Officer, certifying the satisfaction of the conditions specified in paragraphs (a), (b) and (c) of this Section 8.2 .
(e) No Restraining Action . No Action or proceeding before any court, governmental body or agency shall have been threatened, asserted or instituted to restrain or prohibit, or to obtain substantial damages in respect of, this Agreement or the carrying out of the transactions contemplated by this Agreement.

 

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(f) Supporting Documents . The Company shall have received the following:
(i) Copies of resolutions of Parent’s and Acquisition Corp.’s respective board of directors, the sole shareholder of Acquisition Corp. and the stockholders of Parent, certified by their respective Secretaries, authorizing and approving the Merger and the execution, delivery and performance of this Agreement, the Ancillary Agreements and all other documents and instruments to be delivered by them pursuant hereto and thereto.
(ii) A copy of each of Parent’s and Acquisition Corp.’s charter, certified by the office of the Secretary of State of the State of incorporation.
(iii) A certificate of incumbency executed by the respective Secretaries of Parent and Acquisition Corp. certifying the names, titles and signatures of the officers of Parent and Acquisition Corp. authorized to execute the documents referred to in subparagraph (i) above and further certifying that the charter and by-laws of Parent and Acquisition Corp. appended thereto have not been amended or modified.
(iv) A certificate, dated the Closing Date, executed by the Secretary of each of Parent and Acquisition Corp., certifying that, except for the filing of the agreement of merger, together with the appropriate officer’s certificates, with the office of the Secretary of State of the State of California: (i) all Consents with any court, governmental body or instrumentality that are required to be obtained by Parent or Acquisition Corp. for the execution and delivery of this Agreement and the consummation of the Merger shall have been duly made or obtained; and (ii) no Action before any court, governmental body or agency has been threatened, asserted or instituted against Parent or Acquisition Corp. to restrain or prohibit, or to obtain substantial damages in respect of, this Agreement or the carrying out of the transactions contemplated by this Agreement.
(v) The executed resignations of all directors and officers of Parent, with such resignations to take effect at the Effective Time.
(vi) Evidence as of a recent date of the good standing and corporate existence of each of Parent and Acquisition Corp. issued by the Secretary of State of their respective states of incorporation.
(vii) The original corporate record books and stock record books of Parent and Acquisition Corp.

 

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(viii) A agreement of merger, together with an appropriate officer’s certificate of Acquisition Corp. attached thereto, duly executed by Acquisition Corp.
(ix) Evidence that Donald Sampson shall have irrevocably committed to contribute to the capital of Parent immediately after the Effective Date all of his shares of Parent Common Stock without consideration therefor.
(x) Certificates of merger, as filed in the States of Delaware and Nevada, certifying as to the merger of Parent with and into a Delaware corporation solely for purposes of changing the domicile of Parent from the State of Nevada to the State of Delaware.
(xi) Evidence that Parent shall have obtained a new CUSIP number and applied for a new trading symbol after changing its domicile from the State of Nevada to the State of Delaware.
(xii) The registration statement filed by Parent under the Exchange Act covering Parent’s Common Stock shall have been declared effective (or shall automatically be deemed effective) by the Securities and Exchange Commission.
(xiii) Letters of Transmittal and the Written Consent, duly executed by Shareholders of the Company who hold not less than 99% of the outstanding Company Common Stock.
(xiv) Such additional supporting documentation and other information with respect to the transactions contemplated hereby as the Company may reasonably request.
(g) Due Diligence . The Company shall have been and shall continue to be satisfied in its sole discretion (regardless of (i) the satisfaction of any or all of the other closing conditions, (ii) any knowledge of such matters on or prior to the Closing Date or (iii) any indication previously given by, or on behalf of, the Company with respect to the satisfaction of any such matter) with the results of its and its representatives’ due diligence investigation and evaluation of Parent and Acquisition Corp. and each of the transactions contemplated hereby.

 

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ARTICLE IX
TERMINATION PRIOR TO CLOSING
9.1 Termination of Agreement . This Agreement may be terminated at any time prior to the Closing:
(a) by the mutual written consent of the Company, Parent and Acquisition Corp.;
(b) by the Company, if Parent or Acquisition Corp. materially breaches any of its representations, warranties or covenants contained herein, which failure or breach is not cured within five (5) days after the Company has notified Parent and Acquisition Corp. of its intent to terminate this Agreement pursuant to this paragraph (b);
(c) by Parent and Acquisition Corp., if the Company materially breaches any of its representations, warranties or covenants contained herein, which failure or breach is not cured within five (5) days after Parent or Acquisition Corp. has notified the Company of its intent to terminate this Agreement pursuant to this paragraph (c);
(d) by either the Company, on the one hand, or Parent and Acquisition Corp., on the other hand, if there shall be any order, writ, injunction or decree of any court or governmental or regulatory agency binding on Parent, Acquisition Corp. or the Company, which prohibits or materially restrains any of them from consummating the transactions contemplated hereby;
(e) by either the Company, on the one hand, or Parent and Acquisition Corp., on the other hand, if the Closing has not occurred on or prior to June 10, 2008, for any reason other than delay or nonperformance of the party seeking such termination; or
(f) by the Company if the Board of Directors of the Company determines in good faith, based upon advice of legal counsel, that termination pursuant to this Section 9.1(f) is necessary to comply with its fiduciary duties under applicable law as provided in Section 7.6(a) hereof.
9.2 Termination of Obligations . Termination of this Agreement pursuant to Section 9.1 hereof shall terminate all obligations of the parties hereunder, except for the obligations under Article IX and Sections 10.4 , 10.7 , 10.14 and 10.15 hereof; provided , however , that termination pursuant to paragraphs (b) or (c) of Section 9.1 shall not relieve the defaulting or breaching party or parties from any liability to the other parties hereto.
ARTICLE X
MISCELLANEOUS
10.1 Amendments. Subject to applicable law, this Agreement may be amended or modified only by the parties by written agreement executed by each party to be bound thereby and delivered by duly authorized officers of the parties at any time prior to the Effective Time; provided , however , that after the approval of the Merger by the Shareholders, no amendment or modification of this Agreement shall be made that by law requires further approval from the Shareholders without such further approval.

 

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10.2 Notices . Any notice, request, instruction, other document or communications to be given hereunder by any party to any other party shall be in writing and shall be deemed to have been duly given (i) when delivered personally, (ii) upon receipt of a transmission confirmation (with a confirming copy delivered personally or sent by overnight courier) if sent by facsimile or like transmission, or (iii) on the next business day when sent by Federal Express, United Parcel Service, U.S. Express Mail or other reputable overnight courier for guaranteed next day delivery, as follows:
     
If to Parent or Acquisition Corp., to:
  Cody Resources, Inc.
 
  Attention: Donald Sampson
 
  2915 W. Charleston Blvd., Suite 7
 
  Las Vegas, NV 89102
 
  Telephone: (702) 383-5862
 
  Facsimile:
 
   
 
  with a copy to:
 
   
 
  Andrew J. Levinson
 
  1350 Broadway, 11 th Floor
 
  New York, NY 10018
 
  Telephone: (212) 216-8036
 
  Facsimile: (646) 390-6307
 
   
If to the Company, to:
  ChromaDex, Inc.
 
  Attention: Frank Jaksch, President
 
  10005 Muirlands Blvd., Suite G
 
  Irvine, CA 92618
 
  Telephone: (949) 419-0288
 
  Facsimile: (949) 419-0294
 
   
 
  with a copy to:
 
   
 
  Manatt, Phelps & Phillips, LLP
 
  Attention: Bart Greenberg
 
  695 Town Center Drive
 
  Fourteenth Floor
 
  Costa Mesa, CA 92626
 
  Telephone: (714) 371-2518
 
  Facsimile: (714) 371-2560
or to such other persons or addresses as may be designated in writing by the party to receive such notice. Nothing in this Section 10.2 shall be deemed to constitute consent to the manner and address for service of process in connection with any legal proceeding (including arbitration arising in connection with this Agreement), which service shall be effected as required by applicable law.

 

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10.3 Entire Agreement . This Agreement, the Company Disclosure Schedule, the Parent Disclosure Schedule and the exhibits attached hereto or referred to herein and the Ancillary Agreements constitute the entire agreement of the parties, and supersede all prior agreements and undertakings, both written and oral, among the parties, with respect to the subject matter hereof and thereof.
10.4 Expenses . Except as otherwise expressly provided herein, whether or not the Merger occurs, (i) all expenses and fees incurred by the Company or any shareholder thereof shall be borne solely and entirely by the party that has incurred the same, and (ii) all expenses and fees incurred by Parent and Acquisition Corp., or any shareholder thereof, shall be borne solely and entirely by the party that has incurred the same; provided , that if the Merger occurs, the Surviving Corporation agrees to pay to Andrew J. Levinson, legal counsel to Parent, on behalf of and for the benefit of Parent, $20,000 in consideration and in full and final payment of all legal fees and expenses incurred by Parent and Acquisition Corp., or any shareholder thereof, in connection with the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements, which payment shall be made no later than the first business day after the Effective Time.
10.5 Severability . If any term or other provision of this Agreement or any of the Ancillary Agreements is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement and the Ancillary Agreements will nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties will negotiate in good faith to amend or modify this Agreement or the Ancillary Agreement, as the case may be, so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.
10.6 Successors and Assigns; Assignment . This Agreement and the Ancillary Agreements shall be binding upon and inure to the benefit of the parties and their respective permitted successors and assigns. Neither this Agreement, the Ancillary Agreements nor any of the rights, interests or obligations hereunder or thereunder shall be assigned or delegated by any of the parties prior the Effective Time without, in the case of Parent, the prior written approval of the Company and, in the case of the Company, the prior written approval of Parent.
10.7 No Third Party Beneficiaries . Except as set forth in Section 10.6 , nothing herein expressed or implied shall be construed to give any person other than the parties (and their successors and assigns as permitted herein) any legal or equitable rights hereunder.

 

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10.8 Counterparts; Delivery by Facsimile/E-Mail . This Agreement may be executed in multiple counterparts, and by the different parties in separate counterparts, each of which when executed will be deemed to be an original but all of which taken together will constitute one and the same agreement. This Agreement and the Ancillary Agreements, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine or electronic mail, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any of the Ancillary Agreements, each other party hereto or thereto shall re-execute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine or electronic mail to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine or electronic mail as a defense to the formation or enforceability of a contract and each such party forever waives any such defense.
10.9 Waiver . At any time prior to the Effective Time, any party hereto may (i) extend the time for the performance of any of the obligations or other acts of any other party; (ii) waive any inaccuracies in the representations and breaches of the warranties of the other party contained herein or in any document delivered pursuant hereto; and (iii) waive compliance by the other party with any of the agreements or conditions contained herein. Any such extension or waiver will be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby.
10.10 No Constructive Waivers . No failure or delay on the part of any party in the exercise of any right hereunder will impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, agreement or covenant herein, nor will any single or partial exercise of any such right preclude other or further exercise thereof or of any other right. No waiver by any party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.
10.11 Further Assurances . The parties shall use their commercially reasonable efforts to do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments or documents as any other party may reasonably request in order to carry out fully the intent and purposes of this Agreement, the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby.
10.12 Recitals . The recitals set forth above are incorporated herein and, by this reference, are made part of this Agreement as if fully set forth herein.
10.13 Headings . The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
10.14 Governing Law . This Agreement and the agreements, instruments and documents contemplated hereby shall be governed by and construed and enforced in accordance with the laws of the State of California without regard to its conflicts of law principles.

 

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10.15 Dispute Resolution . The parties shall initially attempt to resolve all claims, disputes or controversies arising under, out of or in connection with this Agreement by conducting good faith negotiations amongst themselves. If the parties are unable to resolve the matter following good faith negotiations, the matter shall thereafter be resolved by binding arbitration and each party hereby waives any right it may otherwise have to the resolution of such matter by any means other than binding arbitration pursuant to this Section 10.15 . Whenever a party shall decide to institute arbitration proceedings, it shall provide written notice to that effect to the other parties. The party giving such notice shall, however, refrain from instituting the arbitration proceedings for a period of sixty (60) days following such notice. During this period, the parties shall make good faith efforts to amicably resolve the claim, dispute or controversy without arbitration. Any arbitration hereunder shall be conducted in the English language under the commercial arbitration rules of the American Arbitration Association. Any such arbitration shall be conducted in Orange County, California by a panel of three arbitrators: one arbitrator shall be appointed by each of Parent and Company; and the third shall be appointed by the American Arbitration Association. The panel of arbitrators shall have the authority to grant specific performance. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award and an order of enforcement, as the case may be. In no event shall a demand for arbitration be made after the date when institution of a legal or equitable proceeding based on the claim, dispute or controversy in question would be barred under this Agreement or by the applicable statute of limitations. The prevailing party in any arbitration in accordance with this Section 10.15 shall be entitled to recover from the other party, in addition to any other remedies specified in the award, all reasonable costs, attorneys’ fees and other expenses incurred by such prevailing party to arbitrate the claim, dispute or controversy.
10.16 Interpretation .
(a) When a reference is made in this Agreement to a section or article, such reference shall be to a section or article of this Agreement unless otherwise clearly indicated to the contrary.
(b) Whenever the words “ include ”, “ includes ” or “ including ” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”
(c) The words “ hereof ”, “ hereby ”, “ herein ” and “ herewith ” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, and article, section, paragraph, exhibit and schedule references are to the articles, sections, paragraphs, exhibits and schedules of this Agreement unless otherwise specified.
(d) The words “ knowledge ,” or “ known to ,” or similar terms, when used in this Agreement to qualify any representation or warranty, refers to the knowledge or awareness of certain specific facts or circumstances related to such representation or warranty of the persons in the Applicable Knowledge Group (as defined herein) which a prudent business person would have obtained after reasonable investigation or due diligence on the part of any such person. For the purposes hereof, the “ Applicable Knowledge Group ” with respect to the Company shall be Frank Jaksch and Tom Varvaro. For the purposes hereof, the “ Applicable Knowledge Group ” with respect to Parent and the Acquisition Corp. shall be Donald Sampson and Barbara Grant.
(e) The word “ subsidiary ” shall mean any entity of which at least a majority of the outstanding shares or other equity interests having ordinary voting power for the election of directors or comparable managers of such entity is owned, directly or indirectly by another entity or person.

 

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(f) For purposes of this Agreement, “ ordinary course of business ” means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency).
(g) The plural of any defined term shall have a meaning correlative to such defined term, and words denoting any gender shall include all genders. Where a word or phrase is defined herein, each of its other grammatical forms shall have a corresponding meaning.
(h) A reference to any legislation or to any provision of any legislation shall include any modification or re-enactment thereof, any legislative provision substituted therefor and all regulations and statutory instruments issued thereunder or pursuant thereto, unless the context requires otherwise.
(i) The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed as of the date first above written by their respective officers thereunto duly authorized.
         
  COMPANY
CHROMADEX, INC.
 
 
  BY:   /s/ Frank Jaksch  
    Name:   Frank Jaksch   
    Title:   President & CEO   
 
  PARENT
CODY RESOURCES, INC.
 
 
  BY:   /s/ Donald Sampson   
    Name:   Donald Sampson   
    Title:   President   
 
  ACQUISITION CORP.
CDI ACQUISITION, INC.
 
 
  BY:   /s/ Donald Sampson   
    Name:   Donald Sampson   
    Title:   President   

 

-39-


 

AMENDMENT NO. 1
TO AGREEMENT AND PLAN OF MERGER
This AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER (this “ Amendment ”) is made and entered into as of this 10 th day of June 2008, by and among Cody Resources, Inc., a Nevada corporation (“ Parent ”), CDI Acquisition, Inc., a California corporation (“ Acquisition Corp. ”) and ChromaDex, Inc., a California corporation (the “ Company ”).
R E C I T A L S
A. The Company, Parent, and Acquisition Corp. are parties to that certain Agreement and Plan of Merger dated May 21, 2008 (the “ Merger Agreement ”), pursuant to which Acquisition Corp. will merge with and into the Company. Capitalized terms used herein but which are not otherwise defined shall have the meanings given to such terms in the Merger Agreement.
B. The Company, Parent and Acquisition Corp. desire that the Merger Agreement, including the Company Disclosure Schedules, be amended and supplemented, on the terms and subject to the conditions of this Amendment.
A G R E E M E N T
In consideration of the foregoing recitals and the respective covenants, agreements, representations and warranties contained herein and in the Merger Agreement, the parties, intending to be legally bound, agree to amend and supplement the Merger Agreement as follows:
1.  Termination of the Merger Agreement . Section 9.1(e) of the Merger Agreement is hereby amended and restated in its entirety to read as follows:
"(e)” by either the Company, on the one hand, or Parent and Acquisition Corp., on the other hand, if the Closing has not occurred on or prior to June 30, 2008, for any reason other than delay or nonperformance of the party seeking such termination; or”
2.  Schedule 4.10 of the Company Disclosure Schedules . Paragraph 11 on Schedule 4.10 of the Company Disclosure Schedule is hereby amended by adding the following after subsection (e) thereof:
"(f) Patent License Agreement dated August 19, 2005, by and between the Company and the Board of Regents of the University of Texas System.”
3.  Effective Date . This Amendment shall be deemed to be effective as of the date hereof.

 

 


 

4.  Effect of Amendment . Except as amended by this Amendment, the Merger Agreement shall remain in full force and effect. In addition, if there are any inconsistencies between the Merger Agreement and this Amendment, the terms of this Amendment shall prevail and control for all purposes.
5.  Governing Law . This Amendment shall be construed in accordance with and governed by the Laws of the State of California without giving effect to the principles of conflict of laws.
6.  Counterparts . This Amendment may be executed in any number of counterparts, each of which shall be deemed an original regardless of the date of its execution and delivery. All such counterparts together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.
         
  CODY RESOURCES, Inc.,
a Nevada corporation
 
 
  By:   /s/ Donald Sampson    
    Name:   Donald Sampson   
    Title:   President   
 
         
  CDI ACQUISITION, INC.,
a California corporation
 
 
  By:   /s/ Donald Sampson    
    Name:   Donald Sampson   
    Title:   President   
 
         
  CHROMADEX, INC.,
a California corporation
 
 
  By:   /s/ Frank Jaksch, Jr.    
    Name:   Frank Jaksch, Jr.   
    Title:   President   
 

 

 


 

AMENDMENT NO. 1
TO AGREEMENT AND PLAN OF MERGER
This AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER (this “ Amendment ”) is made and entered into as of this 10 th day of June 2008, by and among Cody Resources, Inc., a Nevada corporation (“ Parent ”), CDI Acquisition, Inc., a California corporation (“ Acquisition Corp. ”), and ChromaDex, Inc., a California corporation (the “ Company ”).
R E C I T A L S
A. The Company, Parent, and Acquisition Corp. are parties to that certain Agreement and Plan of Merger dated May 21, 2008 (the “ Merger Agreement ”), pursuant to which Acquisition Corp. will merge with and into the Company. Capitalized terms used herein but which are not otherwise defined shall have the meanings given to such terms in the Merger Agreement.
B. The Company, Parent and Acquisition Corp. desire that the Merger Agreement, including the Company Disclosure Schedules, be amended and supplemented, on the terms and subject to the conditions of this Amendment.
A G R E E M E N T
In consideration of the foregoing recitals and the respective covenants, agreements, representations and warranties contained herein and in the Merger Agreement, the parties, intending to be legally bound, agree to amend and supplement the Merger Agreement as follows:
1.  Termination of the Merger Agreement . Section 9.1(e) of the Merger Agreement is hereby amended and restated in its entirety to read as follows:
“(e) by either the Company, on the one hand, or Parent and Acquisition Corp., on the other hand, if the Closing has not occurred on or prior to June 30, 2008, for any reason other than delay or nonperformance of the party seeking such termination; or”
2.  Schedule 4.10 of the Company Disclosure Schedules . Paragraph 11 on Schedule 4.10 of the Company Disclosure Schedule is hereby amended by adding the following after subsection (e) thereof:
“(f) Patent License Agreement dated August 19, 2005, by and between the Company and the Board of Regents of the University of Texas System.”
3.  Effective Date . This Amendment shall be deemed to be effective as of the date hereof.

 

 


 

4.  Effect of Amendment . Except as amended by this Amendment, the Merger Agreement shall remain in full force and effect. In addition, if there are any inconsistencies between the Merger Agreement and this Amendment, the terms of this Amendment shall prevail and control for all purposes.
5.  Governing Law . This Amendment shall be construed in accordance with and governed by the Laws of the State of California without giving effect to the principles of conflict of laws.
6.  Counterparts . This Amendment may be executed in any number of counterparts, each of which shall be deemed an original regardless of the date of its execution and delivery. All such counterparts together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written.
         
  CODY RESOURCES, Inc.,
a Nevada corporation
 
 
  By:   /s/ Donald Sampson    
    Name:   Donald Sampson   
    Title:   President   
 
         
  CDI ACQUISITION, INC.,
a California corporation
 
 
  By:   /s/ Donald Sampson    
    Name:   Donald Sampson   
    Title:   President   
 
         
  CHROMADEX, INC.,
a California corporation
 
 
  By:   /s/ Frank Jaksch, Jr.    
    Name:   Frank Jaksch, Jr.   
    Title:   President   
 

 

2

Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
CODY RESOURCES, INC.
I, the undersigned, for purposes of incorporating and organizing a corporation under the General Corporation Law of the State of Delaware, do execute this Certificate of Incorporation and do hereby certify as follows:
I.
The name of this corporation is Cody Resources, Inc.
II.
The address, including street, number, city and country, of the registered office of the corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, Delaware, 19801; and the name of the registered agent of the Corporation in the State of Delaware at such address is the Corporation Trust Company.
III.
The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.
IV.
The Corporation is authorized to issue one class of stock, which shall be designated as “Common Stock”. The total number of shares of Common Stock the Corporation is authorized to issue is Fifty Million (50,000,000) with a par value of $.001 per share.
In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws of the corporation.
V.
The number of directors of the corporation shall be fixed from time to time by a bylaw or amendment thereof duly adopted by the Board of Directors or by the stockholders.
VI.
The election of directors need not be by written ballot unless the Bylaws of the corporation shall so provide.
VII.
Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the corporation.

 

 


 

VIII.
The corporation shall, to the fullest extent permitted by Section 145 of the General Corporation Law of Delaware, as the same exists or as may hereafter be amended and supplemented from time to time, indemnify any and all directors and officers whom it shall have the power to indemnify under said Section 145 from and against any and all of the expenses, liabilities, or other matters referred to or covered by said Section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in their official capacities and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director or officer, and shall inure to the benefit of the heirs, executors, and administrators of such a person. To the fullest extent permitted by Delaware law, as it may be amended from time to time, no director of the Corporation shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director.
IX.
The incorporator of the Corporation is Andrew J. Levinson, whose address is 1350 Broadway, 11 th Floor, New York, NY 10018.
X.
The corporation reserves the right at any time, and from time to time, to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed by law; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the rights reserved in this article.
IN WITNESS WHEREOF, the undersigned incorporator hereby acknowledges that the foregoing Certificate of Incorporation is his act and deed and that the facts stated therein are true.
Dated: June 19, 2008
         
    /s/ ANDREW J. LEVINSON    
 
 
 
Andrew J. Levinson, Incorporator
   

 

2


 

CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CODY RESOURCES, INC.
The following Certificate of Amendment of Certificate of Incorporation has been duly adopted in accordance with provisions of Sections 141(f), 228 and 242 of the General Corporation Law of the State of Delaware.
CODY RESOURCES, INC., a corporation organized and existing under the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That the Certificate of Incorporation of Cody Resources, Inc. (the “Corporation”) was filed with the Secretary of State of Delaware on June 19 th , 2008.
SECOND: That pursuant to a Unanimous Written Consent of Directors and Consent of Stockholders of the Corporation, resolutions were duly adopted that the Certificate of Incorporation of the Corporation be amended as follows:
RESOLVED:  
That the Certificate of Incorporation of the Corporation be amended by deleting Article I thereof and replacing it in its entirety with the following:
“I. The name of this corporation is ChromaDex Corporation.”
THIRD: That the aforesaid amendment was duly adopted in accordance with the provisions of Sections 141(f), 228 and 242 of the General Corporation Law of the State of Delaware, and prompt written notice shall be duly given pursuant to Section 228 of the General Corporation Law of the State of Delaware to those stockholders who did not approve the amendment by written consent.
IN WITNESS WHEREOF, Cody Resources, Inc. has caused this Certificate to be signed by its President and Secretary this 20 th day of June, 2008.
         
  CODY RESOURCES, INC.
 
 
  By:   /s/ Donald Sampson    
    Donald Sampson, President   
       
 
ATTEST:
By:  
/s/ Barbara M. Grant
 
Barbara M. Grant, Secretary

 

Exhibit 3.2
BYLAWS
OF
CODY RESOURCES, INC.
(hereinafter called the “Corporation”)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation shall be in the Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, and the name of the registered agent of the Corporation in the State of Delaware at such address is The Corporation Trust Company.
Section 2. Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the election of directors or for any other purpose shall be held at such time and place, either within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The Annual Meetings of Stockholders shall be held on such date and at such time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which meetings the stockholders shall elect by a plurality vote a Board of Directors, and transact such other business as may properly be brought before the meeting. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be: (A) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (B) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (C) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the Corporation not later than the close of business on the sixtieth (60th) day nor earlier than the close of business on the ninetieth (90th) day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than thirty (30) days from the date contemplated at the time of the previous year’s proxy statement, notice by the stockholder to be timely must be so received not earlier than the close of business on the ninetieth (90th) day prior to such annual meeting and not later than the close of business on the later of the sixtieth (60th) day prior to such annual meeting or, in the event public announcement of the date of such annual meeting is first made by the Corporation fewer than seventy (70) days prior to the date of such annual meeting, the close of business on the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the Corporation.

 

 


 

A stockholder’s notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the Corporation’s books, of the stockholder proposing such business, (iii) the class and number of shares of the Corporation which are beneficially owned by the stockholder, (iv) any material interest of the stockholder in such business and (v) any other information that is required to be provided by the stockholder pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “1934 Act”), in his capacity as a proponent to a stockholder proposal. Notwithstanding the foregoing, in order to include information with respect to a stockholder proposal in the proxy statement and form of proxy for a stockholder’s meeting, stockholders must provide notice as required by the regulations promulgated under the 1934 Act. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Article III, Section 2. The chairman of the annual meeting shall, if the facts warrant, determine and declare at the meeting that business was not properly brought before the meeting and in accordance with the provisions of this Article III, Section 2, and, if he should so determine, he shall so declare at the meeting that any such business not properly brought before the meeting shall not be transacted. Only persons who are confirmed in accordance with the procedures set forth in this v shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders by or at the direction of the Board of Directors or by any stockholder of the Corporation entitled to vote in the election of directors at the meeting who complies with the notice procedures set forth in this Article III, Section 2. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation in accordance with the provisions of this Article III, Section 2. Such stock-holder’s notice shall set forth (i) as to each person, if any, whom the stockholder proposes to nominate for election or re-election as a director: (A) the name, age, business address and residence address of such person, (B) the principal occupation or employment of such person, (C) the class and number of shares of the Corporation which are beneficially owned by such person, (D) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder, and (E) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the 1934 Act (including without limitation such person’s written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected); and (ii) as to such stockholder giving notice, the information required to be provided pursuant to this Article III, Section 2. At the request of the Board of Directors, any person nominated by a stockholder for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in the stockholder’s notice of nomination which pertains to the nominee. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Article III, Section 2. The chairman of the meeting shall, if the facts warrant, determine and declare at the meeting that a nomination was not made in accordance with the procedures prescribed by these Bylaws, and if he should so determine, he shall so declare at the meeting, and the defective nomination shall be disregarded. For purposes of this Article III, Section 2, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

 

2


 

Section 3. Special Meetings. Special meetings of the stockholders of the Corporation may be called, for any purpose or purposes, by (i) the Chairman of the Board of Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board of Directors for adoption), and shall be held at such place, on such date, and at such time, as the Board of Directors shall determine. If a special meeting is called by any person or persons other than the Board of Directors, the request shall be in writing, specifying the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the Chairman of the Board of Directors, the Chief Executive Officer, or the Secretary of the Corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The Board of Directors shall determine the time and place of such special meeting, which shall be held not less than thirty-five (35) nor more than one hundred twenty (120) days after the date of the receipt of the request. Upon determination of the time and place of the meeting, the officer receiving the request shall cause notice to be given to the stockholders entitled to vote, in accordance with the provisions of Article II, Section 4 of these Bylaws. If the notice is not given within sixty (60) days after the receipt of the request, the person or persons requesting the meeting may set the time and place of the meeting and give the notice. Nothing contained in this Article II, Section 3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held.
Section 4. Notice of Meetings. Except as otherwise provided by law or the Certificate of Incorporation, written notice of each meeting of stockholders shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting, such notice to specify the place, date and hour and purpose or purposes of the meeting and the means of remote communications, if any, by which stockholders may be deemed to be present in person and vote. Notice of the time, place and purpose of any meeting of stockholders may be waived in writing, signed by the person entitled to notice thereof, either before or after such meeting, and will be waived by any stockholder by his attendance thereat in person or by proxy, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given.
Section 5. Quorum. Except as otherwise provided by law or by the Certificate of Incorporation, the holders of a majority of the capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting.

 

3


 

Section 6. Voting. Unless otherwise required by law, the Certificate of Incorporation or these Bylaws, any question brought before any meeting of stockholders shall be decided by the vote of the holders of a majority of the stock represented and entitled to vote thereat. Except as otherwise required by the Certificate of Incorporation, each stockholder represented at a meeting of stockholders shall be entitled to cast one vote for each share of the capital stock entitled to vote thereat held by such stockholder. Such votes may be cast in person or by proxy but no proxy shall be voted on or after three years from its date, unless such proxy provides for a longer period. The Board of Directors, in its discretion, or the officer of the Corporation presiding at a meeting of stockholders, in his discretion, may require that any votes cast at such meeting shall be cast by written ballot.
Section 7. Consent of Stockholders in Lieu of Meeting. Unless otherwise provided in the Certificate of Incorporation, any action required or permitted to be taken at any Annual or Special Meeting of Stockholders of the Corporation, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.
Section 8. List of Stockholders Entitled to Vote. The officer of the Corporation who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder of the Corporation who is present.
Section 9. Stock Ledger. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 8 of this Article II or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders.

 

4


 

ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The Board of Directors shall consist of not less than one nor more than 13 members, the exact number of which shall initially be fixed by the Incorporator and thereafter from time to time by the Board of Directors provided that no decrease in the number of directors shall shorten the term of a director. Except as provided in Section 3 of this Article, directors shall be elected by a plurality of the votes cast at Annual Meetings of Stockholders, and each director so elected shall hold office until the next Annual Meeting and until his successor is duly elected and qualified, or until his earlier resignation or removal. Any director may resign at any time upon notice to the Corporation. Directors need not be stockholders. If for any cause, the directors shall not have been elected at an annual meeting, they may be elected as soon thereafter as convenient at a special meeting of the stockholders called for that purpose in the manner provided in these Bylaws.
Section 2. Removal. Any director may be removed at any time with or without cause by an affirmative vote of the holders of a majority of the outstanding shares of the Corporation then entitled to vote. If a director is elected by a voting group of stockholders, only the stockholders of that voting group may participate in the vote to remove such director. A director may not be removed by the stockholders at a meeting unless the notice of the meeting states that the purpose, or one of the purposes, of the meeting is removal of the director. If any directors are so removed, new directors may be elected at the same meeting.
Section 3. Vacancies. Unless otherwise provided in the Certificate of Incorporation, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors, shall unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by stockholder vote, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the fill term of the director for which the vacancy was created or occurred and until such director’s successor shall have been elected and qualified. A vacancy in the Board of Directors shall be deemed to exist under this Bylaw in the case of the death, removal or resignation of any director.
Section 4. Duties and Powers. The business of the Corporation shall be managed by or under the direction of the Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these Bylaws directed or required to be exercised or done by the stockholders.
Section 5. Meetings.
5.1 Annual Meetings. The annual meeting of the Board of Directors shall be held immediately after the annual meeting of stockholders and at the place where such meeting is held. No notice of an annual meeting of the Board of Directors shall be necessary and such meeting shall be held for the purpose of electing officers and transacting such other business as may lawfully come before it.

 

5


 

5.2 Regular Meetings. Unless otherwise restricted by the Certificate of Incorporation, regular meetings of the Board of Directors may be held at any place within or without the state of Delaware which has been designated by resolution of the Board of Directors or the written consent of all directors.
5.3 Special Meetings. Unless otherwise restricted by the Certificate of Incorporation, special meetings of the Board of Directors may be held at any time and place within or without the State of Delaware whenever called by the Chairman of the Board, the President or any two of the directors.
5.4 Telephone Meetings. Any member of the Board of Directors, or of any committee thereof, may participate in a meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting.
5.5 Notice of Meetings. Notice of the time and place of all special meetings of the Board of Directors shall be orally or in writing, by telephone, facsimile, telegraph, telex or electronic transmission during normal business hours, at least twenty-four (24) hours before the date and time of the meeting, or sent in writing to each director by first class mail, charges prepaid, at least three (3) days before the date of the meeting. Notice of any meeting may be waived in writing at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
5.6 Waiver of Notice. The transaction of all business at any meeting of the Board of Directors, or any committee thereof, however called or noticed, or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present and if, either before or after the meeting, each of the directors not present shall sign a written waiver of notice. All such waivers shall be filed with the corporate records or made a part of the minutes of the meeting.
Section 6. Quorum. Unless the Certificate of Incorporation requires a greater number and except with respect to indemnification questions arising under Article IX hereof, for which a quorum shall be one-third of the exact number of directors fixed from time to time in accordance with the Certificate of Incorporation, a quorum of the Board of Directors shall consist of a majority of the exact number of directors fixed from time to time by the Board of Directors in accordance with the Certificate of Incorporation provided, however, at any meeting whether a quorum be present or otherwise, a majority of the directors present may adjourn from time to time until the time fixed for the next regular meeting of the Board of Directors, without notice other than by announcement at the meeting. At each meeting of the Board of Directors at which a quorum is present, all questions and business shall be determined by the affirmative vote of a majority of the directors present, unless a different vote be required by law, the Certificate of Incorporation or these Bylaws.

 

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Section 7. Actions of Board. Unless otherwise provided by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all the members of the Board of Directors or committee, as the case may be, consent thereto in writing, or electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee. Such filings shall be in paper form if the minutes are maintained in paper form and in electronic form if the minutes are maintained in electronic form.
Section 8. Committees.
8.1 Executive Committee. The Board of Directors may by resolution passed by a majority of the whole Board of Directors appoint an Executive Committee to consist of one (1) or more members of the Board of Directors. The Executive Committee, to the extent permitted by law and provided in the resolution of the Board of Directors shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation.
8.2 Other Committees. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, from time to time appoint such other committees as may be permitted by law. Such other committees appointed by the Board of Directors shall consist of one (1) or more members of the Board of Directors and shall have such powers and perform such duties as may be prescribed by the resolution or resolutions creating such committees.
8.3 Term. The Board of Directors, subject to the provisions of Article III Subsections 8.1 and 8.2 of this Bylaw may at any time increase or decrease the number of members of a committee or terminate the existence of a committee. The membership of a committee member shall terminate on the date of his death or voluntary resignation from the committee or from the Board of Directors. The Board of Directors may at any time for any reason remove any individual committee member and the Board of Directors may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee, and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.

 

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8.4 Meetings. Unless the Board of Directors shall otherwise provide, regular meetings of the Executive Committee or any other committee appointed pursuant to this Article III, Section 8 shall be held at such times and places as are determined by the Board of Directors, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter. Special meetings of any such committee may be held at any place which has been determined from time to time by such committee, and may be called by any director who is a member of such committee, upon written notice or notice by electronic transmission to the members of such committee of the time and place of such special meeting given in the manner provided for the giving of written notice or notice by electronic transmission to members of the Board of Directors of the time and place of special meetings of the Board of Directors. Notice of any special meeting of any committee may be waived in writing or by electronic transmission at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends such special meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. A majority of the authorized number of members of any such committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which a quorum is present shall be the act of such committee.
Section 9. Compensation. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.
Section 10. Interested Directors. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose if (i) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.

 

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ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall include, if and when designated by the Board of Directors, the Chairman of the Board of Directors, the Chief Executive Officer, the President, one or more Vice Presidents, the Secretary, the Chief Financial Officer, the Treasurer, and the Controller, all of whom shall be elected at the annual organizational meeting of the Board of Directors. The Board of Directors may also appoint one or more Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such other officers and agents with such powers and duties as it shall deem necessary. The Board of Directors may assign such additional titles to one or more of the officers as it shall deem appropriate. Any one person may hold any number of offices of the Corporation at any one time unless specifically prohibited therefrom by law. The salaries and other compensation of the officers of the Corporation shall be fixed by or in the manner designated by the Board of Directors.
Section 2. Election. The Board of Directors at its first meeting held after each Annual Meeting of Stockholders shall elect the officers of the Corporation who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors; and all officers of the Corporation shall hold office until their successors are chosen and qualified, or until their earlier resignation or removal. Any officer elected by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. The salaries of all officers of the Corporation shall be fixed by the Board of Directors.
Section 3. Resignation and Removal. Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the Board of Directors, at any regular or special meeting thereof, or, except in case of an officer chosen by the Board of Directors, by any officer upon whom such power of removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the Corporation. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Any such resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party.
Section 4. Voting Securities Owned by the Corporation. Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the President or any Vice President and any such officer may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons.
Section 5. Chairman of the Board of Directors. The Chairman of the Board of Directors, when present, shall preside at all meetings of the stockholders and the Board of Directors. The Chairman of the Board of Directors shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time. If there is no President, then the Chairman of the Board of Directors shall also serve as the Chief Executive Officer of the Corporation and shall have the powers and duties prescribed in Section 7 of this Article IV.

 

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Section 6. President. The President shall preside at all meetings of the stockholders and at all meetings of the Board of Directors, unless the Chairman of the Board of Directors has been appointed and is present. Unless some other officer has been elected Chief Executive Officer of the Corporation, the President shall be the Chief Executive Officer of the Corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the Corporation. The President shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time.
Section 7. Chief Executive Officer. The Chief Executive Officer of the Corporation shall have overall executive responsibility and authority for management of the business, affairs, and operations of the Corporation (subject to the authority of the Board of Directors), and, in general, shall perform all duties incident to the office of a chief executive officer of a Corporation, including those duties customarily performed by persons holding such office, and shall perform such other duties as, from time to time, may be assigned to him or her by the Board of Directors.
Section 8. Chief Financial Officer. The Chief Financial Officer shall keep or cause to be kept the books of account of the Corporation in a thorough and proper manner and shall render statements of the financial affairs of the Corporation in such form and as often as required by the Board of Directors or the President. The Chief Financial Officer, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the Corporation. The Chief Financial Officer shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. The President may direct the Treasurer or any Assistant Treasurer, or the Controller or any Assistant Controller to assume and perform the duties of the Chief Financial Officer in the absence or disability of the Chief Financial Officer, and each Treasurer and Assistant Treasurer and each Controller and Assistant Controller shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.
Section 9. Vice Presidents. The Vice Presidents shall perform such duties commonly incident to their office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.
Section 10. Secretary. The Secretary shall attend all meetings of the stockholders and of the Board of Directors and shall record all acts and proceedings thereof in the minute book of the Corporation. The Secretary shall give notice in conformity with these Bylaws of all meetings of the stockholders and of all meetings of the Board of Directors and any committee thereof requiring notice. The Secretary shall perform all other duties given him in these Bylaws and other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time. The President may direct any Assistant Secretary to assume and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

 

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Section 11. Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation.
Section 12. Assistant Secretaries. Except as may be otherwise provided in these Bylaws, Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, any Vice President, if there be one, or the Secretary, and in the absence of the Secretary or in the event of his disability or refusal to act, shall perform the duties of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary.
Section 13. Assistant Treasurers. Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, any Vice President, if there be one, or the Treasurer, and in the absence of the Treasurer or in the event of his disability or refusal to act, shall perform the duties of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer. If required by the Board of Directors, an Assistant Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation.
Section 14. Other Officers. Such other officers as the Board of Directors may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors. The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers.

 

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ARTICLE V
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION
Section 1. Execution of Corporate Instrument. The Board of Directors may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute on behalf of the Corporation any corporate instrument or document, or to sign on behalf of the Corporation the corporate name without limitation, or to enter into contracts on behalf of the Corporation, except where otherwise provided by law or these Bylaws, and such execution or signature shall be binding upon the Corporation.
Unless otherwise specifically determined by the Board of Directors or otherwise required by law, promissory notes, deeds of trust, mortgages and other evidences of indebtedness of the Corporation, and other corporate instruments or documents requiring the corporate seal, and certificates of shares of stock owned by the Corporation, shall be executed, signed or endorsed by the Chairman of the Board of Directors, or the President or any Vice President, and by the Secretary or Treasurer or any Assistant Secretary or Assistant Treasurer. All other instruments and documents requiting the corporate signature, but not requiring the corporate seal, may be executed as aforesaid or in such other manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositaries on funds to the credit of the Corporation or in special accounts of the Corporation shall be signed by such person or persons as the Board of Directors shall authorize so to do.
Unless authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
Section 2. Voting of Securities Owned by the Corporation. All stock and other securities of other Corporations owned or held by the Corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person authorized so to do by resolution of the Board of Directors, or, in the absence of such authorization, by the Chairman of the Board of Directors, the Chief Executive Officer or the President.
Section 3. Execution of Other Securities. All bonds, debentures and other corporate securities of the Corporation, other than stock certificates, may be signed by the Chairman of the Board of Directors, the President, the Chief Executive Officer, the Chief Financial Officer, or such other person as may be authorized by the Board of Directors

 

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ARTICLE VI
STOCK
Section 1. Form of Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate signed, in the name of the Corporation (i) by the Chairman of the Board of Directors, the President or a Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by him in the Corporation.
Section 2. Signatures. Where a certificate is countersigned by (i) a transfer agent other than the Corporation or its employee, or (ii) a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable in the manner prescribed by law and in these Bylaws. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by his attorney lawfully constituted in writing and upon the surrender of the certificate therefor, which shall be canceled before a new certificate shall be issued. The Corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the Corporation to restrict the transfer of shares of stock of the Corporation of any one or more classes owned by such stockholders in any manner not prohibited by the General Corporation Law of Delaware.
Section 5. Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty days nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of stock to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such stock or stocks on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law.

 

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Section 7. Notwithstanding any other provision in these Bylaws, the Corporation may adopt a system of issuance, recordation and transfer of its shares by electronic or other means not involving any issuance of certificates, including provisions for notice to purchasers in substitution for any required statements on certificates, and as may be required by applicable corporate securities laws, which system has been approved by the United States Securities and Exchange Commission. Any system so adopted shall not become effective as to issued and outstanding certificated securities until the certificates therefore have been surrendered to the Corporation.
ARTICLE VII
NOTICES
Section 1. Notices. Whenever, under any provisions of these Bylaws, notice is required to be given to any stockholder, it shall be given in writing, timely and duly deposited in the United States mail, postage prepaid, and addressed to his last known post office address as shown by the stock record of the Corporation or its transfer agent. Any notice required to be given to any director may be given by such method, or by facsimile, telex or telegram, except that such notice other than one which is delivered personally shall be sent to such address as such director shall have filed in writing with the Secretary, or, in the absence of such filing, to the last known post office address of such director. An affidavit of mailing, executed by a duly authorized and competent employee of the Corporation or its transfer agent appointed with respect to the class of stock affected, specifying the name and address or the names and addresses of the stockholder or stockholders, or director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall in the absence of fraud, be prima facie evidence of the facts therein contained. All notices given by mail, as above provided, shall be deemed to have been given as at the time of mailing, and all notices given by facsimile, telex or telegram shall be deemed to have been given as of the sending time recorded at time of transmission. In addition, without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders may be given by electronic transmission in the manner provided in Section 232 of the Delaware General Corporation Law.It shall not be necessary that the same method of giving notice be employed in respect of all directors, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others. The period or limitation of time within which any stockholder may exercise any option or right, or enjoy any privilege or benefit, or be required to act, or within which any director may exercise any power or right, or enjoy any privilege, pursuant to any notice sent him in the manner above provided, shall not be affected or extended in any manner by the failure of such stockholder or such director to receive such notice. Whenever notice is required to be given, under any provision of law or of the Certificate of Incorporation or Bylaws of the Corporation, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given.

 

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In the event that the action taken by the Corporation is such as to require the filing of a certificate under any provision of the Delaware General Corporation Law, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful. Whenever notice is required to be given, under any provision of law or the Certificate of Incorporation or Bylaws of the Corporation, to any stockholder to whom (i) notice of two consecutive annual meetings, and all notices of meetings or of the taking of action by written consent without a meeting to such person during the period between such two consecutive annual meetings, or (ii) all, and at least two, payments (if sent by first class mail) of dividends or interest on securities during a twelve-month period, have been mailed addressed to such person at his address as shown on the records of the Corporation and have been returned undeliverable, the giving of such notice to such person shall not be required. Any action or meeting which shall be taken or held without notice to such person shall have the same force and effect as if such notice had been duly given. If any such person shall deliver to the Corporation a written notice setting forth his then current address, the requirement that notice be given to such person shall be reinstated. In the event that the action taken by the Corporation is such as to require the filing of a certificate under any provision of the Delaware General Corporation Law, the certificate need not state that notice was not given to persons to whom notice was not required to be given pursuant to this paragraph.
Section 2. Waivers of Notice. Whenever any notice is required by law, the Certificate of Incorporation or these Bylaws, to be given to any director, member of a committee or stockholder, a waiver thereof in writing, signed, by the person or persons entitled to said notice, or waiver by electronic transmission by such person whether before or after the time stated therein, shall be deemed equivalent thereto.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, and may be paid in cash, in property, or in shares of the capital stock. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any proper purpose, and the Board of Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the word “Delaware”. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

 

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ARTICLE IX
INDEMNIFICATION
Section 1. Directors and Officers. The Corporation shall indemnify its directors and officers to the fullest extent not prohibited by the Delaware General Corporation Law; provided, however, that the Corporation may modify the extent of such indemnification by individual contracts with its directors and officers; and, provided, further, that the Corporation shall not be required to indemnify any director or officer in connection with any proceeding (or part thereof) initiated by such person unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the Board of Directors of the Corporation, (iii) such indemnification is provided by the Corporation, in its sole discretion, pursuant to the powers vested in the Corporation under the Delaware General Corporation Law or (iv) such indemnification is required to be made under Section 4 of this Article.
Section 2. Employees and Other Agents. The Corporation shall have power to indemnify its employees and other agents as set forth in the Delaware General Corporation Law.
Section 3. Expense. The Corporation shall advance to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer, of the Corporation, or is or was serving at the request of the Corporation as a director or executive officer of another corporation, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request therefor, all expenses incurred by any director or officer in connection with such proceeding upon receipt of an undertaking by or on behalf of such person to repay said amounts if it should be determined ultimately that such person is not entitled to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined Section 5 of this Article, no advance shall be made by the Corporation to an officer of the Corporation (except by reason of the fact that such officer is or was a director of the Corporation in which event this paragraph shall not apply) in any action, suit or proceeding, whether civil, criminal, administrative or investigative, if a determination is reasonably and promptly made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to the proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, that the facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the Corporation.

 

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Section 4. Enforcement. Without the necessity of entering into an express contract, all rights to indemnification and advances to directors and officers under this Bylaw shall be deemed to be contractual rights and be effective to the same extent and as if provided for in a contract between the Corporation and the director or officer. Any right to indemnification or advances granted by this Bylaw to a director or officer shall be enforceable by or on behalf of the person holding such right in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefore. The claimant in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting his claim. In connection with any claim for indemnification, the Corporation shall be entitled to raise as a defense to any such action that the claimant has not met the standard of conduct that make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed. In connection with any claim by an officer of the Corporation (except in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such officer is or was a director of the Corporation) for advances, the Corporation shall be entitled to raise a defense as to any such action clear and convincing evidence that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed in the best interests of the Corporation, or with respect to any criminal action or proceeding that such person acted without reasonable cause to believe that his conduct was lawful. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct. In any suit brought by a director or officer to enforce a right to indemnification or to an advancement of expenses hereunder, the burden of proving that the director or officer is not entitled to be indemnified, or to such advancement of expenses, under this Article XI or otherwise shall be on the Corporation.
Section 5. Non-Exclusivity of Rights. The rights conferred on any person by this Bylaw shall not be exclusive of any other right which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office. The Corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advances, to the fullest extent not prohibited by the Delaware General Corporation Law.
Section 6. Survival of Rights. The rights conferred on any person by this Bylaw shall continue as to a person who has ceased to be a director, officer, employee or other agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
Section 7. Insurance. To the fullest extent permitted by the Delaware General Corporation Law, the Corporation, upon approval by the Board of Directors, may purchase insurance on behalf of any person required or permitted to be indemnified pursuant to this Bylaw.

 

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Section 8. Amendments. Any repeal or modification of this Bylaw shall only be prospective and shall not affect the rights under this Bylaw in effect at the time of the alleged occurrence of any action or omission to act that is the cause of any proceeding against any agent of the Corporation.
Section 9. Saving Clause. If this Bylaw or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each director and officer to the fullest extent not prohibited by any applicable portion of this Bylaw that shall not have been invalidated, or by any other applicable law.
Section 10. Certain Definitions. For the purposes of this Bylaw, the following definitions shall apply:
10.1 The term “proceeding” shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative.
10.2 The term “expenses” shall be broadly construed and shall include, without limitation, court costs, attorneys’ fees, witness fees, fines, amounts paid in settlement or judgment and any other costs and expenses of any nature or kind incurred in connection with any proceeding.
10.3 The term the “corporation” shall have the meaning set forth in Section 145(h) of the DGCL.
10.4 References to a “director,” “executive officer,” “officer,” “employee,” or “agent” of the Corporation shall include, without limitation, situations where such person is serving at the request of the Corporation as, respectively, a director, executive officer, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise.
10.5 References to “other enterprises” shall have the meaning set forth in Section 145(i) of the DGCL.
ARTICLE X
AMENDMENTS
Section 1. Amendment. These Bylaws may be altered, amended or repealed, in whole or in part, or new Bylaws may be adopted by the stockholders or by the Board of Directors, provided, however, that notice of such alteration, amendment, repeal or adoption of new Bylaws be contained in the notice of such meeting of stockholders or Board of Directors as the case may be. All such amendments must be approved by either the holders of a majority of the outstanding capital stock entitled to vote thereon or by a majority of the entire Board of Directors then in office.
Section 2. Entire Board of Directors. As used in this Article X and in these Bylaws generally, the term “entire Board of Directors” means the total number of directors which the Corporation would have if there were no vacancies.

 

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CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
1. That I am the duly elected and acting Secretary of Cody Resources, Inc., a Delaware corporation; and
2. That the foregoing bylaws, comprising 19 pages, constitute the bylaws of said Corporation as duly adopted by action of the Incorporator taken on June 19, 2008 and ratified by the Board of Directors of the Corporation on June 19, 2008.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of said Corporation this 19 day of June, 2008.
         
 
 
/s/ Barbara Grant 
Barbara Grant Secretary
   

 

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Exhibit 4.1
INVESTOR’S RIGHTS AGREEMENT
THIS INVESTOR’S RIGHTS AGREEMENT (hereinafter referred to as the “ Agreement ”), is entered into effective as of the 31 st day of December, 2005, by and between ChromaDex, Inc., a corporation authorized and existing pursuant to the laws of the state of California (the “Corporation”), and The University of Mississippi Research Foundation, a Mississippi nonprofit corporation (the “ Shareholder ”).
WITNESSETH:
WHEREAS, the Shareholder acquired shares of common stock of the Corporation (the “ Shares ”);
WHEREAS, the Corporation and the Shareholder desire to make conditional provisions for the registration of the Shares as set forth herein, if the same be necessary.
NOW, THEREFORE, for and in consideration of the premises and of the mutual covenants, representations, warranties and Agreements herein contained, the parties hereto agree as follows:
SECTION I
DEFINITIONS
1.1 As used in this Agreement, the following capitalized terms shall have the following meanings:
“Exchange Act” means the Securities and Exchange Act of 1934, as amended.
“GAAP” means generally accepted accounting principles, as in effect from time to time in the United States, consistently applied.
“Holder” means the Shareholder, or any assignee of a Shareholder.
“Common Shares” means the common equity shares of the Corporation.
“Common Share Equivalents” means the definition provided in Section 9.1.
“Maintenance Securities” means the definition provided in Section 9.1.
“Percentage Ownership” means, with respect to the Shareholder, (i) the number of Shares, on a fully diluted basis, that such Shareholder beneficially owns at such time, divided by (ii) the total number of Shares, on a fully diluted basis, outstanding at such time.
“Person” means a natural person, partnership, corporation, business trust, association, joint venture or other entity or a government or agency or political subdivision thereof.
“Preemptive Rights” means the definition provided in Section 9.1.

 

 


 

“Prospectus” means the prospectus included in any Registration Statement, as supplemented by any and all prospectus supplements and as amended by any and all post-effective amendments and including all material incorporated by reference in such prospectus.
“Registration” means the registration described in Section II hereof.
“Registrable Securities” means the Shares owned by the Holder, and any securities issued or issuable with respect to such Shares by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or reorganization.
“Registration Statement” means the registration statement which covers Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus included in such registration statement, amendments (including post-effective amendments) and supplements to such registration statement, and all exhibits to and all material incorporated by reference in such registration statement.
“Restricted Stock” means any Shares issued to Holder for which a Registration Statement has not become effective and which are not otherwise saleable without an effective registration statement pursuant to Rule 144 or any other rule of the Securities Act promulgated from time to time.
“Securities Act” means the Securities Act of 1933, as from time to time amended.
“Selling Holder” means any holder of Restricted Stock who exercises any Registration Rights granted hereunder.
“Share” means the common stock in the Corporation and includes any options, warrants or other rights to purchase Shares and securities of any type whatsoever that are, or may become, convertible into Shares with the number of any Shares which is an option, warrant, right or convertible security being the number of such Shares which would result upon the immediate exercise of such option, warrant or right of conversion of such convertible security, without regard as to when such option, warrant or right may in fact be exercised or such convertible security may in fact be converted.
SECTION II
PIGGYBACK REGISTRATION RIGHTS
2.1 If the Corporation proposes to file a registration statement under the Securities Act with respect to an offering for its own account of any class of its equity securities (other than a registration statement on Form S-8 (or any successor form) or any other registration statement relating solely to employee benefit plans or an offering of securities solely to the Corporation’s existing shareholders), then the Corporation shall in each case give written notice of such proposed filing to the Holder as soon as practicable (but no later than 20 business days) before the anticipated filing date, and such notice shall offer each Holder the opportunity to register such number of shares of Restricted Stock as such Holder may request. Each Holder desiring to have Restricted Stock included in such registration statement shall so advise the Corporation in writing within 10 business days after the date on which the Corporation’s notice is so given, setting forth the number of shares of Restricted Stock for which registration is requested.

 

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If the Corporation’s offering is to be an underwritten offering, the Corporation shall, subject to the further provisions of this Agreement, use its reasonable best efforts to cause the managing underwriter or underwriters to permit the Holders of the Restricted Stock requested to be included in the registration for such offering to include such Restricted Stock in such offering on the same terms and conditions as any similar securities of the Corporation included therein. The right of registration pursuant to this Section II connection with an underwritten offering by the Corporation shall, unless the Corporation otherwise assents, be conditioned upon such Holder’s participation as a seller in such underwritten offering and its execution of an underwriting agreement with the managing underwriter or underwriters selected by the Corporation. Notwithstanding the foregoing, if the managing underwriter or underwriters of such offering determines in its or their sole discretion that the success of the offering would be adversely affected by inclusion of the Restricted Stock requested to be included, then in such managing underwriter’s discretion, the number of shares of Restricted Stock to be registered and offered for the accounts of Holders shall be either (i) eliminated entirely from such registration and offering or (ii) reduced pro rata on the basis of the number of securities requested by such Holders to be registered and offered to the extent necessary to reduce the total amount of securities to be included in such offering to the amount recommended by such managing underwriter or underwriters (provided that if securities are being registered and offered for the account of other persons or entities in addition to the Corporation, such reduction shall not be proportionally greater than any similar reductions imposed on such other persons or entities). Any Restricted Stock excluded from an underwriting shall, if applicable, be withdrawn from registration and shall not, without the consent of the Corporation, be transferred in a public distribution prior to the earlier of sixty (60) days (or such other shorter period of time as the managing underwriter may require) after the effective date of the registration statement or sixty (60) days after the date the Holders of such Restricted Stock are notified of such exclusion.
SECTION III
REGISTRATION PROCEDURES
3.1 Whenever Holders of Restricted Stock have requested pursuant to Section 2.1 that any Restricted Stock be registered, the Corporation shall, subject to the provisions of Section 4, use its reasonable best efforts to effect the registration and the sale of such Restricted Stock in accordance with the intended method of disposition thereof as promptly as practicable, and in connection with any such request, the Corporation shall:
(a) prepare and file with the Securities and Exchange Commission, a registration statement on any form for which the Corporation then qualifies and which counsel for the Corporation shall deem appropriate and which form shall be available for the sale or distribution of such Restricted Stock in accordance with the intended method of distribution thereof, and use its reasonable best efforts to cause such registration statement to become effective; provided that, (i) before filing a registration statement or prospectus or any amendments or supplements thereto, the Corporation will furnish to one counsel selected by the Holders of a majority of the shares of Restricted Stock covered by such registration statement copies of all such documents proposed to be filed, which documents will be subject to the review and comment of such counsel and (ii) after the filing of the registration statement, the Corporation shall promptly notify each Selling Holder of Restricted Stock of any stop order issued or, to the knowledge of the Corporation, threatened by the Securities and Exchange Commission and take all reasonable actions to prevent the entry of such stop order or to remove it if entered;

 

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(b) prepare and file with the Securities and Exchange Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period of not less than ninety (90) days or such shorter period as shall terminate when the distribution of all Restricted Stock covered by such registration statement shall have terminated and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the Selling Holders thereof set forth in such registration statement;
(c) as soon as reasonably practicable, furnish to each Selling Holder, prior to filing a registration statement, copies of such registration statement as proposed to be filed and thereafter furnish to such Selling Holder such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration Statement (including each preliminary prospectus) and such other documents as such Selling Holder may reasonably request in order to facilitate the disposition of the Restricted Stock owned by such Selling Holder;
(d) use its best efforts to register or qualify such Restricted Stock under such other securities or blue sky laws of such jurisdictions within the United States and Canada as any Selling Holder reasonably (in light of such Selling Holder’s intended plan of distribution) requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such Selling Holder to consummate the disposition in such jurisdictions of the Restricted Stock owned by such Selling Holder; provided that the Corporation shall not be required to (i) qualify generally to do business or file a general consent to service of process in any jurisdiction or (ii) take any action that would subject itself to taxation in any such jurisdiction;
(e) promptly notify each Selling Holder of such Restricted Stock, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the occurrence of any event known to the Corporation requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers or recipients of such Restricted Stock, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and promptly make available to each Selling Holder any such supplement or amendment;
(f) enter into an underwriting agreement in customary form, the form and substance of such underwriting agreement being subject to the reasonable satisfaction Corporation and a majority in interest of the Selling Holders;

 

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(g) make available for inspection by any Selling Holder, any underwriter participating in any sale or distribution pursuant to such registration statement and any attorney, accountant or other agent retained by any such Selling Holder or underwriter (collectively, the “Inspectors”) all financial and other records, pertinent corporate documents and properties of the Corporation (collectively, the “Records”) as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Corporation’s officers and employees to supply all information reasonably requested for such purpose by any such Inspector in connection with such registration statement; provided that the Corporation shall have no obligation to permit such access to the Records or its officers or employees in a manner that would unreasonably disrupt the normal conduct of its business operations. (Each such Selling Holder and Inspector that actually reviews Records supplied by the Corporation that Include information that the Corporation identifies, in good faith, as being confidential or proprietary (“Confidential Information”) shall be required at the Corporation’s option, prior to any such review, to execute an agreement with the Corporation providing that such Inspector shall not publicly disclose any Confidential Information unless such disclosure is required by applicable law or legal process and shall not use such information for any purpose other than the limited purpose contemplated by this subsection (g). Each such Selling Holder and Inspector shall be required further to agree that it shall, upon learning that disclosure of Confidential Information is sought in a court of competent jurisdiction, give notice to the Corporation and allow the Corporation, at its expense, to undertake appropriate action to prevent disclosure of the Confidential Information);
(h) in the event such sale is pursuant to an underwritten offering, use its reasonable best efforts to obtain a comfort letter or letters from the Corporation’s independent public accountants in customary form and covering such matters of the type customarily covered by comfort letters as the managing underwriter reasonably requests; and
(i) otherwise use its reasonable efforts to comply with all applicable rules and regulations of the Securities and Exchange Commission.
Upon receipt of any notice from the Corporation of the occurrence of any event of the kind described in subsection (e) hereof, such Selling Holder shall forthwith discontinue all offerings, sales and other dispositions of Restricted Stock pursuant to the registration statement covering such Restricted Stock until such Selling Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by subsection (e) hereof. In the event the Corporation shall give any such notice, the Corporation shall extend the period during which such registration statement shall be maintained effective pursuant to this Agreement (including the period referred to in subsection (b) hereof) by the number of days during the period from and including the date of the giving of such notice pursuant to subsection (b) hereof to and including the first date on which each Selling Holder of Restricted Stock covered by such registration statement shall have received the copies of the supplemented or amended prospectus contemplated by subsection (e) hereof.

 

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SECTION IV
CONDITIONS AND LIMITATIONS
4.1 The Corporation’s obligations under Section 2 of this Agreement shall be subject to the Corporation having received the information and documents specified in Section 5 hereof and each Selling Holder shall have observed or performed its other covenants contained in Sections 5 and 7 hereof.
4.2 The Corporation’s obligation under Section 2 hereof shall be subject to the limitations and conditions specified in such section, and to the condition that the Corporation may at any time terminate its proposal to register equity securities for its own account and discontinue its efforts to cause a registration statement to become or remain effective as to any and all shares of Restricted Stock that would otherwise have been eligible for inclusion in such registration.
SECTION V
CERTAIN COVENANTS OF HOLDERS OF RESTRICTED STOCK
5.1 Notices and requests delivered to the Corporation by Holders for whom Restricted Stock is to be registered pursuant to this Agreement shall contain such information regarding the Restricted Stock to be so registered, the Holder and the intended method of disposition of such Restricted Stock as shall reasonably be required in connection with the actions contemplated to be taken pursuant to this Agreement. Any Holder whose Restricted Stock is included in a registration statement pursuant to this Agreement shall execute all consents, powers of attorney, registration statements and other documents reasonably required to be executed by it in order to cause such registration statement to became effective. Each Selling Holder covenants that, in disposing of such Holder’s shares, such Holder will comply with all other requirements of applicable law.
SECTION VI
REGISTRATION EXPENSES
6.1 All Registration Expenses (as defined herein) will be borne by the Corporation. Underwriting discounts and commissions applicable to the sale of Restricted Stock shall be borne by the Holder of the Restricted Stock to which such discount or commission relates, and each Selling Holder shall be responsible for the fees and expenses of any legal counsel, accountants or other agents retained by such Selling Holder and all other out-of-pocket expenses incurred by such Selling Holder in connection with any registration under this Agreement.
6.2 As used herein, the term Registration Expenses means all expenses incident to the Corporation’s performance of or compliance with this Agreement (whether or not the registration in connection with which such expenses are incurred ultimately becomes effective), including without limitation all registration and filing fees, fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Restricted Stock), rating agency fees, printing expenses, the fees and expenses incurred in connection with the listing or admission for quotation of the securities to be registered an any securities exchange or quotation system and fees and disbursements of counsel for the Corporation and its independent certified public accountants (including the expenses of any special audit or comfort letters required by or incident to such performance), securities act liability insurance (if the Corporation elects to obtain such insurance), the reasonable fees and expenses of any special expert retained by the Corporation in connection with such registration and the fees and expenses of other persons retained by the Corporation.

 

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SECTION VII
INDEMNIFICATION; CONTRIBUTION
7.1 Indemnification by the Corporation. In connection with any offering of Restricted Stock pursuant to this Agreement, the Corporation shall indemnify and hold harmless each Selling Holder, its officers, directors and agents and each person, if any, who controls such Selling Holder within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages, liabilities and expenses (including reasonable fees and disbursements of counsel) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus relating to Restricted Stock or in any amendment or supplement thereto or in any preliminary prospectus relating to Restricted Stock or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made, except insofar as such losses, claims, damages, liabilities or expenses arise out of, or are based upon, any such untrue statement or alleged untrue statement or omission or alleged omission based upon information furnished in writing to the Corporation by such Selling Holder or on such Selling Holder’s behalf expressly for use therein. In connection with any underwritten offering of Restricted Stock registered pursuant to this Agreement, the Corporation shall cause to be included in any underwriting agreement with the underwriters of such offering provisions indemnifying and providing for contribution to such underwriters and their officers and directors and each person who controls such underwriters on substantially the same basis as the provisions of this Section 7.1 indemnifying and providing for contribution to the Selling Holders.
7.2 Indemnification by Holders of Restricted Stock. In connection with any offering of Restricted Stock pursuant to this Agreement, each Selling Holder, severally and not jointly, shall indemnify and hold harmless the Corporation, its officers, directors and agents and each person, if any, who controls the Corporation within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, and, in accordance with industry practice, in the case of an offering of Restricted Stock pursuant to this Agreement, each underwriter of such Restricted Stock if requested b underwriter, from and against any and all losses, claims, damages, liabilities and expenses (including reasonable fees and disbursements of counsel) arising in and out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus relating to Restricted Stock or in any amendment or supplement thereto or in any preliminary prospectus relating to Restricted Stock, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made, provided that (i) such losses, claims, damages, liabilities or expenses arise out of, or are based upon, any such untrue statement or alleged untrue statement or omission or alleged omission based upon information furnished in writing to the Corporation by such Selling Holder or on such Selling Holder’s behalf expressly for use therein and no Selling Holder shall be liable for any indemnification under this Section 7.2 in an aggregate amount which exceeds the total net proceeds received by such Selling Holder from such offering. In connection with any underwritten offering of Restricted Stock registered pursuant to this Agreement, each Selling Holder shall cause to be included in any underwriting agreement with the underwriters of such offering provisions indemnifying and providing for contribution to such underwriters, their officers and directors and each person who controls such underwriters on substantially the same basis as the provisions of this Section 7.2 indemnifying and providing for contribution to the Corporation. Notwithstanding anything herein to the contrary, if the Selling Holder is the Shareholder, then the Shareholder shall have no indemnification obligations of any nature whatsoever.

 

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7.3 Conduct of Indemnification Proceedings. If any action or proceeding (including any governmental investigation) shall be brought or asserted against any indemnified party hereunder in respect of which indemnity may be sought from an indemnifying party hereunder, such indemnifying party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such indemnified party, and shall assume the payment of all expenses. Such indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expenses of such indemnified party unless (i) the indemnifying party has agreed to pay such fees and expenses, (ii) the indemnifying party shall have failed to assume the defense of such action or proceeding and employ counsel reasonably satisfactory to such indemnified party, or (iii) the named parties to any such action or proceeding (including any impleaded parties) include both such indemnified party and such indemnifying party, and such indemnified party shall have been advised by counsel that there may be one or more legal defenses available to such indemnified party which are different from or additional to those available to the indemnifying party (in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action or proceeding on behalf of such indemnified party; it being understood, however, that the indemnifying party shall not, in connection with any one such action or proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for such indemnified party, which firm shall be designated in writing by such indemnified party and reasonably satisfactory to the indemnifying party). The indemnifying party shall not be liable for any settlement of any such action or proceeding erected without its written consent, but if settled with its written consent, or if there is a final judgment for the plaintiff in any such action or proceeding, the indemnifying party shall indemnify and hold harmless the indemnified party from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment.
7.4 Contribution. If the indemnification provided for in this Section 7 is unavailable to the Corporation or the Selling Holders in respect of any losses, claims, damages, liabilities or judgments referred to herein, then each such indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities and judgments in such proportion as is appropriate to reflect the relative fault of each such party in connection with such statements or omissions or alleged statements or omissions, as well as any other relevant equitable considerations. The relative fault of each such party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Corporation and the Selling Holders agree that it would not be just and equitable if contribution pursuant to this Section 7.4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding sentences.

 

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The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding sentences shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigation or defending any such action or claims. Notwithstanding the provisions of this Section 7.4, no Selling Holder shall be required to contribute an amount in excess of the amount by which the total price at which the Restricted Stock of such Selling Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section  11(f) of the Securities Act) shall be entitled to contribution from any person who is not guilty of such fraudulent misrepresentation. Notwithstanding anything herein to the contrary, if the Selling Holder is the Shareholder, then the Shareholder shall have no obligations of contribution of any nature whatsoever.
SECTION VIII
REPRESENTATIONS AND WARRANTIES
The Corporation represents and warrants that:
8.1 Existence and Rights. The Corporation is a corporation duly organized, validly existing and in good standing under the laws of the state of California. The Corporation has all requisite corporate power and authority, to carry on its business and to own and use the properties owned and used by it.
8.2 Corporate Authorization. The Corporation has all necessary power and authority to enter into this Agreement and has taken all action, specifically including, without limitation, all corporate action, necessary to execute, deliver and perform this Agreement. This Agreement has been duly authorized, executed and delivered by the Corporation and is a legally valid and binding obligation of the Corporation enforceable against the Corporation in accordance with its terms.
8.3 No Conflict. The execution, delivery and performance of this Agreement and of the related documents by the Corporation will not violate any provision of the Corporation’s Articles of Incorporation or the Bylaws; or violate any law or rule or regulation of any administrative agency or governmental body; or any order, writ, injunction or decree of any court, arbiter, administrative agency or governmental authority having jurisdiction over the Corporation; or violate any indenture, mortgage, contract, will, agreement or other undertaking to which the Corporation is a party or is subject, or result in the creation or imposition of any lien or encumbrance on any of the properties of the Corporation under any of the foregoing.

 

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SECTION IX
PRE-EMPTIVE RIGHTS
9.1 Except as provided below, the Company shall not issue, sell or transfer any shares of Common Shares (or any options, warrants, convertible securities, or other rights to purchase or subscribe for Common Shares) (the “ Common Share Equivalents ”) unless the Company provides the Shareholder written notice (the “ Section 9.1 Notice ”) at least 30 days prior to the proposed issuance date specifying the price at which the Common Share Equivalents are proposed to be issued and sold and all other material terms of the issuance. The Shareholder shall have the right to purchase, during the period set forth in Section 9,1, at the price and on the terms specified in the Section 4.1 Notice, up to the number of shares (or amount) of Common Share Equivalents (the “ Maintenance Securities ”) as are necessary for the Shareholder to maintain its Percentage Ownership as it existed immediately prior to such issuance (the “ Preemptive Rights ”).
9.2 The Shareholder may exercise its right to purchase Maintenance Securities by delivering written notice of acceptance of any offer made as a Section 9.1 notice within 15 days after receipt of the Section 9.1 notice. A delivery of such a written notice of acceptance, which shall specify the number of shares (or amount) of Maintenance Securities that the Shareholder desires to so purchase, shall constitute a binding agreement of the Shareholder to purchase such Maintenance Securities specified in such written acceptance notice, at the price and on substantially the same terms and conditions as set forth in the Section 9.1 notice. The Company shall have 60 days from the date it sends the Section 9.1 notice to consummate the proposed issuance of Common stock Equivalents. On the date of such consummation, the Corporation shall issue certificates representing the Maintenance Securities to be purchased by the Shareholder, registered in the name and in the denomination specified by the Shareholder in the applicable written acceptance notice, against payment by the Shareholder of the purchase price for such Maintenance Securities. If the Corporation proposes to issue Common Share Equivalents after such 60-day period, it shall again comply with the foregoing resolution.
9.3 Notwithstanding the foregoing, the Shareholder shall not be entitled to purchase Maintenance Securities as contemplated by Section IX (and no Section 9.1 notice shall be required) in connection with (i) the grant or exercise of options to purchase Common Stock Equivalents, or the issuance of shares of Common Stock Equivalents, to employees, officers and directors of the Corporation pursuant to any employee benefit plan, incentive award program or other employee compensation arrangement, plan or program, (ii) the issuance of Common Stock Equivalents upon the conversion, exercise or exchange of, or as required by the terms of, outstanding securities (other than securities issued in violation of this Agreement), in accordance with their original terms (including, without limitation, the issuance of shares of common Stock upon the exercise of any Warrants), (iii) the issuance of Common Stock Equivalents pursuant to any stock split, stock dividend or other similar stock recapitalization, (iv) any public offering which would subject the Company to the Piggyback Registration Rights under Section 2.1.
9.4 The provisions of this Section IV shall only apply with respect to the Percentage Ownership calculated for the Shareholder by reference to the number of shares of Restricted Stock held at the time of determination, and shall terminate upon the occurrence of the public offering subjecting the Company to Piggyback Registration Rights under Section 2.1.

 

10


 

SECTION X
MISCELLANEOUS
10.1 Notices. Any notice or other communication required or permitted hereunder shall be deemed given if in writing and delivered personally, telegraphed, telexed, sent by facsimile transmission or sent by certified, registered or express mail, postage prepaid. Any such notice shall be deemed given when so delivered personally or sent by overnight air courier or facsimile transmission or, if mailed, two days after the date of deposit in the United States mails, as follows:
If to Shareholder:
The University of Mississippi Research Foundation
1006 Thad Cochran Research Center
P. O. Box 1848
University, MS 38677-1848
If to Corporation:
ChromaDex, Inc.
2952 South Daimler Street
Santa Ana, California 92705
Any party may require any other party to serve notices in accordance with this Section at a different address or directed to another person for receipt of notices, if such party so designates such other person or address in writing delivered to every other party in accordance with this Section 10.1.
10.2 Partial Invalidity. Each part of this Agreement is intended to be separate. If any term, covenant, condition or provision hereof is illegal or invalid or unenforceable for any reason whatsoever, such illegality, invalidity or unenforceability shall not affect the legality, validity or enforceability of the remaining parts of this Agreement and all such remaining parts hereto shall not be impaired or invalidated in any way, but shall be legal, valid and enforceable and have full force and effect as if the illegal, invalid, unenforceable part has not been included.
10.3 Law Governing Agreement. This Agreement is made and entered into and is to be at least partially performed in the State of Mississippi. It shall be interpreted, construed and enforced and its construction and performance shall be governed by the laws of the State of Mississippi applicable to Agreements made and to be performed entirely within such State without regard to principles of conflicts of laws, except to the extent that Federal law may apply.
10.4 Entire Agreement. This Agreement constitutes the entire understanding and Agreement of the parties hereto, and supersedes any and all prior understandings or other Agreements, either oral or in writing, if any, among such parties with respect to the subject matter hereof and contains all of the covenants and Agreements between the parties with respect thereto. Each party to this Agreement acknowledges that no representations, inducements, or Agreements, oral or otherwise, have been made by such party, or anyone acting on behalf of such party, which are not embodied herein, and no other Agreement, statement or promise not contained in this Agreement shall be valid or binding. The parties hereto have had an opportunity to consult with their respective attorneys concerning the meaning and the import of this Agreement and each has read this Agreement, as signified by their signatures below, and is executing the same for the purposes and consideration herein expressed.

 

11


 

10.5 Waivers. No delay on the part of any party in exercising any right, power, or privilege hereunder shall operate as a waiver thereof. Nor shall any waiver on the part of any party of any such right, power or privilege, nor any single or partial exercise of any such right, power or privilege, preclude any further exercise thereof or the exercise of any other such right, power or privilege. The rights and remedies of any party based upon, arising out of or otherwise in respect of any inaccuracy in or breach by any other party of any representation, warranty, covenant or Agreement contained in this Agreement shall in no way be limited by the fact that the act, omission, occurrence or other state of facts upon which any claim of any such inaccuracy or breach is based may also be the subject matter of any other representation, warranty, covenant or Agreement contained in this Agreement (or in any other Agreement between the parties) as to which there is no inaccuracy or breach.
10.6 Tax Consultation. Each Party acknowledges that it has had the opportunity to and has consulted with their own separate independent accounting and tax advisors in connection with the accounting and tax treatment for the transactions contemplated hereby and the tax ramifications thereof. Each Party shall bear all risk in connection with the accounting and tax treatment of the transactions contemplated by this Agreement and no Party is relying on the other Party in connection with the same.
10.7 Variations in Pronouns. Wherever the context shall so require, all words herein in the male gender shall be deemed to include the female or neuter gender and vice versa, all singular words shall include the plural, and all plural words shall include the singular. All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require.
10.8 Headings. The headings used in this Agreement are for administrative purposes only and do not constitute substantive matter to be considered in construing the terms and shall not affect the interpretation of this Agreement. All references herein to Sections, subsections, and clauses, shall be deemed references to such parts of this Agreement, unless the context shall otherwise require. A reference to an article or section will mean an article or section in this Agreement, unless otherwise explicitly set forth. The titles and headings in this Agreement are for reference purposes only and will not in any manner limit the construction of this Agreement. For the purposes of such construction, this Agreement will be considered as a whole. The terms “including” and “include” as used in this Agreement will be deemed to include the phrase “without limitation.”
10.9 Representation by Counsel. Each party acknowledges that it has had the opportunity to be represented by separate independent counsel in the negotiation of this Agreement, that any such respective attorneys were of its own choosing, that each authorized representative has read this Agreement and that he understands its meaning and legal consequences to each party. Each Party represents that he has consulted with his attorney of choice, or voluntarily chose not to do so, concerning the execution, the meaning and the import of this Agreement, and has read this Agreement and fully understands the terms hereof as signified by his signature below, and is executing the same of his own free will for the purposes and consideration herein expressed. Each Party represents that he has had sufficient time to consider whether to enter into this Agreement and that he is relying solely on his own judgment and the advice of his own counsel, if any, in deciding to execute this Agreement. Each Party warrants and represents that he has read this Agreement in its entirety and has consulted with his attorney, if any concerning the execution of this Agreement. If any or all Parties have chosen not to seek counsel, said party or parties hereby acknowledge that he or they refrained from seeking counsel entirely of his or their own volition and with full knowledge of the consequences of such a decision.

 

12


 

10.10 Presumption Against Scrivener. Each party waives the presumption that this Agreement is presumed to be in favor of the party which did not prepare it, in case of a dispute as to interpretation.
10.11 Capacity. Each party represents that he has the authority to enter into this Agreement either on his own behalf or in an official capacity on behalf of a corporate party.
10.12 Further Assurances. At any time and from time to time after the date hereof, at the request of any Party, and without further consideration, every other party will execute and deliver such other and further instruments and documents, and take such other action as the other Party may reasonably deem necessary, convenient or desirable in order to more effectively assist any Party in exercising all rights with respect thereto, and carrying out the business, duties, and obligations created by this Agreement.
10.13 Amendments. This Agreement may not be modified, amended, superceded, cancelled, renewed or extended, except in writing, signed by the party or parties to be bound thereby.
10.14 Binding Effect and Assignment. This Agreement and any rights hereunder are freely assignable by Shareholder to the extent that Shareholder has assigned or sold any Shares. This Agreement shall inure to the benefit of and bind the Parties hereto and their respective legal representatives, successors, and permitted assigns.
10.15 Counterparts. This Agreement may be executed in several counterparts by one or more of the undersigned and all such counterparts so executed shall together be deemed and constitute one final Agreement, as if one document had been signed by all parties hereto; and each such counterpart shall be deemed an original, binding the parties subscribed hereto and multiple signature pages affixed to a single copy of this Agreement shall be deemed to be a fully executed original Agreement. Several counterparts consisting of multiple copies hereof each signed by less than all parties, but together signed by all parties shall constitute and be deemed a fully executed original Agreement.
10.16 Shareholder Limitations. No provision or term herein shall be enforceable against Shareholder to the extent such provision or term would exceed or violate the authority of Shareholder by the rules and laws of the State of Mississippi to contract for such provision or term.

 

13


 

IN WITNESS WHEREOF, the undersigned have executed this Agreement as evidenced by their respective signatures below, effective as of the date provided herein.
CHROMADEX, INC.
         
By:
 
/s/ Frank Jaksch
   
         
  FRANK JAKSCH    
Its:
  Chief Executive Officer    
THE UNIVERSITY OF MISSISSIPPI RESEARCH FOUNDATION
(SIGNATURE GRAPHIC)

 

14

Exhibit 4.2
TAG-ALONG AGREEMENT
THIS TAG-ALONG AGREEMENT , dated effective as of December 31, 2005 is made and entered into by and among FRANK LOUIS JAKSCH, SNR. & MARIA JAKSCH , Trustees of the Jaksch Family Trust, MARGERY GERMAIN, LAUREN GERMAIN, EMILY GERMAIN, LUCIE GERMAIN , FRANK LOUIS JAKSCH JR. (each, individually, a “ Founder ” and collectively, the “ Founders ”), CHROMADEX, INC. , a California corporation (the “ Company ”) and THE UNIVERSITY OF MISSISSIPPI RESEARCH FOUNDATION , a Mississippi nonprofit corporation (the “ Shareholder ”).
WHEREAS , on October 8, 2004, the Company issued to the Shareholder 238,105 shares of the common stock of the Company (the “ Shareholder Shares ”), and the Company and the Founders have agreed, on the terms and conditions set forth in this Agreement, to grant the Shareholder certain so-called “tag-along” rights upon the sale of certain shares of common stock owned by the Founders; and
WHEREAS , concurrently herewith, the Company and the Shareholder are entering into that certain Stock Rights Agreement, dated even date herewith (the “ Investor’s Rights Agreement ”).
NOW THEREFORE , in consideration of the foregoing and the mutual covenants and agreements set forth herein the parties hereto agree as follows:
Section 1. Tag-Along Right . Except as provided in Section 4 hereof, each Founder and each Permitted Transferee covenants and agrees with the Founder that, during the Tag-Along Period, he, she or it will not effect a Transfer of common stock in the Company (the “ Common Stock ”) unless the Shareholder is offered an equal opportunity to participate (a “ Tag-Along Right ”) in such transaction or transactions with respect to any Shareholder Shares then held by it, on a pro rata basis (based on the ratio of the aggregate number of shares of Common Stock (or Common Stock equivalents) to be sold by the Selling Founders to the aggregate number of shares of Common Stock beneficially owned by the Selling Founders participating in such sale immediately prior to such sale, for the same consideration per share of Common Stock and otherwise on the same terms by which the Selling Founder(s) sells shares of Common Stock (or Common Stock equivalents).
Section 2. Notice and Procedure for Public Offerings . In the case of a Tag-Along Sale involving registration under the Securities Act of 1933, as amended (the “ Securities Act ”), by the Company of the Founder Shares to be sold in the Tag-Along Sale, then the Shareholder shall have the right to participate therein as provided for in the Investor’s Rights Agreement; provided, however, that in the event the number of shares to be underwritten in any such offering is limited or “cut-back” pursuant to the Investor’s Rights Agreement, the parties hereto agree that the Selling Founders and the Shareholder shall be cut-back proportionally to preserve the ratio of (x) the number of shares of Common Stock (or Common Stock equivalents) the Selling Founders desire to have included in such sale over (y) the number of shares the purchasers desire to have included in such sale (the “ Relative Ratio ”), and each of the Selling Founders agrees to voluntarily reduce the number of Founder Shares to be included in such registration in order to preserve the Relative Ratio.

 

 


 

Section 3. Notice and Procedure for Private Transactions . In the case of a Tag-Along Sale that does not involve registration under the Securities Act by the Company of the Founder Shares to be sold in the Tag-Along Sale, then each participating Selling Founder shall give written notice to the Shareholder (the “ Tag-Along Sale Notice ”) not less than 30 days prior to such proposed sale, providing (a) the number of shares of Common Stock subject to the proposed sale; (b) the name and address of the proposed purchaser; and (c) the proposed amount of consideration and a summary of the terms of the proposed sale and advising the Shareholder of its Tag-Along Rights. The Shareholder may exercise its Tag-Along Right by delivery of a written notice (the “ Tag-Along Acceptance Notice ”) to the Selling Founders participating in the Tag-Along Sale within 10 days of the Shareholder’s receipt of the Tag-Along Sale Notice. The Tag-Along Acceptance Notice shall state the number of shares of Common Stock that the Shareholder proposed to include in the sale. If the Tag-Along Acceptance Notice is not received during the time period specified above, then the Founders participating in the sale shall have the right for a 30-day period to effect the proposed sale of shares of Common Stock on terms and conditions no more favorable than those stated in the Tag-Along Sale Notice. If the prospective purchaser or purchasers of the shares to be sold in such Tag-Along Sale declines to purchase the aggregate number of shares sought to be sold by the participating Selling Founders and the Shareholder, the Selling Founders and the Shareholder agree to reduce the number of shares of each participating party to be included in such sale on a proportionate basis that preserves the Relative Ratio. If the Shareholder gives written notice indicating that it wishes to sell shares in the Tag-Along Sale, then the Shareholder shall be obligated to sell that number of shares specified in The Tag-Along Acceptance Notice (as such number may be reduced pursuant to the immediately preceding sentence) for the greatest consideration and upon the best terms by which any Selling Founder is selling to the buyer, such obligation to be conditioned upon and contemporaneous with completion of the transaction of purchase and sale with the buyer.
Section 4. Transfers to Permitted Transferees . Notwithstanding anything herein to the contrary, a Founder may Transfer shares of Common Stock to a Permitted Transferee without providing the Shareholder a Tag-Along Right, provided, however, that each Founder covenants and agrees that such Founder shall not Transfer any shares of Common Stock to a Permitted Transferee unless such Permitted Transferee agrees in writing to be bound by and to be a “Permitted Transferee” pursuant to this Agreement prior to receiving, accepting or acquiring any shares of Common Stock (or any options, warrants or other securities convertible into shares of Common Stock) from a Founder or any other Permitted Transferee.

 

2


 

Section 5. Effectiveness and Termination . The Tag-Along provisions of this Agreement shall automatically terminate with respect to any Shareholder Shares at such time that (i) the Company or any successor in interest registers or has already registered any shares of its common stock under the Securities Act of 1933 (the “33 Act”) and is thereupon subject to the reporting requirements of the Securities Exchange Act of 1934, and (ii) transfer of the Shareholder Shares is no longer restricted pursuant to Rule 144 or any other rule promulgated under the 33 Act. This Agreement shall terminate automatically upon the expiration of the Tag-Along Period. Upon any such termination, except for any rights any party may have in respect of any breach by any other party of its obligations hereunder, none of the parties hereto shall have any further obligation or liability hereunder.
Section 6. Definitions .
(a) The term “ Tag Along Sale ” means a Transfer by any Founder, any Permitted Transferee of a Founder, or any Person having power to Transfer Founder Shares (or any of them) (collectively, “ Selling Founders ”), in one or more transactions (other than a Transfer from a Selling Founder to a Permitted Transferee) of any Founder Shares.
(b) The term “ Founder Shares ” means all shares of Common Stock beneficially owned at any time by the Founders and any Permitted Transferee of the Founders.
(c) The term “ Permitted Transferee ” means any of the following: (1) the spouse, parents, children, grandchildren or siblings of a Founder, (2) a trust established for the sole benefit of a Founder and/or any of such Founder’s spouse, parents, children or grandchildren, (3) a charitable trust established by a Founder for charitable or educational purposes with respect to which such Founder has the power to direct the voting and/or disposition of any shares of Common Stock transferred to or acquired by such trust or similar entity or (4) any other person or entity to whom Shareholder consents to a Transfer subject to such transferred shares remaining subject to this Agreement.
(d) The term “ Tag-Along Period ” means the period from the date of this Agreement to the date on which the Shareholder sells all of its shares of Common Stock either (x) pursuant to an effective registration statement filed in accordance with the Securities Act, or (y) pursuant to an exemption from registration in accordance with the Securities Act and rules promulgated thereunder.

 

3


 

(e) The term “ Selling Founder ” means a Founder who is engaging in a transaction that gives rise to Tag-Along Rights by virtue of the sale of shares of Common Stock beneficially owned by that Founder.
(f) The term “ Transfer ” means any sale, exchange, assignment, gift, transfer or other disposition, directly or indirectly, or any contract therefor, or any other agreement or arrangement with respect to the transfer of voting rights or any other beneficial interest in the Common Stock.
(g) A person “ beneficially owns ” any shares of any security with respect to which such person would be a beneficial owner pursuant to Rule 13d3 promulgated under the Securities and Exchange Act of 1934, as amended.
Section 7. Authority; Binding Effect . Each party hereto hereby represents and warrants to each other party hereto that;
(a) such party has full power and authority to enter into, execute and deliver and perform his obligations under this Agreement and to make the representations and warranties made herein and, in the case of any party that is not a natural person, no further corporate or trust action or approval is required in connection herewith; and
(b) Assuming due execution and delivery by each other party hereto, this Agreement constitutes the valid and binding agreement of such party, enforceable against such party in accordance with its terms.
Section 8. Endorsement of Certificates . Upon execution of this Agreement, the stock certificates representing the Founder Shares shall contain substantially the following legend, in addition to any other legends deemed appropriate or necessary by the Company:
“THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO A TAG-ALONG AGREEMENT DATED AS OF                      , 200_, AS AMENDED OR MODIFIED FROM TIME TO TIME, COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED TO THE HOLDER ON REQUEST TO THE SECRETARY OF THE COMPANY. SUCH TAG-ALONG AGREEMENT PROVIDES, AMONG OTHER THINGS, FOR CERTAIN RESTRICTIONS ON THE SALE, TRANSFER, OR OTHER DISPOSITION OF THE SECURITIES EVIDENCED HEREBY.”

 

4


 

Section 9. Company Books . The Company hereby agrees to abide by the terms of this Agreement. Accordingly, the Company shall not register on its books and records, recognize any Transfer or issue any replacement certificates to any person or entity attempting to acquire securities pursuant to a Transfer that has not complied with the terms of this Agreement.
Section 10. Miscellaneous .
(a)  Notices, Etc. All notices or other communications required or permitted hereunder shall be in writing and shall be delivered personally, telecopied or sent by certified, registered or express mail, postage prepaid. Any such notice shall be deemed given if delivered personally or telecopied, on the date of such delivery or sent by reputable overnight courier, on the first business day following the date of such mailing, as follows:
If to the Shareholder:
The University of Mississippi Research Foundation
1006 Thad Cochran Research Center
P.O. Box 1848
University, MS 38677-1848
If to the Company:
ChromaDex, Inc.
2952 South Daimler Street
Santa Ana, California 92705
If to Jaksch:
c/o ChromaDex, Inc.
2952 South Daimler Street
Santa Ana, California 92705
If to Germain:
6 Olmsted Road
Scarsdale, New York 10583
[List addresses for all other named shareholders]

 

5


 

or to such other address as such party shall have designated by notice received by each other party in accordance with the terms of this Section 7.
(b) Amendments, Waivers, Etc. This Agreement may not be amended, changed, supplemented, waived or otherwise modified or, except as expressly set forth in Section 5, terminated, except by an instrument in writing signed by each party hereto.
(c) Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of and be enforceable by the parties and their respective successors and assigns; provided that neither the rights nor the obligations of any party may be assigned or delegated without the prior written consent of the other parties.
(d) Specific Performance. The parties acknowledge that money damages are not an adequate remedy for violations of this Agreement and that any party may, in its sole discretion, apply to a court of competent jurisdiction for specific performance or injunctive or such other relief as such court may deem just and proper in order to enforce this Agreement or prevent any violation hereof and, to the extent permitted by applicable law, each party waives any objection to the imposition of such relief or any requirement for a bond.
(e) Governing Law. This Agreement shall be governed by the laws of the State of Mississippi, without regard to the principles of conflict of law thereof.
(f) Expenses. The parties hereto agree that each party hereto will bear their own costs, including attorneys fees, in complying with the terms hereof; provided however, that in the event of a dispute or any action to enforce the terms hereof the prevailing party shall be entitled to recover all costs and expenses incurred therein, including attorneys’ fees.
(g) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies each signed by less than all, but together signed by all, the parties hereto.
(h) Entire Agreement. This Agreement constitutes the entire agreement with respect to the subject matter contained herein and therein.
(i) Shareholder Limitations. No provision or term herein shall be enforceable against Shareholder to the extent such provision as term would exceed or violate the authority of Shareholder by the rules and laws of the State of Mississippi to contract for such provision or term.
[SIGNATURES ON FOLLOWING PAGE]

 

6


 

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written.
         
JAKSCH FAMILY TRUST
 
       
By:
  /s/ Frank Louis Jaksch, Sr.    
 
       
 
  FRANK LOUIS JAKSCH, SR., Trustee    
 
       
 
  /s/ MARIA JAKSCH    
 
       
 
  MARIA JAKSCH, Trustee    
 
       
/s/ Margery Germain    
MARGERY GERMAIN    
 
       
/s/ Lauren Germain    
LAUREN GERMAIN    
 
       
/s/ Emily Germain    
EMILY GERMAIN    
 
       
/s/ Lucie Germain    
LUCIE GERMAIN    
 
       
/s/ Frank Louis Jaksch, Jr.    
     
FRANK LOUIS JAKSCH, JR.    
 
       
CHROMADEX, INC., a Californa Corporation    
 
       
By:
  /s/ Frank Jaksch    
 
       
 
  FRANK JAKSCH, CEO    
 
       
THE UNIVERSITY OF MISSISSIPPI RESEARCH FOUNDATION
(SIGNATURE GRAPHIC)

 

7

Exhibit 4.3
August 19, 2005
LICENSE AGREEMENT
Between

L & J BECVAR, L.P.
LICENSOR
And
CHROMADEX, INC.
LICENSEE

 

 


 

License Agreement
Table of Contents
         
ARTICLE I — Definitions
    1  
 
       
ARTICLE II — Patent License and Technology
    3  
2.1 License Grant
    3  
2.2 Sublicenses
    3  
2.3 Retained Grants
    4  
2.4 No Implied Rights
    4  
2.5 Newly Developed Technologies by Licensor
    4  
2.6 Newly Developed Technologies by Licensee
    4  
 
       
ARTICLE III — Payments, Royalties and Reports
    5  
3.1 License Fee(s)
    5  
3.2 Sublicense Fee
    5  
3.3 Earned Royalties
    5  
3.4 Minimum Royalties
    5  
3.5 Patent Costs and Expenses
    6  
3.6 Royalty and Reports; Method of Payment; Payment Exchange Rate and Currency Conversions
    6  
3.6.1 Reports and Payment
    6  
3.6.2 Method of Payment
    6  
3.6.3 Currency Conversions
    7  
3.7 Maintenance of Records; Audits
    7  
 
       
ARTICLE IV — Performance
    8  
 
ARTICLE V — Patents
    8  
5.1 Filing, Prosecution and Maintenance of Patents
    8  
5.2 Enforcement
    9  
5.3 Marking of Products
    9  
 
       
ARTICLE VI — Confidentiality; Additional Covenants; Stock Issuance
    9  
6.1 Nondisclosure Obligation
    9  
6.2 Additional Covenants and Acknowledgments of Licensee
    10  
6.3 Capitalization
    10  
6.4 Authorization of Stock
    11  
6.5 Promotional Marketing
    11  
6.6 Investment Representations
    11  
 
       
ARTICLE VII — Negation of Warranties; Indemnification
    12  
7.1 Disclaimer
    12  
7.2 Additional Disclaimers
    12  
7.3 Indemnification by Licensee
    12  
7.4 Insurance
    12  

 

 - i -


 

         
 
       
ARTICLE VIII — Term and Termination
    13  
8.1 Term and Expiration
    13  
8.2 Termination for Cause
    13  
8.3 Material Breach by Licensee
    13  
8.4 Technology and Know-How License
    14  
8.5 Validity
    14  
8.6 Effect of Termination
    14  
 
       
ARTICLE IX — Miscellaneous
    15  
9.1 Assignment
    15  
9.2 Governing Law
    15  
9.3 Waiver
    15  
9.4 Independent Relationship
    15  
9.5 Export Control
    16  
9.6 Entire Agreement; Amendment
    16  
9.7 Notices
    16  
9.8 Force Majeure
    17  
9.9 Severability
    17  
9.10 Binding Nature of Agreement
    17  
9.11 Arbitration
    17  
9.12 Counterparts
    18  
 
       
EXHIBIT A
    19  
EXHIBIT B
       
EXHIBIT C
       

 

 - ii -


 

LICENSE AGREEMENT
THIS AGREEMENT (“Agreement”) is effective as of the date of the last signature hereto (“Effective Date”) between L & J Becvar, L.P., a limited partnership organized and existing under the laws of Texas, having a place of business at El Paso, Texas (“Licensor”) and ChromaDex, Inc., a corporation organized and existing under the laws of California, having a place of business at Santa Ana, California (“Licensee”).
BACKGROUND
A. Licensor owns certain Patent Rights (defined herein).
B. Licensee desires to license from Licensor the Patent Rights in order to commercialize processes, methods and marketable products covered thereby.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants, and Subject to the terms and conditions contained herein, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
As used In this Agreement, the following terms, whether used in the singular or plural, shall have the respective meanings set. forth below:
1.1 The term “Affiliate” shall mean any individual or entity directly or indirectly controlling, controlled by or under common control with, a party to this Agreement. For purposes of this Agreement, the direct or indirect ownership of over fifty percent (50%) of the outstanding voting securities of an entity, or the right to receive over fifty percent (50%) of the profits or earnings of an entity shall be deemed to constitute control. Such other relationship as in fact gives such individual or entity the power or ability to control the management, business and affairs of an entity shall also be deemed to constitute control.
1.2 The term “Calendar Quarter” shall mean the respective periods of three (3) consecutive calendar months ending on March 31, June 30, September 30 and December 31.
1.3 The term “Calendar Year” shall mean each successive period of twelve (12) months commencing on January 1 and ending on December 31.

 

- 1 -


 

1.4 The term “Common Stock” shall mean common stock of Licensee, $0.0001 par value.
1.5 The term “First Commercial Sale” shall mean, the initial transfer or the initial practice thereof by or on behalf of Licensee, or it’s Affiliates or its sublicensees for end use of Licensed Products in exchange for cash or other consideration.
1.6 The term “Licensed Products” shall mean any product, composition, method or process which, in the course of manufacture, use, practice, sale or import is:
  (a)   within the scope of one or more claims of the Patent Rights; or
 
  (b)   A product containing any one or more of the following or similar elements and which is intended to be used as part of any product, composition, method or process which is within the scope of one or more claims of the Patent Rights:
  (i)   analytical chemistry media (i.e. TLC plates);
 
  (ii)   luminescent bacteria for detection (stabilized);
 
  (iii)   chemicals and reagents for performing steps covered under the Patent Rights;
 
  (iv)   detection devices or media; and/or
 
  (v)   Instruction manual describing or inducing one to perform the steps covered under the Patent Rights.
1.7 The term “Net Sales” shall mean the gross revenues received by Licensee, Affiliates, or sublicensees from the sale of Licensed Products less sales and/or use taxes actually paid, import and/or export duties actually paid, outbound transportation prepaid or allowed, and amounts allowed or credited due to returns (not to exceed the original billing or invoice amount). Transfer of a licensed product within licensee or between licensee and an Affiliate for sale by the transferee shall not be considered a Net Sale for purposes of ascertaining royalty charges. In such, circumstances, the gross sales price and resulting Net Sales price shall be based upon the sale of the Licensed Product by the transferee.

 

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1.8 The term “Minimum Annual Sales” shall mean Net Sales equal to the following amount for the following years:
  (i)   Second year: two hundred thousand dollars ($200,000)
 
  (ii)   Third and Fourth years: five hundred thousand dollars ($500,000) each year
 
  (iii)   Fifth and Sixth years: one million dollars ($1,000,000) each year
 
  (iv)   Thereafter $2,000,000 each year
1.9 The term “Patent Right(s)” shall mean: Luminous Bacteria and Methods for the Isolation, Identification and Quantification, of Toxicants described in U.S. Patent, 6,673,563 and Kit for the Isolation, Identification and Quantification of Toxicants described in U.S. Patent. 6,340,572, and Luminous Bacteria and Methods for the Isolation, Identification and Quantification of Toxicants described in U.S. Patent 6,017,722 as well as divisional, continuation and substitute patent applications claiming priority there from and any and all reissues, reexaminations and extensions thereof; and all foreign equivalents thereof.
1.10 The term “Territory” shall mean the world.
ARTICLE II
PATENT LICENSE AND TECHNOLOGY
2.1 License Grant . Upon the terms and conditions set forth herein, Licensor hereby grants to Licensee, and Licensee accepts, an exclusive worldwide license under the Patent Rights to make and have made, to use and have used, to research and have researched, to develop and have developed, to commercialize and have commercialized, to manufacture and have manufactured, to promote and have promoted, to practice and have practiced, to sell and have sold, to offer to sell, to export and have exported, and to import and have imported any Licensed Products.
2.2 Sublicenses .
(a) Licensee may grant sublicenses consistent with this Agreement.
(b) Licensee must deliver to Licensor, a true and correct copy of each sublicense granted by Licensee, and any modification or termination thereof, within thirty (30) days after execution, modification, or termination.
(c) Licensee shall provide Licensor with prompt notification of the identity and address of each Affiliate or sublicensee to which it grants a sublicense and Licensee shall in a timely manner provide Licensor with a copy of each sublicense agreement which shall be treated as confidential information in accordance with Section 6.1.

 

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2.3 Retained Rights . Licensor and the University of Texas at El Paso shall retain the right, to use the Patent Rights for research, development and non-commercial purposes, which retained right shall include the right to conduct research and development, to present research results at scientific meetings, and to publish research results in professional or scholarly journals, and for non-commercial purposes at the University of Texas at El Paso provided, however such, purposes may include the development of further improvements of the Patent Rights for commercialization. Licensor will submit its manuscript, for any proposed publication of research related to Patent Rights to Licensee at least thirty (30) days before publication, and Licensee shall have the right to review and comment upon the publication in order to protect Licensee’s confidential information. Upon Licensee’s request, publication will be delayed up to sixty (60) additional days to enable Licensee to secure adequate intellectual property protection of Licensee’s property that would be affected by the publication. For the purposes of this clause “publication” shall mean any public disclosure as defined under patent law.
2.4 No Implied Grants . No license or right is hereby granted by implication, estoppel, or otherwise, which are not specifically granted to Licensee hereunder.
2.5 Newly Developed Technologies by Licensor . The parties recognize that James E. Becvar is an employee of the University of Texas at El Paso and is continuing research relating to the Patent Rights and their development and application, each an “Improvement”. As an employee of the University of Texas at El Paso, he is required to assign inventions made under specified conditions to the University of Texas at El Paso, Improvements, if any, owned by the University of Texas at El Paso will be offered to Licensee by the University of Texas at El Paso for licensing under terms and conditions set forth in a separate agreement, In the event that Licensee does not license the Improvement, Chromadex will grant to the University of Texas at E1 Paso a sublicense to the Patent Rights as defined in this Agreement for the purpose of enabling the commercialization of the Improvement. The sublicense fee shall be substantially identical to the terms of the Agreement. Subject to existing or hereafter arising obligations to the University of Texas at El Paso, James E. Becvar will seek the consent of the University of Texas at El Paso to advise Licensee of new inventions reasonably relating to the Patent Rights that may be available for licensing from the University of Texas at El Paso.
2.6 Newly Developed Technologies by Licensee . Subject to obligations to the University of Texas at El Paso, Licensee will, reasonably cooperate to advise Licensor of new inventions reasonably related to the Patent Rights which may be available for licensing from Licensee to Licensor, the University of Texas at El Paso, or other third parties.

 

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ARTICLE III
PAYMENTS: ROYALTIES AND REPORTS
3.1 License Fee(s) . Licensee shall reimburse Licensor the cost associated with technology development, patent, protection, and patent maintenance and legal fees associated with licensing the Patent Rights, in the form of a license fee payable as follows:
(a) A non-creditable and non-refundable license fee of one hundred ten thousand dollars ($110,000) to be paid as follows:
  (i)   $10,000 as of the Effective Date of the Agreement;
 
  (ii)   $2,500 paid on the last business day of each of the months September, October, and November 2005; and
 
  (iii)   $5,000 paid on the last business day of each month thereafter until payment of the $110,000 License Fee has been made, or if greater, 2% of Net Sales paid on the last business day of each month until payment of the $110,000 has been made.
(b) ChromaDex Common Stock, the number of shares to be equal to two percent (2%) of the capital stock of Licensee on a fully diluted basis as of the effective date of the License Agreement, said stock to have “piggy-back” registration rights on terms and conditions consistent with industry standards and any previous agreements granted by Licensee (e.g. the Napro registration rights). Further, Licensor will have anti-dilution rights as set forth in Exhibit A attached hereto.
3.2 Sublicense Fee . Licensee will pay to Licensor:
(a) 20% of any cash payment made to Licensee in consideration of a sublicense, other than royalty payments, which are covered by Section 3.3 below, and/or
(b) a fee constituting a cash payment equal to 10% of any non-cash consideration received by Licensee from sublicensee in consideration of a sublicense, but not including royalty payments which are covered by Section 3.3 below, such consideration to include, without limitation, equity in other companies.
3.3 Earned Royalties . Licensee shall pay to Licensor royalties in an amount equal to 2.5% of Net Sales of Licensed Products by Licensee, its Affiliates and sublicensees. Royalties shall be payable on all products worldwide, without regard to whether there are Patent Rights in any country other than the United States. The negotiated royalty rate of 2.5% represents a rate that is negotiated in lieu of a higher United States royalty rate and no royalty for outside the United States.
3.4 Minimum Royalties .
(a) Licensee agrees to pay to Licensor the annual minimum royalty payments of ten thousand dollars ($10,000) per year (and increasing by fifteen percent each year) commencing on the first anniversary of the License Agreement, subject to a cap of $20,000 per year. Minimum royalties are creditable against earned royalties for the applicable year period.

 

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(b) Minimum royalties shall be due and payable upon the first and each successive anniversary of the Effective Date of this Agreement, Waiver by Licensor of any minimum royalty payable hereunder shall not be deemed to constitute a waiver of any subsequent minimum royalty payment.
3.5 Patent Costs and Expenses . During the term of the Agreement, Licensee shall reimburse Licensor any and all the amounts for patent costs and expenses to prosecute and maintain the Patent Rights; provided such costs are incurred in accordance with Section 5.1 of this Agreement.
3.6 Royalty and Reports; Method of Payment; Payment Exchange Rate and Currency Conversions .
3.6.1 Reports and Payment . Within sixty (60) days following the close of each Calendar Quarter, beginning immediately after the Effective Date, Licensee must deliver to Licensor a true and accurate written report, even if no payments are due Licensor, giving the particulars of the business conducted by Licensee and its sublicensee(s), if any exist, during the preceding three (3) calendar months under this Agreement as are pertinent to calculating payments hereunder. Simultaneously with the submission of the written report, Licensee shall pay to Licensor, on behalf of Licensee, its Affiliates and sublicensees, the aggregate royalty due in United States dollars for such Calendar Quarter. The reports shall include, without limitation, country of sale, date sold, quantity, applicable deductions and calculation of royalty for each sale. If for any Calendar Quarter no royalties are due, Licensee shall submit a report with a written statement to that effect and the calculation therefore.
(a) On or before each anniversary of the Effective Date, irrespective of having a First Commercial Sale or offer for First Commercial Sale, Licensee must deliver to Licensor a written progress report as to Licensee’s (and any sublicensee’s) efforts and accomplishments during the preceding year in diligently commercializing licensed subject matter In the I Territory and Licensee’s (and, if applicable, sublicensee’s) commercialization plans for the upcoming year.
3.6.2 Method of Payment . Payments to be made by Licensee to Licensor under this Agreement shall be paid by check or by bank wire transfer in immediately available funds to such bank account in the United States designated in writing by Licensor from time to time. Licensee agrees to pay license fee as described in 3.1 according to the following distribution:
(a) $110,000 to James Becvar directly for reimbursement of costs associated with technology development, patent protection and maintenance and legal fees associated with licensing;
(b) 2.0% ChromaDex Stock to Licensor; and
(c) 2.5% of Net Sales to Licensor.

 

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3.6.3 Currency Conversions/Tax Withholding . Payments shall be made in United States dollars to the extent that conversions to United States dollars are permitted. The rate of exchange to be used in any such conversion from the currency in the country where such Net Sales are made shall be the commercial rate of exchange prevailing in the United States on the last day of the Calendar Quarter calculated using the exchange rate (local currency, per US$1) published in The Wall Street Journal, Western Edition, under the heading “Currency Trading.” If due to restrictions or prohibitions imposed by national or international authority, royalties in any country cannot be remitted to Licensor within six (6) months after the end of the Calendar Quarter during which they are earned, then Licensee shall be obligated to deposit the royalties in a bank account in such country in the name of Licensor or Licensor’s designee. If Licensee concludes that tax withholdings under the laws of any country are required with respect to payments to Licensor, Licensee may deduct and pay to the appropriate governmental authorities the amount required to be withheld from the amount due Licensor and provide to Licensor reasonable evidence of such payment.
3.7 Maintenance of Records: Audits .
(a) Licensee shall keep complete and accurate records in sufficient detail to enable the royalties payable hereunder to be determined. Upon the written request of Licensor, Licensee shall permit Licensor or Licensor’s representative or accountant, at Licensor’s expense, once annually to have access during normal business hours to the records of Licensee to verify the accuracy of the royalty reports hereunder. During the Term of this Agreement and for one (1) year thereafter, Licensee agrees to keep complete and accurate records of its and its sublicensees’ sales and Net Sales of Licensed Products under the license granted in this Agreement in sufficient detail to enable the royalties payable hereunder to be determined. Licensee agrees to permit Licensor or its representatives, at Licensor’s expense, to periodically but no more than once per annum examine its books, ledgers, and records during regular business hours for the purpose of and to the extent necessary to verify any report required under this Agreement.
(b) If Licensor or its accountant correctly concludes that additional royalties were owed during such period, Licensee shall pay the additional royalties within thirty (30) days of the date Licensor delivers to Licensee a written report setting forth the basis concerning the discrepancy. The fees charged by any accounting firm shall be paid by Licensor, except in the event that such inspection shows an underreporting and underpayment in excess of five percent (5%) for any Calendar Quarter reporting period, then Licensee will pay the cost of such examination and accrued interest at the highest allowable rate but not more than prime rate plus three percent (3%) interest compounded daily on the amount underpaid. Any such audit shall be coordinated with auditing requirements under the UTEP/ChromaDex agreement cross referenced in the Agreement, to prevent duplicate audits in any calendar year.

 

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ARTICLE IV
PERFORMANCE
Licensee represents, warrants and covenants for the term of this Agreement that it shall use its reasonable commercial efforts to develop, introduce into the commercial market and to commercialize Licensed Products as soon as practicable and in such countries where it is commercially viable to do so, consistent with reasonable business practices.
ARTICLE V
PATENTS
5.1 Filing, Prosecution and Maintenance of Patents .
(a) Licensor, through its own patent attorneys reasonably acceptable to licensee (Peacock Myers, P.C. is hereby approved) and in consultation with Licensee, agrees to file, prosecute and maintain Patent Rights in the United States. Licensor shall keep Licensee advised of the issuance of any patents within the Patent Rights and, upon the request of Licensee, provide copies of filing, prosecution and maintenance documents filed relating to Licensor Patent Rights. Licensor shall not have any liability whatsoever to Licensee with respect to the results of the filing, prosecution or maintenance of Patent Rights.
(b) Licensor shall give at least thirty (30) days written notice to Licensee of any intention to cease filing, prosecution and/or maintenance of any patent application or patent within the Patent Rights. In such case, Licensee may elect to continue filing, prosecution or maintenance of patents. Subsequently, in the event Licensee intends to cease filing, prosecution and/or maintenance of Patent Rights which Licensee is responsible for filing, prosecuting or maintaining hereunder, Licensee shall give at least thirty (30) days written notice to Licensor of such intention, and in such case, shall permit Licensor to continue filing, prosecution or maintenance at its own expense.
(c) Each party shall promptly inform the other as to all matters that come to its attention that may affect the preparation, filing, prosecution or maintenance of the Patent Rights, and shall cooperate with the other party with respect thereto, including, without limitation, providing, as reasonably requested, the appropriate powers of attorney, declarations or other documents necessary to facilitate the filing, prosecution or maintenance of the Patent Rights. The Party having responsibility for the preparation, filing, prosecution and maintenance of such Patents, shall promptly provide the other Party with copies of all substantive communications from any patent office and with drafts of all substantive filings to be made, reasonably in advance of their filing, with any patent office with respect thereto; shall consider in good faith any comments thereon provided by the other Party; and shall not unreasonably decline to incorporate changes to such filing proposed by such other Party. Each Party shall assist the other in the preparation and prosecution of such Patent Rights and shall execute all documents reasonably deemed necessary for the filing thereof and/or for the vesting of title thereto as provided in this License Agreement.

 

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5.2 Enforcement .
(a) Licensee shall notify Licensor in writing within thirty (30) days of any infringement of a licensed Patent Right which becomes known to Licensee. Licensor shall notify Licensee in writing within thirty (30) days of any infringement of a licensed Patent Right which becomes known to Licensor.
(b) Licensee, at its expense, shall enforce any Patent Right licensed hereunder against substantial infringement by third parties and it is entitled to retain recovery from such enforcement. Licensor has the right to join the case and comment on any major aspect thereof. Licensee shall have the right to settle any such infringement action on terms it deems reasonable upon review and approval of the Licensor, such review and approval will not be unreasonably withheld. Licensee shall pay Licensor a royalty on any monetary recovery from such enforcement less any legal expenses by Licensee. If Licensee does not file suit against a substantial infringer of a licensed Patent Right within six months after notification under Subsection (a) above, then Licensor may enforce any Patent Right licensed hereunder on behalf of itself and Licensee. In such event, Licensor shall retain all recoveries from such enforcement.
5.3 Marking of Products . Licensee agrees to mark every Licensed Product manufactured, sold, imported or advertised by it (as well as all brochures and advertising material relating to Licensed Products) as to patents pending or patents issued, all in accordance with applicable laws and regulations in each country, and further to mark promotional materials as provided in Section 6.5.
ARTICLE VI
CONFIDENTIALITY; ADDITIONAL COVENANTS
6.1 Nondisclosure Obligation . A receiving party shall use confidential information only in accordance with this Agreement and shall not disclose to any third party any confidential information received from the disclosing party, without the prior written consent of the disclosing party. For purposes of this Agreement, any invention or discovery which is or may be patentable or otherwise protectable under Federal law, rule or regulation included in Patent Rights shall be deemed to be confidential. The foregoing obligations shall survive the expiration or termination of this Agreement for a period of ten (10) years. These obligations shall not apply to confidential information that:
(a) is known by the receiving party at the time of its receipt, and not through a prior disclosure by the disclosing party, as documented by business records;

 

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(b) is at the time of disclosure or thereafter becomes published or otherwise part of the public domain without breach of this Agreement by the receiving party;
(c) is subsequently disclosed to the receiving party by a third party who has the right to make such disclosure;
(d) is developed by the receiving party independently of confidential information or other information received from the disclosing party and such independent development can be properly demonstrated by the receiving party;
(e) is necessary to be disclosed to sublicensees, agents, consultants, Affiliates and/or other third parties for the research and development, manufacturing and/or marketing of Licensed Products (or for such parties to determine their interest in performing such activities), or potential merger partners, acquirers or investors in accordance with this Agreement on the condition that such third parties agree to be bound by the confidentiality obligations contained in this Agreement, provided that the term of confidentiality for such third parties shall be no less than ten (10) years; or
(f) is required to be disclosed by law or court order, provided that written notice is promptly given to the other party in order to provide an opportunity to seek a protective order or other similar order with respect to such confidential information and thereafter discloses only the minimum information required to be disclosed in order to comply with the request, whether or not a protective order or other similar order is obtained by the other party.
6.2 Additional Covenants and Acknowledgments of Licensee . Without limiting anything contained in this Agreement, Licensee represents, warrants and covenants for the term of this Agreement to Licensor that Licensee, its Affiliates and permitted sublicensees shall comply with all applicable laws, rules, and regulations relating to its activities under this Agreement.
6.3 Capitalization . Licensee represents and warrants to Licensor as of the Effective Date of the Agreement, the authorized capital stock of the Licensee consists solely of Common Stock and preferred stock (as set forth in Exhibit B) and that attached hereto as Exhibit B are the Articles of Incorporation which are in effect as of the Effective Date. Licensee represents and warrants that immediately upon the consummation of the transaction contemplated by this Agreement, the authorized capital stock of Licensee shall consist of:
(a) 16,881,541 shares of Common Stock, of which 16,881,541 shares shall have been validly issued and are outstanding, fully paid and nonassessable, with no personal liability attaching to the ownership thereof. No shares of preferred stock of Licensee have been issued or are subject to warrants, options, agreements, convertible securities or other commitments.

 

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(b) Exhibit C attached hereto contains a list of all outstanding warrants, options, agreements, convertible securities or other commitments pursuant to which the Licensee is or may become obligated to issue any shares of its capital stock or other securities of the Licensee.
(c) All shares of stock and other securities issued by the Licensee prior to or at the Effective Date of the Agreement have been issued in transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), and all applicable state securities or “blue sky” laws in connection with the issuance of any shares of Common Stock, and other securities prior to or at the Effective Date.
6.4 Authorization of Stock . The issuance, sale and delivery of the shares of Common Stock issued to Licensor hereunder have been duly authorized by all requisite corporate action of the Licensee, and when issued, sold and delivered in accordance with this Agreement, the Common Stock will be validly issued and outstanding, fully paid and nonassessable with no personal liability attaching to the ownership thereof, and not subject to preemptive or any other similar rights of the shareholders of the Licensee or others. There are no designations, powers, preferences and rights or qualifications, limitations and restriction of the shares of Common Stock stated in the Licensee’s Articles of Incorporation.
6.5 Promotional Marketing . In addition to product patent marking pursuant to Section 5.3, Licensee will identify Laura Becvar as an inventor of the Patent Rights in promotional materials and packaging inserts. Licensor and Licensee will meet and agree on the form of such identification. This identifying language will substantially state “Based on inventions created by Laura Becvar”.
6.6 Investment Representations . The Licensor hereby agrees, represents and warrants, on its own behalf that;
(a) Licensor are acquiring such shares for its own account (and not for the account of others) for investment purposes only and not with a view to the distribution or resale thereof.
(b) Licensor has had access to management of the Licensee and an opportunity to ask questions, and Licensor has received answers, regarding the business and affairs of the Licensee such that Licensor understands the merits and risks of owning shares of common stock of the Licensee, and can bear the risk of loss of its investment herein.
(c) Licensor understand that the shares may not be sold or otherwise disposed of in the absence of either an effective registration statement under the Securities Act of 1933 (“the Act”) or an exemption from the registration provisions of The Act.
(d) Licensor understand that the certificate representing the shares will contain a legend to the effect of paragraph (c) above.

 

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ARTICLE VII
NEGATION OF WARRANTIES; INDEMNIFICATION
7.1 Disclaimer . THE RIGHTS LICENSED HEREUNDER ARE LICENSED “AS IS.” LICENSOR MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND IN THE AGREEMENT AND ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE EXCLUDED FROM THIS AGREEMENT.
7.2 Additional Disclaimers . Without limiting the foregoing in Section 7.1, Licensor makes no representations or warranties, express or implied, as to the accuracy, validity, or utility of any of the Patent Rights, or that the Patent Rights may be exploited without infringing other patents or other intellectual property rights of third parties. Licensor represents that as of the Effective Date of this Agreement, Licensor has no actual notice or actual knowledge of infringement.
7.3 Indemnification by Licensee . Licensee shall indemnify, defend and hold harmless Licensor and its Affiliates, and each of its and their respective employees, officers, directors and agents (each, a “Licensor Indemnified Party”) from and against any and all liability, loss, damage, cost and expense (including reasonable attorneys’ fees) (collectively “Liabilities”) which a Licensor Indemnified Party may incur, suffer or be required to pay resulting from, or arising in connection with: the breach by Licensee, its Affiliates or its sublicensees of any covenant, representation or warranty contained in this Agreement; or any Liabilities arising from the license granted hereunder, including, without limitation, any Liabilities arising from the use or transfer of Licensed Products, or relating to the accuracy or validity of the Patent Rights, including, without limitation, any claims for infringement.
7.4 Insurance . Licensee agrees to maintain a $2 million insurance policy to satisfy its obligations under this Agreement, which policy shall include products liability coverage. Licensee agrees to provide evidence of coverage upon request of Licensor.

 

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ARTICLE VIII
TERM AND TERMINATION
8.1 Term and Expiration . This Agreement shall be effective as of the Effective Date and, unless terminated earlier pursuant to Sections 8.2 or 8.3 below, the term of this Agreement shall continue in effect until the later of the expiration of the last to expire Patent Rights embodied in a Licensed Product, or ten (10) years from the Effective Date (“Term”).
8.2 Termination for Cause. This Agreement may be terminated upon written notice by either party at any time during the term of this Agreement:
(a) if the other party is in breach of its material obligations hereunder and has not cured such breach within sixty (60) days after written notice of the breach with reasonable detail of the particulars of the alleged breach and provided that if there is a dispute submitted to arbitration, the notice and cure period will not commence until the later of the completion of the arbitration; or
(b) upon the filing or institution of bankruptcy, reorganization, liquidation or receivership proceedings, or upon an assignment of a substantial portion of the assets for the benefit of creditors by the other party, or in the event a receiver or custodian is appointed for such party’s business or if a substantial portion of such party’s business is subject to attachment or similar process; provided however, in the case of any involuntary bankruptcy proceeding such right to terminate shall only become effective if the party consents to the involuntary bankruptcy or such proceeding is not dismissed within sixty (60) days after the filing thereof.
(c) if Licensee does not meet Minimum Annual Sales of Licensed Products in the second year, then Licensor may terminate the exclusivity of the License. If the Licensee does not meet Minimum Annual Sales of Licensed Products in the third or subsequent years, the Licensor may terminate the License.
8.3 Material Breach by Licensee In the event of a material breach by Licensee, which has not been cured within sixty (60) days written notice, Licensor may, at its election, upon thirty (30) days written notice, increase the royalties payable hereunder by fifty percent (50%) for the Licensed Products; provided, however, that if there is a dispute submitted to arbitration, the notice and cure period will not commence until the later of the completion of the arbitration. If a material breach is cured after the thirty day period, the increase of royalties shall be in effect for so long as to fully and completely ameliorate the financial impact of such breach and make Licensor whole. Licensor shall have no obligation to notify Licensee that Licensor has been made whole and Licensee shall have the burden of showing that the increase should no longer be applicable.

 

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8.4 Technology and Know-How License . It is agreed and understood that this Agreement is, in part, a license of the technology and know-how incorporated into the Licensed Products and Patent Rights. In the event the Patent Rights are subsequently held to be invalid by a court of the United States or foreign country or countries, such Failure to issue or holding of invalidity shall not render this Agreement invalid.
8.5 Validity . In the event Licensee questions or challenges, directly or indirectly, the validity of the Patent Rights or assists any other person in doing so, Licensor, at its sole option, can automatically terminate this License. In the event all of the Patent Rights for the Territory are declared invalid or unenforceable by a judgment, decree, or decision of a court, tribunal, or other authority of competent jurisdiction and Licensee and Licensor elect not to appeal or no appeal is possible, then Licensee shall be relieved of its obligation to pay future royalties to Licensor hereunder.
8.6 Effect of Termination .
(a) Expiration or termination of the Agreement shall not relieve the parties of any obligation accruing prior to such expiration or termination, and the provisions of Article VI and Section 7.3 shall survive the expiration of the Agreement. Any expiration or early termination of this Agreement shall be without prejudice to the rights of either party against the other accrued or accruing under this Agreement prior to termination or expiration, including the obligation to pay royalties and other consideration due to Licensor.
(b) Upon termination of this Agreement for any reason whatsoever or upon expiration, a final report shall be submitted by Licensee and any royalty payments and other payments due to Licensor under this Agreement shall become immediately due and payable.
(c) Upon termination or expiration of this Agreement, Licensee’s rights and license hereunder shall immediately terminate and Licensee shall immediately terminate the use, manufacture, sale and import of Licensed Products.
(d) In the event of termination of the Agreement for any reason, Licensor shall provide to all sublicensees, no less than thirty (30) days prior to the Effective Date of said termination, written notice of said termination at the address specified by Licensee in the notice provided to Licensor under Section 9.7 of this Agreement. During such thirty (30) day period, the sublicensee shall provide to Licensor notice that the Sublicensee:
(i) reaffirms the terms and conditions of the Agreement as it relates to the rights the sublicense has been granted under the sublicense;
(ii) agrees to abide by all of the terms and conditions of this Agreement applicable to sublicensees and to discharge directly all pertinent obligations of Licensee which Licensee is obligated hereunder to discharge; and

 

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(iii) unless otherwise provided for pursuant to an agreement between such sublicensee and Licensor, acknowledges that Licensor shall have no obligations to the sublicensee with respect to the subject matter of this agreement, other than its obligations set forth in this Agreement with regard to Licensee, and
(e) Licensor agrees to negotiate with sublicensee a license agreement on similar terms and conditions as this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 Assignment . This Agreement may not be assigned by Licensee without the prior written consent of Licensor, which will not be unreasonably withheld; provided, however, Licensee may, without such consent, assign the Agreement and its rights and obligations hereunder in connection with the transfer or sale of all or substantially all of its assets related to the division or the subject business, or in the event of its merger or consolidation or change in control or similar transaction. This Agreement shall be binding upon, and inure to the benefit of, each party, its Affiliates, and its successors and assigns. Licensor may assign any or all of its rights under this Agreement.
9.2 Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New Mexico without regard to the conflict of law provisions thereof. Service of process in any such action may be effected in the manner provided in Section 9.7 for giving of notice or in any other manner consistent with New Mexico law.
9.3 Waiver . The waiver of any breach of this Agreement or the failure or delay of either party to enforce any right under this Agreement shall not constitute, or be construed as, a waiver of any other breach of this Agreement, whether of similar nature or otherwise, nor operate to bar the enforcement of any right under this Agreement.
9.4 Independent Relationship . Nothing herein contained shall be deemed to create an employment, agency, joint venture or partnership relationship between the parties hereto or any of their agents or employees, or any other legal arrangement that would impose liability upon one party for the act or failure to act of the other party. Neither party shall have any power to enter into any contracts or commitments or to incur any liabilities in the name of, or on behalf of, the other party, or to bind the other party in any respect whatsoever.

 

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9.5 Export Control . This Agreement is made subject to any restrictions concerning the export of products or technical information from the Untied States of America which may be Imposed upon or related to Licensor or Licensee from time to time by the Government. Furthermore, Licensee agrees that it will not export, directly or indirectly, any technical information acquired from Licensor under this Agreement or any products or processes using such technical information to any country for which the Government at the time of export requires an export license or other governmental approval, without first obtaining the written consent to do so from the Department of Commerce or other agency of the Government when required by an applicable statute or regulation.
9.6 Entire Agreement: Amendment . This Agreement, including the Exhibits hereto, which are incorporated herein by reference, sets forth the complete, final and exclusive agreement and supersedes and terminates any prior agreements or understandings between the parties. Any amendment to this Agreement Shall be in writing and signed by both parties.
9.7 Notices . Each notice required or permitted to be given or sent under this Agreement shall be given in writing by certified or overnight courier (return receipt requested), to the parties at the addresses and facsimile numbers indicated below.
If to Licensor, to:
L & J Becvar, L.P.,
5444 La Estancia Circle
E1 Paso, TX 79932-2012
Attention: Manager
With a copy as a courtesy to:

Janeen Vilven Doggett
Peacock Myers, P.C.
201 Third Street NW, Suite 1340
P. O. Box 26927
Albuquerque, NM 87125
If to Licensee, to:
ChromaDex, Inc.
2952 S. Daimler St
Santa Ana, CA 92705
Attention: President
Facsimile No.: 949-419-0294
With a copy as a courtesy to:

Mark Germain
6 Olmsted Road
Scarsdale, NY 10583

 

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Any such notice shall be deemed to have been received, in the case of a Facsimile, on the following day if the transmission is properly addressed and transmitted to the correct number, in the case of certified, first class mail, three (3) days after the certified mailing date if the letter is properly addressed and postage prepaid or, in the case of overnight courier, upon actual delivery to the proper place of address. Either party may change its address or its facsimile number by giving the other party written notice pursuant to this Section.
9.8 Force Majeure . Failure of any party to perform its obligations under this Agreement (except the obligation to make payments when properly due) shall not subject such party to any liability or place it in breach of any term or condition of this Agreement if such failure is due to any cause beyond the reasonable control of such nonperforming party, including without limitation, acts of God, fire, explosion, flood drought, war, riot, sabotage, embargo, strikes or other labor trouble, interruption of or delay in the national transportation system, a national health emergency or compliance with any order or regulation of any government entity; provided however, that the party affected shall promptly notify the other party of the condition constituting force majeure and shall use reasonable efforts to eliminate, care and overcome any such causes and to resume performance of its obligations with all possible speed. If a condition constituting force majeure as defined herein exists for more than ninety (90) consecutive days, the parties shall meet to negotiate a mutually satisfactory solution, if practicable.
9.9 Severability . In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable, the validity, legality and enforecability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, unless the absence of the invalidated provision(s) adversely affects the substantive rights of at least one of the parties. The parties shall, in such an event, use their best efforts to replace the invalid, illegal or unenforceable provision(s) with valid, legal and enforceable provision(s) which, insofar as practical, implement the purposes of this Agreement.
9.10 Binding Nature of Agreement . This Agreement shall be binding on all personal representatives, heirs, successors, and assigns of the parties hereto.
9.11 Arbitration . Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled in the United States by arbitration, in accordance with the rules then pertaining, of the American Arbitration Association for an arbitration by a single arbitrator. If the subject of the arbitration involves an intellectual property, corporate, or bankruptcy matter, as determined by the Association, then the arbitrator shall have had experience in that subject. The Association is authorized to make arrangements for this arbitration, to be held under these rules in any locality in the United States agreed upon by the parties or as designated by the Association. This Agreement shall be enforceable and judgment upon any award rendered by the arbitrator may be entered in any court of any country having jurisdiction. The costs of the arbitration, including reasonable attorneys’ fees, shall be born by the losing party or shall be allocated between the parties in such proportion as the arbitrator decides.

 

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9.12 Counterparts . This agreement may be executed in counterparts, which together shall constitute one and the same Agreement.
IN WITHNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above.
                     
[LICENSOR]       [LICENSEE]    
 
                   
By:
  /s/ James Becvar       By:   /s/ Frank Jaksch    
 
                   
 
  Name: James Becvar           Name: Frank Jaksch    
 
  Title: Manager of L & J Becvar, L.P.           Title: President of ChromaDex, Inc.    
 
  Date: 15 September 2005           Date: 8/19/2005    

 

- 18 -


 

EXHIBIT A
1. Whenever ChromaDex shall sell or issue (each such sale or issuance referred to as a “Subsequent Issuance”) shares of Common Stock of ChromaDex, or any options, warrants, convertible securities or other rights to acquire Common Stock of ChromaDex (referred to herein as “Common Stock Equivalents”), such Common Stock Equivalents to include those warrants issued in conversion of Series A Preferred Stock, and the Consideration Per Share (as defined below) in connection with such Subsequent Issuance is lower than L & J Becvar, L.P.’s purchase price per share of $0.87, than L & J Becvar, L.P. shall receive, upon the sale or issuance of such Common Stock (or the actual conversion of Common Stock Equivalents into Common Stock), an additional number of shares of Common Stock equal to the number obtained by using the following formula:
First: determine the Recalculated Share Price as follows:
Recalculated Share Price equals
(a) Total shares outstanding prior to the Subsequent Issuance, (including L & J Becvar, L.P.’s shares) multiplied by the price per share paid by L & J Becvar, L.P. ($0.87), plus the total shares issued in the Subsequent Issuance multiplied by the price per share paid in such Subsequent Issuance;
divided by
(b) The total shares outstanding after the Subsequent Issuance.
Second: calculate the new share total for L & J Becvar, L.P. as follows:
$294,194 divided by the Recalculated Share Price equals the new share total for L & J Becvar, L.P.,
Third: issue additional shares of Common Stock to L & J Becvar, L.P. so that the sum of L & J Becvar, L.P.’s original shareholdings and the newly issued shares equals the new share total.
2. For the purposes of EXHIBIT A, the Consideration Per Share received by ChromaDex in a Subsequent Issuance shall be determined as follows:
(a) “Consideration Per Share” with respect to shares of Common Stock means the amount equal to the total amount of consideration received by ChromaDex for the issuance of such shares of Common Stock, divided by the aggregate number of shares of Common Stock so issued.

 

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(b) “Consideration Per Share” with respect to Common Stock Equivalents means the consideration actually received as of the date of conversion of the Common Stock Equivalents into Common Stock, plus the actual amount of consideration received by ChromaDex for the Common Stock Equivalents, divided by the aggregate number of shares of Common Stock so issued. Unconverted Common Stock Equivalents are not used in calculating dilution until and unless they are converted into Common Stock.
3. L & J Becvar, L.P. shall receive anti-dilution protection pursuant to this Section 1 until twelve months from the date hereof, or until ChromaDex sells not less than 1 million shares of its Common Stock in a public or private offering at a price of not less than $0.87 per share, or until the Common Stock of ChromaDex or any successor entity is listed on thee Nasdaq Small Cap, Nasdaq National Market, AMEX or NYSE. Any Common Stock which is issued pursuant to a Common Stock Equivalent which was issued during this antidilution period shall be subject to this antidilution protection, even if the Common Stock Equivalent is converted into Common Stock after the antidilution period has expired.
4. The antidilution protection set forth in this Section 1 shall not apply to an aggregate of 1,460,000 shares of Common Stock Equivalents for employee options (l,360,000 new options and 100,000 warrants).
5. The antidilution protection set forth in this Section 1 shall be adjusted for stock splits, reverse stock splits and the like effected after the date hereof.

 

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A0561188
(CERTIFICATE)
EXHIBIT B
Page 3 of 4

 

 


 

A0561188
(STAMP)
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
The undersigned certify that:
1.   Frank L. Jaksch, Jr. and Mark S. Germain are the President and Secretary respectively of CHROMADEX, INC., a California corporation.
 
2.   Article IV of the Articles of Incorporation of this corporation is amended to read as follows:
This corporation is authorized to issue 2 classes of shares, designated respectively “Common Stock” and “Preferred Stock”. 20,000,000 shares of Common Stock may be issued. 10,000,000 shares of Preferred Stock may be issued. The Common Stock has voting rights. The Preferred Stock has no voting rights. The board of directors may divide the Preferred Stock into any number of series. The board of directors shall fix the designation and number of shares of each such series. The board of directors may determine and alter the rights, preferences, privileges, and restrictions granted to and imposed upon any wholly unissued series of the Preferred Stock. The board of directors (within the limits and restrictions of any resolution adopted by it, originally fixing the number of shares of any series) may increase or decrease the number of shares of any such series after the issue of shares of that series, but not below the number of then outstanding shares of such series.
3.   The foregoing amendment of Articles of Incorporation has been duly approved by the Board of Directors.
 
4.   The foregoing Amendment of Articles of Incorporation has been duly approved by the required vote of shareholders in accordance with Section 902 of the California Corporations Code. The total number of outstanding shares of the corporation is 2,000,000. The number of shares voting in favor of the amendment equaled or exceeded the vote required. The percentage vote required was more than 50%.
We each further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of our own knowledge.
         
Dated: January 2, 2001  /s/ Frank L. Jaksch Jr.    
  Frank L. Jaksch, Jr., President   
     
  /s/ Mark S. Germain    
  Mark S. Germain, Secretary  (SEAL)
EXHIBIT B
Page 4 of 4

 

 


 

(CERTIFICATE)
EXHIBIT B
Page 1 of 4

 

 


 

2187231
(STAMP)
ARTICLES OF INCORPORATION
OF
CHROMADEX, INC.
ARTICLE I
The name of this corporation is ChromaDex, Inc.
ARTICLE II
The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code.
ARTICLE III
The name and address in the State of California of this corporation’s initial agent for service of process is Frank Louis Jaksch, Jr., 8 Garzoni Aisle, Irvine, California 92606.
ARTICLE IV
This corporation is authorized to issue only one class of shares of stock and the total number of shares which this corporation is authorized to issue is 2,000,000.
         
Dated: 2/17/00  /s/ Mark R. Matthews    
  MARK R. MATTHEWS, Incorporator  (SEAL)
EXHIBIT B
Page 2 of 4

 

 


 

ChromaDEx, Inc.
Employee Stock Option Plan
Share Obligations
                                         
OPTIONS ISSUED TO   ISSUE DATE   EXPIRATION DATE   NUMBER OF OPTION SHARES     CERTIFICATES ISSUED   EXERCISE PRICE     ADDRESSES   CURRENT PERCENT VESTED   CANCELLED
2001 Options
                                       
Option Holder 1
  28-Feb-01   31-Dec-06     23,000     Yes   $ 0.50     On file   80%    
Option Holder 2
  28-Feb-01   31-Dec-06     23,000     Yes   $ 0.50     On file   80%    
 
                                   
Total Options Issued 2001
  above   above     46,000     above   $ 0.50     On file   above    
 
                                   
 
                                       
2002 Options
                                       
Option Holder 3
  5-Jan-02   31-Dec-07     10,000     Yes   $ 0.50     On file   60%    
Option Holder 4
  3-Jan-02   31-Dec-08     10,000     Yes   $ 0.50     On file   60%    
 
                                   
Total Options Issued 2002
  above   above     20,000     above   $ 0.50     NA   above    
 
                                   
 
                                       
2003 Options
                                       
Option Holder 5**
  1-Feb-03   31-Dec-09     225,000     Yes   $ 0.50     On file   40%    
Option Holder 2
  1-Feb-03   31-Dec-09     20,000     Yes   $ 0.75     On file   40%    
Option Holder 6
  1-Feb-03   31-Dec-09     10,000     Yes   $ 0.75     On file   40%    
Option Holder 7
  10-Nov-03   31-Dec-09     5,000     Yes     1.00     On file   20%    
 
                                   
Total Options Issued 2003
  above   above     255,000     above   above     On file   above    
 
                                   
 
                                       
2004 Options
                                       
Option Holder 8*
  19-Jan-04   31-Dec-07     240,000     Yes     1.50     On file   33%    
Option Holder 9
  21-Jan-04   31-Dec-09     4,000     Yes     1.50     On file   20%    
Option Holder 10
  24-May-04   31-Dec-10     5,000     Yes     1.50     On file   0%    
Option Holder 11
  28-Jun-04   31-Dec-10     5,000     Yes     1.50     On file   0%    
Option Holder 2
  28-Jun-04   1-Jan-11     5,000     Yes     1.50     On file   0%    
 
                                   
Total Options Issued 2004
  above   above     240,000     above   above     On file   above    
 
                                   
 
                                       
2005 Options
                                       
Option Holder 2
  1-Jan-05   31-Dec-11     30,000     Yes   $ 1.50     On file   0%    
Option Holder 12
  1-Aug-05   31-Dec-11     5,000     No   $ 1.50     On file   0%    
Option Holder 13
  1-Feb-05   31-Dec-11     5,000     Yes   $ 1.50     On file   0%    
 
                                   
Total Options Issued 2005
  above   above     30,000     above   above     On file   above    
 
                                   
 
                                       
Grand Total Options Issued
  above   above     575,000     No   NA     On file   above    
 
                                   
ChromaDEx option plan above for a 20% per year vesting for each employee. A full vesting after 5 years from issue date.
     
*   These options vest at a rate of 33% per year.
 
**   25,000 of year 1 vested shares transferred to Shareholder [ILLEGIBLE] settlement. These options have been exercised and a share certificate issued.
EXHIBIT C

 

 

Exhibit 4.4
Form of Warrant
THIS WARRANT AND ANY SECURITIES TO BE ISSUED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”), OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE LAWS. THE WARRANT AND SUCH SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND THE LAWS OF ANY APPLICABLE STATE OR OTHER JURISDICTION, OR AN EXEMPTION THEREFROM, THE AVAILABILITY OF WHICH MUST BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY.
     
No. W-[_____]                                             , 200_____ 
WARRANT TO PURCHASE SHARES OF COMMON STOCK
of
CHROMADEX, INC.
This certifies that, for value received, [                                           ], or its registered assigns (“ Holder ”), is entitled, subject to the terms set forth below, to purchase from ChromaDex, Inc., a California corporation (the “ Company ”), shares (the “ Warrant Shares ”) of Common Stock, no par value per share, of the Company (“ Common Stock ”), subject to adjustment as set forth herein, at an exercise price (the “ Exercise Price ”) of $3.00 per Warrant Share, subject to adjustment as set forth herein. This Warrant is one of a number of similar Warrants being issued by the Company in connection with the Company’s offering of up to 4,411,764 shares of Common Stock and Warrants to purchase an additional 2,205,882 shares of Common Stock pursuant to the terms of the Company’s Confidential Private Placement Memorandum dated December 18, 2007 (the “ PPM ”), together with the business plan of the Company, a copy of which is attached to the PPM as Appendix A.
1.  Term of Warrant . Subject to the terms and conditions set forth herein, this Warrant shall only be exercisable, in whole or in part, during the period (the “ Exercise Period ”) beginning on the date hereof (the “ Effective Date ”) and ending on the fifth anniversary of the Effective Date.
2. Exercise of Warrant .
a. Subject to the terms and conditions set forth herein, the purchase rights represented by this Warrant are exercisable by the Holder in whole or in part, at any time, or from time to time, during the Exercise Period, by the surrender of this Warrant and a notice of exercise in the form attached hereto as Annex A (the “ Notice of Exercise ”) duly completed and executed by or on behalf of the Holder, at the principal executive office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder), and upon payment of the Exercise Price for each of the Warrant Shares to be issued pursuant to such exercise (i) in cash or other immediately available funds or (ii) by a cashless exercise in accordance with Section 2(c). This Warrant may not be exercised for less than 500 Warrant Shares at a time (or such lesser number of Warrant Shares which may then constitute the maximum number purchasable pursuant to this Warrant); such number being subject to adjustment for stock splits, stock dividends, mergers, reclassifications, recapitalizations and the like, occurring on or after the date hereof.
b. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the Warrant Shares issuable upon such exercise shall be treated for all purposes as the holder of record of such Warrant Shares as of the close of business on such date. As promptly as practicable on or after such date and in any event within 20 days thereafter, the Company at its expense shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of Warrant Shares issuable upon such exercise. In the event that this Warrant is exercised in part, the Company at its expense will execute and deliver a new Warrant of like tenor exercisable for the number of Warrant Shares for which this Warrant may then be exercised.

 

 


 

c. Notwithstanding any provisions herein to the contrary, in lieu of exercising this Warrant through the payment of the Exercise Price with cash or other immediately available funds, the Holder may elect to receive Warrant Shares with a value equal to the value (as determined below) of this Warrant (or the portion thereof being exercised) by surrender of this Warrant together with the properly endorsed Notice of Exercise and notice of such election in which event the Company shall issue to the Holder a number of Warrant Shares computed using the following formula:
             
 
      X =   Y (A-B)
     A
 
           
 
  Where   X =  
the number of Warrant Shares to be issued to the Holder
 
           
 
      Y =   the number of Shares purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised
 
           
 
      A =   the fair market value of one Warrant Share (at the date of such calculation)
 
           
 
      B =   Exercise Price
For purposes of the above calculation, the fair market value of one Warrant Share shall mean, if the Common Stock is traded on a national securities exchange, the Nasdaq Market System or the over-the-counter market, the average of the last reported sales price on the trading day immediately preceding the date of valuation at which the Common Stock has traded on such national securities exchange, the Nasdaq Market System or the average of the bid and asked prices on the over-the-counter market on the date of valuation. If the Common Stock is not publicly traded, the fair market value per Warrant Share shall be determined by the Board of Directors of the Company based upon the fair market value of the Warrant Share if the Company were to be sold as a going concern and without regard to any discount for the lack of liquidity or on the basis that the relevant securities do not constitute a majority or controlling interest in the Company.
3.  No Fractional Shares or Scrip . No fractional Warrant Shares or scrip representing fractional Warrant Shares shall be issued upon the exercise of this Warrant. In lieu of any fractional Warrant Shares to which the Holder would otherwise be entitled, the Company shall make a cash payment equal to the fair market value (as defined above) of one Warrant Share multiplied by such fraction.
4.  Replacement of Warrant . On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor and amount.
5.  Rights as Shareholders . The Holder, as a holder of this Warrant, shall not be deemed the holder of Warrant Shares for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until this Warrant shall have been exercised as provided herein.
6. Transfer of Warrant .
a.  Warrant Register . The Company will maintain a register (the “ Warrant Register ”) containing the names and addresses of the Holder or Holders. Any Holder of this Warrant or any portion thereof may change its address as shown on the Warrant Register by written notice to the Company requesting such change. Any notice or written communication required or permitted to be given to the Holder may be delivered or given by mail to such Holder as shown on the Warrant Register and at the address shown on the Warrant Register. Until this Warrant is transferred on the Warrant Register of the Company, the Company may treat the Holder as shown on the Warrant Register as the absolute owner of this Warrant for all purposes, notwithstanding any notice to the contrary.
b.  Transferability and Nonnegotiability of Warrant . This Warrant may not be transferred or assigned in whole or in part without compliance with (i) Section 4 (Right of First Refusal) of the Subscription Agreement dated                      , 200_____, by and between Holder and the Company, and (ii) all applicable federal and state securities laws by the transferor and the transferee (including the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, if such are requested by the Company). Subject to such compliance, title to this Warrant may be transferred by endorsement by the Holder executing the assignment form attached hereto as Annex B (the “ Assignment Form ”) and delivery in the same manner as a negotiable instrument transferable by endorsement and delivery.

 

 


 

c.  Exchange of Warrant Upon a Transfer . Upon surrender of this Warrant for exchange, properly endorsed on the Assignment Form and subject to compliance with the other provisions of this Section 6, the Company at its expense shall issue to or on the order of the transferee a new warrant or warrants of like tenor, in the name of the transferee or as the transferee may direct, for the number of Warrant Shares then issuable upon exercise hereof.
7.  Reservation of Shares . The Company covenants that, during the term this Warrant is exercisable, the Company will reserve from its authorized and unissued shares of Common Stock a sufficient number of shares of Common Stock to provide for the issuance of all Warrant Shares issuable upon the exercise of this Warrant and, from time to time, will take all steps necessary to provide sufficient reserves of shares of Common Stock issuable upon exercise of this Warrant. The Company further covenants that all Warrant Shares that may be issued upon the exercise of rights represented by this Warrant and payment of the Exercise Price pursuant to Section 2(a)(i) or Section 2(a)(ii), all as set forth herein, will be fully paid, nonassessable, free of preemptive rights (other than preemptive rights which have been waived) and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously or otherwise specified herein). The Company agrees that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for Warrant Shares upon the exercise of this Warrant.
8.  Adjustment of Exercise Price and Number of Shares . The Exercise Price and the number of Warrant Shares purchasable upon the exercise of this Warrant shall be subject to adjustment from time to time upon the occurrence of certain events described in this Section 8. Upon each adjustment to the Exercise Price, the Holder shall thereafter be entitled to purchase, at the Exercise Price resulting from such adjustment, the number of Warrant Shares obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment, and dividing the product thereof by the Exercise Price resulting from such adjustment.
a. In case the Company shall at any time subdivide its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced, and conversely, in case the outstanding shares of Common Stock of the Company shall be combined into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased.
b. If at any time or from time to time the holders of Common Stock shall have received or become entitled to receive, without further payment therefor,
(i) shares of Common Stock or any shares of capital stock or other securities which are at any time directly or indirectly convertible into or exchangeable for Common Stock, or any rights or options to subscribe for, purchase or otherwise acquire any of the foregoing by way of dividend or other distribution,
(ii) any cash paid or payable otherwise than as a cash dividend, or
(iii) shares of Common Stock or additional stock or other securities or other property (including cash) by way of spinoff, split-up, merger, reclassification, recapitalization, combination of shares or similar corporate rearrangement (other than shares of Common Stock issued as a stock split or adjustments in respect of which shall be covered by the terms of Section 8(a)),
then and in each such case, the Holder hereof shall, upon the exercise of this Warrant, be entitled to receive, in addition to the number of shares of Common Stock receivable thereupon, and without payment of any additional consideration therefor, the amount of shares, capital stock, securities and other property (including cash in the cases referred to in clauses (ii) and (iii) above) which such Holder would hold on the date of such exercise had Holder been the holder of record of such Common Stock as of the date on which holders of Common Stock received or became entitled to receive such shares, capital stock, securities and other property.
c. If any change in the outstanding Common Stock of the Company or any other event occurs as to which the other provisions of this Section 8 are not strictly applicable or if strictly applicable would not fairly protect the purchase rights of the Holder in accordance with such provisions, then the Board of Directors of the Company shall make an adjustment in the number and class of shares issuable under the Warrant, the Exercise Price or the application of such provisions, so as to protect such purchase rights as aforesaid. The adjustment shall be such as will give the Holder upon exercise for the same aggregate Exercise Price the total number, class and kind of shares, capital stock, securities and other property as he would have owned had the Warrant been exercised for Warrant Shares prior to the event and had he continued to hold such Warrant Shares until after the event requiring adjustment.

 

 


 

9.  The Company’s Repurchase/Cancellation Rights .
a.  Repurchase of Warrant Shares . At any time during the period commencing on the date of Holder’s exercise, whether in whole or in part, of its purchase rights under this Warrant and ending on the fifth anniversary of the Effective Date (the “ Repurchase Period ”), the Company shall have the right, but not the obligation, to purchase and acquire from Holder any or all of the Warrant Shares so purchased by Holder (the “ Outstanding Warrant Shares ”) at a price per Outstanding Warrant Share equal to $4.50 per share (the “ Repurchase Price ”). The Company may exercise the right granted to it under this Section 9(a) by delivering a written notice to Holder at any time during the Repurchase Period stating that the Company is exercising the repurchase right granted to it under this Section 9(a), the number of Outstanding Warrant Shares to be so repurchased by the Company (the “ Repurchased Warrant Shares ”), and the total repurchase price for the Repurchased Warrant Shares. The delivery of such notice by the Company to Holder shall constitute a binding commitment of the Company to purchase and acquire all of the Repurchased Warrant Shares for such total repurchase price. The total repurchase price for the Repurchased Warrant Shares shall be delivered to Holder against delivery by Holder of certificate(s) evidencing the Repurchased Warrant Shares no later than 30 days after the Company’s delivery to Holder of the repurchase notice. If the Company does not repurchase all of the Outstanding Warrant Shares subject to the stock certificate delivered by Holder, then, concurrently with its delivery of the total repurchase price to Holder, the Company shall also execute and deliver to Holder a new certificate for the balance of such Outstanding Warrant Shares.
b.  Cancellation of Warrant Rights . At any time during the period commencing on the six-month anniversary of the Effective Date and ending on the fifth anniversary of the Effective Date (the “ Cancellation Period ”), the Company shall have the right, but not the obligation, to terminate and cancel Holder’s purchase rights under this Warrant, whether in whole or in part (in each case, a “ Cancellation ”), in consideration of the Company’s payment and delivery to Holder of cash in the amount of $1.50 ( i.e. , $4.50 less $3.00) multiplied by the number of Warrant Shares subject to such Cancellation. The Company may exercise the Cancellation right granted to it under this Section 9(b) by delivering a written notice to Holder during the Cancellation Period stating that the Company is exercising its right to Cancellation granted to it under this Section 9(b), and the stating the number of Warrant Shares to be subject to such Cancellation. The delivery of such notice by the Company to Holder shall constitute a binding commitment of the Company to terminate and cancel such purchase rights of Holder under this Warrant for the total cancellation price. The total cancellation price for the Cancellation shall be delivered to Holder against delivery by Holder of this Warrant no later than 30 days after the Company’s delivery to Holder of the cancellation notice. If the Cancellation does not terminate and cancel all of Holder’s purchase rights under this Warrant, then, concurrently with its delivery of the total cancellation price to Holder, the Company shall also execute and deliver a new warrant of the same terms and conditions of this Warrant for the remaining Warrant Shares then subject to exercise under this Warrant.
10.  Notices . In case:
a. the Company shall take a record of the holders of its shares of Common Stock for the purpose of entitling them to receive any dividend or other distribution, or any right to subscribe for or purchase any shares of any class or any other securities, or to receive any other right, or
b. of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or merger of the Company with or into another entity, or any conveyance of all or substantially all of the assets of the Company to another corporation, or
c. of any actual or “deemed” liquidation, dissolution or winding up of the Company, including, without limitation, any of the following transactions: (A) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation) that results in the transfer of 50% or more of the outstanding voting power of the Company; or (B) a sale of all or substantially all of the assets of the Company (each, a “ Liquidation Event ”), or
d. of any sale of the Common Stock in an underwritten public offering pursuant to a registration statement on Form S-1 or Form SB 2 or any comparable successor form then in effect under the Securities Act of 1933, as amended (a “ Initial Public Offering ”),
then, and in each such case, the Company will mail or cause to be mailed to the Holder or Holders a notice specifying, as the case may be, (A) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (B) the date on which such reorganization, reclassification, consolidation, merger, conveyance, Liquidation Event or the Initial Public Offering is to take place, and the time, if any is to be fixed, as of which the holders of record of shares of Common Stock shall be entitled to exchange their Warrant Shares for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution, Liquidation Event or the Initial Public Offering. Such notice shall be mailed at least 30 days prior to the date therein specified.

 

 


 

11.  Amendments . This Warrant and any term hereof, may be changed, waived, discharged or terminated only by an instrument signed by the Company and the Holder. No waivers of, or exceptions to, any term, condition or provisions of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.
12.  Miscellaneous .
a. This Warrant shall be governed by and construed in accordance with the laws of the State of California, without reference to the conflict of law principles thereof.
b. This Warrant shall bind the Company, its successors and assigns, and shall benefit and bind the Holder, the Holder’s successors and permitted assigns.
c. The Section headings in this Warrant have been included solely for ease of reference and shall not be considered in the interpretation or construction of this Warrant. All references in this Warrant to “Sections” shall be construed as references to numbered Sections of this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed and issued by its duly authorized representative on the date first above written.
             
    THE “COMPANY”:
 
           
    CHROMADEX, INC. ,
a California corporation
 
           
 
  By:        
         
 
      Its:    
 
           
[ Remainder of Page Intentionally Left Blank – Holder’s Signature Page Follows ]

 

 


 

HOLDER’S COUNTERPART SIGNATURE PAGE
TO
WARRANT
The undersigned Holder agrees to be bound by the terms of the Warrant of ChromaDex, Inc., a California corporation, executed by the Company in favor of the undersigned Holder, and agrees to all of the terms thereof.
FOR HOLDERS THAT ARE INDIVIDUALS:
                 
Date:
          Signature:    
 
               
 
               
 
               
 
               
 
          Name (please print):    
 
               
 
               
FOR HOLDERS THAT ARE TRUSTS:
                     
Date:
                   
 
                   
 
          Name of Trust:        
 
                   
 
                   
                 
 
                   
                 
                     
 
          Signature of Trustee    
 
   
 
   
 
          If applicable:        
 
                   
 
          Signature of Co-Trustee    
 
   
FOR HOLDERS THAT ARE CORPORATIONS, LIMITED LIABILITY COMPANIES OR PARTNERSHIPS:
                     
Date:
                   
 
                   
 
          Name of Entity:        
 
                   
 
                   
                 
                     
 
          Signature:    
 
   
                     
 
          Title of Signatory:    
 
   

 

 


 

Annex A
NOTICE OF EXERCISE
To:       ChromaDex, Inc.
(1) The undersigned hereby (A) elects to purchase  _____  shares of Common Stock of ChromaDex, Inc. pursuant to the provisions of Section 2(a) of the attached Warrant, and tenders herewith payment of the purchase price for such shares in full, or (B) elects to exercise this Warrant for the purchase of  _____  shares of Common Stock, pursuant to the provisions of Section 2(c) of the attached Warrant.
(2) In exercising this Warrant, the undersigned hereby confirms and acknowledges that the Warrant Shares to be issued upon exercise hereof are being acquired solely for the account of the undersigned and not as a nominee for any other party, and for investment, and that the undersigned will not offer, sell or otherwise dispose of any such Warrant Shares except under circumstances that will not result in a violation of applicable federal and state securities laws.
(3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:
             
 
     
 
(Name)
   
(4) Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned or in such other name as is specified below:
             
 
     
 
(Name)
   
 
           
 
           
(Date)
      (Signature)    

 

 


 

Annex B
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the within Warrant, with respect to the number of Warrant Shares set forth below:
         
Name of Assignee   Address   No. of Warrant Shares
 
       
The Assignee acknowledges that this Warrant and the Warrant Shares to be issued upon exercise hereof are being acquired for investment and that the Assignee will not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances which will not result in a violation of applicable federal and state securities laws.
         
Date:
   
 
   
             
 
     
 
Signature of Holder
   
             
 
     
 
Signature of Assignee
   

 

 

Exhibit 10.1
CHROMADEX, INC .
2000 NON-QUALIFIED
INCENTIVE STOCK OPTION PLAN
Purpose . This 2000 Non-qualified Incentive Stock Option Plan (the “Plan”) is intended to promote the growth and general prosperity of CHROMADEX, INC. (the “Company”) by encouraging and enabling selected employees and/or consultants of the Company whose judgment, initiative and effort materially contribute to the successful conduct of the Company’s business, to acquire and retain a proprietary interest in the Company by ownership of its stock. Options granted under the Plan are intended to be options which do not meet the qualified stock option requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).
Definitions . As used in this Plan, capitalized terms shall have the meanings set forth below or as elsewhere defined:
“Board” means the Board of Directors of the Company.
“Committee” means the body administering the Plan.
“Date of Grant” means the date on which an Option is granted under the Plan.
“Effective Date” means October 1, 2000.
“Exercise Price” means the price per share to be paid by the Option Holder to the Company upon exercise of an Option.
“Expiration Date” means the date on which an Option expires if not exercised.
“Option” means an option to purchase Stock of the Company granted under the Plan.
“Option Period” means the period commencing on the Date of Grant and ending on the Expiration Date.
“Option Holder” means a person to whom an Option has been granted under the Plan.
“Stock” means the Company’s voting common stock.

 

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1.  Administration of Plan . The Plan shall be administered by the Board or by a committee appointed by the Board (the “Committee”). If the Plan is administered by the Committee, it shall report all actions taken by it to the Board. Options to members of the Committee may be granted only by a majority of the disinterested members of the Board. The Committee shall have full and final authority in its discretion, subject to the provisions of the Plan, to determine the individuals to whom and the time or times at which Options shall be granted and the number of shares and purchase price of Stock covered by each Option; to construe and interpret the Plan; to determine the terms and provisions of the respective Option Agreements, which need not be identical, including, but without limitation, terms covering the payment of the Option Price; and to make all other determinations and take all other actions deemed necessary or advisable for the proper administration of the Plan. All such actions and determinations shall be conclusively binding for all purposes and upon all persons.
2.  Stock Subject to Options . The aggregate number of shares of the Company’s Stock which may be issued upon the exercise of Options granted under the Plan shall not exceed ten percent (10.00%) of the issued and outstanding shares of Stock [calculated as if all Options are exercised], subject to adjustment under the provisions of Section 10. The shares of Stock to be issued upon the exercise of Options may be authorized but unissued shares, shares issued and reacquired by the Company or shares bought on the market for the purposes of the Plan. In the event any Option shall, for any reason, terminate or expire or be surrendered without having been exercised in full, the shares subject to such Option but not purchased thereunder shall again be available for Options to be granted under the Plan.
3.  Participants . Options may be granted under the Plan to any person who is an employee or consultant of the Company. The Company may, in its sole discretion, determine who may be a participant in the Plan.
4.  Stock Option Agreement . The terms and conditions of Options granted under the Plan shall be evidenced by a Stock Option Agreement (hereinafter referred to as the “Option Agreement”) executed by the Company and the Option Holder. Each Option Agreement shall contain the following provisions approved by the Board (or the Committee):
  (a)  
A provision fixing the number of shares which may be issued upon exercise of the Option;
 
  (b)  
A provision establishing the Exercise Price;
 
  (c)  
A provision incorporating therein this Plan document by reference;
 
  (d)  
A provision fixing the maximum duration of the Option as not more than ten (10) years from the Date of Grant;
 
  (e)  
A provision to accelerate the Exercise Date to the date ninety (90) days after the termination date of the employment or consulting agreement between the Company and the Option Holder;
 
  (f)  
A provision regarding vesting of the Options;
 
  (g)  
A provision authorizing the Company to re-purchase the Stock from Option Holders on termination of the employment or consulting agreement between the Company and the Option Holder.

 

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5.  Exercise Price . Each Option Agreement shall state the Exercise Price (which may be different for each Option Agreement) and all options will be issued at an exercise price that is equal or greater than Fair Market Value (FMV) at the date of the grant. Fair Market Value will be determined by the Board and the executive management of the company based on the current offering price of shares to outside investors.
6.  Period of Option . The Expiration Date of each Option shall be fixed by the Board or Committee on or before the Date of Grant. Notwithstanding any provision of this Plan and/or of any Option Agreement to the contrary and, regardless of the date of vesting, the Expiration Date of the Options shall be the earliest of:
  (a)  
the date the Option Holder’s employment or consulting Agreement with the Company is terminated by the Company;
 
  (b)  
the date the Option Holder tenders his/her voluntarily resignation of employment to the Company; or
 
  (c)  
the Expiration Date of the Options.
7.  Vesting of Shareholder Rights . Neither an Option Holder nor an Option Holder’s successor shall have any of the rights of a shareholder of the Company until the certificates evidencing the shares purchased are properly delivered to such Option Holder or his successor.
8.  Exercise of Option . Each Option shall be exercisable from time to time over a period commencing on the Date of Grant and ending upon the Expiration Date. An Option shall be deemed exercised when written notice of such exercise has been given to the Company at its principal business office by the person entitled to exercise the Option and full payment in cash or cash equivalents for the shares with respect to which the Option is exercised has been received by the Company. Until the issuance of the stock certificates, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to optioned shares notwithstanding the exercise of the Option. No adjustment will be made for a dividend or other rights for which the record date is prior to the date the stock certificate is issued. An Option may be exercised in accordance with this Section 8 as to all or any portion of the shares covered by the Option from time to time during the Option Period, but shall not be exercisable with respect to fractions of a share. The Board or Committee may prescribe minimum increments in which an Option is exercisable. As soon as practicable after any proper exercise of an Option in accordance with the provisions of this Plan, the Company shall, without transfer or issue tax charged to the Option Holder, deliver to the Option Holder at the main office of the Company, or such other place as shall be mutually acceptable, a certificate or certificates representing the shares of Stock as to which the Option has been exercised. The time of issuance and delivery of the Stock may be postponed by the Company for such period as may be required for it with reasonable diligence to comply with any applicable listing requirements of any national or regional securities exchange and any law or regulation applicable to the issuance and delivery of such shares.

 

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9.  Non-transferability of Option . No option shall be transferable or assignable by an Option Holder except for a transfer or assignment without consideration to: (a) a grantor trust of which the Option Holder is a trustee or a co-trustee, (b) a spouse, child, sibling, parent, or other individual who is a related party to the Option Holder as defined in Internal Revenue Code Section 267, (c) an entity which is owned or controlled by the Option Holder and which is a related party to the Option Holder as defined in Internal Revenue Code Section 267, or (d) by will or the laws of descent and distribution of estates. Each option shall be exercisable, during the Option Holder’s lifetime, only by him or by his permitted assign. No transfer or assignment of an option shall be effective until the transferee or assignee shall have signed and delivered to the Company such documents as the Company may require under which said transferee or assignee shall acknowledge and be bound by all terms and conditions of the Plan and of the Option Agreement signed by the Option Holder. No Option shall be subject to execution, attachment, or similar process except with the express consent of the Committee.
10.  Adjustments . In the event that the outstanding shares of Stock of the Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation, by reason of a recapitalization, reclassification, stock split, combination of shares, or dividend or other distribution payable in capital stock, appropriate adjustment shall be made by the Board or Committee in the number and kind of shares for the purchase of which Options may be granted under the Plan. In addition, the Board or Committee may make appropriate adjustment, if any, as it may deem appropriate, in the number and kind of shares as to which outstanding Options, or portions thereof then unexercised, shall be exercisable, to the end that the proportionate interest of the holder of the Option shall, to the extent practicable, be maintained as before the occurrence of such event. Such adjustment in outstanding Options shall be made without change in the total price applicable to the unexercised portion of the Option but with a corresponding adjustment in the Option price per share. Adjustments and determinations under this Section 11 shall be made by the Board or Committee, whose decisions as to what adjustments or determinations shall be made, and the extent thereof, shall be final, binding and conclusive.
11.  Restrictions on Issuing Shares . The exercise of each Option shall be subject to the condition that if at any time the Company shall determine in its discretion that the satisfaction of withholding tax or other withholding liabilities, or that the listing, registration, or qualification of any shares otherwise deliverable upon such exercise upon any securities exchange or under any state or federal law, or that the consent or approval of any regulatory body, is necessary or desirable as a condition of, or in connection with, such exercise or the delivery or purchase of shares pursuant thereto, then in any such event, such exercise shall not be effective unless such withholding, listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not acceptable to the Company.

 

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12.  Restrictions . The Board or Committee may impose such restrictions on any shares sold pursuant to this Plan as it may deem advisable under the federal Securities Act of 1933, (the “Act”) as amended, under the requirements of any stock exchange upon which such shares or shares of the same class are then listed, and under any blue sky or securities laws applicable to such shares.
13.  Legends on Option Certificates . The Options granted hereunder have not been registered under the Act. Transfer or sale of such securities or any interest therein is unlawful except after registration, or pursuant to an exemption from the registration requirements, as provided in the Act and the regulations thereunder. The sale of the securities which are the subject of this Plan has not been qualified with any state and the issuance of such securities or the payment or receipt of any part of the consideration therefor prior to such qualification is unlawful, unless the sale of securities is exempt from the qualification by applicable state securities laws. The rights of all parties are expressly conditioned upon such qualification being obtained, unless the sale is so exempt. The Options granted hereunder are being granted in reliance on perfection of an exemption from qualification. Each certificate of Stock Option shall be stamped or otherwise imprinted with the following legends:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THESE SECURITIES UNDER THAT ACT OR AN OPINION BY COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER’S RULES.
14.  Amendment, Suspension, and Termination of Plan . The Board may at any time suspend or terminate the Plan or may amend it from time to time in such respects as the Board may deem advisable in order that the Options granted hereunder may conform to any changes in the law or in any other respect which the Board may deem to be in the best interests of the Company; provided, however, that without approval by the shareholders of the Company representing a majority of the voting power, no such amendment shall (a) increase the maximum number of shares for which Options may be granted under the Plan, (b) change the provisions of Section 5 relating to the establishment of the Exercise price, or (c) change the provisions of Section 6 relating to the Expiration Date of each Option. The Plan shall terminate ten (10) years after the effective date of the Plan unless terminated earlier by action of the Board. No Option may be granted during any suspension or after the termination of the Plan. No amendment, suspension, or termination of the Plan shall, without an Option Holder’s consent, alter or impair any of the rights or obligations under any Option theretofore granted to such Option Holder under the Plan.

 

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15.  Taxes Fees and Expenses . The Company shall pay all original issue and transfer taxes (but not income taxes, if any) with respect to the grant of Options and/or the issue and transfer of Stock pursuant to the exercise of such Options, and all other fees and expenses necessarily incurred by the Company in connection therewith, and will from time to time use its best efforts to comply with all laws and regulations which, in the opinion of counsel for the Company, shall be applicable thereto.
16.  Reservation of Shares of Stock . The Company, during the term of this Plan, will at all times reserve and keep available such number of shares of its Stock as shall be sufficient to satisfy the requirements of the Plan.
17.  Registration of Options and Stock . The Company, during the term of this Plan, shall have no obligation to obtain from the appropriate regulatory agencies (including the Securities and Exchange Commission) any requisite authorization in order to grant the Options and issue option certificates pursuant to this Plan or to register the options or the Stock under the Act.
18.  Notices . Any notice to be given to the Company pursuant to the provisions of this Plan shall be addressed to the Company in care of its Secretary at its principal office, and any notice to be given to an Option Holder shall be addressed to the Option Holder at the address given on the Option Agreement, or at such other address as such Option Holder may hereafter designate in writing to the Company. Any such notice shall be deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, registered or certified, and deposited, postage and registry or certification fee prepaid, in a post office or branch post office regularly maintained by the United States Postal Service. It shall be the obligation of each Option Holder to provide the Secretary of the Company, by letter mailed as provided herein above, with written notice of the Option Holder’s correct mailing address.
19.  Representations and Warranties . As a condition to the exercise of any portion of an Option, the Company may require the person exercising such Option to make any representation and/or warranty to the Company as may, in the judgment of counsel to the Company, be required under any applicable law or regulation, including but not limited to a representation and warranty that the shares are being acquired only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required under the Securities Act of 1933 or any other applicable law, regulation or rule of any governmental agency.

 

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20.  Plan Records . A copy of this Plan shall be delivered to the Secretary of the Company and shall be shown by him or her to any eligible person making reasonable inquiry concerning it.
21.  Invalid Provisions . In the event that any provision of this Plan document is found to be invalid or otherwise unenforceable under any applicable law, such invalidity or un-enforceability shall not be construed as rendering any other provisions contained herein invalid or unenforceable, and all such other provisions shall be given full force and effect to the same extent as though the invalid or unenforceable provision were not contained herein.
22.  Applicable Law . This Plan shall be governed by and construed in accordance with the laws of the State of California.
23.  Successors and Assigns . This Plan shall be binding on and inure to the benefit of the Company and the Option Holders, and their respective heirs, successors, and assigns.
24.  Headings . The subject headings of the Sections and Sub-sections of this Agreement are included for convenience only, and shall not affect the construction or interpretation of any of its provisions.
IN WITNESS WHEREOF, the Company has duly executed this instrument as of October 1, 2000.
         
 
  CHROMADEX, INC.
 
       
 
  By:    
 
      Frank L. Jaksch, Jr. President

 

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Exhibit 10.2
ChromaDex, Inc.
Second Amended and Restated
2007 Equity Incentive Plan
Adopted March 13, 2007
Approved By Shareholders April 5, 2007
Amended and Restated: February 11, 2008 and May 12, 2008
Termination Date: March 13, 2017
1. Purposes.
(a) Eligible Stock Award Recipients. The persons eligible to receive Stock Awards are the Employees, Directors and Consultants of the Company and its Affiliates.
(b) Available Stock Awards. The purpose of this Plan is to provide a means by which eligible recipients of Stock Awards may be given an opportunity to benefit from increases in value of the Common Stock through the granting of the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.
(c) General Purpose. The Company, by means of this Plan, seeks to retain the services of the group of persons eligible to receive Stock Awards, to secure and retain the services of new members of this group and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates.
2. Definitions.
(a)  “Administrator” means, collectively the Board, and/or one or more Committees, and/or one or more executive officers of the Company designated by the Board to administer the Plan or specific portions thereof; provided, however, that the administration of Stock Awards with respect to any Participant who is subject to Section 16 of the Exchange Act may only be administered by a committee of Independent Directors (as defined in Section 2(s)).
(b)  “Affiliate” means any parent corporation or subsidiary corporation of the Company, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the Code.
(c)  “Board” means the Board of Directors of the Company.
(d)  “Capitalization Adjustment” has the meaning given to that term in Section 11(a).

 

 


 

(e)  “Change of 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 “person” (as such term is used in Section 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), 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;
(ii)  the consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization (or similar transaction), if more than fifty percent (50%) of the combined voting power of the continuing or surviving entity’s securities outstanding immediately after such merger, consolidation or other reorganization (or similar transaction) is Owned by persons who were not shareholders of the Company immediately prior to such merger, consolidation or other reorganization; or
(iii)  the consummation of a sale, transfer or other disposition of all or substantially all of the Company’s assets.
The term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company or creating a holding company that will be Owned in substantially the same proportions by the persons or entities who held the Company’s securities immediately before such transaction.
(f)  “Code” means the Internal Revenue Code of 1986, as amended.
(g)  “Committee” means a committee of one or more members of the Board appointed by the Board to administer the Plan or specific portions thereof.
(h)  “Common Stock” means the common stock of the Company.
(i)  “Company” means ChromaDex, Inc., a California corporation.
(j)  “Consultant” means any person, including an advisor, engaged by the Company or an Affiliate to render consulting or advisory services and who is compensated for such services. The term “Consultant” shall not include Directors who are not compensated by the Company for services as Directors, and the payment of a director’s fee by the Company to a Director for his or her services as a Director shall not cause such Director to be considered a “Consultant” for purposes of this Plan.
(k)  “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, Consultant or Director 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, shall not terminate a Participant’s Continuous Service. For example, a change in status from an Employee of the Company to a Consultant for an Affiliate or to a Director shall not constitute an interruption of Continuous Service. The Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave. Notwithstanding the foregoing, a leave of absence shall be treated as Continuous Service for purposes of vesting in a Stock Award only to such extent as may be provided in the Company’s leave of absence policy or in the written terms of the Participant’s leave of absence.

 

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(l)  “Corporate Transaction” means the occurrence, 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 discretion, of the consolidated assets of the Company and its subsidiaries;
(ii)  a sale or other disposition of at least 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.
(m)  “Director” means a member of the Board of Directors of the Company or an Affiliate of the Company.
(n)  “Disability” means the inability of a person, in the opinion of a qualified physician acceptable to the Company, to perform the major duties of that person’s position with the Company or an Affiliate because of the sickness or injury of the person.
(o)  “Employee” means any person employed by the Company or an Affiliate. Service as a Director or payment of a director’s fee by the Company or such service or for service as a member of the Board of Directors of an Affiliate shall not be sufficient to constitute “employment” by the Company or an Affiliate.
(p)  “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(q) “ Fair Market Value” means, as of any date, provided the Common Stock is listed on an established stock exchange or a national market system, including without limitation the Over-the-Counter Bulletin Board (“OTCBB”) market, the Nasdaq Global Market or Nasdaq Global Select Market of the National Association of Securities Dealers, Inc. Automated Quotation (“Nasdaq”) System, the Fair Market Value of a share of Common Stock shall be the average of the highest and the lowest trading prices for such stock on the date of grant of the Award. If no sales were reported on such date of grant of the Award, the Fair Market Value of a share of Common Stock shall be the average of the highest and lowest trading prices for such stock on the last market trading day with reported sales prior to the date of determination. In the case where the Company is not listed on an established stock exchange or national market system, Fair Market Value shall be determined by the Board in good faith in accordance with Code Section 409A and the applicable Treasury regulations.

 

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(r)  “Fiscal Year” means a fiscal year of the Company.
(s)  “Independent Directors” means a Non-Employee Director who is (i) a “non-employee director” within the meaning of Section 16b-3 of the Exchange Act, (ii) “independent” as determined under the rules or regulations of any applicable securities market, and (iii) an “outside director” under Treasury Regulation Section 1.162-27(e)(3), as any of these definitions may be modified or supplemented from time to time.
(t)  “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.
(u)  “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option.
(v)  “Non-Employee Director” means a Director who is not employed by the Company or an Affiliate.
(w)  “Officer” means any person designated by the Company as an officer.
(x)  “Option” means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant to this Plan.
(y)  “Option Agreement” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of this Plan.
(z)  “Optionholder” means a person to whom an Option is granted pursuant to this Plan or, if applicable, such other person who holds an outstanding Option.
(aa)  “Own,” “Owned,” “Owner,” “Ownership” A person or entity shall 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.
(bb)  “Participant” means a person to whom a Stock Award is granted pursuant to this Plan or, if applicable, such other person who holds an outstanding Stock Award.
(cc)  “Plan” means this Second Amended and Restated ChromaDex, Inc. 2007 Equity Incentive Plan.
(dd)  “Securities Act” means the Securities Act of 1933, as amended.
(ee)  “Stock Award” means any right granted under this Plan, including an Option, a stock bonus and a right to acquire restricted stock.

 

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(ff)  “Stock Award Agreement” means a written agreement between the Company and a holder of a Stock Award evidencing the terms and conditions of an individual Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditions of this Plan.
(gg)  “Ten Percent Shareholder” means a person or entity 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 of any of its Affiliates.
3. Administration.
(a) The Administrator. The Administrator, if not the Board, shall be appointed by the Board from time to time.
(b) Powers of the Administrator. The Administrator shall have the power, subject to, and within the limitations of, the express provisions of this Plan:
(i)  To determine from time to time which of the persons eligible under this Plan shall be granted Stock Awards; when and how each Stock Award shall be granted; what type or combination of types of Stock Award shall be granted; the provisions of each Stock Award granted (which need not be identical), including the time or times when a person shall be permitted to receive Common Stock pursuant to a Stock Award; and the number of shares of Common Stock with respect to which a Stock Award shall be granted to each such person.
(ii)  To construe and interpret this Plan and Stock Awards granted under it, and to establish, amend and revoke rules and regulations for its administration. The Administrator, in the exercise of this power, may correct any defect, omission or inconsistency in this Plan or in any Stock Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make this Plan fully effective.
(iii)  To amend this Plan or a Stock Award as provided in Section 12.
(iv)  Generally, to exercise such powers and to perform such acts as the Administrator deems necessary or expedient to promote the best interests of the Company which are not in conflict with the provisions of this Plan.
(c) Effect of Administrator’s Decision. All determinations, interpretations and constructions made by the Administrator in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.

 

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4. Shares Subject to this Plan.
(a) Share Reserve. Subject to the provisions of Section 11 relating to Capitalization Adjustments, the Common Stock that may be issued pursuant to Stock Awards shall not exceed in the aggregate the greater of: (i) four million (4,000,000) shares of Common Stock, or (ii) 10% of the shares of Common Stock issued and outstanding on any date during the Plan Term, as determined in accordance with Section 13(a). No more than four million (4,000,000) shares of Common Stock may be subject to Incentive Stock Options granted under this Plan.
(b) Reversion of Shares to the Share Reserve . If any Stock Award shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, the shares of Common Stock not acquired under such Stock Award shall revert to and again become available for issuance under this Plan.
(c) Source of Shares. The shares of Common Stock subject to this Plan may be unissued shares or reacquired shares, bought on the market or otherwise.
5. Eligibility.
(a) Eligibility for Specific Stock Awards . Incentive Stock Options may be granted only to Employees. Stock Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants.
(b) Ten Percent Shareholders. A Ten Percent Shareholder shall not be granted an Incentive Stock Option unless the per-share exercise price of such Option is at least one hundred ten percent (110%) of the Fair Market Value of a share of the Common Stock on the date of grant and the Option is not exercisable after the expiration of five (5) years from the date of grant.
6. Option Provisions.
Each Option shall be in such form and shall contain such terms and conditions as the Administrator shall deem appropriate, consistent with the provisions of this Plan. All Options shall 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 shall be issued for shares of Common Stock purchased on exercise of each type of Option. The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:
(a) Term. Subject to the provisions of Section 5(b) regarding Ten Percent Shareholders, no Option shall be exercisable after the expiration of ten (10) years from the date it was granted.
(b) Exercise Price of an Incentive Stock Option. Subject to the provisions of Section 5(b) regarding Ten Percent Shareholders, the per-share exercise price of each Incentive Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of a share of the Common Stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, an Incentive Stock Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code.
(c) Exercise Price of a Nonstatutory Stock Option. The per-share exercise price of each Nonstatutory Stock Option shall not be less than one hundred percent (100%) of the Fair Market Value of a share of Common Stock subject to the Option on the date the Option is granted.

 

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(d) Consideration. The purchase price of Common Stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash at the time the Option is exercised or (ii) at the discretion of the Administrator at the time of the grant of the Option (or subsequently in the case of a Nonstatutory Stock Option) (A) by delivery to the Company of other Common Stock or (B) in any other form of legal consideration that may be acceptable to the Administrator.
(e) Transferability of an Incentive Stock Option. An Incentive Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.
(f) Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock Option shall not be transferable except by will or by the laws of descent and distribution. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.
(g) Vesting Generally. The total number of shares of Common Stock subject to an Option may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be equal. The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Administrator may deem appropriate. The vesting provisions of individual Options may vary.
(h) Termination of Continuous Service. In the event an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination) but only within such period of time ending on the earlier of (i) the date thirty (30) days following the termination of the Optionholder’s Continuous Service (or such longer or shorter period specified in the Option Agreement, which period shall not be less than thirty (30) days unless such termination is for cause (as such term is defined in an individual written employment agreement between the Company or any Affiliate and the Participant, and, in the absence of such an individual agreement, as determined by the Administrator), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination of the Optionholder’s Continuous Service, the Optionholder does not exercise his or her Option within the time specified in the Option Agreement, the Option shall terminate.
(i) Disability of Optionholder. In the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination of the Optionholder’s Continuous Service (or such longer or shorter period specified in the Option Agreement, which period shall not be less than six (6) months or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination of the Optionholder’s Continuous Service, the Optionholder does not exercise his or her Option within the time specified herein, the Option shall terminate.

 

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(j) Death of Optionholder. In the event that (i) an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death or (ii) the Optionholder dies within the period (if any) specified in the Option Agreement after the termination of the Optionholder’s Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Optionholder’s death pursuant to Section 6(e) or 6(f), but only within the period ending on the earlier of (1) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Option Agreement, which period shall not be less than six (6) months) or (2) the expiration of the term of such Option as set forth in the Option Agreement. If, after death, the Option is not exercised within the time specified herein, the Option shall terminate.
(k) Early Exercise. The Option may, but need not, include a provision whereby the Optionholder may elect at any time before the Optionholder’s Continuous Service terminates to exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior to the full vesting of the Option.
7. Provisions of Stock Awards other than Options.
(a) Stock Bonus Awards. Each stock bonus agreement shall be in such form and shall contain such terms and conditions as the Administrator shall deem appropriate, consistent with the provisions of this Plan. The terms and conditions of stock bonus agreements may change from time to time, and the terms and conditions of separate stock bonus agreements need not be identical, but each stock bonus agreement shall include (through incorporation of provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:
(i) Consideration. A stock bonus may be awarded in consideration for past services actually rendered to the Company or an Affiliate for its benefit.
(ii) Vesting. Shares of Common Stock awarded under the stock bonus agreement may, but need not, be subject to a share repurchase option in favor of the Company in accordance with a vesting schedule to be determined by the Administrator.
(iii) Termination of Participant’s Continuous Service. In the event a Participant’s Continuous Service terminates, the Company may reacquire any or all of the shares of Common Stock held by the Participant which have not vested as of the date of termination of the Participant’s Continuous Service under the terms of the stock bonus agreement.
(iv) Transferability. Rights to acquire shares of Common Stock under the stock bonus agreement shall be transferable by the Participant only upon such terms and conditions as are set forth in the stock bonus agreement, as the Administrator shall determine in its discretion, so long as Common Stock awarded under the stock bonus agreement remains subject to the terms of the stock bonus agreement.

 

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(b) Restricted Stock Awards. Each restricted stock purchase agreement shall be in such form and shall contain such terms and conditions as the Administrator shall deem appropriate, consistent with the provisions of this Plan. The terms and conditions of the restricted stock purchase agreements may change from time to time, and the terms and conditions of separate restricted stock purchase agreements need not be identical, but each restricted stock purchase agreement shall include (through incorporation of provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:
(i) Purchase Price. The per-share purchase price, if any, under each restricted stock purchase agreement shall be such amount as the Administrator shall determine and designate in such restricted stock purchase agreement.
(ii) Consideration. The purchase price, if any, of Common Stock acquired pursuant to the restricted stock purchase agreement shall be paid either: (i) in cash at the time of purchase; or (ii) in any other form of legal consideration that may be acceptable to the Administrator in its discretion.
(iii) Vesting. Shares of Common Stock acquired under the restricted stock purchase agreement may, but need not, be subject to a share repurchase option in favor of the Company in accordance with a vesting schedule to be determined by the Administrator.
(iv) Termination of Participant’s Continuous Service. In the event a Participant’s Continuous Service terminates, the Company may repurchase or otherwise reacquire any or all of the shares of Common Stock held by the Participant which have not vested as of the date of termination of the Participant’s Continuous Service under the terms of the restricted stock purchase agreement.
(v) Transferability. Rights to acquire shares of Common Stock under the restricted stock purchase agreement shall be transferable by the Participant only upon such terms and conditions as are set forth in the restricted stock purchase agreement, as the Administrator shall determine in its discretion, so long as Common Stock awarded under the restricted stock purchase agreement remains subject to the terms of the restricted stock purchase agreement.
8. Covenants of the Company.
During the terms of the Stock Awards, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Stock Awards.
9. Use of Proceeds from Stock.
Proceeds from the sale of Common Stock pursuant to Stock Awards shall constitute general funds of the Company.

 

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10. Miscellaneous.
(a) Acceleration of Exercisability and Vesting. The Administrator shall have the power to accelerate the time at which a Stock Award may first be exercised or the time during which a Stock Award or any part thereof will vest in accordance with this Plan, notwithstanding the provisions in the Stock Award stating the time at which it may first be exercised or the time during which it will vest.
(b) Shareholder Rights. No Participant shall 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 such Stock Award unless and until such Participant has satisfied all requirements for exercise of the Stock Award pursuant to its terms.
(c) No Employment or other Service Rights. Nothing in this Plan or any instrument executed or Stock Award granted pursuant hereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Stock Award was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee at any time, 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.
(d) Incentive Stock Option $100,000 Limitation. 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 Optionholder during any calendar year (under all plans of the Company and its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of an Option Agreement.
(e) Annual Limitation on Stock Awards. No Participant shall be granted an Award or Awards in any Fiscal Year in which the combined number of Shares underlying such Award(s) exceeds 2% of the then issued and outstanding shares of Common Stock.
(f) Withholding Obligations. To the extent provided by the terms of a Stock Award Agreement, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under a Stock Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) tendering a cash payment; (ii) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant as a result of the exercise or acquisition of Common Stock under 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 lower amount as may be necessary to avoid variable award accounting); or (iii) delivering to the Company Owned and unencumbered shares of Common Stock.

 

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11. Adjustments upon Changes in Stock.
(a) Capitalization Adjustments . If any change is made in or other event occurs with respect to the Common Stock subject to this Plan, or subject to any Stock Award, without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company) (each, a “ Capitalization Adjustment ”), this Plan will be appropriately adjusted in the class(es) and maximum number of securities subject to this Plan pursuant to Section 4(a), and the outstanding Stock Awards will be appropriately adjusted in the class(es) and number of securities and price per share of Common Stock subject to such outstanding Stock Awards. The Administrator shall make such adjustments, and its determination shall be final, binding and conclusive. (The conversion of any convertible securities of the Company shall not be treated as a transaction “without receipt of consideration” by the Company.)
(b) Dissolution or Liquidation . In the event of a dissolution or liquidation of the Company, then all outstanding Stock Awards shall terminate immediately prior to the completion of such dissolution or liquidation, and shares of Common Stock subject to the Company’s repurchase option may be repurchased by the Company notwithstanding the fact that the holder of such stock is still in Continuous Service.
(c) Corporate Transaction . In the event of a Corporate Transaction, any surviving corporation or acquiring corporation may assume or continue any or all Stock Awards outstanding under the Plan or may substitute similar awards for Stock Awards outstanding under this Plan (it being understood that similar awards include, but are not limited to, awards to acquire the same consideration paid to the shareholders or the Company, as the case may be, pursuant to the Corporate Transaction), and any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to Stock Awards may be assigned by the Company to the successor of the Company (or such successor’s parent company), if any, in connection with such Corporate Transaction. In the event that any surviving corporation or acquiring corporation does not assume or continue any or all such outstanding Stock Awards or substitute similar options for such outstanding Stock Awards, then with respect to Stock Awards that have not been assumed, continued or substituted, the Administrator may:
(i)  (A) cancel all outstanding Stock Awards, and terminate this Plan, effective as of the consummation of such transaction (the “ Closing ”), provided that it will notify all Participants holding outstanding Stock Awards that would otherwise be exercisable as of the Closing of the proposed Corporate Transaction a reasonable period of time prior to the Closing so that each such Participant will be given an opportunity to exercise the then exercisable portion of such Stock Awards prior to the cancellation thereof, and (B) exercise the Company’s repurchase option with respect to outstanding Stock Awards, to the extent such right has not lapsed; or
(ii)  at the Administrator’s discretion, deem the vesting of all or a portion of Stock Awards that have not been assumed, continued or substituted prior to the Closing (and, if applicable, the time at which such Stock Awards may be exercised) accelerated in full (contingent upon the effectiveness of the Corporate Transaction) to a date prior to the Closing as the Administrator shall determine (or, if the Administrator shall not determine such a date, to the date that is five (5) days prior to the Closing), and any reacquisition or repurchase rights held by the Company with respect to such Stock Awards (contingent upon the effectiveness of the Corporate Transaction) shall lapse.

 

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With respect to any other Stock Awards outstanding under this Plan that have not been assumed, continued or substituted, the vesting of such Stock Awards (and, if applicable, the time at which such Stock Award may be exercised) shall not be accelerated, unless otherwise provided in a written agreement between the Company or any Affiliate and the holder of such Stock Award, and such Stock Awards shall terminate if not exercised (if applicable) prior to the effective time of the Corporate Transaction.
(d) Change in Control . In the event of a Change in Control, a Stock Award held by any Participant may be subject to acceleration of vesting and exercisability upon or after such events as may be provided in the Stock Award Agreement for such Stock Award or as may be provided in any other written agreement between the Company or any Affiliate and the Participant, but in the absence of such provision, no such acceleration shall occur.
12. Amendment of this Plan and Stock Awards.
(a) Amendment of Plan. The Administrator at any time, and from time to time, may amend this Plan. However, except as provided in Section 11 relating to adjustments upon changes in Common Stock, no amendment shall be effective unless approved by the shareholders of the Company to the extent shareholder approval is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3 under the Exchange Act or any Nasdaq or securities exchange listing requirements.
(b) Shareholder Approval. The Administrator may, in its sole discretion, submit any other amendment to this Plan for shareholder approval.
(c) Contemplated Amendments. It is expressly contemplated that the Administrator may amend this Plan in any respect the Administrator deems necessary or advisable to provide eligible Employees with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to Incentive Stock Options and/or to bring this Plan and/or Incentive Stock Options granted under it into compliance therewith.
(d) No Impairment of Rights. Rights under any Stock Award granted before amendment of this Plan shall not be impaired by any amendment of this Plan unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing.
(e) Amendment of Stock Awards. The Administrator at any time, and from time to time, may amend the terms of any one or more Stock Awards; provided, however, that the rights under any Stock Award shall not be impaired by any such amendment unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing.

 

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13. Termination or Suspension of this Plan.
(a) Plan Term. The Administrator may suspend or terminate this Plan at any time. Unless sooner terminated, this Plan shall terminate on the day before the tenth (10th) anniversary of the date this Plan is adopted by the Administrator or approved by the shareholders of the Company, whichever is earlier. No Stock Awards may be granted under this Plan while this Plan is suspended or after it is terminated.
(b) No Impairment of Rights. Suspension or termination of this Plan shall not impair rights and obligations under any Stock Award granted while this Plan is in effect except with the written consent of the Participant.
14. Effective Date of Plan.
This Plan shall become effective as determined by the Administrator, but no Stock Award shall be exercised (or, in the case of a stock bonus, shall be granted) unless and until this Plan has been approved by the shareholders of the Company, which approval shall be within twelve (12) months before or after the date this Plan is adopted by the Administrator.
15. Choice of Law .
The law of the State of California shall govern all questions concerning the construction, validity and interpretation of this Plan and any Stock Award granted hereunder, without regard to such state’s conflict of laws rules.

 

13

Exhibit 10.3
CHROMADEX, INC.
2007 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
(Incentive Stock Option or Nonstatutory Stock Option)
Pursuant to your Stock Option Grant Notice (“ Grant Notice ”) and this Stock Option Agreement, Chromadex, Inc., a California corporation (the “ Company ”), has granted you an option under its 2007 Equity Incentive Plan (the “ Plan ”) to purchase the number of shares of the Company’s Common Stock indicated in your Grant Notice at the exercise price indicated in your Grant Notice. Defined terms not explicitly defined in this Stock Option Agreement but defined in the Plan shall have the same definitions as in the Plan.
The details of your option are as follows:
1.  Vesting . Subject to the limitations contained herein, your option will vest as provided in your Grant Notice, provided that vesting will cease upon the termination of your Continuous Service.
[DRAFTING NOTE: 1(a) AND (b) ARE OPTIONAL PROVISIONS]
(a) Special Acceleration Provisions . Notwithstanding any other provisions of the Plan to the contrary;
(i) If a Change in Control (as such term is defined below) occurs within twenty-four (24) months of your Vesting Commencement Date, then for each year or part of a year that accrues following your Vesting Commencement Date, Twenty-Five percent (25%) of your options shall vest, or any reacquisition or repurchase rights held by the Company with respect to Common Stock acquired pursuant to the early exercise of such an option shall lapse with respect to such shares, as appropriate (“ Special Change of Control Vesting ”). Vesting of your remaining options (or expiration of repurchase rights on the resulting remaining shares) shall commence at a rate of 1/48 of the shares per month beginning on the thirteenth-month anniversary of your Vesting Comencement Date or on the twenty-fifth-month anniversary of your Vesting Comencement Date if such Special Change of Contro Vesting occurs during the second twelve months following your Vesting Commencement Date.
(ii) If (1) a Change in Control (as such term is defined below) occurs and (2) within one (1) month prior to the date of such Change in Control or thirteen (13) months after the date of such Change in Control your Continuous Service terminates due to an involuntary termination (not including death or Disability) without Cause or due to a Constructive Termination, then the vesting and exercisability of all remaining Options held by you shall be accelerated in full or any reacquisition or repurchase rights held by the Company with respect to Common Stock acquired pursuant to the early exercise of an Option shall lapse in full, as appropriate.

 

 


 

For purposes of this Section 1 only, Accountants means the Company’s independent certified public accountants.
For purposes of this Section 1(a) only, Change in Control means(i) the merger, consolidation or other reorganization of the Company, with or into one or more entities other than an Affiliate, as a result of which the outstanding shares of the Company immediately prior to such merger or consolidation are, or are to be, converted (A) solely into cash or non-voting securities of the surviving or resulting entity, or (B) at least in part into voting securities of the surviving or resulting entity, but such voting securities will represent less than fifty percent (50%) of the outstanding voting securities of the surviving or resulting entity; (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the company to a Person that was not a shareholder or an Affiliate thereof on December 23, 2005 or an Affiliate of the Company; or (iii) a Person who is not an Investor or a Shareholder or an Affiliate thereof as of the date hereof acquires directly or indirectly fifty percent (50%) or more of the Company’s outstanding voting securities.
(b) Parachute Payments . In the event that the acceleration of the vesting and exercisability of the Options and/or the lapse of reacquisition or repurchase rights with respect to Common Stock acquired pursuant to the early exercise of an Option provided for in Section 1(a) and benefits otherwise payable to you (i) constitute “parachute payments” within the meaning of Section 280G of the Code, or any comparable successor provisions, and (ii) but for this subsection would be subject to the excise tax imposed by Section 4999 of the Code, or any comparable successor provisions (the “ Excise Tax ”), then your benefits hereunder shall be either
  (i)  
provided to you in full, or
 
  (ii)  
provided to you as to such lesser extent which would result in no portion of such benefits being subject to the Excise Tax,
whichever of the foregoing amounts, when taking into account applicable federal, state, local and foreign income and employment taxes, the Excise Tax, and any other applicable taxes, results in the receipt by you, on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under the Excise Tax. Unless the Company and you otherwise agree in writing, any determination required under this Section shall be made in writing in good faith by the Accountants. In the event of a reduction of benefits hereunder, you shall be given the choice of which benefits to reduce. For purposes of making the calculations required by this Section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of the Code, and other applicable legal authority. The Company and you shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section.

 

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If, notwithstanding any reduction described in this Section, the IRS determines that you are liable for the Excise Tax as a result of the receipt of the payment of benefits as described above, then you shall be obligated to pay back to the Company, within thirty (30) days after a final IRS determination or in the event that you challenge the final IRS determination, a final judicial determination, a portion of the payment equal to the “ Repayment Amount. ” The Repayment Amount with respect to the payment of benefits shall be the smallest such amount, if any, as shall be required to be paid to the Company so that your net after-tax proceeds with respect to any payment of benefits (after taking into account the payment of the Excise Tax and all other applicable taxes imposed on such payment) shall be maximized. The Repayment Amount with respect to the payment of benefits shall be zero if a Repayment Amount of more than zero would not result in your net after-tax proceeds with respect to the payment of such benefits being maximized. If the Excise Tax is not eliminated pursuant to this paragraph, you shall pay the Excise Tax.
Notwithstanding any other provision of this Section 1(b), if (i) there is a reduction in the payment of benefits as described in this Section, (ii) the IRS later determines that you are liable for the Excise Tax, the payment of which would result in the maximization of your net after-tax proceeds (calculated as if your benefits had not previously been reduced), and (iii) you pay the Excise Tax, then the Company shall pay to you those benefits which were reduced pursuant to this Section contemporaneously or as soon as administratively possible after you pay the Excise Tax so that your net after-tax proceeds with respect to the payment of benefits is maximized.
If you either (i) bring any action to enforce rights pursuant to this Section 1(b), or (ii) defend any legal challenge to your rights hereunder, you shall be entitled to recover attorneys’ fees and costs incurred in connection with such action, regardless of the outcome of such action; provided, however, that in the event such action is commenced by you, the court finds the claim was brought in good faith.
2.  Number of Shares and Exercise Price . The number of shares of Common Stock subject to your option and your exercise price per share referenced in your Grant Notice may be adjusted from time to time for Capitalization Adjustments, as provided in the Plan.
3.  Exercise prior to Vesting (“ Early Exercise ”) . If permitted in your Grant Notice (i.e., the “Exercise Schedule” indicates that “Early Exercise” of your option is permitted) and subject to the provisions of your option, you may elect at any time that is both (i) during the period of your Continuous Service and (ii) during the term of your option, to exercise all or part of your option, including the nonvested portion of your option; provided, however, that:
(a)  a partial exercise of your option shall be deemed to cover first vested shares of Common Stock and then the earliest vesting installment of unvested shares of Common Stock;
(b)  any shares of Common Stock so purchased from installments that have not vested as of the date of exercise shall be subject to the purchase option in favor of the Company as described in the Company’s form of Early Exercise Stock Purchase Agreement;

 

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(c)  you shall enter into the Company’s form of Early Exercise Stock Purchase Agreement with a vesting schedule that will result in the same vesting as if no early exercise had occurred; and
(d)  if your option is an incentive stock option, then, as provided in the Plan, to the extent that the aggregate Fair Market Value (determined at the time of grant) of the shares of Common Stock with respect to which your option plus all other incentive stock options you hold are exercisable for the first time by you during any calendar year (under all plans of the Company and its Affiliates) exceeds one hundred thousand dollars ($100,000), your option(s) or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as nonstatutory stock options.
4.  Method of Payment . Payment of the exercise price is due in full upon exercise of all or any part of your option. You may elect to make payment of the exercise price in cash or by check or in any other manner permitted by your Grant Notice , which may include one or more of the following:
(a)  In the Company’s sole discretion at the time your option is exercised and provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal , pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, 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.
(b)  Provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal , by delivery of already-owned shares of Common Stock either that you have held for the period required to avoid a charge to the Company’s reported earnings (generally six months) or that you did not acquire, directly or indirectly from the Company, that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on the date of exercise. “Delivery” for these purposes, in the sole discretion of the Company at the time you exercise your option, shall include delivery to the Company of your attestation of ownership of such shares of Common Stock in a form approved by the Company. Notwithstanding the foregoing, you may not exercise your option by tender to the Company of Common Stock to the extent such tender would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock.
(c)  Pursuant to the following deferred payment alternative:
(i)  Not less than one hundred percent (100%) of the aggregate exercise price, plus accrued interest, shall be due four (4) years from date of exercise or, at the Company’s election, upon termination of your Continuous Service.
(ii)  Interest shall be compounded at least annually and shall be charged at the minimum rate of interest necessary to avoid the treatment as interest, under any applicable provisions of the Code, of any portion of any amounts other than amounts stated to be interest under the deferred payment arrangement.

 

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(iii)  At any time that the Company is incorporated in Delaware, payment of the Common Stock’s “par value,” as defined in the Delaware General Corporation Law, shall be made in cash and not by deferred payment.
(iv)  In order to elect the deferred payment alternative, you must, as a part of your written notice of exercise, give notice of the election of this payment alternative and, in order to secure the payment of the deferred exercise price to the Company hereunder, if the Company so requests, you must tender to the Company a promissory note and a security agreement covering the purchased shares of Common Stock, both in form and substance satisfactory to the Company, or such other or additional documentation as the Company may request.
5.  Whole Shares . You may exercise your option only for whole shares of Common Stock.
6.  Securities Law Compliance . Notwithstanding anything to the contrary contained herein, you may not exercise your option unless the shares of Common Stock issuable upon such exercise are then registered under the Securities Act or, if such shares of Common Stock are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your option must also comply with other applicable laws and regulations governing your option, and you may not exercise your option if the Company determines that such exercise would not be in material compliance with such laws and regulations.
7.  Term . You may not exercise your option before the commencement of its term or after its term expires. The term of your option commences on the Date of Grant and expires upon the earliest of the following:
(a)  thirty (30) days after the termination of your Continuous Service for any reason other than your Disability or death, provided that if during any part of such thirty- (30-) day period your option is not exercisable solely because of the condition set forth in the preceding paragraph relating to “Securities Law Compliance,” your option shall not expire until the earlier of the Expiration Date or until it shall have been exercisable for an aggregate period of thirty (30) days after the termination of your Continuous Service;
(b)  twelve (12) months after the termination of your Continuous Service due to your Disability;
(c)  eighteen (18) months after your death if you die either during your Continuous Service or within thirty (30) days after your Continuous Service terminates;
(d)  the Expiration Date indicated in your Grant Notice; or
(e)  the day before the tenth (10th) anniversary of the Date of Grant.

 

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If your option is an incentive stock option, note that, to obtain the federal income tax advantages associated with an “incentive stock option,” the Code requires that at all times beginning on the date of grant of your option and ending on the day three (3) months before the date of your option’s exercise, you must be an employee of the Company or an Affiliate, except in the event of your death or Disability. The Company has provided for extended exercisability of your option under certain circumstances for your benefit but cannot guarantee that your option will necessarily be treated as an “incentive stock option” if you continue to provide services to the Company or an Affiliate as a Consultant or Director after your employment terminates or if you otherwise exercise your option more than three (3) months after the date your employment terminates.
8.  Exercise.
(a)  You may exercise the vested portion of your option (and the unvested portion of your option if your Grant Notice so permits) during its term by delivering a Notice of Exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require.
(b)  By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (1) the exercise of your option, (2) the lapse of any substantial risk of forfeiture to which the shares of Common Stock are subject at the time of exercise, or (3) the disposition of shares of Common Stock acquired upon such exercise.
(c)  If your option is an incentive stock option, by exercising your option you agree that you will notify the Company in writing within fifteen (15) days after the date of any disposition of any of the shares of the Common Stock issued upon exercise of your option that occurs within two (2) years after the date of your option grant or within one (1) year after such shares of Common Stock are transferred upon exercise of your option.
(d)  By exercising your option you agree that the Company (or a representative of the underwriter(s)) may, in connection with the first underwritten registration of the offering of any securities of the Company under the Securities Act, require that you not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any shares of Common Stock or other securities of the Company held by you, for a period of time specified by the underwriter(s) (not to exceed one hundred eighty (180) days) following the effective date of the registration statement of the Company filed under the Securities Act. You further agree to execute and deliver such other agreements as may be reasonably requested by the Company and/or the underwriter(s) that are consistent with the foregoing or that are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to your shares of Common Stock until the end of such period. The underwriters of the Company’s stock are intended third party beneficiaries of this Section 8(d) and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.

 

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9.  Transferability . Your option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your option.
10.  Right of Repurchase . Upon the termination of your Continuous Service, the Company shall have an irrevocable option (the “ Repurchase Option ”) for a period of one (1) year after said termination (or in the case of shares issued upon exercise of the Option after such date of termination, within one (1) year after the date of such exercise), or such longer period as may be agreed to by the Company and you (for example, for purposes of satisfying the requirements of Section 1202(c)(3) of the Code regarding “qualified small business stock”), to repurchase from you or your personal representative, as the case may be, any or all of those shares of Common Stock that you received pursuant to the exercise of your Option (the “ Repurchased Shares ”) at a price per Repurchased Share equal to the Fair Market Value. The Repurchase Option may only be exercised by the Company for cash or cancellation of purchase money indebtedness for the Repurchased Share. The Company may exercise the right granted to it under this Section 10 by delivering a written notice to you (or to your legal representative) at any time during the applicable period stating that the Company is exercising the repurchase right granted to it under this Section 10. The delivery of such notice by the Company to you (or to your legal representative) shall constitute a binding commitment of the Company to purchase and acquire all of the Repurchased Share so designated in such notice. The total purchase price for the Repurchased Share shall be delivered to you (or to your legal representative) against delivery by you of certificates evidencing the Repurchased Shares with stock powers duly executed in blank and a certificate setting forth customary representations and warranties by you as to title and the absence of any liens against payment of the purchase price therefor no later than 30 days after the delivery of the election notice to you by the Company.
11.  Option not a Service Contract . Your option is not an employment or service contract, and nothing in your option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to continue your employment. In addition, nothing in your option shall obligate the Company or an Affiliate, their respective shareholders, Boards of Directors, Officers or Employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.

 

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12.  Withholding Obligations.
(a)  At the time you exercise your option, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a “cashless exercise” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with your option.
(b)  Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable conditions or restrictions of law, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law. If the date of determination of any tax withholding obligation is deferred to a date later than the date of exercise of your option, share withholding pursuant to the preceding sentence shall not be permitted unless you make a proper and timely election under Section 83(b) of the Code, covering the aggregate number of shares of Common Stock acquired upon such exercise with respect to which such determination is otherwise deferred, to accelerate the determination of such tax withholding obligation to the date of exercise of your option. Notwithstanding the filing of such election, shares of Common Stock shall be withheld solely from fully vested shares of Common Stock determined as of the date of exercise of your option that are otherwise issuable to you upon such exercise. Any adverse consequences to you arising in connection with such share withholding procedure shall be your sole responsibility.
(c)  You may not exercise your option unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your option when desired even though your option is vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein.
13.  Notices . Any notices provided for in your option or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.
14.  Governing Plan Document . Your option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your option and those of the Plan, the provisions of the Plan shall control.

 

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Exhibit 10.4
ChromaDex, Inc.
Restricted Stock Purchase Agreement
under the 2007 Equity Incentive Plan
This Agreement is made by and between ChromaDex, Inc. , a California corporation (the “ Company ”), and _____  (“ Purchaser ”).
R E C I T A L S
A Purchaser holds a notice of grant of right to purchase stock dated _____ (the “ Notice of Grant ”) to purchase shares of Common Stock (“ Common Stock ”) of the Company (the “ Purchase Right ”) pursuant to the Company’s 2007 Equity Incentive Plan (the “ Plan ”); and
B.  T he Purchase Right consists of the Notice and a Restricted Stock Purchase Agreement.
C. Purchaser desires to exercise the Purchase right on the terms and conditions contained herein.
A G R E E M E N T
In consideration of the foregoing recitals and the mutual covenants and conditions contained herein, the parties, intending to be legally bound, agree as follows:
1.  Incorporation of Plan by Reference. This Agreement is subject to all of the terms and conditions as set forth in the Plan. If there is a conflict between the terms of this Agreement and the Plan, the terms of the Plan shall control. Defined terms not explicitly defined in this Agreement but defined in the Plan shall have the same definitions as in the Plan.
2.  Purchase and Sale of Common Stock.
(a) Agreement to Purchase and Sell Common Stock . Purchaser hereby agrees to purchase from the Company, and the Company hereby agrees to sell to Purchaser, shares of the Common Stock of the Company in accordance with the Notice of Grant duly executed by Purchaser and attached hereto as Exhibit A . In accordance with the terms of the Option, the purchase price for the shares of Common Stock are payable by a Promissory Note substantially in the form set forth in Exhibit D , subject to a Pledge Agreement substantially in the form set forth in Exhibit E .
(b) Closing . The closing hereunder, including payment for and delivery of the Common Stock, shall occur at the offices of the Company immediately following the execution of this Agreement, or at such other time and place as the parties may mutually agree; provided, however, that if shareholder approval of the Plan is required before this Agreement may be executed, then the Notice of Grant may not be exercised, and the closing shall be delayed, until such shareholder approval is obtained. If such shareholder approval is not obtained within the time limit specified in the Plan, then this Agreement shall be null and void.

 

 


 

3.  Repurchase Option. Upon the earlier of (i) the termination of Purchaser’s Continuous Service, or (ii) the occurrence of a Corporate Transaction and the Company opts to terminate the Plan pursuant to Section 10(c)(i) of the Plan, then the Company shall have an irrevocable option (the “ Unvested Share Repurchase Option ”) for a period of ninety (90) days after said termination or Corporate Transaction, or such longer period as may be agreed to by the Company and the Purchaser, to repurchase from Purchaser or Purchaser’s personal representative, as the case may be, those shares that Purchaser received pursuant to the exercise of the Notice of Grant. Pursuant to its repurchase option, the Company may repurchase all or any of the shares that Purchaser received pursuant to the exercise of the Notice of Grant that (a) have not as yet vested as of such termination or Corporate Transaction date in accordance with the Vesting Schedule indicated on Purchaser’s Notice of Grant (the “ Unvested Shares ”) at a price (“ Option Price ”) equal to the Purchaser’s Purchase Price for such shares as indicated on Purchaser’s Notice of Grant , and (b) have vested as of such termination or Corporate Transaction date in accordance with the Vesting Schedule indicated on Purchaser’s Notice of Grant (the “ Vested Shares ”) at a price equal to the Fair Market Value for such shares.
4.  Exercise of Repurchase Option . The Repurchase Option shall be exercised by written notice signed by an Officer of the Company and delivered or mailed as provided herein. Such notice shall identify the number of shares of Common Stock to be purchased and shall notify Purchaser of the time, place and date for settlement of such purchase, which shall be scheduled by the Company within the term of the Repurchase Option set forth above. The Company shall be entitled to pay for any shares of Common Stock purchased pursuant to its Repurchase Option at the Company’s option in cash or by offset against any indebtedness owing to the Company by Purchaser (including without limitation any Note given in payment for the Common Stock), or by a combination of both. Upon delivery of such notice and payment of the purchase price in any of the ways described above, the Company shall become the legal and beneficial owner of the Common Stock being repurchased and all rights and interest therein or related thereto, and the Company shall have the right to transfer to its own name the Common Stock being repurchased by the Company, without further action by Purchaser.
5.  Capitalization Adjustments to Common Stock. In the event of a “Capitalization Adjustment” affecting the Company’s outstanding Common Stock as a class as designated in the Plan, then any and all new, substituted or additional securities or other property to which Purchaser is entitled by reason of Purchaser’s ownership of Common Stock shall be immediately subject to the Repurchase Option and be included in the word “Common Stock” for all purposes of the Repurchase Option with the same force and effect as the shares of the Common Stock presently subject to the Repurchase Option, but only to the extent the Common Stock is, at the time, covered by such Repurchase Option. While the total Option Price shall remain the same after each such event, the Option Price per share of Common Stock upon exercise of the Repurchase Option shall be appropriately adjusted.
6.  Corporate Transactions. In the event of a Corporate Transaction described in the Plan, then the Repurchase Option may be assigned by the Company to the successor of the Company (or such successor’s parent company), if any, in connection with such Corporate Transaction. To the extent the Repurchase Option remains in effect following such Corporate Transaction, it shall apply to the new capital stock or other property received in exchange for the Common Stock in consummation of the Corporate Transaction, but only to the extent the Common Stock was at the time covered by such right. Appropriate adjustments shall be made to the price per share payable upon exercise of the Repurchase Option to reflect the Corporate Transaction upon the Company’s capital structure; provided, however, that the aggregate Option Price shall remain the same.

 

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7.  Escrow of Unvested Common Stock . As security for Purchaser’s faithful performance of the terms of this Agreement and to insure the availability for delivery of Purchaser’s Common Stock upon exercise of the Repurchase Option herein provided for, Purchaser agrees, at the closing hereunder, to deliver to and deposit with the Secretary of the Company or the Secretary’s designee (“ Escrow Agent ”), as Escrow Agent in this transaction, three (3) stock assignments duly endorsed (with date and number of shares blank) in the form attached hereto as Exhibit B , together with a certificate or certificates evidencing all of the Common Stock subject to the Repurchase Option; said documents are to be held by the Escrow Agent and delivered by said Escrow Agent pursuant to the Joint Escrow Instructions of the Company and Purchaser set forth in Exhibit C , attached hereto and incorporated by this reference, which instructions shall also be delivered to the Escrow Agent at the closing hereunder.
8.  Rights of Purchaser . Subject to the provisions of this Agreement, Purchaser shall exercise all rights and privileges of a shareholder of the Company with respect to the shares deposited in escrow. Purchaser shall be deemed to be the holder of the shares for purposes of receiving any dividends that may be paid with respect to such shares and for purposes of exercising any voting rights relating to such shares, even if some or all of such shares have not yet vested and been released from the Company’s Repurchase Option.
9.  Limitations on Transfer . In addition to any other limitation on transfer created by applicable securities laws, Purchaser shall not sell, assign, hypothecate, donate, encumber or otherwise dispose of any interest in the Common Stock while the Common Stock is subject to the Repurchase Option. After any Common Stock has been released from the Repurchase Option, Purchaser shall not sell, assign, hypothecate, donate, encumber or otherwise dispose of any interest in the Common Stock except in compliance with the provisions herein and applicable securities laws. Furthermore, the Common Stock shall be subject to any right of first refusal in favor of the Company or its assignees that may be contained in the Company’s Bylaws.
10.  Restrictive Legends . All certificates representing the Common Stock shall have endorsed thereon legends in substantially the following forms (in addition to any other legend which may be required by other agreements between the parties hereto):
(a)  “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN OPTION SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS COMPANY. ANY TRANSFER OR ATTEMPTED TRANSFER OF ANY SHARES SUBJECT TO SUCH OPTION IS VOID WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT OF THE COMPANY.”
(b)  “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.”
(c)  Any legend required by appropriate blue sky officials.

 

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11.  Investment Representations. In connection with the purchase of the Common Stock, Purchaser represents to the Company the following:
(a)  Purchaser is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Common Stock. Purchaser is acquiring the Common Stock for investment for Purchaser’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act.
(b)  Purchaser understands that the Common Stock has not been registered under the Securities Act by reason of a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Purchaser’s investment intent as expressed herein.
(c)  Purchaser further acknowledges and understands that the Common Stock must be held indefinitely unless the Common Stock is subsequently registered under the Securities Act or an exemption from such registration is available. Purchaser further acknowledges and understands that the Company is under no obligation to register the Common Stock. Purchaser understands that the certificate evidencing the Common Stock will be imprinted with a legend that prohibits the transfer of the Common Stock unless the Common Stock is registered or such registration is not required in the opinion of counsel for the Company.
(d)  Purchaser is familiar with the provisions of Rules 144 and 701, under the Securities Act, as in effect from time to time, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly, from the issuer thereof (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of issuance of the securities, such issuance will be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the securities exempt under Rule 701 may be sold by Purchaser ninety (90) days thereafter, subject to the satisfaction of certain of the conditions specified by Rule 144.
(e)  In the event that the sale of the Common Stock does not qualify under Rule 701 at the time of purchase, then the Common Stock may be resold by Purchaser in certain limited circumstances subject to the provisions of Rule 144, which requires, among other things: (i) the availability of certain public information about the Company and (ii) the resale occurring following the required holding period under Rule 144 after the Purchaser has purchased, and made full payment of (within the meaning of Rule 144), the securities to be sold.
(f)  Purchaser further understands that at the time Purchaser wishes to sell the Common Stock there may be no public market upon which to make such a sale, and that, even if such a public market then exists, the Company may not be satisfying the current public current information requirements of Rule 144 or 701, and that, in such event, Purchaser would be precluded from selling the Common Stock under Rule 144 or 701 even if the minimum holding period requirement had been satisfied.

 

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12.  Section 83( b ) Election. Purchaser understands that Section 83(a) of the Code, taxes as ordinary income the difference between the amount paid for the Common Stock and the fair market value of the Common Stock as of the date any restrictions on the Common Stock lapse. In this context, “restriction” includes the right of the Company to buy back the Unvested Shares pursuant to the Repurchase Option set forth above. Purchaser understands that Purchaser may elect to be taxed at the time the Common Stock is purchased, rather than when and as the Repurchase Option expires, by filing an election under Section 83(b) (an “ 83(b) Election ”) of the Code with the Internal Revenue Service within thirty (30) days from the date of purchase. Even if the fair market value of the Common Stock at the time of the execution of this Agreement equals the amount paid for the Common Stock, the 83(b) Election must be made to avoid income under Section 83(a) in the future. Purchaser understands that failure to file such an 83(b) Election in a timely manner may result in adverse tax consequences for Purchaser. Purchaser further understands that Purchaser must file an additional copy of such 83(b) Election with his or her federal income tax return for the calendar year in which the date of this Agreement falls. Purchaser acknowledges that the foregoing is only a summary of the effect of United States federal income taxation with respect to purchase of the Common Stock hereunder, and does not purport to be complete. Purchaser further acknowledges that the Company has directed Purchaser to seek independent advice regarding the applicable provisions of the Code, the income tax laws of any municipality, state or foreign country in which Purchaser may reside, and the tax consequences of Purchaser’s death. Purchaser assumes all responsibility for filing an 83(b) Election and paying all taxes resulting from such election or the lapse of the restrictions on the Common Stock.
13.  Refusal to Transfer . The Company shall not be required (a) to transfer on its books any shares of Common Stock of the Company which shall have been transferred in violation of any of the provisions set forth in this Agreement or (b) to treat as owner of such shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares shall have been so transferred.
14.  No Employment Rights . This Agreement is not an employment contract and nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company (or a parent or subsidiary of the Company) to terminate Purchaser’s employment for any reason at any time, with or without cause and with or without notice.

 

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15.  Miscellaneous .
(a) Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or sent by telegram or fax or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to the other party hereto at such party’s address hereinafter shown below its signature or at such other address as such party may designate by ten (10) days’ advance written notice to the other party hereto.
(b) Successors and Assigns. This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer herein set forth, be binding upon Purchaser, Purchaser’s successors, and assigns. The Company may assign the Repurchase Option hereunder at any time or from time to time, in whole or in part.
(c) Attorneys’ Fees; Specific Performance. Purchaser shall reimburse the Company for all costs incurred by the Company in enforcing the performance of, or protecting its rights under, any part of this Agreement, including reasonable costs of investigation and attorneys’ fees. It is the intention of the parties that the Company, upon exercise of the Repurchase Option and payment of the Option Price, pursuant to the terms of this Agreement, shall be entitled to receive the Common Stock, in specie, in order to have such Common Stock available for future issuance without dilution of the holdings of other shareholders. Furthermore, it is expressly agreed between the parties that money damages are inadequate to compensate the Company for the Common Stock and that the Company shall, upon proper exercise of the Repurchase Option, be entitled to specific enforcement of its rights to purchase and receive said Common Stock.
(d) Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of California. The parties agree that any action brought by either party to interpret or enforce any provision of this Agreement shall be brought in, and each party agrees to, and does hereby, submit to the jurisdiction and venue of, the appropriate state or federal court for the district encompassing the Company’s principal place of business.
(e) Further Execution. The parties agree to take all such further action(s) as may reasonably be necessary to carry out and consummate this Agreement as soon as practicable, and to take whatever steps may be necessary to obtain any governmental approval in connection with or otherwise qualify the issuance of the securities that are the subject of this Agreement.
(f) Independent Counsel. Purchaser acknowledges that this Agreement has been prepared on behalf of the Company by Manatt, Phelps & Phillips, LLP, counsel to the Company and that Manatt, Phelps & Phillips, LLP does not represent, and is not acting on behalf of, Purchaser. Purchaser has been provided with an opportunity to consult with Purchaser’s own counsel with respect to this Agreement.
(g) Entire Agreement; Amendment. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes and merges all prior agreements or understandings, whether written or oral. This Agreement may not be amended, modified or revoked, in whole or in part, except by an agreement in writing signed by each of the parties hereto.
(h) Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.

 

6


 

(i) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.
In witness whereof, the parties hereto have executed this Agreement as of this _____ day of _____ 200 _____ .
                 
        ChromaDex, Inc.    
 
               
 
      By        
 
         
 
   
 
      Title        
 
         
 
   
 
      Address:   10005 Muirlands Boulevard     
 
          Suite G, 1st Floor    
 
          Irvine, CA 92618    
 
               
             
 
      Purchaser        
 
               
 
  Address:            
             
 
               
 
             
     
Attachments:
   
 
   
Exhibit A
  Notice of Grant
Exhibit B
  Assignment Separate from Certificate
Exhibit C
  Joint Escrow Instructions
Exhibit D
  Promissory Note
Exhibit E
  Pledge Agreement

 

7


 

Exhibit A
NOTICE OF GRANT
[ see attached ]

 

 


 

Exhibit B
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
For Value Received,  _____ hereby sells, assigns and transfers unto ChromaDex, Inc., a California corporation (the “ Company ”), pursuant to the Repurchase Option under that certain Restricted Stock Purchase Agreement, dated _____ by and between the undersigned and the Company (the “ Agreement ”), _____ ( _____ ) shares of Common Stock of the Company standing in the undersigned’s name on the books of the Company represented by Certificate No(s). _____ and does hereby irrevocably constitute and appoint the Company’s Secretary attorney to transfer said Common Stock on the books of the Company with full power of substitution in the premises. This Assignment may be used only in accordance with and subject to the terms and conditions of the Agreement, in connection with the repurchase of shares of Common Stock issued to the undersigned pursuant to the Agreement, and only to the extent that such shares remain subject to the Company’s Repurchase Option under the Agreement.
Dated:                                          
         
 
 
 
(Signature)
   
 
       
 
 
 
 
(Print Name)
   
(Instruction: Please do not fill in any blanks other than the “Signature” line and the “Print Name” line. )

 

 


 

Exhibit C
JOINT ESCROW INSTRUCTIONS
Secretary
ChromaDex, Inc.
10005 Muirlands Boulevard
Suite G, 1st Floor
Irvine, CA 92618
Dear Sir or Madam:
As Escrow Agent for both ChromaDex, Inc. , a California corporation (“ Company ”), and the undersigned purchaser of Common Stock of the Company (“ Purchaser ”), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of that certain Restricted Stock Purchase Agreement (“ Agreement ”), dated _____ to which a copy of these Joint Escrow Instructions is attached as Exhibit C, in accordance with the following instructions:
1.  In the event the Company or an assignee shall elect to exercise the Repurchase Option set forth in the Agreement, the Company or its assignee will give to Purchaser and you a written notice specifying the number of shares of Common Stock to be purchased, the purchase price, and the time for a closing hereunder at the principal office of the Company. Purchaser and the Company hereby irrevocably authorize and direct you to close the transaction contemplated by such notice in accordance with the terms of said notice.
2.  At the closing you are directed (a) to date any stock assignments necessary for the transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver same, together with the certificate evidencing the shares of Common Stock to be transferred, to the Company against the simultaneous delivery to you of the purchase price (which may include suitable acknowledgment of cancellation of indebtedness) of the number of shares of Common Stock being purchased pursuant to the exercise of the Repurchase Option.
3.  Purchaser irrevocably authorizes the Company to deposit with you any certificates evidencing shares of Common Stock to be held by you hereunder and any additions and substitutions to said shares as specified in the Agreement. Purchaser does hereby irrevocably constitute and appoint you as the Purchaser’s attorney-in-fact and agent for the term of this escrow to execute with respect to such securities and other property all documents of assignment and/or transfer and all stock certificates necessary or appropriate to make all securities negotiable and complete any transaction herein contemplated.
4.  This escrow shall terminate upon expiration or exercise in full of the Repurchase Option, whichever occurs first.

 

 


 

5.  If at the time of termination of this escrow you should have in your possession any documents, securities, or other property belonging to Purchaser, you shall deliver all of same to Purchaser and shall be discharged of all further obligations hereunder; provided, however, that if at the time of termination of this escrow you are advised by the Company that the property subject to this escrow is the subject of a pledge or other security agreement, you shall deliver all such property to the pledgeholder or other person designated by the Company.
6.  Except as otherwise provided in these Joint Escrow Instructions, your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto.
7.  You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties or their assignees. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith.
8.  You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law, and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree of any court, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.
9.  You shall not be liable in any respect on account of the identity, authority or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder.
10.  You shall not be liable for the outlawing of any rights under any statute of limitations with respect to these Joint Escrow Instructions or any documents deposited with you.
11.  Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be Secretary of the Company or if you shall resign by written notice to each party. In the event of any such termination, the Company may appoint any officer or assistant officer of the Company as successor Escrow Agent and Purchaser hereby confirms the appointment of such successor or successors as the Purchaser’s attorney-in-fact and agent to the full extent of your appointment.
12.  If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.

 

 


 

13.  It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities, you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities until such dispute shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.
14.  Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery, including delivery by express courier or five days after deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties hereunto entitled at the following addresses, or at such other addresses as a party may designate by ten days’ advance written notice to each of the other parties hereto:
             
 
  Company:   ChromaDex, Inc.    
 
      10005 Muirlands Boulevard     
 
      Suite G, 1st Floor    
 
      Irvine, CA 92618    
 
           
 
  Purchaser:        
 
     
 
   
 
     
 
   
 
     
 
   
 
           
 
  Escrow Agent:   Secretary    
 
      ChromaDex, Inc.    
 
      10005 Muirlands Boulevard     
 
      Suite G, 1st Floor    
 
      Irvine, CA 92618    
15.  By signing these Joint Escrow Instructions you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Agreement.
16.  You shall be entitled to employ such legal counsel and other experts (including without limitation the firm of Manatt, Phelps & Phillips, LLP) as you may deem necessary properly to advise you in connection with your obligations hereunder. You may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor. The Company shall be responsible for all fees generated by such legal counsel in connection with your obligations hereunder.
17.  This instrument shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. It is understood and agreed that references to “you” or “your” herein refer to the original Escrow Agent and to any and all successor Escrow Agents. It is understood and agreed that the Company may at any time or from time to time assign its rights under the Agreement and these Joint Escrow Instructions in whole or in part.

 

 


 

18.  This Agreement shall be governed by and interpreted and determined in accordance with the laws of the State of California, as such laws are applied by California courts to contracts made and to be performed entirely in California by residents of that state.
             
    Very truly yours,    
 
           
    ChromaDex, Inc.    
 
           
 
  By        
 
     
 
   
 
 
  Title        
 
     
 
   
 
           
 
  Purchaser:    
 
         
 
           
Escrow Agent:
           
 
 
           

 

 


 

Exhibit D
PROMISSORY NOTE
$ _____    Irvine, California
    [Date]
For Value Received , the undersigned hereby unconditionally promises to pay to the order of ChromaDex, Inc. , a California corporation (the “ Company ”), at 10005 Muirlands Boulevard, Suite G, 1st Floor, Irvine, CA 92618, or at such other place as the holder hereof may designate in writing, in lawful money of the United States of America and in immediately available funds, the principal sum of _____ Dollars ($ _____ ) together with interest accrued from the date hereof on the unpaid principal at the rate of _____ % per annum, or the maximum rate permissible by law (which under the laws of the State of California shall be deemed to be the laws relating to permissible rates of interest on commercial loans), whichever is less, as follows:
Principal Repayment. The outstanding principal amount hereunder shall be [ due and payable in full on _____  ] [Alternative text: subject to scheduled amortized repayments on the dates and in the amounts listed below.
     
Principal Repayment Date   Repayment Amount] ; and
Interest Payments. Interest shall be compounded annually and shall be payable [ monthly / quarterly / annually in arrears ] [ in arrears on each Principal Repayment Date ] and shall be calculated on the basis of a 360-day year for the actual number of days elapsed;
provided, however, that in the event that the undersigned’s employment by or association with the Company or its Affiliate is terminated for any reason prior to payment in full of this Note, this Note shall be accelerated and all remaining unpaid principal and interest shall become due and payable immediately after such termination.
If the undersigned fails to pay any of the principal and accrued interest when due, the Company, at its sole option, shall have the right to accelerate this Note, in which event the entire principal balance and all accrued interest shall become immediately due and payable, and immediately collectible by the Company pursuant to applicable law.
This Note may be prepaid at any time without penalty. All money paid toward the satisfaction of this Note shall be applied first to the payment of interest as required hereunder and then to the retirement of the principal.

 

 


 

The full amount of this Note is secured by a pledge of shares of Common Stock of the Company, and is subject to all of the terms and provisions of the Restricted Stock Purchase Agreement and Stock Pledge Agreement of even date herewith between the undersigned and the Company.
The undersigned hereby represents and agrees that the amounts due under this Note are not consumer debt, and are not incurred primarily for personal, family or household purposes, but are for business and commercial purposes only.
The undersigned hereby waives presentment, protest and notice of protest, demand for payment, notice of dishonor and all other notices or demands in connection with the delivery, acceptance, performance, default or endorsement of this Note.
The holder hereof shall be entitled to recover, and the undersigned agrees to pay when incurred, all costs and expenses of collection of this Note, including without limitation, reasonable attorneys’ fees.
This Note shall be governed by, and construed, enforced and interpreted in accordance with, the laws of the State of California, excluding conflict of laws principles that would cause the application of laws of any other jurisdiction.
             
 
  Signed        
 
     
 
   

 

 


 

Exhibit E
STOCK PLEDGE AGREEMENT
This Stock Pledge Agreement (“ Pledge Agreement” ) is made by _____ (“Pledgor”), in favor of ChromaDex, Inc.. , a California corporation with its principal place of business at ChromaDex, Inc., 10005 Muirlands Boulevard, Suite G, 1st Floor, Irvine, CA 92618 (“ Pledgee ”).
Whereas , Pledgor has concurrently herewith executed that certain Promissory Note (the “ Note ”) in favor of Pledgee in the amount of _____ Dollars ($ _____ ) in payment of the purchase price of _____ ( _____ ) shares of the Common Stock of Pledgee; and
Whereas , Pledgee is willing to accept the Note from Pledgor, but only upon the condition, among others, that Pledgor shall have executed and delivered to Pledgee this Pledge Agreement and the Collateral (as defined below):
Now, Therefore , in consideration of the foregoing recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound, Pledgor hereby agrees as follows:
1.  As security for the full, prompt and complete payment and performance when due (whether by stated maturity, by acceleration or otherwise) of all indebtedness of Pledgor to Pledgee created under the Note (all such indebtedness being the “ Liabilities ”), together with, without limitation, the prompt payment of all expenses, including, without limitation, reasonable attorneys’ fees and legal expenses, incidental to the collection of the Liabilities and the enforcement or protection of Pledgee’s lien in and to the collateral pledged hereunder, Pledgor hereby pledges to Pledgee, and grants to Pledgee, a first priority security interest in all of the following (collectively, the “ Pledged Collateral ”):
(a)   _____ ( _____ ) shares of Common Stock of Pledgee represented by Certificates numbered _____ (the “ Pledged Shares ”), and all dividends, cash, instruments, and other property or proceeds from time to time received, receivable, or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares;
(b)  all voting trust certificates held by Pledgor evidencing the right to vote any Pledged Shares subject to any voting trust; and
(c)  all additional shares and voting trust certificates from time to time acquired by Pledgor in any manner (which additional shares shall be deemed to be part of the Pledged Shares), and the certificates representing such additional shares, and all dividends, cash, instruments, and other property or proceeds from time to time received, receivable, or otherwise distributed in respect of or in exchange for any or all of such shares.

 

 


 

The term “indebtedness” is used herein in its most comprehensive sense and includes any and all advances, debts, obligations and Liabilities heretofore, now or hereafter made, incurred or created, whether voluntary or involuntary and whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, and whether recovery upon such indebtedness may be or hereafter becomes unenforceable.
2.  At any time, without notice, and at the expense of Pledgor, Pledgee in its name or in the name of its nominee or of Pledgor may, but shall not be obligated to: (1) collect by legal proceedings or otherwise all dividends (except cash dividends other than liquidating dividends), interest, principal payments and other sums now or hereafter payable upon or on account of said Pledged Collateral; (2) enter into any extension, reorganization, deposit, merger or consolidation agreement, or any agreement in any way relating to or affecting the Pledged Collateral, and in connection therewith may deposit or surrender control of such Pledged Collateral thereunder, accept other property in exchange for such Pledged Collateral and do and perform such acts and things as it may deem proper, and any money or property received in exchange for such Pledged Collateral shall be applied to the indebtedness or thereafter held by it pursuant to the provisions hereof; (3) insure, process and preserve the Pledged Collateral; (4) cause the Pledged Collateral to be transferred to its name or to the name of its nominee; (5) exercise as to such Pledged Collateral all the rights, powers and remedies of an owner, except that so long as no default exists under the Note or hereunder Pledgor shall retain all voting rights as to the Pledged Shares.
3.  Pledgor agrees to pay prior to delinquency all taxes, charges, liens and assessments against the Pledged Collateral, and upon the failure of Pledgor to do so, Pledgee at its option may pay any of them and shall be the sole judge of the legality or validity thereof and the amount necessary to discharge the same.
4.  At the option of Pledgee and without necessity of demand or notice, all or any part of the indebtedness of Pledgor shall immediately become due and payable irrespective of any agreed maturity, upon the happening of any of the following events: (1) failure to keep or perform any of the terms or provisions of this Pledge Agreement; (2) failure to pay any installment of principal or interest on the Note when due; (3) the levy of any attachment, execution or other process against the Pledged Collateral; or (4) the insolvency, commission of an act of bankruptcy, general assignment for the benefit of creditors, filing of any petition in bankruptcy or for relief under the provisions of Title 11 of the United States Code of, by, or against Pledgor.
5.  In the event of the nonpayment of any indebtedness when due, whether by acceleration or otherwise, or upon the happening of any of the events specified in the last preceding section, Pledgee may then, or at any time thereafter, at its election, apply, set off, collect or sell in one or more sales, or take such steps as may be necessary to liquidate and reduce to cash in the hands of Pledgee in whole or in part, with or without any previous demands or demand of performance or notice or advertisement, the whole or any part of the Pledged Collateral in such order as Pledgee may elect, and any such sale may be made either at public or private sale at its place of business or elsewhere, or at any broker’s board or securities exchange, either for cash or upon credit or for future delivery; provided, however, that if such disposition is at private sale,

 

 


 

then the purchase price of the Pledged Collateral shall be equal to the public market price then in effect, or, if at the time of sale no public market for the Pledged Collateral exists, then, in recognition of the fact that the sale of the Pledged Collateral would have to be registered under the Securities Act of 1933 and that the expenses of such registration are commercially unreasonable for the type and amount of collateral pledged hereunder, Pledgee and Pledgor hereby agree that such private sale shall be at a purchase price mutually agreed to by Pledgee and Pledgor or, if the parties cannot agree upon a purchase price, then at a purchase price established by a majority of three independent appraisers knowledgeable of the value of such collateral, one named by Pledgor within ten (10) days after written request by the Pledgee to do so, one named by Pledgee within such 10-day period, and the third named by the two appraisers so selected, with the appraisal to be rendered by such body within thirty (30) days of the appointment of the third appraiser. The cost of such appraisal, including all appraiser’s fees, shall be charged against the proceeds of sale as an expense of such sale. Pledgee may be the purchaser of any or all Pledged Collateral so sold and hold the same thereafter in its own right free from any claim of Pledgor or right of redemption. Demands of performance, notices of sale, advertisements and presence of property at sale are hereby waived, and Pledgee is hereby authorized to sell hereunder any evidence of debt pledged to it. Any officer or agent of Pledgee may conduct any sale hereunder.
6.  The proceeds of the sale of any of the Pledged Collateral and all sums received or collected by Pledgee from or on account of such Pledged Collateral shall be applied by Pledgee to the payment of expenses incurred or paid by Pledgee in connection with any sale, transfer or delivery of the Pledged Collateral, to the payment of any other costs, charges, attorneys’ fees or expenses mentioned herein, and to the payment of the indebtedness or any part hereof, all in such order and manner as Pledgee in its discretion may determine. Pledgee shall then pay any balance to Pledgor.
7.  Upon the transfer of all or any part of the indebtedness Pledgee may transfer all or any part of the Pledged Collateral and shall be fully discharged thereafter from all liability and responsibility with respect to such Pledged Collateral so transferred, and the transferee shall be vested with all the rights and powers of Pledgee hereunder with respect to such Pledged Collateral so transferred; but with respect to any Pledged Collateral not so transferred Pledgee shall retain all rights and powers hereby given.
8.  Until all indebtedness shall have been paid in full the power of sale and all other rights, powers and remedies granted to Pledgee hereunder shall continue to exist and may be exercised by Pledgee at any time and from time to time irrespective of the fact that the indebtedness or any part thereof may have become barred by any statute of limitations, or that the personal liability of Pledgor may have ceased.
9.  Pledgee agrees that so long as no default exists under the Note or hereunder, the Pledged Shares shall, upon the request of Pledgor, be released from pledge as the indebtedness is paid. Such releases shall be at the rate of one share for each _____ ($ _____ ) of principal amount of indebtedness paid. Release from pledge, however, shall not result in release from the provisions of those certain Joint Escrow Instructions, if any, of even date herewith among the parties to this Pledge Agreement and the Escrow Agent named therein.

 

 


 

10.  Pledgee may at any time deliver the Pledged Collateral or any part thereof to Pledgor and the receipt of Pledgor shall be a complete and full acquittance for the Pledged Collateral so delivered, and Pledgee shall thereafter be discharged from any liability or responsibility therefor.
11.  The rights, powers and remedies given to Pledgee by this Pledge Agreement shall be in addition to all rights, powers and remedies given to Pledgee by virtue of any statute or rule of law. Any forbearance or failure or delay by Pledgee in exercising any right, power or remedy hereunder shall not be deemed to be a waiver of such right, power or remedy, and any single or partial exercise of any right, power or remedy hereunder shall not preclude the further exercise thereof; and every right, power and remedy of Pledgee shall continue in full force and effect until such right, power or remedy is specifically waived by an instrument in writing executed by Pledgee.
12.  If any provision of this Pledge Agreement is held to be unenforceable for any reason, it shall be adjusted, if possible, rather than voided in order to achieve the intent of the parties to the extent possible. In any event, all other provisions of this Pledge Agreement shall be deemed valid and enforceable to the full extent possible.
13.  This Pledge Agreement shall be governed by, and construed in accordance with, the laws of the State of California as applied to contracts made and performed entirely within the State of California by residents of such State.
             
Dated: _______________   Pledgor    
 
           
         
 
           
 
  Printed Name:        
 
     
 
   

 

 

Exhibit 10.5
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this “ Agreement ”) is made and entered into as of this 14th day of April 2008, by and between CHROMADEX, INC., a California corporation (“ Employer ”), and FRANK L JAKSCH, JR. (“ Employee ”).
R E C I T A L S
A. Employer desires to obtain the benefit of the services of Employee and Employee desires to render such services to Employer.
B. Employer and Employee desire to set forth the terms and conditions of Employee’s employment with Employer on the terms and subject to the conditions of this Agreement.
A G R E E M E N T
In consideration of the foregoing recitals and of the mutual covenants and conditions contained herein, the parties, intending to be legally bound, agree as follows:
1.  Term . Employer agrees to employ Employee, and Employee agrees to serve Employer, in accordance with the terms of this Agreement, for a term (the “ Term ”) beginning on April 14th (the “ Effective Date ”) and continuing for a period of two years thereafter unless earlier terminated in accordance with the provisions hereof. To the extent that Employee remains employed by Employer after the expiration of the initial Term, and the initial Term of this Agreement is not otherwise renewed or continued in writing by Employer and Employee, then Employee’s employment status shall no longer be subject to the terms and conditions of this Agreement and shall be “at-will” without any continuing right to employment by Employer.
2. Employment of Employee .
(a)  Specific Positions . Employer and Employee hereby agree that, subject to the provisions of this Agreement, Employer will employ Employee and Employee will serve Employer as the Chief Executive Officer of Employer. Employee shall report to, and perform such usual and customary duties of such office and as may be delegated to Employee from time to time by, the Board of Directors of Employer (the “ Board ”), including, without limitation, those specific duties set forth on Exhibit A attached hereto, subject always to the policies as determined from time to time by Employer. The Board may and reserves the right to change Employee’s position and reporting relationship subject to the needs of its business.
(b)  Promotion of Employer’s Business . During the Term, Employee shall not engage in any business competitive with Employer. Employee agrees to devote his full business time, attention, knowledge, skill and energy to the business, affairs and interests of Employer and matters related thereto, and shall use his best efforts and abilities to promote Employer’s interests; provided , however , that Employee is not precluded from devoting reasonable periods of time required: (i) for serving as a director or committee member of any organization that does not compete with Employer or that does not involve a conflict of interest with Employer; or (ii) for managing his personal investments; so long as in either case, such activities do not materially interfere with the regular performance of his duties under this Agreement.
(c)  Principal Office . Employee’s principal office and normal place of work shall be at Employer’s executive offices in Southern California or as otherwise assigned by Employer consistent with the needs of its business. Employee’s normal place of work shall be defined as any office where Employee is consistently requested by Employer to commute to more than one day per week.

 

 


 

3.  Salary . Employer shall pay to Employee during the term of this Agreement a base salary (“ Base Salary ”) of $150,000 per year payable in accordance with Employer’s normal payroll. This Base Salary shall be increased to $175,000 upon the consummation of any transaction whereby Employer shall thereafter have publicly traded shares or is required to file reports with the SEC. In addition, the Base Salary shall be increased to $200,000 upon the consummation of one or more transactions occurring after the foregoing transaction and in which Employer receives financing in an aggregate amount of not less than $5 million. The Base Salary may be reviewed annually thereafter and may be increased (but not decreased) at Employer’s sole discretion in accordance with Employer’s normal review process.
4.  Bonus . As determined by the Board.
5.  Other . Stock options as determined by the Board.
6.  Benefits .
(a)  Fringe Benefits . During Employee’s employment by Employer under this Agreement, Employee shall be eligible for participation in and shall be covered by any and all such medical, dental, life and other voluntary insurance plans and such other similar benefits generally available to other employees of Employer in similar employment positions, on the same terms as such employees, subject to meeting applicable eligibility requirements. Employee shall also be covered by long-term disability insurance, to the extent that such insurance is available to Employer on commercially reasonable terms and conditions, such that, upon a termination of Employee by Employer under Section 7(c) as a result of a disability, Employee shall be entitled to receive disability insurance coverage in an amount and for a duration at least equal to that made generally available to officers of Employer under Employer’s long-term disability insurance in effect as of the date of this Agreement.
(b)  Reimbursements . During Employee’s employment with Employer under this Agreement, Employee shall be entitled to receive prompt reimbursement of all reasonable expenses incurred by Employee in performing services hereunder, including all expenses of travel at the request of, or in the service of, Employer provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by Employer.
(c)  Automobile . Subject to the approval of the Board, Employer may elect to reimburse Employee for certain costs incurred by Employee in leasing, maintaining, operating and insuring an automobile for use by Employee in the performance of Employee’s duties hereunder. The extent by which such costs are reimbursed by Employer to Employee shall be determined in accordance with Employer’s automobile reimbursement policy then in effect, which policy shall have been approved by the Board.

 

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7. Termination .
(a)  Termination for Cause . Employer shall have the right, exercisable immediately upon written notice, to terminate Employee’s employment for “Cause.”
(i)  Definition of Cause . As used herein, “ Cause ” means any of the following: (A) Employee is convicted by a court of competent jurisdiction, pleads “no contest” to a felony or any other conduct of a criminal nature involving moral turpitude (other than minor traffic violations); (B) Employee intentionally engages in fraud, embezzlement or any other illegal conduct substantially detrimental to the business or reputation of Employer, regardless of whether such conduct is designed to defraud Employer or others; (C) Employee imparts material confidential information relating to Employer or its business to competitors or to other third parties other than in the course of carrying out Employee’s duties; (D) Employee refuses to perform his duties hereunder or otherwise breaches any material covenant, warranty or representation of this Agreement, or Employee’s Non-Disclosure and Confidentiality Agreement with Employer, and fails to cure such breach (if such breach is then capable of being cured) within 10 business days following written notice thereof specifying in reasonable detail the nature of such breach, or if such breach is not capable of being cured in such time, a cure shall not have been diligently initiated within such 10 business day period, (E) violation of any rules, policies or procedures of Employer, as documented in Employer’s Human Resources Standards manual, associate guidebook or other written or electronically published company policies; (F) Employee’s willful failure to follow any lawful directive of the Board; and (G) any action on the part of Employee which discredits or disparages Employer or its reputation.
(ii)  Effect of Termination . Upon termination in accordance with this Section 7(a), Employee shall be entitled to no further payments from Employer under this Agreement, except for the payments, of cash and in-kind, provided for under Sections 3 and 6 of this Agreement accrued hereunder through, but not including, the effective date of such termination. Employer’s exercise of its right to terminate for Cause shall be without prejudice to any other remedy to which it may be entitled at law, in equity or under this Agreement.
(b)  Voluntary Termination . Employee may terminate his employment at any time by giving no less than 30 days’ written notice to Employer. Employer reserves the right to accept Employee’s voluntary termination immediately, without notice and without any further payment obligation except as described below.
(i)  No Reason . Upon termination in accordance with this Section 7(b), except as otherwise provided in Section 7(b)(ii), below, Employee shall be entitled to no further payments from Employer under this Agreement, except for the payments, of cash and in-kind, provided for under Sections 3 and 6 of this Agreement accrued hereunder through, but not including, the effective date of such termination.

 

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(ii)  Good Reason . Notwithstanding anything to the contrary in Section 7(b)(i), above, if Employee terminates his employment under this Section 7(b) for Good Reason (as defined below), Employee shall be entitled to receive from Employer all of the compensation and benefits provided for in Section 7(e), below plus whatever bonus Employee would have been entitled to for the year in which such termination occurs, and, for purposes thereof, Employee shall be deemed to have been employed for the entirety of such year. As used herein, “ Good Reason ” means any of the following: (A) the assignment to Employee of duties materially inconsistent with those of other employees of Employer in similar employment positions, and Employee provides written notice to Employer within 60 days of such assignment that such duties are materially inconsistent with those duties of such similarly-situated employees, and Employer fails to release Employee from his obligation to perform such inconsistent duties and to re-assign Employee to his customary duties within 20 business days after Employer’s receipt of such notice; or (B) if, without the consent of Employee, Employee’s normal place of work is or becomes situated more than 50 linear miles from Employee’s personal residence as of the Effective Date, or (C) a failure by Employer to comply with any other material provision of this Agreement which has not been cured within 60 days after notice of such noncompliance has been given by Employee to Employer, or if such failure is not capable of being cured in such time, a cure shall not have been diligently initiated by Employer within such 60 day period.
(c)  Termination Due to Death or Disability . This Agreement shall automatically terminate upon the death of Employee. In addition, if any disability or incapacity of Employee to perform his duties as the result of any injury, sickness or physical, mental or emotional condition continues for a period of 70 consecutive days or a total of 70 days in any 90-day period, Employer may terminate Employee’s employment upon written notice to Employee. Upon termination in accordance with this Section 7(c), Employee (or Employee’s estate, as the case may be) shall be entitled to those payments, of cash and in-kind, provided for under Sections 3 through 6, inclusive, of this Agreement accrued hereunder through, but not including, the date of death or, in the case of disability, the date of termination. Notwithstanding any policy of Employer to the contrary, any bonus that would be due to Employee for the fiscal year in which termination pursuant to this Section 7(c) occurs will, at the option of the Board, be either prorated or paid in full to Employee (or Employee’s estate, as the case may be) at the time Employee would have received such bonus had he remained an employee of Employer. During such time that Employee is unable to perform his duties as a result of any injury, sickness or physical, mental or emotional condition, Employer, at its option, may reduce the Base Salary by the amount, if any, of the disability insurance or similar benefits for which Employee receives as a result of such injury, sickness or physical, mental or emotional condition. Such reductions to the Base Salary, if any, shall be limited to benefits actually received by Employer from disability insurance plans paid for by Employer or from state or federal government mandated disability plans. The Base Salary shall not be reduced by any disability insurance benefits received by Employee, if any, from plans purchased by Employee.
(d)  Termination Upon Cessation of Business . Employer shall have the right to immediately terminate Employee’s employment under this Agreement upon a “Cessation of Business.” For purposes of this Agreement, a “ Cessation of Business ” shall mean Employer’s ceasing to operate in the ordinary course of business, whether by dissolution, liquidation, sale of assets, consolidation, merger or otherwise, in connection with, pursuant to or arising out of a good faith determination by Employer that the continuing operation of the business in its ordinary course is reasonably likely to render Employer unable to meet its liabilities as they mature. If Employee is so terminated by Employer pursuant to this Section 7(d) during the Term, Employer shall (i) pay to Employee the Base Salary, and (ii) provide the same medical, dental, disability and life insurance pursuant to Section 6(a) to which Employee was entitled hereunder as of the date of termination, provided, however, that in the case of such medical and dental insurance, that Employee makes a timely election for continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), in each case (i.e., the Base Salary and insurance), until the earlier to occur of (A) the expiration of the remaining portion of the Term, or (B) the expiration of the nine-month period commencing on the date Employee is terminated. Employer shall make such payments of the Base Salary in a single lump sum payment at termination.

 

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(e)  Termination Without Cause . Employer shall have the right, exercisable upon written notice, to terminate Employee’s employment under this Agreement for any reason other than set forth in Sections 7(a), (c) and (d), above, at any time during the Term. If Employee is so terminated by Employer pursuant to this Section 7(e) during the Term, Employer shall pay Employee two weeks of Base Salary for each full year of service to a maximum of eight (8) weeks of the Base Salary. Should Employee, at Employee’s sole and exclusive option, provide Employer with Employer’s then standard form of separation, waiver and release agreement of all claims against Employer, then Employer agrees to (i) pay to Employee the Base Salary, and (ii) provide the same medical, dental, long-term disability and life insurance pursuant to Section 6(a) to which Employee was entitled hereunder as of the date of termination provided, however, that in the case of such medical and dental insurance, that Employee makes a timely election for continuation coverage under COBRA, in each case (i.e., the Base Salary and insurance), until the earlier to occur of (A) the expiration of the remaining portion of the Term, or (B) the twelve (12) _-month period commencing on the date Employee is terminated. Employer shall make such payments in accordance with its regular payroll schedule. If any such payments are due Employee upon a Cessation of Business, all remaining payments shall become immediately due and payable upon the occurrence of such Cessation of Business.
(f)  Exclusive Remedy . The payments contemplated by this Agreement shall constitute Employee’s exclusive and sole remedy for any claim that Employee might otherwise have against Employer under this Agreement which, but for Employee’s termination of employment hereunder, might otherwise be due and payable by Employer to Employee. Employee covenants not to assert or pursue any such remedies, other than an action to enforce the payments due to Employee under this Agreement. Nothing in this Section 7(f), however, shall be construed to bar, preclude or otherwise limit Employee’s right to bring an action against Employer if Employee’s termination of employment with Employer was otherwise unlawful or in violation of public policy.
8. Miscellaneous .
(a)  Withholdings . All payments to Employee hereunder shall be made after reduction for all federal, state and local withholding and payroll taxes, all as determined under applicable law and regulations, and Employer shall make all reports and similar filings required by such law and regulations with respect to such payments, withholdings and taxes.
(b)  Succession . This Agreement shall inure to the benefit of and shall be binding upon Employer, its successors and assigns. The obligations and duties of Employee hereunder shall be personal and not assignable.

 

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(c)  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 or by facsimile to and received by the party to whom such notice is intended (provided the original thereof is sent by mail, in the manner set forth below, on the next business day after the facsimile transmission is sent), or in lieu of such personal delivery or overnight express delivery or facsimile transmission, on 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. The parties may change their respective addresses for the purpose of this Section 8(c) by giving notice of such change to the other parties in the manner which is provided in this Section 8(c).
(d)  Entire Agreement . This Agreement contains the entire agreement of the parties relating to the subject matter hereof, and it replaces and supersedes any prior agreements, whether oral or written, between the parties relating to said subject matter, including, without limitation, that certain offer letter dated September 15, 2005, from Employer to Employee.
(e)  Headings . The headings of Sections herein are used for convenience only and shall not affect the meaning or contents hereof.
(f)  Waiver; Amendment . No provision hereof may be waived except by a written agreement signed by the waiving party. The waiver of any term or of any condition of this Agreement shall not be deemed to constitute the waiver of any other term or condition. This Agreement may be amended only by a written agreement signed by the parties hereto.
(g)  Severability . If any of the provisions of this Agreement shall be held unenforceable by the final determination of a court of competent jurisdiction and all appeals therefrom shall have failed or the time for such appeals shall have expired, such provision or provisions shall be deemed eliminated from this Agreement but the remaining provisions shall nevertheless be given full effect. In the event this Agreement or any portion hereof is more restrictive than permitted by the law of the jurisdiction in which enforcement is sought, this Agreement or such portion shall be limited in that jurisdiction only to the extent required by the law of that jurisdiction.
(h)  Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of California.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above.
                 
“EMPLOYER”:       “EMPLOYEE”:
 
               
CHROMADEX, INC. ,            
a California corporation            
 
               
By:
  /s/ Stephen Block        /s/ Frank Jaksch     
 
               
 
  Stephen A. Block,       FRANK L JAKSCH, JR.    
 
  Director, Chairman of Compensation            
 
  Committee            

 

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EXHIBIT A
Responsibilities
Responsible for all aspects of Employer’s ongoing management.

 

 

Exhibit 10.6
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this “ Agreement ”) is made and entered into as of this 14th day of April 2008, by and between CHROMADEX, INC., a California corporation (“ Employer ”), and THOMAS C. VARVARO (“ Employee ”).
R E C I T A L S
A. Employer desires to obtain the benefit of the services of Employee and Employee desires to render such services to Employer.
B. Employer and Employee desire to set forth the terms and conditions of Employee’s employment with Employer on the terms and subject to the conditions of this Agreement.
A G R E E M E N T
In consideration of the foregoing recitals and of the mutual covenants and conditions contained herein, the parties, intending to be legally bound, agree as follows:
1.  Term . Employer agrees to employ Employee, and Employee agrees to serve Employer, in accordance with the terms of this Agreement, for a term (the “ Term ”) beginning on April 14th (the “ Effective Date ”) and continuing for a period of two years thereafter unless earlier terminated in accordance with the provisions hereof. To the extent that Employee remains employed by Employer after the expiration of the initial Term, and the initial Term of this Agreement is not otherwise renewed or continued in writing by Employer and Employee, then Employee’s employment status shall no longer be subject to the terms and conditions of this Agreement and shall be “at-will” without any continuing right to employment by Employer.
2. Employment of Employee .
(a)  Specific Positions . Employer and Employee hereby agree that, subject to the provisions of this Agreement, Employer will employ Employee and Employee will serve Employer as the Chief Financial Officer of Employer. Employee shall perform such usual and customary duties of such office and as may be delegated to Employee from time to time by Employer, including, without limitation, those specific duties set forth on Exhibit A attached hereto, subject always to the policies as determined from time to time by Employer. In addition, Employee’s reporting relationship shall initially be determined by the Chief Executive Officer of Employer. Employer reserves the right to change Employee’s position and reporting relationship subject to the needs of its business.
(b)  Promotion of Employer’s Business . During the Term, Employee shall not engage in any business competitive with Employer. Employee agrees to devote his full business time, attention, knowledge, skill and energy to the business, affairs and interests of Employer and matters related thereto, and shall use his best efforts and abilities to promote Employer’s interests; provided , however , that Employee is not precluded from devoting reasonable periods of time required: (i) for serving as a director or committee member of any organization that does not compete with Employer or that does not involve a conflict of interest with Employer; or (ii) for managing his personal investments; so long as in either case, such activities do not materially interfere with the regular performance of his duties under this Agreement.

 

 


 

(c)  Principal Office . Employee’s principal office and normal place of work shall be at Employer’s executive offices in Southern California or as otherwise assigned by Employer consistent with the needs of its business. Employee’s normal place of work shall be defined as any office where Employee is consistently requested by Employer to commute to more than one day per week. Employer shall not require Employee to spend more than 50% of work days at Employer’s executive offices, and shall reimburse Employee for all travel related expenses to and from said offices pursuant to Section 6(b).
3.  Salary . Employer shall pay to Employee during the term of this Agreement a base salary (“ Base Salary ”) of $110,000 per year payable in accordance with Employer’s normal payroll. This Base Salary shall be increased to $130,000 upon the consummation of any transaction whereby Employer shall thereafter have publicly traded shares or is required to file reports with the SEC. In addition, the Base Salary shall be increased to $150,000 upon the consummation of one or more transactions occurring after the foregoing transaction and in which Employer receives financing in an aggregate amount of not less than $5 million. The Base Salary may be reviewed annually thereafter and may be increased (but not decreased) at Employer’s sole discretion in accordance with Employer’s normal review process.
4.  Bonus . As determined by the Board of Directors of Employer (the “Board”).
5.  Other . Stock options as determined by the Board.
6.  Benefits .
(a)  Fringe Benefits . During Employee’s employment by Employer under this Agreement, Employee shall be eligible for participation in and shall be covered by any and all such medical, dental, life and other voluntary insurance plans and such other similar benefits generally available to other employees of Employer in similar employment positions, on the same terms as such employees, subject to meeting applicable eligibility requirements. Employee shall also be covered by long-term disability insurance, to the extent that such insurance is available to Employer on commercially reasonable terms and conditions, such that, upon a termination of Employee by Employer under Section 7(c) as a result of a disability, Employee shall be entitled to receive disability insurance coverage in an amount and for a duration at least equal to that made generally available to officers of Employer under Employer’s long-term disability insurance in effect as of the date of this Agreement.
(b)  Reimbursements . During Employee’s employment with Employer under this Agreement, Employee shall be entitled to receive prompt reimbursement of all reasonable expenses incurred by Employee in performing services hereunder, including all expenses of travel at the request of, or in the service of, Employer provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by Employer.
(c)  Automobile . Subject to the approval of the Board, Employer may elect to reimburse Employee for certain costs incurred by Employee in leasing, maintaining, operating and insuring an automobile for use by Employee in the performance of Employee’s duties hereunder. The extent by which such costs are reimbursed by Employer to Employee shall be determined in accordance with Employer’s automobile reimbursement policy then in effect, which policy shall have been approved by the Board.

 

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7. Termination .
(a)  Termination for Cause . Employer shall have the right, exercisable immediately upon written notice, to terminate Employee’s employment for “Cause.”
(i)  Definition of Cause . As used herein, “ Cause ” means any of the following: (A) Employee is convicted by a court of competent jurisdiction, pleads “no contest” to a felony or any other conduct of a criminal nature involving moral turpitude (other than minor traffic violations); (B) Employee intentionally engages in fraud, embezzlement or any other illegal conduct substantially detrimental to the business or reputation of Employer, regardless of whether such conduct is designed to defraud Employer or others; (C) Employee imparts material confidential information relating to Employer or its business to competitors or to other third parties other than in the course of carrying out Employee’s duties; (D) Employee refuses to perform his duties hereunder or otherwise breaches any material covenant, warranty or representation of this Agreement, or Employee’s Non-Disclosure and Confidentiality Agreement with Employer, and fails to cure such breach (if such breach is then capable of being cured) within 10 business days following written notice thereof specifying in reasonable detail the nature of such breach, or if such breach is not capable of being cured in such time, a cure shall not have been diligently initiated within such 10 business day period, (E) violation of any rules, policies or procedures of Employer, as documented in Employer’s Human Resources Standards manual, associate guidebook or other written or electronically published company policies; (F) Employee’s willful failure to follow any lawful directive of the Board; and (G) any action on the part of Employee which discredits or disparages Employer or its reputation.
(ii)  Effect of Termination . Upon termination in accordance with this Section 7(a), Employee shall be entitled to no further payments from Employer under this Agreement, except for the payments, of cash and in-kind, provided for under Sections 3 and 6 of this Agreement accrued hereunder through, but not including, the effective date of such termination. Employer’s exercise of its right to terminate for Cause shall be without prejudice to any other remedy to which it may be entitled at law, in equity or under this Agreement.
(b)  Voluntary Termination . Employee may terminate his employment at any time by giving no less than 30 days’ written notice to Employer. Employer reserves the right to accept Employee’s voluntary termination immediately, without notice and without any further payment obligation except as described below.
(i)  No Reason . Upon termination in accordance with this Section 7(b), except as otherwise provided in Section 7(b)(ii), below, Employee shall be entitled to no further payments from Employer under this Agreement, except for the payments, of cash and in-kind, provided for under Sections 3 and 6 of this Agreement accrued hereunder through, but not including, the effective date of such termination.

 

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(ii)  Good Reason . Notwithstanding anything to the contrary in Section 7(b)(i), above, if Employee terminates his employment under this Section 7(b) for Good Reason (as defined below), Employee shall be entitled to receive from Employer all of the compensation and benefits provided for in Section 7(e), below plus whatever bonus Employee would have been entitled to for the year in which such termination occurs, and, for purposes thereof, Employee shall be deemed to have been employed for the entirety of such year. As used herein, “ Good Reason ” means any of the following: (A) the assignment to Employee of duties materially inconsistent with those of other employees of Employer in similar employment positions, and Employee provides written notice to Employer within 60 days of such assignment that such duties are materially inconsistent with those duties of such similarly-situated employees, and Employer fails to release Employee from his obligation to perform such inconsistent duties and to re-assign Employee to his customary duties within 20 business days after Employer’s receipt of such notice; or (B) if, without the consent of Employee, Employee’s normal place of work is or becomes situated more than 50 linear miles from Employee’s personal residence as of the Effective Date, or (C) a failure by Employer to comply with any other material provision of this Agreement which has not been cured within 60 days after notice of such noncompliance has been given by Employee to Employer, or if such failure is not capable of being cured in such time, a cure shall not have been diligently initiated by Employer within such 60 day period.
(c)  Termination Due to Death or Disability . This Agreement shall automatically terminate upon the death of Employee. In addition, if any disability or incapacity of Employee to perform his duties as the result of any injury, sickness or physical, mental or emotional condition continues for a period of 70 consecutive days or a total of 70 days in any 90-day period, Employer may terminate Employee’s employment upon written notice to Employee. Upon termination in accordance with this Section 7(c), Employee (or Employee’s estate, as the case may be) shall be entitled to those payments, of cash and in-kind, provided for under Sections 3 through 6, inclusive, of this Agreement accrued hereunder through, but not including, the date of death or, in the case of disability, the date of termination. Notwithstanding any policy of Employer to the contrary, any bonus that would be due to Employee for the fiscal year in which termination pursuant to this Section 7(c) occurs will, at the option of the Board, be either prorated or paid in full to Employee (or Employee’s estate, as the case may be) at the time Employee would have received such bonus had he remained an employee of Employer. During such time that Employee is unable to perform his duties as a result of any injury, sickness or physical, mental or emotional condition, Employer, at its option, may reduce the Base Salary by the amount, if any, of the disability insurance or similar benefits for which Employee receives as a result of such injury, sickness or physical, mental or emotional condition. Such reductions to the Base Salary, if any, shall be limited to benefits actually received by Employer from disability insurance plans paid for by Employer or from state or federal government mandated disability plans. The Base Salary shall not be reduced by any disability insurance benefits received by Employee, if any, from plans purchased by Employee.

 

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(d)  Termination Upon Cessation of Business . Employer shall have the right to immediately terminate Employee’s employment under this Agreement upon a “Cessation of Business.” For purposes of this Agreement, a “ Cessation of Business ” shall mean Employer’s ceasing to operate in the ordinary course of business, whether by dissolution, liquidation, sale of assets, consolidation, merger or otherwise, in connection with, pursuant to or arising out of a good faith determination by Employer that the continuing operation of the business in its ordinary course is reasonably likely to render Employer unable to meet its liabilities as they mature. If Employee is so terminated by Employer pursuant to this Section 7(d) during the Term, Employer shall (i) pay to Employee the Base Salary, and (ii) provide the same medical, dental, disability and life insurance pursuant to Section 6(a) to which Employee was entitled hereunder as of the date of termination, provided, however, that in the case of such medical and dental insurance, that Employee makes a timely election for continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), in each case (i.e., the Base Salary and insurance), until the earlier to occur of (A) the expiration of the remaining portion of the Term, or (B) the expiration of the nine-month period commencing on the date Employee is terminated. Employer shall make such payments of the Base Salary in a single lump sum payment at termination.
(e)  Termination Without Cause . Employer shall have the right, exercisable upon written notice, to terminate Employee’s employment under this Agreement for any reason other than set forth in Sections 7(a), (c) and (d), above, at any time during the Term. If Employee is so terminated by Employer pursuant to this Section 7(e) during the Term, Employer shall pay Employee two weeks of Base Salary for each full year of service to a maximum of eight (8) weeks of the Base Salary. Should Employee, at Employee’s sole and exclusive option, provide Employer with Employer’s then standard form of separation, waiver and release agreement of all claims against Employer, then Employer agrees to (i) pay to Employee the Base Salary, and (ii) provide the same medical, dental, long-term disability and life insurance pursuant to Section 6(a) to which Employee was entitled hereunder as of the date of termination provided, however, that in the case of such medical and dental insurance, that Employee makes a timely election for continuation coverage under COBRA, in each case (i.e., the Base Salary and insurance), until the earlier to occur of (A) the expiration of the remaining portion of the Term, or (B) the twelve (12) _-month period commencing on the date Employee is terminated. Employer shall make such payments in accordance with its regular payroll schedule. If any such payments are due Employee upon a Cessation of Business, all remaining payments shall become immediately due and payable upon the occurrence of such Cessation of Business.
(f)  Exclusive Remedy . The payments contemplated by this Agreement shall constitute Employee’s exclusive and sole remedy for any claim that Employee might otherwise have against Employer under this Agreement which, but for Employee’s termination of employment hereunder, might otherwise be due and payable by Employer to Employee. Employee covenants not to assert or pursue any such remedies, other than an action to enforce the payments due to Employee under this Agreement. Nothing in this Section 7(f), however, shall be construed to bar, preclude or otherwise limit Employee’s right to bring an action against Employer if Employee’s termination of employment with Employer was otherwise unlawful or in violation of public policy.

 

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8. Miscellaneous .
(a)  Withholdings . All payments to Employee hereunder shall be made after reduction for all federal, state and local withholding and payroll taxes, all as determined under applicable law and regulations, and Employer shall make all reports and similar filings required by such law and regulations with respect to such payments, withholdings and taxes.
(b)  Succession . This Agreement shall inure to the benefit of and shall be binding upon Employer, its successors and assigns. The obligations and duties of Employee hereunder shall be personal and not assignable.
(c)  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 or by facsimile to and received by the party to whom such notice is intended (provided the original thereof is sent by mail, in the manner set forth below, on the next business day after the facsimile transmission is sent), or in lieu of such personal delivery or overnight express delivery or facsimile transmission, on 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. The parties may change their respective addresses for the purpose of this Section 8(c) by giving notice of such change to the other parties in the manner which is provided in this Section 8(c).
(d)  Entire Agreement . This Agreement contains the entire agreement of the parties relating to the subject matter hereof, and it replaces and supersedes any prior agreements, whether oral or written, between the parties relating to said subject matter, including, without limitation, that certain offer letter dated September 15, 2005, from Employer to Employee.
(e)  Headings . The headings of Sections herein are used for convenience only and shall not affect the meaning or contents hereof.
(f)  Waiver; Amendment . No provision hereof may be waived except by a written agreement signed by the waiving party. The waiver of any term or of any condition of this Agreement shall not be deemed to constitute the waiver of any other term or condition. This Agreement may be amended only by a written agreement signed by the parties hereto.
(g)  Severability . If any of the provisions of this Agreement shall be held unenforceable by the final determination of a court of competent jurisdiction and all appeals therefrom shall have failed or the time for such appeals shall have expired, such provision or provisions shall be deemed eliminated from this Agreement but the remaining provisions shall nevertheless be given full effect. In the event this Agreement or any portion hereof is more restrictive than permitted by the law of the jurisdiction in which enforcement is sought, this Agreement or such portion shall be limited in that jurisdiction only to the extent required by the law of that jurisdiction.
(h)  Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of California.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above.
                 
“EMPLOYER”:       “EMPLOYEE”:
 
               
CHROMADEX, INC. ,            
a California corporation            
 
               
By:
  /s/ Frank Jaksch        /s/ Tom Varvaro     
 
               
 
  Frank L. Jaksch, Jr.       THOMAS C. VARVARO    
 
  Chief Executive Officer            

 

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EXHIBIT A
Responsibilities
Oversee all Employer operations including but not limited to Financial, Human Resources, Information Technologies, Order Fulfillment, Risk Management and day-to-day operations.

 

 

Exhibit 10.7
(AIR LOGO)
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE — NET
AIR COMMERCIAL REAL ESTATE ASSOCIATION
1.  Basic Provisions (“Basic Provisions”).
1.1 Parties: This Lease (“ Lease ”), dated for reference purposes only December 19, 2006, is made by and between SCIF Portfolio II, LLC, a California limited liability company (“ Lessor ”) and Chromadex, Inc., a California corporation (“ Lessee ”), (collectively the “Parties”, or individually a “ Party ”).
1.2(a) Premises: That certain portion of the Project (as defined below), including all Improvements therein or to be provided by Lessor under the terms of this Lease, commonly known by the street address of 10005 Muirlands Blvd., Suite. G, 1st Floor and Suite K, located in the City of Irvine, County of Orange, State of California, with zip coda 92618, as outlined on Exhibit A attached hereto (“ Premises ”) and generally described as (describe briefly the nature of the Premises): an approximately 7,536 square foot space, which is part of an approximately 50,670 square foot multi-tenant business park. In addition to Lessee’s rights to use and occupy the Premises as hereinafter specified, Lessee shall have non-exclusive rights to the Common Areas (as defined in Paragraph 2.7 below) as hereinafter specified, but shall not have any rights to the roof, exterior walls or utility raceways of the building containing the Premises (“Building”) or to any other buildings In the Project. The Premises, the Building, the Common Areas, the land upon which they are located, along with all other buildings and Improvements thereon, are herein collectively referred to as the “Project” (See also Paragraph 2)
1.2(b)  Parking: 22 unreserved vehicle parking spaces (“ Unreserved Parking Spaces ”); and 0 reserved vehicle parking spaces (“ Reserved Parking Spaces ”). (See also Paragraph 2.6 below and Paragraph 2.6 of Owner’s Addendum, attached.)
1.3 Term: 5 years and 0 months (“ Original Term ”) commencing March 1, 2006 (“ Commencement Date ”) and ending February 28, 2011 (“ Expiration Date ”). (See also Paragraph 3 below and Paragraphs 1.3 and 50.3 of the Owner’s Addendum attached.)
1.4 Early Possession: Upon the execution of Lease and any addenda, and upon payment to Lessor of all monies due upon Lease execution (see also Paragraph 50.5 of the Owner’s Addendum attached) (“ Early Possession Date ”). (See also Paragraphs 3.2 and 3.3)
1.5 Base Rent: $8,289.60 per month (“ Base Rent ”), payable on the first day of each month commencing with the Term of the Lease as defined in Paragraph 1.3 above. (See also Paragraph 4)
þ If this box is checked, there are provisions in this Lease for the Base Rent to be adjusted. (See Owner’s Addendum Paragraph 50.1)
1.6 Lessee’s Share of Common Area Operating Expenses: Fourteen point eight seven percent (14.87%) (“ Lessee’s Share ”).
1.7 Base Rent and Other Monies Paid Upon Execution:
  (a)  
Base Rent: $8,289.60 for the period First month of the Lease Term.
 
  (b)  
Common Area Operating Expenses: $1,431.84 for the period N/A.
 
  (c)  
Security Deposit: $49,737.60. (“Security Deposit”). (See also Paragraph 5)
 
  (d)  
Other: $ N/A for __________
 
  (e)  
Total Due Upon Execution of this Lease: $59,459.04.
1.8 Agreed Use: The premises shall be used for office administration, lab for genetic engineering and lawful related uses. (See also Paragraph 6)
1.9 Insuring Party: Lessor is the “ Insuring Party ”. (See also Paragraph 8)
1.10 Real Estate Brokers: (See also Paragraph 15)
(a)  Representation: The following real estate brokers (the “ Brokers ”) and brokerage relationships exist In this transaction
(check applicable boxes):
þ Voit Commercial Brokerage represents Lessor exclusively (“ Lessor’s Broker ”);
þ Lee & Associates — Newport Beach represents Lessee exclusively (“ Lessee’s Broker ”); or
o N/A represents both Lessor and Lessee (“ Dual Agency ”).
(b)  Payment to Brokers: Upon execution and delivery of this Lease by both Parties, Lessor shall pay to the Brokers the brokerage fee agreed to in a separate written agreement ( or if there is no such agreement the sum of              of                      % of the total Base Rent for the brokerage services rendered by the Brokers ).
     
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1.12 Addenda and Exhibits . Attached hereto is an Owner’s Addendum or Addenda consisting of Paragraphs                      through                      and Exhibits A through D, all of which constitute a part of this Lease.
2.  Premises.
2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the Premises, for the term, at the rental, and upon all of the terms, covenants and conditions set forth in this Lease. Unless otherwise provided herein, any statement of size set forth in this Lease, or that may have been used in calculating Rent, is an approximation which the Parties agree is reasonable and any payments based thereon are not subject to revision whether or not the actual size is more or less.
2.2 Condition. Lessor shall deliver that portion of the Premises contained within the Building (“Unit”) to Lessee broom clean and free of debris on the Commencement Date or the Early Possession Date, whichever first occurs (“Start Date”), and, so long as the required service contracts described in Paragraph 7.1(b) below are obtained by Lessee and in effect within thirty days following the Start Date, warrants that the existing electrical, plumbing, fire sprinkler, lighting, healing, ventilating and air conditioning systems (“HVAC”), loading doors, if any, and all other such elements in the Unit, other than those constructed by Lessee, shall be in good operating condition on said date and that the structural elements of the roof, bearing walls and foundation of the Unit shall be free of material defects. if a non-compliance with such warranty exists as of the Start Date, or if one of such systems or elements should malfunction or fall within the appropriate warranty period. Lessor shall, as Lessor’s sole obligation with respect to such matter, except as otherwise provided in this Lease, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of such non-compliance, malfunction or failure, rectify same at Lessor’s expense. The warranty periods shall be as follows: (i) 618 months as to the HVAC systems, and (ii) 30 days as to the remaining systems and other elements of the Unit. If Lessee does not give Lessor the required notice within the appropriate warranty period, correction of any such non-compliance, malfunction or failure shall be the obligation or Lessee at Lessee’s sole cost and expense (except for the repairs to the fire sprinkler systems, roof, foundations, and/or bearing walls see Paragraph 7).
2.3 Compliance. Lessor warrants that the improvements on the Premises and the Common Areas comply with the building codes that were in effect at the time that each such improvement, or portion thereof, was constructed, and also with all applicable laws, covenants or restrictions of record, regulations, and ordinances in effect on the Start Date (“Applicable Requirements”), Said warranty does not apply to the use to which Lessee will put the Premises or to any Alterations or Utility Installations (as defined in Paragraph 7.3(a)) made or to be made by Lessee. NOTE: Lessee is responsible for determining whether or not the Applicable Requirements, and especially the zoning, are appropriate for Lessee’s intended use, and acknowledges that past uses of the Premises may no longer be allowed. if the Premises do not comply with said warranty, Lessor shall, except as otherwise provided, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent or such non-compliance, rectify the same at Lessor’s expense. If Lessee does not give lessor written notice of a non-compliance with this warranty within 6 months following the Start-Date, correction of that non-compliance shall be the obligation of Lessee at Lessee’s sole cost and expense. If the Applicable Requirements are hereafter changed so as to require during the term of this Lease the construction of an addition to or an alteration of the Unit, Premises and/or Building, the remediation of any Hazardous Substance, or the reinforcement or other physical modification of the Unit, Premises and/or Building (“Capital Expenditure”), Lessor and Lessee shall allocate the cost of such work as follows:
(a) Subject to Paragraph 2.3(c) below, if such Capital Expenditures are required as a result of the specific and unique use of the Premises by Lessee as compared with uses by tenants in general, Lessee shall be fully responsible for the cost thereof, provided, however that if such Capital Expenditure is required during the last 2 years of this Lease and the cost thereof exceeds 6 months’ Base Rent, Lessee may instead terminate this Lease unless Lessor notifies Lessee, in writing, within 10 days after receipt of Lessee’s termination notice that Lessor has elected to pay the difference between the actual cost thereof and the amount equal to 6 months’ Base Rent. If Lessee elects termination. Lessee shall immediately cease the use of the Premises which requires such Capital Expenditure and deliver to Lessor written notice specifying a termination date at least 90 days thereafter. Such termination date shall, however, in no event be earlier than the last day that Lessee could legally utilize the Premises without commencing such Capital Expenditure.
(b) If such Capital Expenditure is not the result of the specific and unique use of the Premises by Lessee (such as, governmentally mandated seismic modifications), then Lessor and Lessee shall allocate the obligation to pay for the portion of such costs reasonably attributable to the Premises pursuant to the formula set out in Paragraph 7.1(d); provided, however, that if such Capital Expenditure is required during the last 2 years of this Lease or if Lessor reasonably determines that it is not economically feasible to pay its share thereof, Lessor shall have the option to terminate this Lease upon 90 days prior written notice to Lessee unless Lessee notifies Lessor, in writing, within 10 days after receipt or Lessor’s termination notice that Lessee will pay for such Capital Expenditure. If Lessor does not elect to terminate, and fails to tender its share of any such Capital Expenditure, Lessee may advance such funds and deduct same, with Interest, from Rent until Lessor’s share of such costs have been fully paid, if Lessee is unable to finance Lessor’s share, or if the balance of the Rent due and payable for the remainder of this Lease is not sufficient to fully reimburse Lessee on an offset basis, Lessee shall have the right to terminate this Lease upon 30 days written notice to Lessor.
(c) Notwithstanding the above, the provisions concerning Capital Expenditures are intended to apply only to non-voluntary, unexpected, and new Applicable Requirements. If the Capital Expenditures are instead triggered by Lessee as a result of an actual or proposed change in use, change in intensity of use, or modification to the Premises then, and in that event, Lessee shall be fully responsible for the cost thereof, and Lessee shall not have any right to terminate this Lease.
2.4 Acknowledgements. Lessee acknowledges that: (a) it has been advised by Lessor and/or Brokers to satisfy itself with respect to the condition of the Premises (including but not limited to the electrical, HVAC and fire sprinkler systems, security, environmental aspects, and compliance with Applicable Requirements and the Americans with Disabilities Act), and their suitability for Lessee’s intended use. (b) Lessee has made such investigation as it deems necessary with reference to such matters and assumes all responsibility therefor as the same relate to its occupancy of the Premises, and (c) neither Lessor, Lessor’s agents, nor Brokers have made any oral or written representations or warranties with respect to said matters other than as set forth in this Lease. In addition, Lessor acknowledges that: (i) Brokers have made no representations, premises or warranties concerning Lessee’s ability to honor the Lease or suitability to occupy the Premises, and (ii) It is Lessor’s sole responsibility to investigate the financial capability and/or suitability of all proposed tenants.
2.5 Lessee as Prior Owner/Occupant. The warranties made by Lessor in Paragraph 2 shall be of no force or effect if immediately prior to the Start Date Lessee was the owner or occupant of the Premises. In such event, Lessee shall be responsible for any necessary corrective work.
2.6 Vehicle Parking. Lessee shall be entitled to use the number of Unreserved Parking Spaces and Reserved Parking Spaces specified In Paragraph 1.2(b) on those portions of the Common Areas designated from time to time by Lessor for parking. Lessee shall not use more parking spaces than said number. Said parking spaces shall be used for parking by vehicles no larger than full-size passenger automobiles, or pick-up trucks, herein called “ Permitted Size Vehicles .” Lessor may regulate the loading and unloading of vehicles by adopting Rules and Regulations as provided in Paragraph 2.9. No vehicles other than Permitted Size Vehicles may be parked in the Common Area without the prior written permission of Lessor.
(a) Lessee shall not permit or allow any vehicles that belong to or are controlled by Lessee or Lessee’s employees, suppliers shippers, customers, contractors or invitees to be loaded, unloaded, or parked in areas other than those designated by Lessor for such activities.
(b) Lessee shall not service or store any vehicles In the Common Areas.
(c) If Lessee permits or allows any of the prohibited activities described in this Paragraph 2.6, then Lessor shall have the right, without notice, In addition to such other rights and remedies that it may have, to remove or tow away the vehicle involved and charge the cost to Lessee, which cost shall be immediately payable upon demand by Lessor.
     
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2.7 Common Areas — Definition. The term “ Common Areas ” is defined as all areas and facilities outside the Premises and within the exterior boundary line of the Project and interior utility raceways and Installations within the Unit that are provided and designated by the Lessor from time to time for the general non-exclusive use of Lessor, Lessee and other tenants of the Project and their respective employees, suppliers, shippers, customers, contractors and invitees, including parking areas, loading and unloading areas, trash areas, roadways, walkways, driveways and landscaped areas.
2.8 Common Areas — Lessee’s Rights. Lessor grants to Lessee, for the benefit of Lessee and its employees, suppliers, shippers, contractors, customers and invitees, during the term of this Lease, the non-exclusive right to use, in common with others entitled to such use, the Common Areas as they exist from time to time, subject to any rights, powers, and privileges reserved by Lessor under the terms hereof or under the terms of any rules and regulations or restrictions governing the use of the Project. Under no circumstances shall the right herein granted to use the Common Areas be deemed to Include the right to store any property, temporarily or permanently, in the Common Areas. Any such storage shall be permitted only by the prior written consent of Lessor or Lessor’s designated agent, which consent may be revoked at any time. In the event that any unauthorized storage shall occur then Lessor shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove the property and charge the cost to Lessee, which cost shall be immediately payable upon demand by Lessor.
2.9 Common Areas — Rules and Regulations. Lessor or such other person(s) as Lessor may appoint shall have the exclusive control and management of the Common Areas and shall have the right, from time to time, to establish, modify, amend and enforce reasonable rules and regulations (“ Rules and Regulations ”) for the management, safety, care, and cleanliness of the grounds, the parking and unloading of vehicles and the preservation of good order, as well as for the convenience of other occupants or tenants of the Building and the Project and their invitees. Lessee agrees to abide by and conform to all such Rules and Regulations, and to cause its employees, suppliers, shippers, customers, contractors and invitees to so abide and conform. Lessor shall not be responsible to Lessee for the non-compliance with said Rules and Regulations by other tenants of the Project.
2.10 Common Areas — Changes. Lessor shall have the right, in Lessor’s sole discretion, from time to time:
(a) To make changes to the Common Areas, including, without limitation, changes in the location, size, shape and number of driveways, entrances, parking spaces, parking areas, loading and unloading areas, ingress, egress, direction of traffic, landscaped areas, walkways and utility raceways:
(b) To close temporarily any of the Common Areas for maintenance purposes so long as reasonable access to the Premises remains available;
(c) To designate other land outside the boundaries of the Project to be a part of the Common Areas;
(d) To add additional buildings and improvements to the Common Areas:
(e) To use the Common Areas while engaged in making additional Improvements, repairs or alterations to the Project, or any portion thereof: and
(f) To do and perform such other acts and make such other changes in, to or with respect to the Common Areas and Project as Lessor may, in the exercise of sound business Judgment, deem to be appropriate.
3.  Term.
3.1 Term. The Commencement Date, Expiration Date and Original Term of this Lease are as specified in Paragraph 1.3.
3.2 Early Possession. If Lessee totally or partially occupies the Premises prior to the Commencement Date, the obligation to pay Base Rent shall be abated for the period of such early possession. All other terms of this Lease (Including but not limited to the obligations to pay Lessee’s Share of Common Area Operating Expenses, Real Property Taxes and Insurance premiums and to maintain the Premises) shall, however, be in effect during such period. Any such early possession shall not affect the Expiration Date.
3.3 Delay In Possession. Lessor agrees to use its best commercially reasonable efforts to deliver possession of the Premises to Lessee by the Commencement Date. If, despite said efforts, Lesser is unable to deliver possession as agreed, Lessor shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease. Lessee shall not, however, be obligated to pay Rent or perform its other obligations until It receives possession of the Premises. If, due to circumstances within Lesser’s control, possession Is not delivered within 60 days after the Commencement Date, Lessee may, at its option, by notice in writing within 10 days after the end of such 60 day period, cancel this Lease, in which event the Parties shall be discharged from all obligations hereunder. If such written notice is not received by Lesser within said 10 day period, Lessee’s right to cancel shall terminate. Except as otherwise provided, if possession is not tendered to Lessee by the Commencement Date Start-Date and Lessee does not terminate this Lease, as aforesaid, any period of rent abatement that Lessee would otherwise have enjoyed shall run from the date of delivery of possession and continue for a period equal to what Lessee would otherwise have enjoyed under the terms hereof, but minus any days of delay caused by the acts or omissions of Lessee. If possession of the Premises is not delivered within 4 months after the Commencement Date, this Lease shall terminate unless other agreements are reached between Lessor and Lessee, in writing.
3.4 Lessee Compliance. Lessor shall not be required to lender possession of the Premises to Lessee until Lessee complies with its obligation to provide evidence of insurance (Paragraph 8.5). Pending delivery of such evidence, Lessee shall be required to perform all of its obligations under this Lease from and after the Start Date, including the payment of Rent, notwithstanding Lessor’s election to withhold possession pending receipt of such evidence of insurance. Further, if Lessee is required to perform any other conditions prior to or concurrent with the Start Date, the Start Date shall occur but Lessor may elect to withhold possession until such conditions are satisfied.
4.  Rent.
4.1 Rent Defined. All monetary obligations of Lessee to Lessor under the terms of this Lease (except for the Security Deposit) are deemed to be rent (“ Rent ”).
4.2 Common Area Operating Expenses. Lessee shall pay to Lessor during the term hereof, in addition to the Base Rent, Lessee’s Share (as specified in Paragraph 1.6) of all Common Area Operating Expenses, as hereinafter defined, during each calendar year of the term of this Lease, in accordance with the following provisions:
(a) “ Common Area Operating Expenses ” are defined, for purposes of this Lease, as all costs incurred by Lessor relating to the ownership and operation of the Project, including, but not limited to, the following:
  (i)  
The operation, repair and maintenance, in neat, clean, good order and condition of the following:
  (aa)  
The Common Areas and Common Area Improvements, including parking areas, loading and unloading areas, trash areas, roadways, parkways, walkways, driveways, landscaped areas, bumpers, irrigation systems, Common Area lighting facilities, fences and gates, elevators, roofs, and roof drainage systems.
  (bb)  
Exlerior signs and any tenant directories.
 
  (cc)  
Any fire detection and/or sprinkler systems.
     
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  (ii)  
The cost of water, gas, electricity and telephone to service the Common Areas and any utilities not separately metered.
 
  (iii)  
Trash disposal, pest control services, property management, security services, and the costs of any environmental inspections.
 
  (iv)  
Reserves set aside for maintenance and repair of Common Areas.
 
  (v)  
Real Property Taxes (as defined in Paragraph 10).
 
  (vi)  
The cost of the premiums for the insurance maintained by Lessor pursuant to Paragraph 8.
 
  (vii)  
Any deductible portion of an insured loss concerning the Building or the Common Areas.
 
  (viii)  
The cost of any Capital Expenditure to the Building or the Project not covered under the provisions of
Paragraph 2.3 provided; however, that Lessor shall allocate the cost of any such Capital Expenditure over a period of time equivalent to the anticipated useful life of such a Capital Expenditure, using commonly accepted sound management practices, and Lessee shall be required to pay its proportional share of such cost on a monthly basis by dividing the cost plus a commercially reasonable rate of interest to amortize such a Capital Expenditure by the number of months of its anticipated useful life. Such payments shall continue until the cost of the Capital Expenditure plus interest has been fully amortized or the Lease Term, or any extension of the Original Term, expires. a 12                                           year period and Lessee shall not be required to pay more than Lessee’s Share-of 1/44th of the cost of such                                           Capital Expenditure in any given month.
  (ix)  
Any other services to be provided by Lessor that are stated elsewhere in this Lease to be a Common Area Operating Expense.
(b) Any Common Area Operating Expenses and Real Property Taxes that are specifically attributable to the Unit, the Building or to any other building in the Project or to the operation, repair and maintenance thereof, shall be allocated entirely to such Unit, Building, or other building. However, any Common Area Operating Expenses and Real Property Taxes that are not specifically attributable to the Building or to any other building or to the operation, repair and maintenance thereof, shall be equitably allocated by Lessor to all buildings in the Project.
(c) The inclusion of the improvements, facilities and services set forth in Subparagraph 4.2(a) shall not be deemed to impose an obligation upon Lessor to either have said improvements or facilities or to provide those services unless the Project already has the same, Lessor already provides the services, or Lessor has agreed elsewhere in this Lease to provide the same or some of them.
(d) Lessee’s Share of Common Area Operating Expenses shall be payable by Lessee within 10 days after a reasonably detailed statement of actual expenses is presented to Lessee. At Lessor’s option, however, an amount may be estimated by Lessor from time to time of Lessee’s Share of annual Common Area Operating Expenses and the same shall be payable monthly or quarterly, as Lessor shall designate, during each 12 month period of the Lease term, on the same day as the Base Rent is due hereunder. Lessor shall deliver to Lessee within a reasonable period 60-days after the expiration of each calendar year a reasonably detailed statement showing Lessee’s Share of the actual Common Area Operating Expenses incurred during the preceding year. If Lessee’s payments under this Paragraph 4.2(d) during the preceding year exceed Lessee’s Share as indicated on such statement, Lessor shall credit the amount of such over-payment against Lessee’s Share of Common Area Operating Expenses next becoming due. If Lessee’s payments under this Paragraph 4.2(d) during the preceding year were loss than Lessee’s Share as indicated on such statement, Lessee shall pay to Lessor the amount of the deficiency within 10 days after delivery by Lessor to Lessee of the statement. Failure by Lessor to deliver to Lessee within a reasonable time period a statement showing Lessee’s Share of Actual Operating Expenses shall in no way diminish Lessee’s obligation to pay Lessor any sums due nor Lessor’s right to collect such sums.
4.3 Payment. Lessee shall cause payment of Rent to be received by Lessor in lawful money of the United States, without offset or deduction (except as specifically permitted in this Lease), on or before the day on which it is due. Rent for any period during the term hereof which is for loss than one full calendar month shall be prorated based upon the actual number of days of said month. Payment of Rent shall be made to Lessor at its address stated herein or to such other persons or place as Lessor may from time to time designate in writing. Acceptance of a payment which is less than the amount than due shall not be a waiver of Lessor’s rights to the balance of such Rent, regardless of Lessor’s endorsement of any check so stating. In the event that any check, draft, or other instrument of payment given by Lessee to Lessor is dishonored for any reason, Lessee agrees to pay to Lessor the sum of $25 in addition to any late charges which may be due.
5.  Security Deposit. Lessee shall deposit with Lessor upon execution hereof the Security Deposit as security for Lessee’s faithful performance of its obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults under this Lease, Lessor may use, apply or retain all or any portion of said Security Deposit for the payment of any amount due Lessor or to reimburse or compensate Lessor for any liability, expense, loss or damage which Lessor may suffer or incur by reason thereof. If Lessor uses or applies all or any portion of the Security Deposit, Lessee shall within 10 days after written request therefor deposit monies with Lessor sufficient to restore said Security Deposit to the full amount required by this Lease, If the Base Rent Increases during the term of this Lease, Lessee shall, upon written request from Lessor, deposit additional monies with Lessor so that the total amount of the Security Deposit shall at all times bear the same proportion to the increased Base Rent as the initial Security Deposit bore to the Initial Base Rent. Should the Agreed Use be amended to accommodate a material change in the business of Lessee or to accommodate a sublessee or assignee, Lessor shall have the right to increase the Security Deposit to the extent necessary, in Lessor’s reasonable judgment, to account for any increased wear and tear that the Premises may suffer as a result thereof. If a change in control of Lessee occurs during this Lease and following such change the financial condition of Lessee is, in Lessor’s reasonable judgment, significantly reduced, Lessee shall deposit such additional monies with Lessor as shall be sufficient to cause the Security Deposit to be at a commercially reasonable level based on such change in financial condition. Lessor shall not be required to keep the Security Deposit separate from its general accounts. Within 14 days after the expiration or termination of this Lease, If Lessor elects to apply the Security Deposit only to unpaid Rent, and otherwise within 30 days after the Premises have been vacated pursuant to Paragraph 7.4(c) below, Lessor shall return that portion of the Security Deposit not used or applied by Lessor, No part of the Security Deposit shall be considered to be held in trust, to bear interest or to be prepayment for any monies to be paid by Lessee under this Lease. It Lessee makes all payments of monies due in a timely fashion and is nor in default pursuant to the terms of this Lease the initial security deposit of $49,737.60 shall be reduced by applying the amount of $8,289.60 to Lessee’s rent payments in months 6, 9, 12, 18, and 30
6.  Use.
6.1 Use. Lessee shall use and occupy the Premises only for the Agreed Use, or any other legal use which is reasonably comparable thereto, and for no other purpose. Lessee shall not use or permit the use of the Premises in a manner that is unlawful, creates damage, waste or a nuisance, or that disturbs occupants of or causes damage to neighboring premises or properties. Lessor shall not unreasonably withhold or delay its consent to any written request for a modification of the Agreed Use, so long as the same will not impair the structural integrity of the improvements on the Premises or the mechanical or electrical systems therein, and/or is not significantly more burdensome to the Premises, and so long as the same is approved, if such approval is required, by the Planning and/or Building Departments of the City of Irvine. If Lessor elects to withhold consent Lessor shall within 7 days after such request give written notification of same, which notice shall include an explanation of Lessor’s objections to the change in the Agreed Use.
     
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6.2 Hazardous Substances.
(a)  Reportable Uses Require Consent. The term “ Hazardous Substance ” as used in this Lease shall mean any product, substance, or waste whose presence, use, manufacture, disposal, transportation, or release, either by itself or in combination with other materials expected to be on the Premises, is either; (i) potentially injurious to the public health, safety or welfare, the environment or the Premises, (ii) regulated or monitored by any governmental authority, or (iii) a basis for potential liability of Lessor to any governmental agency or third party under any applicable statute or common law theory. Hazardous Substances shall include, but not be limited to, hydrocarbons, petroleum, gasoline, and/or crude oil or any products, by-products or fractions thereof. Lessee shall not engage in any activity in or on the Premises which constitutes a Reportable Use of Hazardous Substances without the express prior written consent of Lessor and timely compliance (at Lessee’s expense) with all Applicable Requirements. “Reportable use” shall mean (i) the installation or use of any above or below ground storage tank, (ii) the generation, possession, storage, use, transportation, or disposal of a Hazardous Substance that requires a permit from, or with respect to which a report, notice, registration or business plan is required to be filed with, any governmental authority, and/or (iii) the presence at the Premises of a Hazardous Substance with respect to which any Applicable Requirements requires that a notice be given to persons entering or occupying the Premises or neighboring properties. Notwithstanding the foregoing, Lessee may use any ordinary and customary materials reasonably required to be used in the normal course of the Agreed Use, so long as such use is in compliance with all Applicable Requirements, is not a Reportable Use, and does not expose the Premises or neighboring property to any meaningful risk of contamination or damage or expose Lessor to any liability therefor. In addition, Lessor may condition its consent to any Reportable use upon receiving such additional assurances as Lessor reasonably deems necessary to protect itself, the public, the Promises and/or the environment against damage, contamination, injury and/or liability, including, but not limited to, the installation (and removal on or before Lease expiration or termination) of protective modifications (such as concrete encasements) and/or increasing the Security Deposit.
(b)  Duty to Inform Lessor. If Lessee knows, or has reasonable cause to believe, that a Hazardous Substance has come to be located in, on, under or about the Premises, other than as previously consented to by Lessor. Lessee shall immediately give written notice of such fact to Lessor, and provide Lessor with a copy of any report, notice, claim or other documentation which it has concerning the presence of such Hazardous Substance.
(c)  Lessee Remediation. Lessee shall not cause or permit any Hazardous Substance to be spilled or released in, on, under, or about the Premises (including through the plumbing or sanitary sewer system) and shall promptly, at Lessee’s expense, take all investigatory and/or remedial action reasonably recommended, whether or not formally ordered or required, for the cleanup of any contamination of, and for the maintenance, security and/or monitoring of the Premises or neighboring properties, that was caused or materially contributed to by Lessee, or pertaining to or involving any Hazardous Substance brought onto the Premises during the term of this Lease, by or for Lessee, or any third party.
(d)  Lessee Indemnification. Lessee shall indemnify, defend and hold Lessor, its agents, employees, lenders and ground lessor, if any, harmless from and against any and all loss of rents and/or damages, liabilities, judgments, claims, expenses, penalties, and attorneys’ and consultants’ fees arising out of or involving any Hazardous Substance brought onto the Premises by or for Lessee, or any third party (provided, however, that Lessee shall have no liability under this Lease with respect to underground migration of any Hazardous Substance under the Premises on above ground migration from areas outside of the Project). Lessee’s obligations shall include, but not be limited to, the effects of any contamination or injury to person, property or the environment created or suffered by Lessee, and the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease. No termination, cancellation or release agreement entered into by Lessor and Lessee shall release Lessee from its obligations under this Lease with respect to Hazardous Substances, unless specifically so agreed by Lessor in writing at the time of such agreement.
(e)  Lessor Indemnification. Lessor and its successors and assigns shall indemnify, defend, reimburse and hold Lessee, its employees and lenders, harmless from and against any and all environmental damages, including the cost of remediation, which existed as a result of Hazardous Substances on the Premises prior to the Start Date or which are subsequently caused by the gross negligence or willful misconduct of Lessor, its agents or employees. Lessor’s obligations, as and when required by the Applicable Requirements, shall include, but not be limited to, the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease.
(f)  Investigations and Remediations. Lessor shall retain the responsibility and pay for any investigations or remediation measures required by governmental entities having jurisdiction with respect to the existence of Hazardous Substances on the Premises prior to the Start Date, unless such remediation measure is required as a result of Lessee’s use (including “ Alterations ”, as defined in paragraph 7.3(a) below) of the Premises, in which event Lessee shall be responsible for such payment. Lessee shall cooperate fully in any such activities at the request of Lessor, including allowing Lessor and Lessor’s agents to have reasonable access to the Premises at reasonable times in order to carry out Lessor’s investigative and remedial responsibilities.
(g)  Lessor Termination Option. If a Hazardous Substance Condition (see Paragraph 9.1(e)) occurs during the term of this Lease, unless Lessee is legally responsible therefor (in which case Lessee shall make the investigation and remediation thereof required by the Applicable Requirements and this Lease shall continue in full force and effect, but subject to Lessor’s rights under Paragraph 6.2(d) and Paragraph 13). Lessor may at Lessor’s option, either (i) investigate and remediate such Hazardous Substance Condition, if required, as soon as reasonably possible at Lessor’s expense, in which event this Lease shall continue in full force and effect, or (ii) if the estimated cost to remediate such condition exceeds 12 times the then monthly Base Rent or $100,000, whichever is greater, give written notice to Lessee, within 30 days after receipt by Lessor of knowledge of the occurrence of such Hazardous Substance Condition, of Lessor’s desire to terminate this Lease as of the date 60 days following the date of such notice. In the event Lessor elects to give a termination notice. Lessee may, within 10 days thereafter, give written notice to Lessor of Lessee’s commitment to pay the amount by which the cost of the remediation of such Hazardous Substance Condition exceeds an amount equal to 12 times the then monthly Base Rent or $100,000, whichever is greater. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within 30 days following such commitment. In such event, this Lease shall continue in full force and effect, and Lessor shall proceed to make such remediation as soon as reasonably possible after the required funds are available. If Lessee does not give such notice and provide the required funds or assurance thereof within the time provided, this Lease shall terminate as of the date specified in Lessor’s notice of termination.
6.3 Lessee’s Compliance with Applicable Requirements. Except as otherwise provided in this Lease, Lessee shall, at Lessee’s solo expense, fully, diligently and in a timely manner, materially comply with all Applicable Requirements, the requirements of any applicable fire insurance underwriter or rating bureau, and the recommendations of Lessor’s engineers and/or consultants which relate in any manner to the Premises, without regard to whether said requirements are now in effect or become effective after the Start Date. Lessee shall, within 10 days after receipt of Lessor’s written request, provide Lessor with copies of all permits and other documents, and other information evidencing Lessee’s compliance with any Applicable Requirements specified by Lessor, and shall immediately upon receipt, notify Lessor in writing (with copies of any documents involved) of any threatened or actual claim, notice, citation, warning, complaint or report pertaining to or involving the failure of Lessee or the Premises to comply with any Applicable Requirements.
6.4 Inspection; Compliance. Lessor and Lessor’s “Lender” (as defined in Paragraph 30) and consultants shall have the right to enter into Promises at any time. In the case of an emergency, and otherwise at reasonable times (following reasonable notice to Lessee, if providing such notice is practical), for the purpose of inspecting the condition of the Premises and for verifying compliance by Lessee with this Lease. The cost of any such inspections shall be paid by Lessor, unless a violation of Applicable Requirements, or a contamination is found to exist or be imminent, or the Inspection is requested or ordered by a governmental authority. In such case, Lessee shall upon request reimburse Lessor for the cost of such inspection, so long as such inspection is reasonably related to the violation or contamination.
     
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7.  Maintenance; Repairs, Utility Installations; Trade Fixtures and Alterations.
7.1 Lessee’s Obligations.
(a)  In General. Subject to the provisions of Paragraph 2.2 (Condition), 2.3 (Compliance), 6.3 (Lessee’s Compliance with Applicable Requirements), 7.2 (Lessor’s Obligations), 9 (Damage or Destruction), and 14 (Condemnation). Lessee shall, at Lessee’s sole expense, keep the Premises, Utility installations (Intended for Lessee’s exclusive use, no matter where located), and Alterations in good order, condition and repair (whether or not the portion of the Premises requiring repairs, or the means of repairing the same, are reasonably or readily accessible to Lessee, and whether or not the need for such repairs occurs as a result of Lessee’s use, any prior use, the elements or the age of such portion of the Premises). Including, but not limited to, all equipment or facilities, such as plumbing, HVAC equipment, electrical, lighting facilities, boilers, pressure vessels, fixtures, interior walls, interior surfaces of exterior walls, ceilings, floors, windows, doors, plate glass, and skylights but excluding any items which are the responsibility of Lessor pursuant to Paragraph 7.2. Lessee, In keeping the Premises in good order, condition and repair, shall exercise and perform good maintenance practices, specifically including the procurement and maintenance of the service contracts required by Paragraph 7.1(b) below, Lessee’s obligations shall include restorations, replacements or renewals when necessary to keep the Premises and all Improvements thereon or a part thereof in good order, condition and state of repair.
(b)  Service Contracts. Lessee shall, at Lessee’s solo expense, procure and maintain contracts, with copies to Lessor, in customary form and substance for, and with contractors specializing and experienced in the maintenance of the following equipment and improvements, if any. If and when installed on the Premises: (i) HVAC equipment, (ii) boiler and pressure vessels, (iii) clarifiers, and (iv) any other equipment, If reasonably required by Lessor. However. Lessor reserves the right, upon notice to Lessee, to procure and maintain any or all of such service contracts, and If Lessor so elects. Lessee shall reimburse Lessor, upon demand, for the cost thereof.
(c)  Failure to Perform. If Lessee falls to perform Lessee’s obligations under this Paragraph 7.1, Lessor may enter upon the Premises after 10 days’ prior written notice to Lessee (except In the case of an emergency. In which case no notice shall be required), perform such obligations on Lessee’s behalf, and put the Premises in good order, condition and repair, and Lessee shall promptly reimburse Lessor for the cost thereof.
(d)  Replacement. Subject to Lessee’s indemnification of Lessor as set forth in Paragraph 8.7 below, and without relieving Lessee of liability resulting from Lessee’s failure to exercise and perform good maintenance practices, if an Item described in Paragraph 7.1(b) cannot be repaired other then at a cost which is in excess of 50% of the cost of replacing such item, then such Item shall be replaced by Lessor, and the cost thereof shall be prorated between the Parties and Lessee shall only be obligated to pay, each month during the remainder of the term of this Lease, on the date on which Base Rent is due, an amount equal to the product of multiplying the cost of such replacement by a fraction, the numerator of which is one, and the denominator of which is 144 (to. 1/l44th of the cost per month). Lessee shall pay interest on the unamortized balance at a rate that is commercially reasonable in the Judgment of Lessor’s accountants. Lessee may, however, prepay its obligation at any time.
7.2 Lessor’s Obligations. Subject to the provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance), 4.2 (Common Area Operating Expenses), 6 (Use). 7.1 (Lessee’s Obligations), 9 (Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement pursuant to Paragraphs 4.2, shall keep in good order, condition and repair the foundations, exterior walls, structural condition of interior bearing walls, exterior roof, fire sprinkler system. Common Area fire alarm and/or smoke detection systems, fire hydrants, parking lots, walkways, parkways, driveways, landscaping, fences, signs and utility systems serving the Common Areas and all parts thereof, as well as providing the services for which there is a Common Area Operating Expense pursuant to Paragraph 4.2. Lessor shall not be obligated to paint the exterior or Interior surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or replace windows, doors or plate glass of the Premises. Lessee expressly waives the benefit of any statute now or hereafter in effect to the extent it is inconsistent with the terms of this Lease.
7.3 Utility Installations; Trade Fixtures; Alterations.
(a)  Definitions. The term “Utility Installations” refers to all floor and window coverings, air lines, power panels, electrical distribution, security and fire protection systems, communication systems, lighting fixtures, HVAC equipment, plumbing, and fencing in or on the Premises. The term “ Trade Fixtures ” shall moan Lessee’s machinery and equipment that can be removed-without doing material damage to the Premises. The term “ Alterations ” shall mean any modification of the improvements, other than Utility Installations or Trade Fixtures, whether by addition or deletion. “ Lessee Owned Alterations and/or Utility Installations ” are defined as Alterations and/or Utility Installations made by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a).
(b)  Consent. Lessee shall not make any Alterations or Utility Installations to the Premises without Lessor’s prior written consent. Lessee may, however, make non-structural Utility Installations to the Interior of the Premises (excluding the roof) without such consent but upon notice to Lessor, as long as they are not visible from the outside, do not Involve puncturing, relocating or removing the roof or any existing walls, and the cumulative cost thereof during this Lease as extended does not exceed a sum equal to 3 month’s Base Rent in the aggregate or a sum equal to one month’s Base Rent in any one year. Notwithstanding the foregoing, Lessee shall not make or permit any roof penetrations and/or install anything on the roof without the prior written approval of Lessor. Lessor may, as a precondition to granting such approval, require Lessee to utilize a contractor chosen and/or approved by Lessor. Any Alterations or Utility installations that Lessee shall desire to make and which require the consent of the Lessor shall be presented to Lessor in written form with detailed plans. Consent shall be deemed conditioned upon Lessee’s: (i) acquiring all applicable governmental permits, (ii) furnishing Lessor with copies of both the permits and the plans and specifications prior to commencement of the work, and (iii) compliance with all conditions of said permits and other Applicable Requirements in a prompt and expedilious manner. Any Alterations or Utility installations shall be performed in a workmanlike manner with good and sufficient materials. Lessee shall promptly upon completion furnish Lessor with as-built plans and specifications. For work which costs an amount in excess of one month’s Base Rent, Lessor may condition its consent upon Lessee providing a lien and completion bond in an amount equal to 150% of the estimated cost of such Alteration or Utility installation and/or upon Lessee’s posting an additional Security Deposit with Lessor.
(c)  Indemnification. Lessee shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for Lessee at or for use on the Premises, which claims are or may be secured by any mechanic’s or materialman’s lien against the Premises or any Interest therein, except the labor or materials furnished that are to be performed by Lessor. Lessee shall give Lessor not less than 10 days notice prior to the commencement of any work in, on or about the Premises, and Lessor shall have the right to post notices of non-responsibility. If Lessee shall contest the validity of any such lien, claim or demand, then Lessee shall, at its sole expense defend and protect itself. Lessor and the Premises against the same and shall pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement thereof. If Lessor shell require, Lessee shall furnish a surely bond in an amount equal to 150% of the amount of such contested lien, claim or demand, indemnifying Lessor against liability for the same. If Lessor elects to participate in any such action. Lessee shall pay Lessor’s attorneys’ fees and costs.
7.4 Ownership; Removal; Surrender; and Restoration.
(a)  Ownership. Subject to Lessor’s right to require removal or elect ownership as hereinafter provided, all Alterations and Utility Installations made by Lessee shall be the property or Lessee, but considered a part of the Premises. Lessor may, at any time, elect in writing to be the owner of all or any specified part of the Lessee Owned Alterations and Utility Installations. Unless otherwise instructed per paragraph 7.4(b) hereof all Lessee Owned Alterations and Utility installations shall, at the expiration or termination of this Lease, become the property of Lessor and be surrendered by Lessee with the Premises.
(b)  Removal. By delivery to Lessee of written notice from Lessor not earlier than 90 and not later than 30 days prior to the end of the term of this Lease, Lessor may require that any or all Lessee Owned Alterations or Utility Installations be removed by the expiration or termination of this Lease. Lessor may require the removal at any time of all or any part of any Lessee Owned Alterations or Utility Installations made without the required consent.
     
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(c)  Surrender; Restoration. Lessee shall surrender the Premises by the Expiration Date or any earlier termination date, with all of the improvements, parts and surfaces thereof broom clean and free of debris, and in good operating order, condition and state of repair, ordinary wear and tear excepted. “Ordinary wear and tear” shall not include any damage or deterioration that would have been prevented by good maintenance practice. Notwithstanding the foregoing, if there is an early termination of the Lease and the completed portion of the Term of this Lease is for 12 months or less, then Lessee shall surrender the Premises in the same condition as delivered to Lessee on the Start Date with NO allowance for ordinary wear and tear. Lessee shall repair any damage occasioned by the installation, maintenance or removal of Trade Fixtures, Lessee owned Alterations and/or Utility Installations, furnishings, and equipment as well as the removal of any storage tank installed by or for Lessee. Lessee shall also completely remove from the Premises any and all Hazardous Substances brought onto the Premises by or for Lessee, or any third party (except Hazardous Substances which wore deposited via underground migration from areas outside of the Project) even if such removal would require Lessee to perform or pay for work that exceeds statutory requirements. Trade Fixtures shall remain the property of Lessee and shall be removed by Lessee. The failure by Lessee to timely vacate the Premises pursuant to this Paragraph 7.4(c) without the express written consent of Lessor shall constitute a holdover under the provisions of paragraph 26 below.
8.  Insurance; Indemnity.
8.1 Payment of Premiums. The cost of the premiums for the insurance policies required to be carried by Lessor, pursuant to Paragraphs 8.2(b), 8.3(a) and 8.3(b), shall be a Common Area Operating Expense and payable by Lessee, at Lessor’s sole discretion, either as due and payable by Lessor or in monthly installments as additional rent. Premiums for policy periods commencing prior to or extending beyond, the term of this Lease shall be prorated to coincide with the corresponding Start Date or Expiration Date.
8.2 Liability Insurance.
(a)  Carried by Lessee. Lessee shall obtain and keep in force a Commercial General Liability policy of insurance protecting Lessee and Lessor as an additional insured against claims for bodily injury, personal injury and property damage based upon or arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto. Such Insurance shall be on an occurrence basis providing single limit coverage in an amount not less than $51,000,000 per occurrence with an annual aggregate of not less than $2,000,000, an “ Additional Insured-Managers or Lessors of Premises Endorsement ” and contain the “ Amendment of the Pollution Exclusion Endorsement ” for damage caused by heat, smoke or fumes from a hostile fire. The policy shall not contain any intra-insured exclusions as between Insured persons or organizations, but shall Include coverage for liability assumed under this Lease as an “Insured contract” for the performance of Lessee’s indemnity obligations under this Lease, The limits of said insurance shall not, however, limit the liability of Lessee nor relieve Lessee of any obligation hereunder. All Insurance carried by Lessee shall be primary to and not contributory with any similar insurance carried by Lessor, whose Insurance shall be considered excess insurance only.
(b)  Carried by Lessor. Lessor shall maintain liability insurance as described in Paragraph 8.2(a), in addition to, and not in lieu of, the insurance required to be maintained by Lessee, Lessee shall not be named as an additional Insured therein.
8.3 Property Insurance — Building, Improvements and Rental Value.
(a)  Building and Improvements. Lessor shall obtain and keep in force a policy or policies of insurance In the name of Lessor, with loss payable to Lessor, any ground-lessor, and to any Lender insuring loss or damage to the Premises. The amount of such insurance shall be equal to the full replacement cost of the Premises, as the same shall exist from time to time, or the amount required by any Lender, but in no event more than the commercially reasonable and available insurable value thereof. Lessee Owned Alterations and Utility Installations, Trade Fixtures, and Lessee’s personal property shall be Insured by Lessee under Paragraph 8.4. if the coverage is available and commercially appropriate, such policy or policies shall insure against all risks of direct physical loss or damage (except the perils of flood and/or earthquake unless required by a Lender), including coverage for debris removal and the enforcement of any Applicable Requirements requiring the upgrading, demolition, reconstruction or replacement of any portion of the Premises as the result of a covered loss. Said policy or policies shall also contain an agreed valuation provision in lieu of any coinsurance clause, waiver of subrogation, and inflation guard protection causing an increase in the annual property Insurance coverage amount by a factor of not loss than the adjusted U.S. Department of Labor Consumer Price Index for All Urban Consumers for the city nearest to where the Premises are located. If such insurance coverage has a deductible clause, the deductible amount shall not exceed $1,000 per occurrence.
(b)  Rental Value. Lessor shall also obtain and keep in force a policy or policies in the name of Lessor with loss payable to Lessor and any Lender, insuring the loss of the full Rent for one year with an extended period of indemnity for an additional 180 days ( Rental Value insurance ”). Said insurance shall contain an agreed valuation provision in lieu of any coinsurance clause, and the amount of coverage shall be adjusted annually to reflect the projected Rent otherwise payable by Lessee, for the next 12 month period.
(c)  Adjacent Premises. Lessee shall pay for any increase in the premiums for the property insurance of the Building and for the Common Areas or other buildings in the Project if said increase is caused by Lessee’s acts, omissions, use or occupancy of the Premises.
(d)  Lessee’s Improvements. Since Lessor is the insuring Party, Lessor shall not be required to insure Lessee Owned Alterations and Utility Installations unless the item in question has become the property of Lessor under the terms of this Lease.
8.4 Lessee’s Property; Business Interruption Insurance.
(a)  Property Damage. Lessee shall obtain and maintain insurance coverage on all of Lessee’s personal property, Trade Fixtures, and Lessee Owned Alterations and Utility Installations. Such insurance shall be full replacement cost coverage with a deductible of not to exceed $1,000 per occurrence. The proceeds from any such insurance shall be used by Lessee for the replacement of personal property, Trade Fixtures and Lessee Owned Alterations and Utility Installations. Lessee shall provide Lessor with written evidence that such insurance is in force.
(b)  Business Interruption. Lessee shall obtain and maintain loss of income and extra expense insurance In amounts as will reimburse Lessee for direct or indirect loss of earnings attributable to all perils commonly Insured against by prudent lessees in the business of Lessee or attributable to prevention of access to the Premises as a result of such perils.
(c)  No Representation of Adequate Coverage. Lessor makes no representation that the limits or forms of coverage of insurance specified herein are adequate to cover Lessee’s property, business operations or obligations under this Lease.
8.5 Insurance Policies. Insurance required herein shall be by companies duly licensed or admitted to transact business in the state whore the Premises are located, and maintaining during the policy term a “ General Policyholders Rating ” of at least B+, V, as set forth in the most current issue of “ Best’s Insurance Guide ”, or such other rating as may be required by a Lender. Lessee shall not do or permit to be done anything which Invalidates the required insurance policies. Lessee shall, prior to the Start Dale, deliver to Lessor certified copies of policies of such insurance or certificates evidencing the existence and amounts of the required Insurance. No such policy shall be cancelable or subject to modification except after 30 5 days prior written notice to Lessor. Lessee shall, at least 30 5 days prior to the expiration of such policies, furnish Lessor with evidence of renewals or “insurance binders” evidencing renewal thereof, or Lessor may order such insurance and charge the cost thereof to Lessee, which amount shall to payable by Lessee to Lessor upon demand. Such policies shall be for a term of at least one year, or the length of the remaining term of this Lease, whichever is less. If either Party shall fail to procure and maintain the Insurance required to be carried by it, the other Party may, but shall not be required to, procure and maintain the same.
     
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8.6 Waiver of Subrogation. Without affecting any other rights or remedies, Lessee and Lessor each hereby release and relieve the other, and waive their entire right to recover damages against the other, for loss of or damage to its property arising out of or incident to the perils required to be insured against herein. The effect of such releases and waivers Is not limited by the amount of insurance carried or required, or by any deductibles applicable hereto. The Parties agree to have their respective property damage insurance carriers waive any right to subrogation that such companies may have against Lessor or Lessee, as the case may be, so long as the insurance is not Invalidated thereby.
8.7 Indemnity. Except for Lessor’s gross negligence or willful misconduct. Lessee shall indemnify, protect, defend and hold harmless the Premises, Lessor and its agents, Lessor’s master or ground lessor, partners and Lenders, from and against any and all claims, loss of rents and/or damages, lions, judgments, penalties, attorneys’ and consultants’ fees, expenses and/or liabilities arising out of, involving, or in connection with, the use and/or occupancy of the Premises by Lessee. If any action or proceeding is brought against Lessor by reason of any of the foregoing matters, Lessee shall upon notice defend the same at Lessee’s expense by counsel reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not have first paid any such claim in order to be defended or indemnified.
8.8 Exemption of Lessor from Liability. Lessor shall not be liable for injury or damage to the person or goods, wares, merchandise or other property of Lessee, Lessee’s employees, contractors, Invitees, customers, or any other person In or about the Premises, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause, whether the said injury or damage results from conditions arising upon the Premises or upon other portions of the Building, or from other sources or places. Lessor shall not be liable for any damages arising from any act or neglect of any other tenant of Lessor nor from the failure of Lessor to enforce the provisions of any other lease in the Project. Notwithstanding Lessor’s negligence or breach of this Lease. Lessor shall under no circumstances be liable for injury to Lessee’s business or for any loss of income or profit therefrom.
9.  Damage or Destruction.
9.1 Definitions.
(a)  “Premises Partial Damage” shall mean damage or destruction to the Improvements on the Premises, other than Lessee Owned Alterations and Utility Installations, which can reasonably be repaired in 3 months or less from the date of the damage or destruction, and the cost thereof does not exceed a sum equal to 6 month’s Base Rent. Lessor shall notify Lessee in writing within 30 days from the date of the damage or destruction as to whether or not the damage is Partial or Total.
(b)  “Premises Total Destruction” shall mean damage or destruction to the improvements on the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which cannot reasonably be repaired in 3 months or loss from the date of the damage or destruction and/or the cost thereof exceeds a sum equal to 6 month’s Base Rent. Lessor shall notify Lessee in writing within 30 days from the date of the damage or destruction as to whether or not the damage is Partial or Total.
(c)  “Insured Loss” shall moan damage or destruction to Improvements on the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which was caused by an event required to be covered by the Insurance described in Paragraph 8.3(a), irrespective of any deductible amounts or coverage limits involved.
(d)  “Replacement Cost” shall mean the cost to repair or rebuild the Improvements owned by Lessor at the time of the occurrence to their condition existing Immediately prior thereto, including demolition, debris removal and upgrading required by the operation of Applicable Requirements, and without deduction for depreciation,
(e)  “Hazardous Substance Condition” shall mean the occurrence or discovery of a condition Involving the presence of, or a contamination by, a Hazardous Substance as defined in Paragraph 6.2(a), In, on, or under the Premises.
9.2 Partial Damage — Insured Loss. If a Premises Partial Damage that is an Insured Loss occurs, then Lessor shall, at Lessor’s expense, repair such damage (but not Lessee’s Trade Fixtures or Lessee Owned Alterations and Utility Installations) as soon as reasonably possible and this Lease shall continue in full force and effect; provided, however, that Lessee shall, at Lessor’s election, make the repair of any damage or destruction the total cost to repair of which is $5.000 or less, and, in such event, Lessor shall make any applicable insurance proceeds available to Lessee on a reasonable basis for that purpose. Notwithstanding the foregoing, if the required insurance was not in force or the insurance proceeds are not sufficient to effect such repair, the Insuring Party shall promptly contribute the shortage in proceeds as and when required to complete said repairs, in the event, however, such shortage was due to the fact that, by reason of the unique nature of the Improvements, full replacement cost insurance coverage was not commercially reasonable and available, Lessor shall have no obligation to pay for the shortage in Insurance proceeds or to fully restore the unique aspects of the Premises unless Lessee provides Lessor with the funds to cover same, or adequate assurance thereof, within 10 days following receipt of written notice of such shortage and request therefore. If Lessor receives said funds or adequate assurance thereof within said 10 day period, the party responsible for making the repairs shall complete them as soon as reasonably possible and this Lease shall remain in full force and effect. If such funds or assurance are not received, Lessor may nevertheless elect by written notice to Lessee within 10 days thereafter to: (i) make such restoration and repair as is commercially reasonable with Lessor paying any shortage in proceeds, in which case this Lease shall remain in full force and effect or (ii) have this Lease terminate 30 days thereafter. Lessee shall not be entitled to reimbursement of any funds contributed by Lessee to repair any such damage or destruction. Premises Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3. notwithstanding that there may be some insurance coverage, but the net proceeds of any such Insurance shall be made available for the repairs if made by either Party.
9.3 Partial Damage — Uninsured Loss. If a Premises Partial Damage that is not an Insured Loss occurs, unless caused by a negligent or willful act of Lessee (In which event Lessee shall make the repairs at Lessee’s expense), Lessor may either: (I) repair such damage as soon as reasonably possible at Lessor’s expense, in which event this Lease shall continue in full force and effect, or (ii) terminate this Lease by giving written notice to Lessee within 30 days after receipt by Lessor of knowledge of the occurrence of such damage. Such termination shall be effective 60 days following the date of such notice. In the event Lessor elects to terminate this Lease, Lessee shall have the right within 10 days after receipt of the termination notice to give written notice to Lessor of Lessee’s commitment to pay for the repair of such damage without reimbursement from Lessor. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within 30 days after making such commitment. In such event this Lease shall continue in full force and effect, and Lessor shall proceed to make such repairs as soon as reasonably possible after the required funds are available. If Lessee does not make the required commitment, this Lease shall terminate as of the date specified in the termination notice.
9.4 Total Destruction. Notwithstanding any other provision hereof, if a Premises Total Destruction occurs, this Lease shall terminate 60 days following such Destruction. If the damage or destruction was caused by the gross negligence or willful misconduct of Lessee, Lessor shall have the right to recover Lessor’s damages from Lessee, except as provided in Paragraph 8.6.
9.5 Damage Near End of Term. If at any time during the last 6 months of this Lease there is damage for which the cost to repair exceeds one month’s Base Rent, whether or not an Insured Loss, Lessor may terminate this Lease effective 60 days following the date of occurrence of such damage by giving a written termination notice to Lessee within 30 days after the date of occurrence of such damage. Notwithstanding the foregoing, if Lessee at that time has an exercisable option to extend this Lease or to purchase the Premises, then Lessee may preserve this Lease by, (a) exercising such option and (b) providing Lessor with any shortage in Insurance proceeds (or adequate assurance thereof) needed to make the repairs or before the earlier of (i) the date which is 10 days after Lessee’s receipt of Lessor’s written notice purporting to terminate this Lease or (ii) the day prior to the date upon which such option expires. If Lessee duly exercises such option during such period and provides Lessor with funds (or adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor’s commercially reasonable expense, repair such damage as soon as reasonably possible and this Lease shall continue in full force and effect. If Lessee fails to exercise such option and provide such funds or assurance during such period, then this Lease shall terminate on the date specified in the termination notice and Lessee’s option shall be extinguished.
     
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9.6 Abatement of Rent; Lessee’s Remedies.
(a)  Abatement. In the event of Premises Partial Damage or Premises Total Destruction or a Hazardous Substance Condition for which Lessee is not responsible under this Lease, the Rent payable by Lessee for the period required for the repair, remediation or restoration of such damage shall be abated In proportion to the degree to which Lessee’s use of the Premises Is Impaired, but not to exceed the proceeds received from the Rental Value Insurance. All other obligations of Lessee hereunder shall be performed by Lessee, and Lessor shall have no liability for any such damage, destruction, remediation, repair or restoration except as provided heroin.
(b)  Remedies. If Lessor shall be obligated to repair or restore the Premises and does not commence, in a substantial and meaningful way, such repair or restoration within 90 days after such obligation shall accrue. Lessee may, at any time prior to the commencement of such repair or restoration, give written notice to Lessor and to any Lenders of which Lessee has actual notice, of Lessee’s election to terminate this Lease on a date not less than 60 days following the giving of such notice. if Lessee gives such notice and such repair or restoration is not commenced within 30 days thereafter, this Lease shall terminate as of the date specified in said notice. If the repair or restoration is commenced within such 30 days, this Lease shall continue in full force and effect. “ Commence ” shall mean either the unconditional authorization of the preparation of the required plans, or the beginning of the actual work on the Premises, whichever first occurs.
9.7 Termination; Advance Payments. Upon termination of this Lease pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be made concerning advance Base Rent and any other advance payments made by Lessee to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee’s Security Deposit as has not been, or is not then required to be used by Lessor.
9.8 Waive Statutes. Lessor and Lessee agree that the terms of this Lease shall govern the effect of any damage to or destruction of the Premises with respect to the termination of this Lease and hereby waive the provisions of any present or future statute to the extent Inconsistent herewith.
10.  Real Property Taxes.
10.1 Definition. As used herein, the term “Real Property Taxes” shall include any form of assessment; real estate, general, special, ordinary or extraordinary, or rental levy or tax (other than inheritance, personal Income or estate taxes); improvement bond; and/or license fee imposed upon or levied against any legal or equitable Interest of Lessor in the Project, Lessor’s right to other income therefrom, and/or Lessor’s business of leasing, by any authority having the direct or indirect power to tax and where the funds are generated with reference to the Project address and where the proceeds so generated are to be applied by the city, county or other local taxing authority of a jurisdiction within which the Project is located. The term “ Real Property Taxes ” shall also Include any tax, fee, levy, assessment or charge, or any increase therein, imposed by reason of events occurring during the term of this Lease, including but not limited to, a change in the ownership of the Project or any portion thereof or a change in the improvements thereon. In calculating Real Property Taxes for any calendar year, the Real Property Taxes for any real estate tax year shall be included in the calculation of Real Property Taxes for such calendar year based upon the number of days which such calendar year and tax year have in common.
10.2 Payment of Taxes. Lessor shall pay the Real Property Taxes applicable to the Project, and except as otherwise provided in Paragraph 10.3, any such amounts shall be included in the calculation of Common Area Operating Expenses in accordance with the provisions of Paragraph 4.2, and, at Lessor’s sole discretion, may be billed either as due and payable by Lessor or in monthly installments as part of additional rent.
10.3 Additional Improvements. Common Area Operating Expenses shall not Include Real Property Taxes specified in the tax assessor’s records and work shoots as being caused by additional Improvements placed upon the Project by other lessees or by Lessor for the exclusive enjoyment of such other lessees. Notwithstanding Paragraph 10.2 hereof, Lessee shall, however, pay to Lessor at the time Common Area Operating Expenses are payable under Paragraph 4.2, the entirely of any increase in Real Property Taxes if assessed solely by reason of Alterations, Trade Fixtures or Utility Installations placed upon the Premises by Lessee or at Lessee’s request.
10.4 Joint Assessment. If the Building is not separately assessed, Real Property Taxes allocated to the Building shall be an equitable proportion of the Real Property Taxes for all of the land and improvements Included within the tax parcel assessed, such proportion to be determined by Lesser from the respective valuations assigned in the assessor’s work sheets or such other information as may be reasonably available. Lessor’s reasonable determination thereof, in good faith, shall be conclusive.
10.5 Personal Property Taxes. Lessee shall pay prior to delinquency all taxes assessed against and levied upon Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all personal property of Lessee contained in the Premises. When possible. Lessee shall cause its Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Lessor. If any of Lessee’s said property shall be assessed with Lessor’s real property. Lessee shall pay Lessor the taxes attributable to Lessee’s property within 10 days after receipt of a written statement selling forth the taxes applicable to Lessee’s property.
11.  Utilities. Lessee shall pay for all water, gas, heat, light, power, telephone, trash disposal and other utilities and services supplied to the Premises, together with any taxes thereon. Lessee shall pay its actual cost of electricity consumed on the Premises directly (and not as part of utilities delivered to the Common Areas) by means of separate metering. The meter shall be provided by Lessor to Lessee at no cost to Lessee. Lessee shall be entirely responsible for arranging commencement of service, all billing and termination of service directly with the electrical supplier. Interruptions of such service by the provider shall not be the responsibility of Lessor nor shall Lessor be in any way liable for any loss to Lessee from such interruption. Gas service to the Property (which is not required for normal occupancy of the Premises) shall not be provided by Lessor; should Lessee’s use of the Premises require gas service, Lessee may, at Lessee’s sole cost and expense, arrange for gas service to be installed and provided to the Premises. Plans for such installation and service shall require the written approval of Lessor. Lessee shall be responsible for all costs related to the subsequent use and consumption of gas provided by such service, including maintenance and repair. Water service to the Premises shall not be separately metered but shall either be estimated by a qualified consultant and billed to Lessee monthly as additional rent or billed to Lessee as part of the monthly estimated Common Area Operating Expenses. All other utilities provided to the Property by Lessor shall be reimbursed monthly to Lessor by Lessee as part of Common Area Operating Expenses, according to the proportional share and the estimated monthly charge as set forth in Paragraph; 1.6 above and reconciled annually as set forth in Paragraph 4.2(d) above, Notwithstanding the provisions of Paragraph 4.2, If at any time in Lessor’s sole judgment, Lessor determines that Lessee is using a disproportionate amount of water, electricity or other commonly metered utilities, or that Lessee is generating such a large volume of trash as to require an increase in the size of the dumpster and/or an increase in the number of times per month that the dumpster is emptied, then lessee may increase Lessee’s Base Rent by an amount equal to such increased costs.
     
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12.  Assignment and Subletting.
12.1 Lessor’s Consent Required.
(a) Lessee shall not voluntarily or by operation of law assign, transfer, mortgage or encumber (collectively, “ assign or assignment ”) or sublet all or any part of Lessee’s Interest in this Lease or in the Premises without Lessor’s prior written consent.
(b) A change in the control of Lessee shall constitute an assignment requiring consent. The transfer, on a cumulative basis, of 25% or more of the voting control of Lessee shall constitute a change in control for this purpose.
(c) The involvement of Lessee or its assets in any transaction, or series of transactions (by way of merger, sale, acquisition, financing, transfer, leveraged buy-out or otherwise), whether or not a formal assignment or hypothecation of this Lease or Lessee’s assets occurs, which results or will result in a reduction of the Net Worth of Lessee by an amount greater than 25% of such Net Worth as it was represented at the time of the execution of this Lease or at the time of the most recent assignment to which Lessor has consented, or as it exists immediately prior to said transaction or transactions constituting such reduction, whichever was or is greater, shall be considered an assignment of this Lease to which Lessor may withhold its consent. “ Net Worth of Lessee ” shall mean the net worth of Lessee (excluding any guarantors) established under generally accepted accounting principles.
(d)  An assignment or subletting without consent shall, at Lessor’s option, be a Default curable after notice per Paragraph 13.1(c), or a noncurable Breach without the necessity of any notice and grace period. If Lessor elects to treat such unapproved assignment or subletting as a noncurable Breach, Lessor may either: (i) terminate this Lease, or (ii) upon 30 days written notice, increase the monthly Base Rent to 110% of the Base Rent then in effect. Further, in the event of such Breach and rental adjustment, (i) the purchase price of any option to purchase the Premises held by Lessee shall be subject to similar adjustment to 110% of the price previously in effect, and (ii) all fixed and non-fixed rental adjustments scheduled during the remainder of the Lease term shall be increased to 110% of the scheduled adjusted rent.
(e) Lessee’s remedy for any breach of Paragraph 12.1 by Lessor shall be limited to compensatory damages and/or injunctive relief.
12.2 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor’s consent, no assignment or subletting shall: (i) be effective without the express written assumption by such assignee or sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of any obligations hereunder, or (iii) alter the primary liability of Lessee for the payment of Rent or for the performance of any other obligations to be performed by Lessee.
(b) Lessor may accept Rent or performance of Lessee’s obligations from any person other than Lessee pending approval or disapproval of an assignment. Neither a delay in the approval or disapproval of such assignment nor the acceptance of Rent or performance shall constitute a waiver or estoppel of Lessor’s right to exercise its remedies for Lessee’s Default or Broach.
(c) Lessor’s consent to any assignment or subletting shall not constitute a consent to any subsequent assignment or subletting.
(d) In the event of any Default or Breach by Lessee, Lessor may proceed directly against Lessee, any Guarantors or anyone else responsible for the performance of Lessee’s obligations under this Lease, including any assignee or sublessee, without first exhausting Lessor’s remedies against any other person or entity responsible therefore to Lessor, or any security hold by Lessor.
(e) Each request for consent to an assignment or subletting shall be in writing, accompanied by information relevant to Lessor’s determination as to the financial and operational responsibility and appropriateness of the proposed assignee or sublessee, including but not limited to the intended use and/or required modification of the Premises, if any, together with a fee of $1, 000 any reasonable costs of the Lessor including but not limited to legal costs or 10% of the current monthly Base Rent applicable to the portion of the Premises which is the subject of the proposed assignment or sublease, whichever is greater, as consideration for Lessor’s considering and processing said request. Lessee agrees to provide Lessor with such other or additional information and/or documentation as may be reasonably requested.
(f) Any assignee of, or sublessee under, this Lease shall, by reason of accepting such assignment or entering into such sublease, be deemed to have assumed and agreed to conform and comply with each and every term, covenant, condition and obligation herein to be observed or performed by Lessee during the term of said assignment or sublease, other than such obligations as are contrary to or inconsistent with provisions of an assignment or sublease to which Lessor has specifically consented to in writing.
(g) Lessor’s consent to any assignment or subletting shall not transfer to the assignee or sublessee any Option granted to the original Lessee by this Lease unless such transfer is specifically consented to by Lessor in writing. (See Paragraph 39.2)
(h) “ Affiliates. ” See Paragraph 12.3(h) of Owner’s Addendum, attached.
12.3 Additional Terms and Conditions Applicable to Subletting. The following terms and conditions shall apply to any subletting by Lessee of all or any part of the Premises and shall be deemed included in all subleases under this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee’s interest in all Rent payable on any sublease, and Lessor may collect such Rent and apply same toward Lessee’s obligations under this Lease; provided, however, that until a Breach shall occur in the performance of Lessee’s obligations. Lessee may collect said Rent. Lessor shall not, by reason of the foregoing or any assignment of such sublease, nor by reason of the collection of Rent, be deemed liable to the sublessee for any failure of Lessee to perform and comply with any of Lessee’s obligations to such sublessee. Lessee hereby irrevocably authorizes and directs any such sublessee, upon receipt of a written notice from Lesser stating that a Breach exists in the performance of Lessee’s obligations under this Lease, to pay to Lessor all Rent due and to become due under the sublease. Sublessee shall rely upon any such notice from Lessor and shall pay all Rents to Lessor without any obligation or right to inquire as to whether such Breach exists, notwithstanding any claim from Lessee to the contrary.
(b) In the event of a Breach by Lessee, Lessor may, at its option, require sublessee to altom to Lessor, in which event Lesser shall undertake the obligations of the sublessor under such sublease from the time of the exercise of said option to the expiration of such sublease: provided, however, Lesser shall not be liable for any prepaid rents or security deposit paid by such sublessee to such sublessor or for any prior Defaults or Breaches of such sublessor.
(c) Any matter requiring the consent of the sublessor under a sublease shall also require the consent of Lessor.
(d) No sublessee shall further assign or sublet all or any part of the Premises without Lessor’s prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by Lessee to the sublessee, who shall have the right to cure the Default of Lessee within the grace period, if any, specified in such notice. The sublessee shall have a right of reimbursement and offset from and against Lessee for any such Defaults cured by the sublessee.
13.  Default; Breach; Remedies.
13.1 Default; Breach. A “ Default ” is defined as a failure by the Lessee to comply with or perform any of the terms, covenants. conditions or Rules and Regulations under this Lease. A “Breach” is defined as the occurrence of one or more of the following Defaults, and the failure of Lessee to cure such Default within any applicable grace period:
(a) The abandonment of the Premises; or the vacating of the Promises without providing a commercially reasonable level of security, or where the coverage of the property insurance described in Paragraph 8.3 is jeopardized as a result thereof, or without providing reasonable assurances to minimize potential vandalism.
     
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(b) The failure of Lessee to make any payment of Rent or any Security Deposit required to be made by Lessee hereunder, whether to Lessor or to a third party, when due, to provide reasonable evidence of insurance or surely bond, or to fulfill any obligation under this Lease which endangers or threatens life or property, where such failure continues for a period of 3 business days following written notice to Lessee.
(c) The failure by Lessee to provide (i) reasonable written evidence of compliance with Applicable Requirements, (ii) the service contracts, (iii) the rescission of an unauthorized assignment or subletting, (iv) an Estoppel Certificate, (v) a requested subordination, (vi) evidence concerning any guaranty and/or Guarantor, (vii) any document requested under Paragraph 41 (easements), or (viii) any other documentation or information which Lessor may reasonably require of Lessee under the terms of this Lease, where any such failure continues for a period or 10 days following written notice to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or provisions of this Lease, or of the rules adopted under Paragraph 2.9 hereof, other than those described in subparagraphs 13.1(a), (b) or (c), above, where such Default continues for a period of 30 days after written notice; provided, however, that if the nature of Lessee’s Default is such that more than 30 days are reasonably required for its cure, then it shall not be deemed to be a Breach if Lessee commences such cure within said 30 day period and thereafter diligently prosecutes such euro to completion.
(e) The occurrence of any of the following events: (i) the making of any general arrangement or assignment for the benefit of creditors: (ii) becoming a “debtor” as defined in 11 U.S.C. § 101 or any successor statute thereto (unless, in the case of a petition filed against Lessee, the same is dismissed within 60 days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Lessee’s assets located at the Premises or of Lessee’s interest in this Lease, where possession is not restored to Lessee within 30 days; or (iv) the attachment, execution or other Judicial seizure of substantially all or Lessee’s assets located at the Premises or of Lessee’s interest in this Lease, where such seizure is not discharged within 30 days; provided, however, in the event that any provision of this subparagraph (c) is contrary to any applicable law, such provision shall be of no force or effect, and not affect the validity of the remaining provisions.
(f) The discovery that any financial statement of Lessee or of any Guarantor given to Lessor was materially false.
(g) If the performance of Lessee’s obligations under this Lease is guaranteed: (I) the death or a Guarantor, (ii) the termination of a Guarantor’s liability with respect to this Lease other than in accordance with the terms of such guaranty, (iii) a Guarantor’s becoming insolvent or the subject of a bankruptcy filing, (iv) a Guarantor’s refusal to honor the guaranty, or (v) a Guarantor’s breach of its guaranty obligation on an anticipatory basis, and Lessee’s failure, within 60 days following written notice of any such event, to provide written alternative assurance or security, which, when coupled with the then existing resources of Lessee, equals or exceeds the combined financial resources of Lessee and the Guarantors that existed at the time of execution of this Lease.
13.2 Remedies. If Lessee fails to perform any of its affirmative duties or obligations, within 10 days after written notice (or in case of an emergency, without notice). Lessor may, at its option, perform such duty or obligation on Lessee’s behalf, including but not limited to the obtaining of reasonably required bonds, insurance policies, or governmental licenses, permits or approvals. The costs and expenses of any such performance by Lessor shall be duo and payable by Lessee upon receipt of invoice therefor. If any check given to Lessor by Lessee shall not be honored by the bank upon which it is drawn, Lessor, at its option, may require all future payments to be made by Lessee to be by cashier’s chock. In the event of a Breach, Lessor may, with or without further notice or demand, and without limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of such Breach:
(a) Terminate Lessee’s right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Lessee shall immediately surrender possession to Lessor. In such event Lessor shall be entitled to recover from Lessee: (i) the unpaid Rent which had been earned at the time of termination; (ii) the worth at the time of award of the amount by which the unpaid rent which would have boon earned after termination until the time of award exceeds the amount of such rental loss that the Lessee proves could have been reasonably avoided; (iii) the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that the Lessee proves could be reasonably avoided; and (iv) any other amount necessary to compensate Lessor for all the detriment proximately caused by the Lessee’s failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including but not limited to the cost of recovering possession of the Premises, expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorneys’ fees, and that portion of any leasing commission paid by Lessor in connection with this Lease applicable to the unexpired term of this Lease. The worth at the time of award of the amount referred to in provision (iii) of the immediately preceding sentence shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of the District within which the Premises are located at the time of award plus one percent. Efforts by Lessor to mitigate damages caused by Lessee’s Broach of this Lease shall not waive Lessor’s right to recover damages under Paragraph 12. If termination of this Lease is obtained through the provisional remedy of unlawful detainer, Lessor shall have the right to recover in such proceeding any unpaid Rent and damages as are recoverable therein, or Lessor may reserve the right to recover all or any part thereof in a separate suit. If a notice and grace period required under Paragraph 13.1 was not previously given, a notice to pay rent or quit, or to perform or quit given to Lessee under the unlawful detainer statute shall also constitute the notice required by Paragraph 13.1. in such case, the applicable grace period required by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and the failure of Lessee to cure the Default within the greater of the two such grace periods shall constitute both on unlawful detainer and a Breach of this Lease entitling Lessor to the remedies provided for in this Lease and/or by said statute.
(b) Continue the Lease and Lessees right to possessions and recover the Rent as it becomes due, in which event Lessee may sublet or assign, subject only to reasonable limitations. Acts of maintenance, efforts to relet, and/or the appointment of a receiver to protect the Lessor’s interests, shall not constitute a termination of the Lessee’s right to possession.
(c) Pursue any other remedy now or hereafter available under the laws or Judicial decisions of the state wherein the Premises are located. The expiration or termination of this Lease and/or the termination of Lessee’s right to possession shall not relieve Lessee from liability under any indemnity provisions of this Lease as to matters occurring or accruing during the term hereof or by reason of Lessee’s occupancy of the Premises.
13.3 Inducement Recapture. Any agreement for free or abated rent or other charges, or for the giving or paying by Lessor to or for Lessee of any cash or other bonus. Inducement or consideration for Lessee’s entering into this Lease, all of which concessions are hereinafter referred to as “Inducement Provisions”, shall be deemed conditioned upon Lessee’s full and faithful performance of all of the terms, covenants and conditions of this Lease. Upon Breach of this Lease by Lessee, any such inducement Provision shall automatically be deemed deleted from this Lease and of no further force or effect, and any rent, other charge, bonus, inducement or consideration theretofore abated, given or paid by Lesser under such an inducement Provision shall be immediately due and payable by Lessee to Lessor, notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or the cure of the Breach which Initiated the operation of this paragraph shall not be deemed a waiver by Lessor of the provisions of this paragraph unless specifically so stated in writing by Lessor at the time of such acceptance.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee of Rent will cause Lessor to incur costs not contemplated by this Lease, the exact amount or which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be Imposed upon Lessor by any Lender. Accordingly, If any Rent shall not be received by Lessor within 5 10 days after such amount shall be due, then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a one-time late charge equal to 10% of each such overdue amount or $100, whichever is greater. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of such late payment. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee’s Default or Broach with respect to such overdue amount, nor prevent the exercise of any of the other rights and remedies granted hereunder. In the event that a late charge is payable hereunder, whether or not collected, for 3 consecutive installments of Base Rent, then notwithstanding any provision of this Lease to the contrary. Base Rent shall, at Lessor’s option, become due and payable quarterly in advance.
     
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13.5 Interest. Any monetary payment due Lessor hereunder, other than late charges, not received by Lessor, when due as to scheduled payments (such as Base Rent) or within 30 days following the date on which it was due for non-scheduled payment, shall bear interest from the date when due, as to scheduled payments, or the 31st day after It was due as to non-scheduled payments. The interest (“ Interest ”) charged shall be equal to the prime rate reported in the Wall Street Journal as published closest prior to the date when due plus 4%, but shall not exceed the maximum rate allowed by law. Interest is payable in addition to the potential late charge provided for in Paragraph 13.4.
13.6 Breach by Lessor.
(a)  Notice of Breach. Lessor shall not be deemed in breach of this Lease unless Lessor fails within a reasonable time to perform an obligation required to be performed by Lessor. For purposes of this Paragraph, a reasonable time shall in no event be less than 30 days after receipt by Lessor, and any Lender whose name and address shall have been furnished Lessee in writing for such purpose, of written notice specifying wherein such obligation of Lessor has not been performed: provided, however, that if the nature of Lessor’s obligation is such that more than 30 days are reasonably required for its performance, then Lessor shall not be in breach if performance is commenced within such 30 day period and thereafter diligently pursued to completion.
(b)  Performance by Lessee on Behalf of Lessor. In the event that neither Lessor nor Lender cures said breach within 30 days after receipt of said notice, or if having commenced said cure they do not diligently pursue it to completion, then Lessee may elect to cure said breach at Lessee’s expense and offset from Rent an amount equal to the greater of one month’s Base Rent or the Security Deposit, and to pay an excess of such expense under protest, reserving Lessee’s right to reimbursement from Lessor. Lessee shall document the cost of said cure and supply said documentation to Lessor.
14.  Condemnation. If the Premises or any portion thereof are taken under the power of eminent domain or sold under the threat of the exercise of said power (collectively “ Condemnation ”), this Lease shall terminate as to the part taken as of the date the condemning authority takes title or possession, whichever first occurs. If more than 10% of the floor area of the Unit, or more than 25% of Lessee’s Reserved Parking Spaces, is taken by Condemnation, Lessee may, at Lessee’s option, to be exercised in writing within 10 days after Lessor shall have given Lessee written notice of such taking (or in the absence of such notice, within 10 days after the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the Premises remaining, except that the Base Rent shall be reduced in proportion to the reduction in utility of the Premises caused by such Condemnation. Condemnation awards and/or payments shall be the property of Lessor, whether such award shall be made as compensation for diminution in value of the leasehold, the value of the part taken, or for severance damages; provided, however, that Lessee shall be entitled to any compensation for Lessee’s relocation expenses, loss of business goodwill and/or Trade Fixtures, without regard to whether or not this Lease is terminated pursuant to the provisions of this Paragraph. All Alterations and Utility Installations made to the Premises by Lessee, for purposes of Condemnation only, shall be considered the property of the Lessee and Lessee shall be entitled to any and all compensation which is payable therefor. In the event that this Lease is not terminated by reason of the Condemnation. Lessor shall repair any damage to the Premises caused by such Condemnation.
15.  Brokerage Fees.
15.1 INTENTIONALLY OMITTED Additional Commission. In addition to the payments owed pursuant
to Paragraph 1.10 above, and unless Lessor and the Brokers otherwise agree In writing Lessor agrees that: (a) If Lessee exercises any Option, (b) if Lessee acquires from lessor any rights to the premises or other premises owned by Lessor and located within the Project: (c) If Lessee remains In possession of the Premises, with the consent of Lessor, after the expiration of this Lease, or (d) if Base Rent is Increased, whether by agreement or operation of an escalation clause herein, then, Lessor shall pay Brokers a fee in accordance with the schedule of the Brokers a fee in accordance with the schedule of the Brokers in effect at the time of the execution of this Lease.
15.2 INTENTIONALLY OMITTED Assumption of Obligations. Any buyer or transferee of Lessor’s interest in this Lease shall be deemed to have assumed Lessor’s obligation hereunder. Brokers shall be third party beneficiaries of the provisions of Paragraphs 1.10, 15, 22 and 31. If Lessor fails to pay to Brokers any amounts due as and for brokerage fees pertaining to this Lease when due then such amounts shall accrue Interest. In addition if Lessor falls to pay any amounts to Lessee’s Broker when due, Lessee’s Broker may send written notice to Lessor and Lessee of such failure and if Lessor fails to pay such amounts within 10 days after said notice. Lessee shall pay said monies to its Broker and offset such amounts against Rent. In addition Lessee’s Broker shall be deemed to be a third party beneficiary of any commission agreement entered into by and/or between Lessor and Lessor’s Broker for the limited purpose of collecting any brokerage fee owed.
15.3 Representations and Indemnities of Broker Relationships. Lessee and Lessor each represent and warrant to the other that it has had no dealings with any person, firm, broker or finder (other than the Brokers, if any) in connection with this Lease, and that no one other than said named Brokers is entitled to any commission or finder’s fee in connection herewith. Lessee and Lessor do each hereby agree to indemnify, protect, defend and hold the other harmless from and against liability for compensation or charges which may be claimed by any such unnamed broker, finder or other similar party by reason of any dealings or actions of the indemnifying Party, including any costs, expenses, attorneys’ fees reasonably incurred with respect thereto.
16.  Estoppel Certificates.
(a) Each Party (as “ Responding Party ”) shall within 10 days after written notice from the other Party (the “Requesting Party”) execute, acknowledge and deliver to the Requesting Party a statement in writing which whether or not in a form similar to the then most current “ Estoppel Certificate ” form published by the AIR Commercial Real Estate Association requests information that is customarily asked of Lessors or Lessees to provide in Estoppel Certificates, plus such additional information, confirmation and/or statements as may be reasonably requested by the Requesting Party. (See Paragraph 16A of Owner’s Addendum, attached.)
(b) If the Responding Party shall fail to execute or deliver the Estoppel Certificate within such 10 day period, the Requesting Party may execute an Estoppel Certificate stating that: (i) the Lease is in full force and effect without modification except as may be represented by the Requesting Party, (ii) there are no uncured defaults in the Requesting Party’s performance, and (iii) if Lessor is the Requesting Party, not more than one month’s rent has been paid in advance. Prospective purchasers and encumbrances may rely upon the Requesting Party’s Estoppel Certificate, and the Responding Party shall be estopped from denying the truth of the facts contained in said Certificate.
(c) If Lessor desires to finance, refinance, or sell the Premises, or any part thereof, Lessee and all Guarantors shall deliver to any potential lender or purchaser designated by Lessor such financial statements as may be reasonably required by such lender or purchaser, including but not limited to Lessee’s financial statements for the past 3 years. All such financial statements shall be received by Lessor and such lender or purchaser in confidence and shall be used only for the purposes herein set forth.
17.  Definition of Lessor. The term “ Lessor ” as used herein shall mean the owner or owners at the time in question of the fee title to the Premises, or, if this is a sublease, of the Lessee’s interest in the prior lease. In the event of a transfer of Lessor’s title or interest in the Premises or this Lease, Lessor shall deliver to the transferee or assignee (in cash or by credit) any unused Security Deposit held by Lessor. Except as provided in Paragraph 15, upon such transfer or assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor shall be relieved of all liability with respect to the obligations and/or covenants under this Lease thereafter to be performed by the Lessor. Subject to the foregoing, the obligations and/or covenants in this Lease to be performed by the Lessor shall be binding only upon the Lessor as hereinabove defined. Notwithstanding the above, and subject to the provisions of Paragraph 20 below, the original Lessor under this Lease, and all subsequent holders of the Lessor’s interest in this Lease shall remain liable and responsible with regard to the potential duties and liabilities of Lessor pertaining to Hazardous Substances as outlined in Paragraph 6.2 above.
     
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18.  Severability . The invalidity of any provision of this Lease, as determined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof.
19.  Days . Unless otherwise specifically indicated to the contrary, the word “ days ” as used in this Lease shall mean and refer to calendar days.
20.  Limitation on Liability . Subject to the provisions of Paragraph 17 above, the obligations of Lessor under this Lease shall not constitute personal obligations of Lessor, the individual partners of Lessor or its or their individual partners, directors, officers or shareholders, and Lessee shall look to the Premises, and to no other assets of Lessor, for the satisfaction of any liability of Lessor with respect to this Lease, and shall not seek recourse against the individual partners of Lessor, or its or their individual partners, directors, officers or shareholders, or any of their personal assets for such satisfaction.
21.  Time of Essence . Time is of the essence with respect to the performance of all obligations to be performed or observed by the Parties under this Lease.
22.  No Prior or Other Agreements; Broker Disclaimer . This Lease contains all agreements between the Parties with respect to any matter mentioned herein, and no other prior or contemporaneous agreement or understanding shall be effective. Lessor and Lessee each represents and warrants to the Brokers that it has made, and is relying solely upon, its own investigation as to the nature, quality, character and financial responsibility of the other Party to this Lease and as to the use, nature, quality and character of the Premises. Brokers have no responsibility with respect thereto or with respect to any default or breach hereof by either Party. The liability (including court costs and attorneys’ fees), of any Broker with respect to negotiation, execution, delivery or performance by either Lessor or Lessee under this Lease or any amendment or modification hereto shall be limited to an amount up to the fee received by such Broker pursuant to this Lease; provided, however, that the foregoing limitation on each Broker’s liability shall not be applicable to any gross negligence or willful misconduct of such Broker.
23.  Notices .
23.1 Notice Requirements . All notices required or permitted by this Lease or applicable law shall be in writing and may be delivered in person (by hand or by courier) or may be sent by regular , certified or registered mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile transmission, and shall be deemed sufficiently given if served in a manner specified in this Paragraph 23. The addresses noted adjacent to a Party’s signature on this Lease shall be that Party’s address for delivery or mailing of notices. Either Party may by written notice to the other specify a different address for notice, except that upon Lessee’s taking possession of the Premises, the Premises shall constitute Lessee’s address for notice. A copy of all notices to Lessor shall be concurrently transmitted to such party or parties at such addresses as Lessor may from time to time hereafter designate in writing.
23.2 Date of Notice . Any notice sent by registered or certified mail, return receipt requested, shall be deemed given on the date of delivery shown on the receipt card, or if no delivery date is shown, the postmark thereon. If sent by regular mail the notice shall be deemed given 48 hours after the same is addressed as required herein and mailed with postage prepaid. Notices delivered by United States Express Mail or overnight courier that guarantee next day delivery shall be deemed given 24 hours after delivery of the same to the Postal Service or courier. Notices transmitted by facsimile transmission or similar means shall be deemed delivered upon telephone confirmation of receipt (confirmation report from fax machine is sufficient), provided a copy is also delivered via delivery or mail. If notice is received on a Saturday, Sunday or legal holiday, it shall be deemed received on the next business day.
24.  Waivers . No waiver by Lessor of the Default or Breach of any term, covenant or condition hereof by Lessee, shall be deemed a waiver of any other term, covenant or condition hereof, or of any subsequent Default or Breach by Lessee of the same or of any other term, covenant or condition hereof. Lessor’s consent to, or approval of, any act shall not be deemed to render unnecessary the obtaining of Lessor’s consent to, or approval of, any subsequent or similar act by Lessee, or be construed as the basis of an estoppel to enforce the provision or provisions of this Lease requiring such consent. The acceptance of Rent by Lessor shall not be a waiver of any Default or Breach by Lessee. Any payment by Lessee may be accepted by Lessor on account of moneys or damages due Lessor, notwithstanding any qualifying statements or conditions made by Lessee in connection therewith, which such statements and/or conditions shall be of no force or effect whatsoever unless specifically agreed to in writing by Lessor at or before the time of deposit of such payment.
25.  Disclosures Regarding The Nature of a Real Estate Agency Relationship .
(a) When entering into a discussion with a real estate agent regarding a real estate transaction, a Lessor or Lessee should from the outset understand what type of agency relationship or representation it has with the agent or agents in the transaction. Lessor and Lessee acknowledge being advised by the Brokers in this transaction, as follows:
(i)  Lessor’s Agent . A Lessor’s agent under a listing agreement with the Lessor acts as the agent for the Lessor only. A Lessor’s agent or subagent has the following affirmative obligations: To the Lessor: A fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the Lessor. To the Lessee and the Lessor: (a) Diligent exercise of reasonable skills and care in performance of the agent’s duties. (b) A duty of honest and fair dealing and good faith. (c) A duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the Parties. An agent is not obligated to reveal to either Party any confidential information obtained from the other Party which does not involve the affirmative duties set forth above.
(ii)  Lessee’s Agent . An agent can agree to act as agent for the Lessee only. In these situations, the agent is not the Lessor’s agent, even if by agreement the agent may receive compensation for services rendered, either in full or in part from the Lessor. An agent acting only for a Lessee has the following affirmative obligations. To the Lessee: A fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the Lessee. To the Lessee and the Lessor: (a) Diligent exercise of reasonable skills and care in performance of the agent’s duties. (b) A duty of honest and fair dealing and good faith. (c) A duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the Parties. An agent is not obligated to reveal to either Party any confidential information obtained from the other Party which does not involve the affirmative duties set forth above.
(iii)  Agent Representing Both Lessor and Lessee . A real estate agent, either acting directly or through one or more associate licenses, can legally be the agent of both the Lessor and the Lessee in a transaction, but only with the knowledge and consent of both the Lessor and the Lessee. In a dual agency situation, the agent has the following affirmative obligations to both the Lessor and the Lessee: (a) A fiduciary duty of utmost care, integrity, honesty and loyalty in the dealings with either Lessor or the Lessee. (b) Other duties to the Lessor and the Lessee as stated above in subparagraphs (i) or (ii). In representing both Lessor and Lessee, the agent may not without the express permission of the respective Party, disclose to the other Party that the Lessor will accept rent in an amount less than that indicated in the listing or that the Lessee is willing to pay a higher rent than that offered. The above duties of the agent in a real estate transaction do not relieve a Lessor or Lessee from the responsibility to protect their own interests. Lessor and Lessee should carefully road all agreements to assure that they adequately express their understanding of the transaction. A real estate agent is a person qualified to advise about real estate. If legal or tax advice is desired, consult a competent professional.
(b) Brokers have no responsibility with respect to any default or breach hereof by either Party. The liability (including court costs and attorney’ fees), of any Broker with respect to any breach of duty, error or omission relating to this Lease shall not exceed the fee received by such Broker pursuant to this Lease; provided, however, that the foregoing limitation on each Broker’s liability shall not be applicable to any gross negligence or willful misconduct of such Broker.
(c) Buyer and Seller agree to identify to Brokers as “ Confidential ” any communication or information given Brokers that is considered by such Party to be confidential.
     
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26.  No Right To Holdover . Lessee has no right to retain possession of the Premises or any part thereof beyond the expiration or termination of this Lease. In the event that Lessee holds over, then the Base Rent shall be increased to 150% of the Base Rent applicable immediately preceding the expiration or termination. Nothing contained herein shall be construed as consent by Lessor to any holding over by Lessee.
27.  Cumulative Remedies . No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity.
28.  Covenants and Conditions; Construction of Agreement . All provisions of this Lease to be observed or performed by Lessee are both covenants and conditions. In construing this Lease, all headings and titles are for the convenience of the Parties only and shall not be considered a part of this Lease. Whenever required by the context, the singular shall include the plural and vice versa. This lease shall not be construed as If prepared by one of the Parties, but rather according to its fair meaning as a whole, as if both Parties had prepared it.
29.  Binding Effect; Choice of Law . This Lease shall be binding upon the parties, their personal representatives, successors and assigns and be governed by the laws of the State in which the Premises are located. Any litigation between the Parties hereto concerning this Lease shall be initiated in the county in which the Premises are located.
30.  Subordination; Attornment; Non-Disturbance .
30.1 Subordination . This Lease and any Option granted hereby shall be subject and subordinate to any ground lease, mortgage, deed of trust, or other hypothecation or security device (collectively, “ Security Device ”), now or hereafter placed upon the Premises, to any and all advances made on the security thereof, and to all renewals, modifications, and extensions thereof. Lessee agrees that the holders of any such Security Devices (in this Lease together referred to as “ Lender ”) shall have no liability or obligation to perform any of the obligations of Lessor under this Lease. Any Lender may elect to have this Lease and/or any Option granted hereby superior to the lien of its Security Device by giving written notice thereof to Lessee, whereupon this Lease and such Options shall be deemed prior to such Security Device, notwithstanding the relative dates of the documentation or recordation thereof.
30.2 Attornment . In the event that Lessor transfers title to the Premises, or the Premises are acquired by another upon the foreclosure or termination of a Security Device to which this Lease is subordinated (i) Lessee shall, subject to the non-disturbance provisions of Paragraph 30.3, attorn to such new owner, and upon request, enter into a new lease, containing all of the terms and provisions of this Lease, with such new owner for the remainder of the term hereof, or, at the election of such new owner, this Lease shall automatically become a new Lease between Lessee and such new owner, upon all of the terms and conditions hereof, for the remainder of the term hereof, and (ii) Lessor shall thereafter be relieved of any further obligations hereunder and such new owner shall assume all of Lessor’s obligations hereunder, except that such new owner shall not: (a) be liable for any act or omission of any prior lessor or with respect to events occurring prior to acquisition of ownership: (b) be subject to any offsets or defenses which Lessee might have against any prior lessor, (c) be bound by prepayment of more than one month’s rent, or (d) be liable for the return of any security deposit paid to any prior lessor.
30.3 Non-Disturbance . With respect to Security Devices entered into by Lessor after the execution of this Lease. Lessee’s subordination of this Lease shall be subject to receiving a commercially reasonable non-disturbance agreement (a “ Non-Disturbance Agreement ”) from the Lender which Non-Disturbance Agreement provides that Lessee’s possession of the Premises, and this Lease, including any options to extend the term hereof, will not be disturbed so long as Lessee is not in Breach hereof and attorns to the record owner of the Premises. Further, within 60 days after the execution of this Lease, Lessor shall use its commercially reasonable efforts to obtain a Non-Disturbance Agreement from the holder of any pre-existing Security Device which is secured by the Premises. In the event that Lessor is unable to provide the Non-Disturbance Agreement within said 60 days, then Lessee may, at Lessee’s option, directly contact Lender and attempt to negotiate for the execution and delivery of a Non-Disturbance Agreement.
30.4 Self-Executing . The agreements contained in this Paragraph 30 shall be effective without the execution of any further documents; provided, however, that, upon written request from Lessor or a Lender in connection with a sale, financing or refinancing of the Premises. Lessee and Lessor shall execute such further writings as may be reasonably required to separately document any subordination, attornment and/or Non-Disturbance Agreement provided for herein.
31.  Attorneys’ Fees . If any Party or Broker brings an action or proceeding involving the Premises whether founded in tort, contract or equity, or to declare rights hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorneys’ fees. Such fees may be awarded in the same suit or recovered in a separate suit, whether or not such action or proceeding is pursued to decision or judgment. The term, “Prevailing Party” shall include, without limitation, a Party or Broker who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other Party or Broker of its claim or defense. The attorneys’ fees award shall not be computed in accordance with any court fee schedule, but shall be such as to fully reimburse all attorneys’ fees reasonably incurred. In addition, Lessor shall be entitled to attorneys’ fees, costs and expenses incurred in the preparation and service of notices of Default and consultations in connection therewith, whether or not a legal action is subsequently commenced in connection with such Default or resulting Breach ($200 is a reasonable minimum per occurrence for such services and consultation).
32.  Lessor’s Access; Showing Premises; Repairs . Lessor and Lessor’s agents shall have the right to enter the Premises at any time, in the case of an emergency, and otherwise at reasonable times for the purpose of showing the same to prospective purchasers, lenders, or tenants, and making such alterations, repairs, improvements or additions to the Premises as Lessor may deem necessary. All such activities shall be without statement of rent or liability to Lessee, Lessor may at any time place on the Premises any ordinary “ For Sale ” signs and Lessor may during the last 6 months of the term hereof place on the Premises any ordinary “ For Lease ” signs and coordinate with Lessee any showings to prospective tenants. Lessee may at any time place on the Premises any ordinary “ For Sublease ” sign.
33.  Auctions . Lessee shall not conduct, nor permit to be conducted, any auction upon the Premises without Lessor’s prior written consent. Lessor shall not be obligated to exercise any standard of reasonableness in determining whether to permit an auction.
34.  Sign . Except for ordinary “ For Sublease ” signs which may be placed only on the Premises, Lessee shall not place any sign upon the Project without Lessor’s prior written consent. All signs must comply with all Applicable Requirements. (See also Owner’s Addendum Paragraph 34, attached).
35.  Termination; Merger. Unless specifically stated otherwise in writing by Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual termination or cancellation hereof, or a termination hereof by Lessor for Breach by Lessee, shall automatically terminate any sublease or Lessor estate in the Premises; provided, however, that Lessor may elect to continue any one or all existing subtenancies. Lessor’s failure within 10 days following any such event to elect to the contrary by written notice to the holder of any such lessor interest, shall constitute Lessor’s election to have such event constitute the termination of such interest.
     
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36.  Consents . Except as otherwise provided herein, wherever in this Lease the consent of a Party is required to an act by or for the other Party, such consent shall not be unreasonably withhold or delayed. Lessor’s actual reasonable costs and expenses (including but not limited to architects’, attorneys’, engineers’ and other consultants’ fees) incurred in the consideration of, or response to, a request by Lessee for any Lessor consent, including but not limited to consents to an assignment, a subletting or the presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt of an invoice and supporting documentation therefor. Lessor’s consent to any act, assignment or subletting shall not constitute an acknowledgment that no Default or Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver of any then existing Default or Breach, except as may be otherwise specifically stated in writing by Lessor at the time of such consent. The failure to specify herein any particular condition to Lessor’s consent shall not preclude the imposition by Lessor at the time of consent of such further or other conditions as are then reasonable with reference to the particular matter for which consent is being given. In the event that either Party disagrees with any determination made by the other hereunder and reasonably requests the reasons for such determination, the determining party shall furnish its reasons in writing and in reasonable detail within 10 business days following such request.
37.  Guarantor .
37.1 Execution . The Guarantors, if any, shall each execute a guaranty in the form most recently published by the AIR Commercial Real Estate Association, and each such Guarantor shall have the same obligations as Lessee under this Lease.
37.2 Default . It shall constitute a Default of the Lessee if any Guarantor fails or refuses, upon request to provide: (a) evidence of the execution of the guaranty, including the authority of the party signing on Guarantor’s behalf to obligate Guarantor, and in the case of a corporate Guarantor, a certified copy of a resolution of its board of directors authorizing the making of such guaranty, (b) current financial statements, (c) an Estoppel Certificate, or (d) written confirmation that the guaranty is still in effect.
38.  Quiet Possession . Subject to payment by Lessee of the Rent and performance of all of the covenants, conditions and provisions on Lessee’s part to be observed and performed under this Lease, Lessee shall have quiet possession and quiet enjoyment of the Premises during the term hereof.
39.  Options . If Lessee is granted an option, as defined below, then the following provisions shall apply.
39.1 Definition . “Option” shall mean: (a) the right to extend the term of or renew this Lease or to extend or renew any lease that Lessee has on other property of Lessor; (b) the right of first refusal or first offer to lease either the Premises or other property of Lessor; (c) the right to purchase or the right of first refusal to purchase the Premises or other property of Lessor.
39.2 Options Personal To Original Lessee . Any Option granted to Lessee in this Lease is personal to the original Lessee, and cannot be assigned or exercised by anyone other than said original Lessee and only while the original Lessee is in full possession of the Premises and, if requested by Lessor, with Lessee certifying that Lessee has no intention of thereafter assigning or subletting.
39.3 Multiple Options . In the event that Lessee has any multiple Options to extend or renew this Lease, a later Option cannot be exercised unless the prior Options have been validity exercised.
39.4 Effect of Default on Options .
(a) Lessee shall have no right to exercise an Option: (i) during the period commencing with the giving of any notice of Default and continuing until said Default is cured, (ii) during the period of time any Rent is unpaid (without regard to whether notice thereof is given Lessee), (iii) during the time Lessee is in Breach of this Lease, or (iv) in the event that Lessee has been given 3 or more notices of separate Default, whether or not the Defaults are cured, during the 12 month period immediately preceding the exercise of the Option.
(b) The period of time within which an Option may be exercised shall not be extended or enlarged by reason of Lessee’s inability to exercise an Option because of the provisions of Paragraph 39.4(a).
(c) An Option shall terminate and be of no further force or effect, notwithstanding Lessee’s due and timely exercise of the Option, if, after such exercise and prior to the commencement of the extended term, (i) Lessee fails to pay Rent for a period of 30 days after such Rent becomes due (without any necessity of Lessor to give notice thereof), (ii) Lessor gives to Lessee 3 or more notices of separate Default during any 12 month period, whether or not the Defaults are cured, or (iii) if Lessee commits a Breach of this Lease.
40.  Security Measures . Lessee hereby acknowledges that the Rent payable to Lessor hereunder does not include the cost of guard service or other security measures, and that Lessor shall have no obligation whatsoever to provide same. Lessee assumes all responsibility for the protection of the Premises, Lessee, its agents and invitees and their property from the acts of third parties.
41.  Reservations . Lessor reserves the right: (I) to grant, without the consent or joinder of Lessee, such casements, rights and dedications that Lessor deems necessary, (ii) to cause the recordation of parcel maps and restrictions, and (iii) to create and/or install new utility raceways, so long as such easements, rights, dedications, maps, restrictions, and utility raceways do not unreasonably interfere with the use of the Premises by Lessee, Lessee agrees to sign any documents reasonably requested by Lessor to effectuate such rights.
42.  Performance Under Protest . If at any time a dispute shall arise as to any amount or sum of money to be paid by one Party to the other under the provisions hereof, the Party against whom the obligation to pay the money is asserted shall have the right to make payment “under protest” and such payment shall not be regarded as a voluntary payment and there shall survive the right on the part of said Party to institute suit for recovery of such sum. If it shall be adjudged that there was no legal obligation on the part of said Party to pay such sum or any part thereof, said Party shall be entitled to recover such sum or so much thereof as it was not legally required to pay.
43.  Authority . If either Party hereto is a corporation, trust, limited liability company, partnership, or similar entity, each individual executing this Lease on behalf of such entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on its behalf. Each party shall, within 30 days after request, deliver to the other party satisfactory evidence of such authority.
44.  Conflict . Any conflict between the printed provisions of this Lease and the typewritten or handwritten provisions shall be controlled by the typewritten or handwritten provisions.
45.  Offer . Preparation of this Lease by either party or their agent and submission of same to the other Party shall not be deemed an offer to lease to the other Party. This Lease is not intended to be binding until executed and delivered by all Parties hereto.
46.  Amendments . This Lease may be modified only in writing, signed by the Parties in interest at the time of the modification. As long as they do not materially change Lessee’s obligations hereunder. Lessee agrees to make such reasonable non-monetary modifications to this Lease as may be reasonably required by a Lender in connection with the obtaining of normal financing or refinancing of the Premises.
47.  Multiple Parties . If more than one person or entity is named herein as either Lessor or Lessee, such multiple Parties shall have joint and several responsibility to comply with the terms of this Lease.
48.  Waiver of Jury Trial . The Parties hereby waive their respective rights to trial by jury in any action or proceeding involving the Property or arising out of this Agreement.
49.  Mediation and Arbitration of Disputes . An Addendum requiring the Mediation and/or the Arbitration of all disputes between the Parties and/or Brokers arising out of this Lease o is þ is not attached to this Lease.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.
     
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ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AIR COMMERCIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO:
1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE PREMISES SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT AND THE SUITABILITY OF THE PREMISES FOR LESSEE’S INTENDED USE.
WARNING: IF THE PREMISES ARE LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE STATE IN WHICH THE PREMISES ARE LOCATED.
The parties hereto have executed this Lease at the place and on the dates specified above their respective signatures.
         
Execute at: Los Angeles, CA
      Executed at: 2952 S. Daimler St., Santa Ava, CA
On: 1/25/07
      On: 01/16/2007
 
       
By LESSOR:
      By LESSEE:
SCIF Portfolio II, LLC, a California limited company
      CHROMADEX, INC., a California corporation
                                 
By:   SCIF Partners II, LLC
a Delaware limited liability company,
      By:   /s/ Frank Jaksch    
 
                               
    Managing Member      
Name Printed: Frank Jaksch
   
                       
Title: President and CEO
   
 
                               
    By:   Southern California Industrial Fund, LLC,       By:        
 
                               
        a California limited liability company,      
Name Printed:
   
 
                         
 
   
        Managing Member      
Title:
   
 
                         
 
   
                       
Address: 10005 Muirlands Blvd., Suite K
   
                       
Irvine, California 92618
   
        By:   The Magellan Group, Inc.                
            a Delaware corporation       Telephone: (949) 419-0288    
            Managing Member       Facsimile: (949) 419-0294    
                        Federal ID No.      
 
                         
 
   
 
          By:   /s/ Martin Slusser                
 
                               
 
              Martin Slusser,                
 
              President                
 
                               
 
          By:   /s/ Kevin Staley                
 
                               
 
              Kevin Staley,                
 
              Chairman of the Board                
         
By:
 
 
   
 
   
Name Printed: Martin Slusser
   
Title:  Managing Member
   
   
     
 
       
By:
   
 
   
Name Printed: Kevin Staley
   
Title:  Managing Member
   
 
   
     
Address: 1800 Avenue of the Stars, Suite 105
   
Los Angeles, California 90067
   
 
       
Telephone: (310) 277-8337    
Facsimile: (310) 277-8330    
Federal ID No. 95-4676908
   
     
     
©1999 — AIR COMMERCIAL REAL ESTATE ASSOCIATION   FORM MTN-2-2/04E

 

PAGE 16 OF 17


 

                             
BROKER:       BROKER:
 
                           
Voit Commercial Brokerage       Lee & Associates Newport Beach, Inc.
Att: Sam Olmstead       Att: Bob Rieden
Title: Vice President       Title: Senior Vice President
Address: 18500 Von Karman Ave., Suite 150       Address: 3991 MacArthur Blvd., Suite 100
Irvine, California 92612       Newport Beach, CA 92660
Telephone: (949) 851-5100       Telephone: (949) 724-4710
Facsimile: (949) 261-9092       Facsimile: (949) 833-0608
Federeal ID No.
          Federeal Id:                
 
 
 
         
 
           
These forms are often modified to meet changing requirements of law and needs of the industry. Always write or call to make sure you are utilizing the most current form: AIR Commercial Real Estate Association, 700 South Flower Street, Suite 600, Los Angeles, CA 90017. (213) 687-8777.
©Copyright 1999 By AIR Commercial Real Estate Association.
All rights reserved.
No part of these works may be reproduced in any form without permission in writing.
     
©1999 — AIR COMMERCIAL REAL ESTATE ASSOCIATION   FORM MTN-2-2/04E

 

PAGE 17 OF 17


 

OWNER’S ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL
MULTI-TENANT LEASE – NET, DATED DECEMBER 16, 2004, FOR 10005 MUIRLANDS
BLVD., SUITE. G, 1ST FLOOR AND SUITE K, IRVINE, CALIFORNIA, 92618
THIS ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE-NET (“Addendum”) is made and entered into by and between SCIF PORTFOLIO-II, LLC, a California Limited Liability Company and CHROMADEX, INC., a California corporation (“Lessee”), dated December 19, 2006, to which this Addendum is attached and incorporated. The terms, covenants and conditions set forth herein are intended to and shall have the same force and effect as if set forth at length in the body of the Lease. To the extent that the provisions of this Addendum are inconsistent with any provisions of the Lease, the provisions of this Addendum shall supersede and control.
2.2 Condition of Premises. Lessee hereby acknowledges and agrees that, prior to the execution of the Lease, Lessee has performed all inspections of the Premises that Lessee deems necessary or appropriate, and, except as otherwise set forth in Paragraph 2.2 of the Lease, and with the improvements Lessor shall make to the Premises as set forth in Paragraph 50.4 below (“Lessor’s Tenant Improvements”) and any additional obligations of Lessor per Paragraph 2.3 below, Lessee hereby accepts the Premises “as-is” in its current condition. Lessee further acknowledges that neither Lessor nor any agent of Lessor has made any representation or warranty with respect to the Premises’ or the Project’s suitability for the conduct of Lessee’s business therein and that the responsibility for determining the suitability for the conduct of Lessee’s business is the sole and entire responsibility of Lessee. The taking of possession of the Premises by Lessee shall conclusively establish that the Premises were, at such time, in satisfactory condition.
2.3 Condition of Premises. At delivery, all Lessor’s modifications to the facility will be in full compliance with all existing requirements of the Americans with Disabilities Act (“ADA”). During the initial five-year Term of the Lease only, Lessee shall not be responsible for its proportional share of any subsequent earthquake retrofit or ADA requirements that may be required by the City of Irvine or any other government agency unless such requirements are a direct result of Lessee’s expansion of improvements, specific use or change of use.
2.6 Parking. Notwithstanding anything to the contrary set forth in Paragraphs 1.2(b) and 2.6 of the Lease, and subject to any reasonable rules and regulations promulgated by Lessor, as the same may be established from time to time, of the twenty-two (22) unreserved parking spaces allocated for Lessee’s parking in Paragraph 1.2(b). Lessee also hereby acknowledges and accepts that no officer or employee of Lessee, no visitor, customer, contractor, agent, consultant or other invitee of Lessee shall be permitted to park vehicles of any size whatsoever nor for anytime whatsoever, however briefly, in the parking areas reserved exclusively to the use of other tenants in the Project, and that the it shall be entirely the responsibility of Lessee to inform itself and all its officers, employees, customers, contractors, agents, consultants or other invitees of this restriction and to assure that such restriction is strictly enforced.
CHROMADEX. INC. — OWNER’S ADDENDUM

 

1


 

Lessor otherwise reserves the right to restrict, reserve and/or assign parking throughout the parking areas of the Project for the parking needs of other tenants in the Project. Lessee agrees to fully cooperate with Lessor and other lessees of the Project in order that the Project’s parking area shall be operated in the manner reasonably established by Lessor. All responsibility for damage and theft to vehicles is assumed by Lessee and Lessee’s employees and visitors. Lessee shall repair or cause to be repaired, at Lessee’s sole cost and expense, any and all damage to the Building and the Project caused by Lessee’s, or Lessee’s employees’ or visitors’ use of such parking areas therein. Lessor shall not be liable to Lessee, nor, except as may be provided in Paragraph 14 of the Lease shall this Lease be affected in any way, by reason of any moratorium, initiative, referendum, statute, regulation or other governmental action which could in any manner prevent or limit the parking rights of Lessee hereunder. Any governmental charges or surcharges or other monetary obligations imposed relative to parking rights with respect to the Project shall be considered assessments and Common Area Operating Expenses, and Lessee shall pay Lessee’s pro-rata share thereof pursuant to the provisions of Paragraph 4.2 of the Lease.
4.2 Common Area Operating Expenses. Notwithstanding anything to the contrary set forth in the Lease:
4.2(a) “Common Area Operating Expenses” shall be defined to include all expenses identified in Paragraph 4.2(a) of the Lease and all other expenses reasonably incurred by Lessor in operating, maintaining and repairing the Building and the Project, as determined by standard accounting practices, including, but not limited to: rent taxes, gross receipts taxes (whether assessed against Lessor or assessed against Lessee and paid by Lessor, or both); water and sewer charges (if not separately metered to Lessee); the cost of utilities, janitorial services and labor (if not separately metered to Lessee); parking charges, surcharges or any other costs levied, assessed or imposed by, or at the direction of, or resulting from statutes or regulations promulgated by any federal, state or local governmental authority in connection with the use or occupancy of the Building or the Project; the cost (amortized over the reasonably anticipated useful life of the asset, together with a commercially reasonable rate of interest) of: (i) any capital improvements made to the Building or the Project by Lessor after the Commencement Date of the Term as required pursuant to any law or regulation that was not applicable at the time they were constructed, or (ii) replacement of any equipment needed to operate the Building or the Project at a consistent level or quality, but only in the event that such equipment (A) is malfunctioning or non-functioning and the repair of such equipment would not be economically feasible when compared to the cost of replacement, or (B) is otherwise due for replacement in the ordinary course of its reasonably anticipated useful life; costs incurred in the management of the Building and the Project, including a management fee, which Lessor will make all reasonable efforts to assess at a rate that is customary for similar property and competitive with local practice, and which Lessor on similar industrial properties customarily assesses as a sum equal to fifteen percent (15%) of Lessor’s costs to operate the Project excluding any marketing fees or any expenses paid for directly by Lessee, but including all reasonable Common
CHROMADEX, INC. — OWNER’S ADDENDUM

 

2


 

Area Maintenance expenses, all taxes and all applicable insurance costs for the Property, reasonable supplies, wages and salaries of employees, but only to the extent used in the management, operation and maintenance of the Building and the Project, and payroll taxes and similar governmental charges with respect thereto; the cost of waste disposal and sweeping of the property; the costs of installing, maintaining and repairing all fire alarm and fire prevention equipment, including but not limited to charges for water to the fire sprinkler system and all costs of monitoring the fire alarm system, excepting such costs as might be paid directly by Lessee for fire monitoring; the costs of security for the Project; the costs of heating and ventilating any of the Common Areas, if applicable; the costs of repair and maintenance of the Building and the Project, the costs of maintaining signs; reasonable audit or verification fees of operating expenses and of the utilities payable by Lessee if not separately metered to Lessee; and the costs of resurfacing, painting, lighting, cleaning, refuse removal of the Building and the Project. Lessor’s current estimate for Operating Expenses is approximately Nineteen cents ($.19) per square foot per month. Lessor emphasizes that the above costs are estimates only and that the actual costs to Lessee cannot be calculated precisely until the Project is fully leased and operational.
4.2(d). Lessor’s failure to notify Lessee of Lessee’s estimate of the Common Area Operating Expenses prior to the Commencement Date of the Term or prior to the commencement of any calendar year of the Term, shall not preclude Lessor from collecting, following such notification, Lessee’s Pro-Rata Share of estimated Common Area Operating Expenses, which expenses (or balance) shall be due concurrently with Lessee’s next monthly installment of rent; provided, however, that if Lessor fails to notify Lessee of Lessee’s estimated Common Area Operating Expenses for the upcoming calendar year, Lessee shall continue to pay such Common Area Operating Expenses in effect for the prior calendar year until such time as Lessee is notified in writing of Lessor’s estimate for the then-current calendar year. Common Area Operating Expenses for a partial month shall be prorated based on a three hundred sixty (360) day calendar year. With respect to the reconciliation of the Lessee’s Pro-Rata share of estimated Common Area Operating Expenses against the actual expenses incurred by Lessor, failure by Lessor to provide Lessee within a reasonable time period a detailed statement showing Lessee’s share of actual operating expenses shall in no way diminish Lessee’s obligation to pay any sums due nor Lessor’s right to collect such sums.
6.1 Use. Should any standard or regulation now or hereafter be imposed on Lessor or Lessee by a state, federal or local governmental body charged with the establishment, regulation and enforcement of occupational, health or safety standards for employers, employees, lessors or lessees, then, except as otherwise specifically set forth in the Lease (notably in Paragraph 2.3 of the Lease), Lessee agrees to comply promptly with such standards or regulations, and to bear the cost and expense of such compliance if the same is required as a direct result of Lessee’s specific use of the Premises.
CHROMADEX, INC. — OWNER’S ADDENDUM

 

3


 

7.1(a) Lessee’s Repair and Maintenance Obligations. All repairs and maintenance of the Premises by Lessee as required under the Lease shall be performed in a manner consistent with the standard local practices of contractors in the Los Angeles County area, by contractors and other personnel reasonably approved by Lessor, shall be performed in accordance with a repair and maintenance plan reasonably approved by Lessor, and shall comply with guidelines and shall meet such standards of quality as may be reasonably established by Lessor from time to time during the Term, including, without limitation, providing Lessor with copies of all permits obtained by Lessee and “as-built” drawings of such work performed by Lessee. Lessee shall be responsible for the regular maintenance and repair of the heating, ventilation and air conditioning system during the entire Term of the Lease, including any extension of the Term by options to extend exercised by Lessee.
7.2 Lessors’s Obligations . Lessor shall be responsible for the maintenance and repair of the roof membrane, which costs shall be reimbursed by Lessee through the reimbursement provisions of Common Area Operating Expenses, as set forth in Paragraph 4.2 of the Lease. Lessor, at Lessor’s sole cost and expense, shall be solely responsible for the roof structure and all structural elements of the Building throughout the Term of the Lease. Lessor shall also be responsible for painting the exterior of the building on a reasonably regular basis, subject to the reimbursement by Lessee through the reimbursement provisions of Common Area Operating Expenses, as set forth in Paragraph 4.2 of the Lease.
8.2(a) Liability Insurance: Carried by Lessee. The following shall be added to the end of Paragraph 8.2(a) of the Lease:
“Lessee agrees to maintain in full force and effect at all times during the term of this Lease, as it may be extended, at its own expense, for the protection of Lessee and Lessor, as their interests may appear, policies of insurance issued by a reasonable carrier or carriers acceptable to Lessor which afford the following coverages: (i) Worker’s compensation: statutory limits; and (ii) Employer’s liability: as required by law.
“In the event that Lessee fails to obtain and maintain any insurance required under the Lease for any reason whatsoever, such failure shall constitute a material default by Lessee under this Lease and Lessee shall be conclusively deemed to have self-insured such insurance obligations with the full waiver of subrogation set forth in the Lease.”
12.3 Assignment and Subletting.
12.3(f) Bonus Rent. Notwithstanding anything to the contrary contained in Paragraph 12 of the Lease, fifty percent (50%) of any sums or other economic consideration received by Lessee as a result of any assignment or subletting entered into pursuant to Paragraph 12 of the Lease, however denominated under the assignment or sublease, which exceed, in the aggregate: (a) the total sums which Lessee is obligated to pay Lessor under this Lease (prorated to reflect obligations allocable to any portion of the Premises subleased), plus (b)(i) any real estate brokerage commissions or fees payable by Lessee in connection with such assignment or subletting(ii) costs of tenant improvements required to be constructed by Lessee for any such assignee or subtenant, and (iii) other reasonable costs incurred by Lessee in connection with any such assignment or subletting (including without limitation attorneys’ fees), shall be paid to Lessor as additional rent under this Lease without affecting or reducing any other obligations of Lessee hereunder. Lessee understands, acknowledges and agrees that Lessor’s right to recapture any consideration paid in connection with an approved assignment or subletting is a material inducement for Lessor’s agreement to lease the Premises to Lessee upon the terms and conditions set forth herein.
CHROMADEX, INC. — OWNER’S ADDENDUM

 

4


 

12.3 (h) Affiliates. Notwithstanding anything to the contrary in this Section 12, neither (A) an assignment of the Premises to a transferee which is the resulting entity of a merger or consolidation of Lessee with another entity, nor (B) an assignment or subletting of all or a portion of the Premises to an entity which is controlled by, controls, or is under common control with, Lessee (any entity in (A) or (B) being deemed, for purposes of this Lease, an “Affiliate” of Lessee) shall be deemed a Transfer, provided that Lessee notifies Lessor in writing at least thirty (30) days in advance of any such assignment or sublease, and promptly supplies Lessor with any documents or information reasonably requested by Lessor regarding such Transfer or transferee, and that such assignment or sublease is not a subterfuge by Lessee to avoid its obligations under this Lease. “Control,” as used herein, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person or entity, whether by the ownership of voting securities, by contract or otherwise.
16(a). Estoppel Certificates . Notwithstanding anything to the contrary in Section 16(a) of the Lease, Lessor and Lessee agree that the Estoppel to be delivered by Lessee to Lessor shall be substantially in the form attached hereto as Exhibit D.
16(c). Financial Statements . In order to induce Lessor to enter into the Lease, Lessee agrees that it shall promptly furnish Lessor, from time to time, upon Lessor’s written request, with financial statements reflecting Lessee’s current financial condition. Lessor shall be entitled to make the information contained in the financial statements available to any potential partner or lenders of Lessor or purchasers of the Premises or any portion thereof, and, in making such information available to any potential partner or lender, Lessor will make all reasonable efforts to insure that such information will be treated as confidential. Lessee represents and warrants that all financial statements, records and information furnished by Lessee to Lessor in connection with the Lease are true, correct and complete in all respects.
17.  Lessor’s Liability . It is expressly understood and agreed that notwithstanding anything in the Lease to the contrary, and notwithstanding any applicable law to the contrary, the liability of Lessor and any of the officers, directors, shareholders, employees, servants or agents of Lessor (“Lessor’s Parties”) hereunder and any recourse by Lessee against Lessor or the Lessor Parties shall be limited solely and exclusively to an amount which is equal to the interest of Lessor in the Building, and neither Lessor, nor any of the Lessor Parties shall have any personal liability therefor, and Lessee hereby expressly waives and releases such personal liability on behalf of itself and all persons claiming by, through or under Lessee.
CHROMADEX, INC. — OWNER’S ADDENDUM

 

5


 

23.  Notices . All notices, demands or other communications given or permitted hereunder shall be in writing (except as otherwise expressly stated herein) and shall be sent by personal delivery, by recognized overnight courier or by United States mail, registered or certified, return receipt requested, postage prepaid, and shall be deemed delivered on the date of personal delivery, one (I) business day following the date of delivery to a recognized overnight courier, and three (3) business days following deposit of United States mail, registered or certified, return receipt requested, postage prepaid, as the case may be. Such notices, demands or other communications shall be addressed as follows:
     
To Lessor:
  SCIF PORTFOLIO II, LLC, c/o Magellan Realty Advisors, 1800 Avenue of the Stars, Suite 105, Los Angeles, California 90067
 
   
To Lessee:
  CHROMADEX, INC.
or to such other address or to such other substitute person or entity as any party shall designate to the other for such purpose in the manner hereinabove set forth.
Lessee agrees to send by certified or registered mail to any mortgagee or deed of trust beneficiary of the Premises whose address has been previously furnished to Lessee, a copy of any notice of default served by Lessee on Lessor. If Lessor fails to cure such default within the time provided for in the Lease, such mortgagee or beneficiary shall have an additional thirty (30) days to cure such default; provided, however, that if such default cannot reasonably be cured within that thirty (30) day period, then such mortgagee or beneficiary shall have such additional time to cure the default as is reasonably necessary under the circumstances, provided such mortgagee or beneficiary commences the cure of such default within said thirty (30) day period and diligently pursues the same to completion.
25.  Recording : Neither Lessor nor Lessee shall record, nor cause to be recorded, the Lease or a memorandum thereof.
26.  Holding Over . If Lessee fails to surrender the Premises upon the expiration or earlier termination of the Term without the express written consent of Lessor, Lessee shall become a tenant-at-sufferance at a rental rate equal to one hundred fifty percent (150%) of the monthly Base Rent payable by Lessee for the month immediately preceding such expiration or earlier termination, and Lessee shall remain responsible for the payment of Lessee’s Share of Common Area Operating Expenses and all other monetary obligations due and payable by Lessee under the Lease. Acceptance by Lessor of rent after such expiration or earlier termination of the Term shall not result in any renewal of the Term. The foregoing provisions are in addition to and do not affect Lessor’s right of re-entry or any other rights or remedies of Lessor hereunder or as otherwise provided at law or in equity, or both. If Lessee fails to surrender the Premises upon the expiration or earlier termination of the Term, Lessee shall indemnify and hold Lessor harmless from and against any and all losses, costs, damages and liability (including actual attorneys’ fees and costs, and court costs), direct or indirect, which Lessor may suffer as a result of Lessee’s failure to surrender the Premises.
CHROMADEX, INC. — OWNER’S ADDENDUM

 

6


 

34.  Signage . Lessor retains absolute control over the exterior appearance of the Building and Project and the exterior appearance of the Premises. Except as otherwise set forth herein, Tenant will not install, or permit to be installed, any drapes, furnishings, signs, lettering, advertising or any items that will in any way alter the exterior appearance of the Building or the exterior appearance of the Premises without prior written consent of Lessor. Following execution of the Lease, Lessee shall provide Lessor with all plans for its signage program, Lessor’s approval of which shall not be unreasonably withheld. Lessee shall be allowed to install signage upon the Premises per the signage regulations of the City of Irvine and of any other applicable regulatory agency as well as Lessor’s overall signage program for the Project. Except as provided for herein, Lessee shall not install any signage upon any other portion of the Building, Common Areas or Project. The graphics, materials, color, design, lettering, size, quality, specifications and exact location of every aspect of Lessee’s signage shall be subject to the prior written approval of Lessor, which approval shall not be unreasonably withheld, and shall also comply with and be subject to all other applicable laws, statutes, ordinances, rules, regulations, permits, approvals, and all covenants, conditions or restrictions of record. All expenses without limitation for Lessee’s entire signage program, all design, construction, installation and maintenance costs and any direct or indirect expenses of Lessor’s to review, support or approve Lessee’s signage, shall be the sole and entire responsibility of Lessee. At the expiration or earlier termination of the Lease, Lessee shall, at Lessee’s sole cost and expense, remove all signs installed by Lessee from the Premises and any other locations on the Property, including any Common Areas, where Lessee installed or caused signs of any nature to be installed, and restore all such areas to the condition existing prior to the installation of all such signs. If Lessee fails to remove the signs and restore the Premises and other areas of the Property as provided in this Addendum Paragraph 34 within thirty (30) days of the expiration or earlier termination of the Lease, then Lessor may perform such work and all actual costs and expenses incurred by Lessor in connection therewith shall constitute additional rent under the Lease and shall be paid by Lessee to Lessor within ten (10) days of Lessee’s receipt of an invoice therefore. The signage rights granted to Lessee under this Paragraph 34 are personal to the Original Lessee, and may not be assigned or transferred to any other person or entity, including, without limitation, any assignee or sublessee of this Lease.
41.  Security . Lessee shall, at Lessee’s sole cost and expense, take such security measures as Lessee deems reasonably appropriate or necessary in order to secure the Premises; provided, however, in the event any such security measures require any alterations of or additions to the Premises, any such alterations and/or additions shall be subject to the terms of Paragraphs 7.3 and 7.4 of the Lease.
CHROMADEX, INC. — OWNER’S ADDENDUM

 

7


 

50.  Miscellaneous Conditions :
50.1 Rent Adjustments : The Base Monthly Rent shall be the following:
             
Months       Rate/Rentable SF/Mo.  
1-12  
 
  $ 1.10  
13-24  
 
  $ 1.15  
25-36  
 
  $ 1.20  
37-48  
 
  $ 1.25  
49-60  
 
  $ 1.30  
50.4 Lessor’s Tenant Improvements: Lessor shall provide the improvements as provided in Exhibit C.
50.5 Lessee’s Tenant Improvements and Early Possession : Upon full execution of the Lease and payment to Lessor by Lessee of all monies due upon Lease execution, and upon presentation to Lessor of a certificate of insurance for all required Lessee insurance, Lessee may take possession of the Premises for the purposes of installing Lessee’s own improvements, subject to any approvals required by the City of Irvine. Lessee shall be solely and entirely responsible for obtaining all appropriate permits and licenses required for such improvements by any governmental or regulatory agency in whose jurisdiction such work falls. Lessee shall assure that all improvements by Lessee or any of its contractors, consultants, agents or invitees be done in such a manner as to conform to all building codes in effect at the time improvements are begun and also with all applicable laws, covenants and restrictions of record, regulations and ordinances in effect on the start date, and that any third party hired by Lessee to provide improvements is fully covered by all appropriate liability and worker’s compensation insurance. In addition, all of Lessee’s improvements shall be completed in a workmanlike manner, free and clear of all liens, and shall remain free and clear of all liens.
Lessee shall fully indemnify Lessor against liability for any costs or expenses or consequences of any other nature resulting from the installation, maintenance, operation or removal of any of Lessee’s improvements.
In addition to the terms and conditions for the removal, restoration and condition of the Premises upon surrender set forth in Paragraph 7.4 of the Lease, at the expiration of the Lease Term, or any extension of that Term, or at the earlier termination of the Lease, Lessee shall, upon the election of Lessor and at Lessee’s sole and entire cost and expense, remove all the tenant improvements installed by Lessee prior to or subsequent to the Commencement Date of the Lease up to the date of expiration or earlier termination of the Lease.
CHROMADEX, INC. — OWNER’S ADDENDUM

 

8


 

Lessee shall also take all reasonable precautions to assure that the action of any of its officers, employees, contractors, agents, consultants or other invitees on the Premises does not interfere with Lessor’s work to complete Lessor’s Tenant Improvements. Any delay to Lessor’s substantial completion of such improvements directly resulting from any such act or omission by Lessee’s officers, employees, contractors, agents, consultants or other invitees attributable and chargeable to Lessee in determining the Commencement date of the Lease and the payment of rent. In the event of such delay, the Commencement Date of the Lease shall be determined as the number of days’ delay prior to the date of substantial completion of the improvement and delivery of the Premises to Lessee.
50.7 Hours of Operation : Subject to any overriding regulation of the City of Irvine in effect now or in the future, there shall be no restrictions on Lessee’s hours of operation.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Addendum concurrently with the Lease of even date herewith.
     
“LESSOR”:
  SCIF PORTFOLIO II, LLC,
a California limited liability company
                 
By:   SCIF Partners II, LLC,
a Delaware limited liability company,
Managing Member
   
 
               
    By:   Southern California Industrial Fund, LLC,
a California limited liability company,
Managing Member
   
 
               
 
      By:   The Magellan Group, Inc.
a Delaware corporation,
Managing Member
   
 
               
 
               
By:
  /s/ Martin Slusser    
         
    Martin Slusser,    
    Chairman of the Board    
 
               
By:
  /s/ Kevin Staley    
         
    Kevin Staley,    
    President    
     
LESSEE: CHROMADEX, INC., a California corporation
         
  By:   /s/ Frank Jaksch    
    Frank Jaksch   
CHROMADEX, INC. — OWNER’S ADDENDUM

 

9


 

EXHIBIT A — PREMISIES PLAN
(FLOOR PLAN)

 

 


 

Site Plan — Exhibit B
10005 & 10015 Muirlands Parkway o Irvine Spectrum, CA
(SITE PLAN)

 

 


 

EXHIBIT “C” — PAGE 1
(FLOOR PLAN)

 

 


 

EXHIBIT “C” — PAGE 2
(FLOOR PLAN)

 

 


 

EXHIBIT “C” — PAGE 3
Kitchen & Bathroom
(FLOOR PLAN)

 

 


 

EXHIBIT “C” PAGE 4
(IMAGE)

 

 


 

EXHIBIT “C”, PAGE 5
(USA DEVELOPMENT LOGO)
12/07/2006
The Magellan group
1800 Ave, of the stars #105
Los Angeles, Ca, 90087
(310) 277-8337
Attn. Scott Matkins.
Re: Property located at 10006 Muirlands Ave. Irvine, Ca, 92218 SCIF portfolio II Ste. G
* Concrete.
Remove all necessary lawn to pour new walkway for new entrance and relocate all irrigation heads.
* Floooring.
Provide all new floor covering as indicated on drawings with allowance of the following items carpet $24,00 per square yard including removal installation , cove base, padding wood flooring not to exceed $4.00 per square foot.
* Painting.
Includes all interior painting of all walls with several shades of colors as requested by the new tenants.
* Electrical.
Relocate all necessary electrical fixtures and switches, enclose all electrical panels replace all necessary ceiling tiles to match and replace all broken lenses and bulbs add 2 sets of 220 volts outlets at back, rough out handy boxes for future cat6 outlets
1218 E. 17th St., Santa Ana, California 92701 (310) 213-9823 FAX (714) 245-1575

 

 


 

EXHIBIT “C” PAGE 6
(USA DEVELOPMENT LOGO)
12/07/2006
The Magellan group
1800 Ave, of the stars #105
Los Angeles, Ca, 90067
Attn. Scott Matkins.
Re: Proposal for the repairs and improvements to the property located at 10005 Muirlands Ave. Irvine, Ca, 92218
       SCIF Portfolio II LLC:
*  Demolition:
Remove all existing carpeting, remove all floor linoleum in restrooms,removal of all FRP in 2 restrooms, remove light fixtures and exhaust fans, remove all walls as indicated on drawings remove all electrical not needed,remove all pedestrian interior doors, remove all counters and kitchen appliances.
*  Framing and drywall.
Provide all new framing as indicated on drawings, provide a new store front doors and sidelight panels, seal off several door openings as indicated on drawings, provide new window openings- and doors.
*  Glazing.
Provide all new windows as indicated on drawings and a new store front.
*  Doors.
Provide all new interior doors with allowance of $300.00 par door including hardware and installation
1218 E. 17th St., Santa Ana, California 92701 (310) 213-9823 FAX (714) 245-1575

 

 


 

EXHIBIT “C”, PAGE 7
(USA DEVELOPMENT LOGO)
12/07/2006
The Magellan group
1800 Ave, of the stars #105
Los Angeles, Ca, 90067
(310) 277-8337
Attn. Scott Matkins.
Re: Property location at 1005 Muilands Ave. Irvine, Ca, 92218 SCIF portfolio II ste. G
*  Cabinets, and appliances.
Provide and install a new cabinet made by IKIA or equal quality selected by the tenant provide and install a new sink and faucet and a new counter top (butoher blook)
*  HVAC.
Relocate all necessary ducts and registers to provide air supply to all offices and path of travel
Items not included in estimate are.
permits, partitions, and data, phone, cable, security systems.
Total, cost for Improvements is $79,400.00
Contractor.                                          
                 Rudy P. Ellzarraraz
1218 E. 17th St. Santa Ana, California 92701 (310) 213-9823 FAX (714) 245-1575

 

 


 

EXHIBIT D
ESTOPPEL CERTIFICATE
                                          , 19                     
To:
                                         
                                         
                                         
                                         
Re: Lease Dated:                                            , a                      (“Lessor”)
 
 
  Lessee:                                                                                                                                 
 
 
                                                                        (“Lessee”)
 
 
  Premises:   Approximately_square feet located at                                                               
 
 
                                                                   (“Premises”)
Ladies and Gentlemen:
The undersigned hereby certifies to                      (“Buyer”) as of the date hereof as follows:
1. The undersigned is the “Lessee” under the above-referenced lease (“Lease”) covering the above-referenced Premises (“Premises”). A true, correct and complete copy of the Lease (including all addenda, riders, amendments, modifications and supplements thereto) is attached hereto as Exhibit “A”.
2. The Lease constitutes the entire agreement between Lessor and Lessee with respect to the Premises and the Lease has not been modified, changed, altered or amended in any respect except as follows:
 
.
3. The term of the Lease commenced on                                           , 19           , and, including any presently exercised option or renewal term, will expire on                                           , 19            . Lessee has accepted full and complete possession of the Premises and is the actual occupant in possession and has not sublet, assigned or hypothecated or otherwise transferred all or any portion of Lessee’s leasehold interest. All improvements to be constructed on the Premises by Lessor have been completed to the satisfaction of Lessee and accepted by Lessee and any tenant construction allowances have been paid in full. All duties of an inducement nature required of the Lessor in the Lease have been fulfilled. All of the Lessor’s obligations which have accrued prior to the date hereof have been performed.

 

 


 

4. There exists no breach or default, nor state of facts nor condition which, with notice, the passage of time, or both, would result in a breach or default on the part of either Lessee or Lessor. To the best of Lessee’s knowledge, no claim, controversy, dispute, quarrel or disagreement exists between Lessee and Lessor.
5. Lessee is currently obligated to pay base annual rental in monthly installments of $                                           per month and monthly installments of annual rental have been paid through                                           , 19          . In addition, the Lease requires rent adjustments based on [insert dates of rent escalations, if any]. No other rent has been paid in advance and Lessee has no claim or defense against Lessor under the Lease and is asserting no offsets or credits against either the rent or Lessor. In addition, Lessee is currently obligated to pay a proportionate share of common area maintenance charges equal to $                                           per month, and Lessee’s proportionate share is                      %. Lessee’s base year is                      . Lessee has no claim against Lessor for any security, rental, cleaning or other deposits, except for a security deposit in the amount of $                                           which was paid pursuant to the Lease.
6. The Lease is in full force and effect in accordance with its terms and is a binding obligation of the undersigned.
7. The undersigned has received no notice of prior sale, transfer, assignment, hypothecation or pledge of the Lease or of the rents secured therein, except to Buyer.
8. Lessee has no option or preferential right to purchase all or any part of the Premises (or the real property of which the Premises are a part) nor any right or interest with respect to the Premises or the real property of which the Premises are a part other than as Lessee under the Lease. Lessee has no right to renew or extend the terms of the Lease or expand the Premises except                                                                .
9. Lessee has made no agreement with Lessor or any agent, representative or employee of Lessor concerning free rent, partial rent, rebate of rental payments or any other type of rental or other economic inducement or concession except as expressly set forth in the Lease.
10. There has not been filed by or against Lessee a petition in bankruptcy, voluntary or otherwise, any assignment for the benefit of creditors, any petition seeking reorganization or arrangement under the bankruptcy laws of the United States, or any state thereof, or any other action brought under said bankruptcy laws with respect to Lessee.
11. All insurance required of Lessee by the Lease has been provided by Lessee and all premiums paid.

 

 


 

12. The undersigned (i) is not presently engaged in nor does it presently permit, (ii) has not at any time in the past engaged in nor permitted, and (iii) has no knowledge that any third person or entity engaged in or permitted any operations or activities upon, or any use or occupancy of the Property, or any portion thereof, for the purpose of or in any way involving the handling, manufacturing, treatment, storage, use, transportation, spillage, leakage, dumping, discharge or disposal (whether legal or illegal, accidental or intentional) of any hazardous substances, materials or wastes, or any wastes regulated under any local, state or federal law, except as follows:                                                                (if none, so state).
13. The undersigned acknowledges that:
(a) Buyer or Buyer’s assignee is purchasing Lessor’s interest in the Property which includes the Premises and, in connection with that purchase, will be receiving an assignment of Lessor’s interest under the Lease;
(b) Lessor, Buyer and Buyer’s successors, agents and assigns (including, but not limited to lenders, title insurers and subsequently purchasers) will be relying upon each of the statements contained herein in connection with Buyer’s purchase of the property of which the Premises is a part and but for the assurances and agreements contained herein Buyer would not purchase the property of which the Premises is a part; and
(c) the undersigned will attorn to and recognize Buyer as the Lessor under the Lease and will pay all rents and other amounts due thereunder to Buyer upon notice to the undersigned that Buyer has become the owner of Lessor’s interest in the Premises under the Lease.
14. In the event any of the statements set forth herein conflicts or is inconsistent with any provision or term contained in the Lease or any modifications thereof, the statement contained herein shall prevail.
                                         
DATE
                                                              
         
     
  By:      
    Its:     
       
 
  “LESSEE”  

 

 

Exhibit 10.8
RAILHEAD PARTNERS L.L.C.
P.O.B. 358
NEDERLAND, CO 80466
303/258-3577
Andrew Cookler
Manager
September 24, 2003
Mr. Hugh Dunkerley
Vice President of Corporate Development
ChromaDex Analytics, Inc.
Dear Hugh,
This letter shall serve as Amendment 1 to the Lease Agreement dated October 26, 2001, as amended and assigned, by and between ChromaDex Analytics, Inc. as Tenant and Railhead Partners LLC, as Landlord.
The above parties agree to amend the original lease as follows:
  1)   Tenant shall occupy the premises at 2830 Wilderness PI. Suite F. Such tenancy shall commence on November 1, 2003 and shall expire on January 31, 2011.
 
  2)   The monthly rent shall be:
         
November 1, 2003 to January 31, 2005
  $ 1929.17  
February 1, 2005 to January 31, 2006
  $ 1987.05  
February 1, 2006 to January 31, 2007
  $ 2046.66  
February 1, 2007 to January 31, 2008
  $ 2108.06  
February 1, 2008 to January 31, 2009
  $ 2171.30  
February 1, 2009 to January 31, 2010
  $ 2236.44  
February 1, 2010 to January 31, 2011
  $ 2303.53  
  3)   Tenant agrees to pay a security deposit to Landlord in the amount of $2000 on or before October 15, 2003.
 
  4)   Save and except for the foregoing provisions, all other paragraphs and covenants shall remain in effect as therein stated. In the event of a conflict between the provisions of this Amendment 1, or any other Amendments or Addendums, and the Lease agreement, then the provisions of this Amendment 1 shall prevail.
Dated as of the 24 of September, 2003
 
                   
Landlord:       Tenant:    
Railhead Partners LLC       ChromaDex Analytics, Inc.    
 
                   
By:
  /s/ Andrew Cookler
 
      By:   /s/ Hugh Dunkerley
 
   
      Andrew Cookler           Title: VP Corporate Development    
      Manager                

 

 


 

VICTOR M. GRIMM, P.C.
1027 14 th Street
Boulder, Colorado 80302
(303) 413-0565
(303) 413-0681 Facsimile
(LOGO)
                 
 
               
    Call (303) 413-0565 if pages are illegible or transmission is incomplete.
 
               
TO:
  Mr. Hugh Dunkeley   FAX PHONE NO.:     303 442 4237  
 
               
COMPANY:
  Chromadex   TELEPHONE:   714-473-7737
 
               
c:
  Andrew Cookler   FAX PHONE NO.:     303 258 3577  
 
               
COMPANY:
  Railhead Partners, LLC            
 
               
FROM:
  Denise E. Grimm, Certified Paralegal            
 
               
DATE:
  April 24, 2003 (11:14 AM)            
THE INFORMATION CONTAINED IN THIS COMMUNICATION IS CONFIDENTIAL, MAY BE ATTORNEY-CLIENT PRIVILEGED, MAY CONSTITUTE INSIDE INFORMATION, AND IS INTENDED FOR THE USE OF THE ADDRESSEE. UNAUTHORIZED USE, DISCLOSURE OR COPYING IS STRICTLY PROHIBITED AND MAY BE UNLAWFUL. IF YOU HAVE RECEIVED THIS COMMUNICATION IN ERROR, PLEASE IMMEDIATELY NOTIFY US AT (303) 413-0565.
RE:   Assignment of Lease from NaPro BioTherapeutics, Inc.
Dear Mr. Dunkeley,
Pursuant to your request of April 23 rd , I am attaching herewith a copy of the signed Lease Agreement that you have accepted as Assignee. Also, please note that the signage provisions are addressed in § 5.2, page 4 of the Lease Agreement. Please contact me should you have any other questions or concerns.
Finally, when our client returns on May 9 th , I will have him contact you concerning the adjacent premises and the possibility of letting same.
Best regards,
.deg
Att.

 

 


 

LEASE AGREEMENT
By and Between
RAILHEAD PARTNERS, LLC a Colorado limited liability company
(Landlord)
-and-
NaPro BioTherapeutics, Inc., a Delaware corporation
(Tenant)
dated October 26, 2001

 

 


 

TERM SHEET
THIS TERM SHEET is provided for the convenience of Tenant. Reference should be made to the terms and conditions of the Lease Agreement dated the 26th day of October, 2001.
BASIC LEASE PROVISIONS
             
       
 
   
  1.    
Property Name and Address
  2830 Wilderness Place
       
 
  Units A, B, C, D & E
       
 
  Boulder, Colorado
       
 
   
  2.    
Approximate Square Footage
  10,100 square feet
       
 
   
  3.    
Basic Annual Rent
  Two Hundred Twelve Thousand One Hundred and no/100 Dollars ($212,100.00)
       
 
  (4% increase for Years 2-5)
       
 
   
  4.    
Basic Monthly Rent
  Seventeen Thousand Six Hundred Seventy-Five and no/100 Dollars ($17,675.00)
       
 
  (4% increase for Years 2-5)
       
 
   
  5.    
Term:
  February 1, 2002 through January 31, 2007
       
 
   
  6.    
Option Periods Available (if any)
  Five (05) years
       
 
   
  7.    
Commencement Date
  February 1, 2002
       
 
   
  8.    
Security Deposit
  Seventeen Thousand Six Hundred Seventy-Five and no/100 Dollars ($17,675.00)
       
 
   
  9.    
Late Payment Service Charge
  Five Percent (5.0%)
       
 
   
  10.    
Address for Notices:
   
       
 
   
       
Landlord :
  Railhead Partners, LLC
       
 
  P.O.B. 358
       
 
  Nederland, CO 80466
       
 
   
       
Tenant :
  NaPro BioTherapeutics, Inc.
       
 
  6304 Spine Road, Unit A
       
 
  Boulder, Colorado 80301
       
 
   
  12.    
Lease Payments Payable to
  Railhead Partners, LLC

 

 


 

TABLE OF CONTENTS
         
 
       
1. Premises
    1  
1.1 Demise
    1  
1.2 Licenses
    1  
1.3 Parking
    1  
1.4 Common Areas
    1  
1.5 Control of Common Areas
    2  
 
       
2. Term
    2  
 
       
3. Rent/Utilities
    2  
3.1 Basic Rent
    2  
3.2 Utilities
    2  
3.3 Landlord Provided Utilities
    2  
3.4 Interruption of Utilities
    2  
 
       
4. Security Deposit
    3  
4.1 Receipt of Deposit
    3  
4.2 Application of Deposit
    3  
4.3 Return of Deposit
    3  
 
       
5. Use of Premises
    3  
5.1 Limited Use
    3  
5.2 Signs
    3  
5.3 Legal Compliance
    3  
5.4 Nuisance Prohibited
    4  
 
       
6. Condition, Maintenance and Improvement of Premises and Property
    4  
6.1 Condition of Premises/Work Letter
    4  
6.2 Tenant Improvements
    4  
6.3 Improvements/Prior Landlord Consent
    4  
6.4 Tenant’s Duty to Repair
    5  
6.5 Landlord’s Duty to Repair
    5  
6.6 Tenant Work/Compliance with Codes
    5  
6.7 Waste Prohibited
    5  
6.8 Rubbish Removal
    5  
6.9 Violations of Codes Prohibited
    6  
6.10 Snow/Ice Removal
    6  
6.11 Common Area Maintenance
    6  
6.12 Delivery of Premises
    6  

 

2


 

         
 
       
7. Damage to Premises and Property/Indemnification/Insurance
    6  
7.1 Negligent Damages
    6  
7.2 Liability Indemnification/Insurance
    7  
7.3 Fire/Casualty Insurance
    7  
7.4 Insurance Requirements
    7  
7.5 Waiver of Liability
    7  
7.6 Landlord Insurance
    7  
 
       
8. Condemnation
    8  
8.1 Taking of Whole
    8  
8.2 Partial Taking
    8  
8.3 Condemnation Awards
    8  
 
       
9. Damage/Restoration of Premises
    8  
9.1 Irreparable Damage
    8  
9.2 Repairable Damages/No Repair
    8  
9.3 Repair of Damages
    8  
 
       
10. Tenant’s Additional Covenants
    8  
10.1 Landlord Entry
    8  
10.2 Removal of Fixtures/Redelivery
    9  
10.3 Subordination/Estoppel Letters
    9  
10.4 Nondisturbance Agreement
    9  
10.5 Assignment Prohibited
    10  
10.6 Storage
    10  
10.7 Landlord’s Representation and Warranty Regarding Environmental Conditions
    10  
10.8 Hazardous Material Prohibited
    10  
10.9 Permitted Hazardous Materials
    10  
10.10 Environmental Audit upon Delivery of Premises
    11  
10.11 Environmental Audit upon Re-Delivery of Premises
    11  
10.12 Hazardous Materials; Definition
    12  
10.13 Hazardous Conditions
    12  
10.14 Use of Hazardous Materials
    12  
 
       
11. Additional Covenants of Landlord
    12  
11.1 Quiet Enjoyment
    12  
 
       
12. Default
    13  
12.1 Event of Default
    13  

 

3


 

         
 
       
13. Remedies Upon Default
    13  
13.1 Remedies
    13  
13.2 Cumulative Remedies
    14  
 
       
14. Additional Provisions
    14  
14.1 Option to Extend Term
    14  
14.2 Brokerage Commission
    14  
14.3 Costs of Negotiation
    14  
14.4 Confidentiality
    14  
14.5 Notices
    15  
14.6 Holdover
    15  
14.7 Cure by Landlord
    16  
14.8 Heirs and Assigns
    16  
14.9 Amendment
    16  
14.10 Governing Law
    16  
14.11 Sole Agreement
    16  
14.12 Attorneys’ Fees
    16  
14.13 Captions
    16  
14.14 Interpretation
    16  
14.15 No Waiver
    16  
14.16 Severability
    16  
14.17 No Recordation
    17  
14.18 Authority
    17  
14.19 Exhibits
    17  
14.20 Counterparts
    17  

 

4


 

LEASE AGREEMENT
THIS LEASE AGREEMENT (hereinafter the “ Lease ”) is dated October 26, 2001 and is by and between RAILHEAD PARTNERS, LLC, a Colorado limited liability company (hereinafter the “ Landlord ”) and NaPro BioTherapeutics, Inc., a Delaware corporation (hereinafter the “ Tenant ”).
RECITALS
A. Landlord is the owner of certain real estate legally described in Exhibit A attached hereto and incorporated herein by this reference, located in Boulder County, Colorado and commonly known as 2830 Wilderness Place, Units A, B, C, D and E (hereinafter the “ Real Estate ”). The Real Estate is improved with a(n) industrial building (hereinafter the “ Improvements ”) (the Real Estate and improvements are collectively referred to as the “ Property ”).
B. Tenant is desirous of leasing a certain portion of the Property from Landlord pursuant to the terms and conditions contained herein.
C. Landlord is desirous of leasing a certain portion of the Property to Tenant pursuant to the terms and conditions contained herein.
NOW, THEREFORE, for good and valuable consideration recited herein, including payment of rent and the other covenants, conditions and agreements, Landlord and Tenant agree as follows:
1. Premises .
1.1 Demise . Landlord hereby leases and demises to Tenant the following described portion of the Property:
Units A, B, C, D and E consisting of approximately Ten Thousand One Hundred (10,100) square feet in interior area (hereinafter the “ Premises ”). The Premises are more specifically described in Exhibit B attached hereto and incorporated herein by this reference.
1.2 Licenses . Additionally, for the Term, Landlord grants to Tenant a Parking License and Common Area License, both of which are hereafter defined.
1.3 Parking . Landlord further grants to Tenant, its employees and invitees, at no additional charge, a non-exclusive license for the use of twenty-five (25) parking spaces upon the Property (hereinafter the “ Parking License ”). The Parking License shall be effective for the term of this Lease as defined below. Landlord and Tenant shall designate specific spaces for the Parking License prior to commencement of the Term.
1.4 Common Areas . The “Common Areas” are all areas outside of the Premises upon the Property designated by Landlord for common use of Tenant, its employees, licensees, invitees, contractors and Landlord. Landlord grants to Tenant, its employees, licensees, invitees and contractors a non-exclusive license over such Common Areas of Property which are necessary to the use and occupancy of Premises and Parking License (hereinafter the “ Common Area License ”). Said License shall be effective for the Term of this Lease. Tenant shall not use Common Areas for any type of storage or parking of trucks, trailers or other vehicles without the advance written consent of Landlord.
Lease Agreement, Railhead Partners, L.L.C. and NaPro BioTherapeutics, Inc., Page 1

 

 


 

1.5 Control of Common Areas . All parking and Common Areas of Property shall at all times be subject to the management of Landlord. Same shall not be deemed part of the Premises.
2.  Term . This Lease shall commence on February 1, 2002 and terminate on January 31, 2007 (hereinafter the “ Term ”) unless extended by the terms and provisions of this Lease, or unless sooner terminated by reason of default or otherwise, as provided herein.
3. Rent/Utilities .
3.1 Basic Rent . Tenant shall pay as basic rent for the Premises the amount of Two Hundred Twelve Thousand One Hundred and no/100 Dollars ($212,100,00) annually (hereinafter the “ Basic Rent ”). The Basic Rent shall be payable in equal monthly installments of Seventeen Thousand Six Hundred Seventy-Five and no/100 Dollars ($17,675,00) in advance, without notice, on the fifteenth (15 th ) day of the month for which due. The Basic Rent for a period of less than one month shall be adjusted on a pro-rata basis. Basic Rent shall be adjusted after the first twelve (12) months of the Term in increments of Four Percent (4.0%) per annum, pursuant to Escalation Rider attached hereto and incorporated herein by this reference as Exhibit C . Any rent not paid on or before the fifteenth (15 th ) of the month shall be subject to an additional late charge of Five Percent (5.0%) of rental payment due. On or before January 15, 2001, Tenant shall make an initial rent payment covering the period from February 1, 2002 to March 14, 2002. Monthly payments will thereafter be made on the fifteenth (15 th ) of the month commencing on March 15, 2002.
3.2 Utilities . Except as provided herein, Tenant shall be responsible for the payment of all utility charges upon the Premises and in conjunction with the Tenant’s business including, but not limited to, natural gas, electricity, water, sewer and telephone. Tenant shall contract directly with all utility providers. All utility payments shall be directed to the respective utility providers. Payments shall be made in a timely manner. As water and sewer charges are billed directly to Landlord for the entire Property, Landlord shall prorate water and sewer charges on an equitable basis among the users and shall provide invoices to Tenant on a regular basis for such charges. Tenant shall pay upon such invoices within thirty (30) days from receipt thereof. The non-payment or late payment of utility charges shall be deemed identical to the non-payment or late payment of Basic Rent.
3.3 Landlord Provided Utilities . Landlord shall provide and pay for electrical, lighting, landscaping and HVAC services in the Common Areas of the Property (if applicable).
3.4 Interruption of Utilities . Tenant agrees that Landlord shall not be liable by abatement of Basic Rent or otherwise, for failure to furnish or delay in furnishing any utility service, or for any diminution or surge thereof. Such failures, delays, diminutions or power surges shall never be deemed to constitute an eviction or disturbance of the Tenant’s use and possession of the Premises or relieve Tenant from performing any of Tenant’s obligations hereunder, including the payment of Basic Rent. Notwithstanding the foregoing, in the event utilities are disrupted for a period in excess of ninety (90) days, then Tenant may elect to terminate the Lease.
Lease Agreement, Railhead Partners, L.L.C. and NaPro BioTherapeutics, Inc., Page 2

 

 


 

4. Security Deposit .
4.1 Receipt of Deposit . To secure the faithful performance by Tenant of all of the covenants, conditions and agreements in this Lease, set forth and contained on the part of the Tenant to be observed and performed and agreements in this Lease which become applicable upon its termination by re-entry or otherwise, Tenant has deposited (or will deposit upon execution of this Lease) with Landlord the sum of Seventeen Thousand Six Hundred Seventy-Five and no/100 Dollars ($17,675,00) (hereinafter the “ Security Deposit ”).
4.2 Application of Deposit . The parties agree: (a) that the Security Deposit, or any portion thereof, may be applied to the curing of any default that may exist, and/or payment of subsequent damages and costs incurred by Landlord, without prejudice to any other remedy or remedies which the Landlord may have on account thereof, and upon such application Tenant shall pay Landlord on demand the amount so applied which shall be added to the Security Deposit, so the same will be restored to its original amount; (b) that should the Premises be conveyed by Landlord, the Security Deposit or any portion thereof may be turned over to Landlord’s grantee, and if the same be turned over, Tenant agrees to look to such grantee for such application or return: and (c) that Landlord shall not be obligated to hold the Security Deposit as a separate fund.
4.3 Return of Deposit . If Tenant shall perform all of its respective covenants and agreements in this Lease, the Security Deposit or the part of the portion thereof not previously applied pursuant to the provisions of this Lease, together with a statement, shall be returned to Tenant without interest, no later than thirty (30) days after the expiration of the Term or any renewal or extension thereof, (or such earlier time if required by applicable law) provided Tenant has vacated the Premises and surrendered possession thereof to Landlord.
5. Use of Premises .
5.1 Limited Use . The Premises shall be used for: Research and development laboratory and related offices; provided such uses are in conformity with applicable zoning regulations. Tenant shall not, without the prior written consent of Landlord, permit the Premises to be used for any other purpose. The written consent of Landlord will not be unreasonably withheld.
5.2 Signs . Any and all signage of Tenant upon the Premises shall be subject to the prior written approval of Landlord. All signage shall be in conformance with local and state laws. All signage shall conform to aesthetic and design criteria, themes and standards of the Property.
5.3 Legal Compliance . Tenant, its employees and invitees, shall comply with and abide by all federal, state, county and municipal laws and ordinances in connection with the occupancy of the Premises and the Property. Improvements and uses of Premises shall comply with all applicable laws, regulations and ordinances. No alcoholic beverages shall be commercially dispensed or consumed by Tenant, its employees, invitees, agents or contractors upon the Premises or Property. No illegal drugs or controlled substance shall be permitted upon the Premises or Property (excluding prescriptive medications possessed by an individual pursuant to a valid doctor’s prescriptions or as Tenant may legally possess in the conduct of its business). No use which shall increase the rate or cost of insurance upon Property shall be permitted. No hazardous or dangerous activities shall be permitted upon the Premises, excepting the uses previously approved by Landlord under the terms of this Lease. Regarding such activities, Tenant will, at all times, exercise due care in its operations and adhere to industry standards in its operations.
Lease Agreement, Railhead Partners, L.L.C. and NaPro BioTherapeutics, Inc., Page 3

 

 


 

5.4 Nuisance Prohibited . Tenant shall not act in any manner, nor permit employees or invitees to act in any manner, which shall be a nuisance to other tenants or invitees of the Property or adjacent property owners or tenants, or which would interfere with the other tenant’s quiet enjoyment of their premises. Said prohibition includes, but is not limited to, loud noises, music, noxious or unpleasant odors other than those which have been consented to under the terms and conditions of this Lease, and disruptive behavior or actions, which violate applicable laws.
6. Condition, Maintenance and Improvement of Premises and Property .
6.1 Condition of Premises/Work Letter . Tenant is familiar with the physical condition of the Premises and Property and has been provided with a conceptual plan of the Premises, a copy of which is attached hereto and incorporated herein as Exhibit D . The aforementioned conceptual plan indicates improvements and fixtures which are currently attached to the Premises and which shall remain in place after Tenant’s occupancy thereof. Landlord represents and warrants that as of the date of the commencement of the Term, all of the systems upon the Property serving the Premises including electrical, plumbing and HVAC, shall be in good working order (the “ Commencement Date Operational Warranty ”). Other than the Commencement Date Operational Warranty, Landlord makes no representations or warranties as to the physical condition of the Premises or its suitability for Tenant’s intended purpose. Other than the work, if any, to be performed pursuant to Tenant’s work letter (hereinafter the “ Work Letter ”), attached hereto and incorporated herein by this reference as Exhibit E , except as to the Commencement Date Operational Warranty, the Premises are rented AS-IS, in current condition, and all warranties are hereby expressly disclaimed.
6.2 Tenant Improvements . Unless otherwise provided in Work Letter, Tenant shall be responsible for any and all improvements and alterations within the Premises, including, but not limited to, electrical wiring, HVAC, plumbing, framing, drywall, flooring, finish work, telephone systems, wiring and fixtures (hereinafter the “ Tenant Work ”).
6.3 Improvements/Prior Landlord Consent . Tenant agrees to submit to Landlord complete plans and specifications including engineering, mechanical and electrical work covering any and all contemplated Tenant Work, and any subsequent improvements or alterations of the Premises. The plans and specifications shall be in such detail as Landlord may require, and in compliance with all applicable statutes, ordinances, regulations and codes, and shall be approved by a licensed architect. As soon as reasonably feasible thereafter, Landlord shall notify Tenant of any failures of Tenant’s plans to meet with Landlord’s approval. Tenant shall cause Tenant’s plans to be revised to the extent necessary to obtain Landlord’s approval. Tenant shall not commence any Tenant Work or any other improvements or alterations of Premises until Landlord has approved its plans. Any and all minor work or repairs for which plans are not necessary shall also be approved in advance by Landlord prior to ANY WORK being performed. Notwithstanding the foregoing, in the event Tenant is unsuccessful in its attempt to contact the Landlord for such approval and the intended improvements are to be non-structural and the estimated value of the intended improvements is less than Five Thousand and no/100 Dollars ($5,000.00), Tenant may proceed to effect such improvements without the consent of the Landlord wiring, HVAC equipment, fixtures, appliances, and interior walls, doorways, and appurtenances belonging thereto installed for the use or used in connection with the Premises. Tenant shall, at Tenant’s own expense, make as and when needed all repairs to the Premises and to all such equipment, fixtures, appliances and appurtenances necessary to keep the same in good order and condition. “ Repairs ” shall include all replacements, renewals, alterations and betterments. All Repairs shall be equal or better in quality and class to the original work.
Lease Agreement, Railhead Partners, L.L.C. and NaPro BioTherapeutics, Inc., Page 4

 

 


 

6.5 Landlord’s Duty to Repair . Landlord shall maintain the foundation, exterior walls (excluding all windows, window frames and doors to the extent not covered by Landlord’s insurance or if cost is below applicable deductible for insurance) and roof of the Improvements in good repair. The cost of any maintenance, Repairs or replacements necessitated by the intentional, reckless or negligent acts or omissions, misuse or abuse of Tenant, its agents, employees, customers, licensees, invitees or contractors, shall be paid by Tenant to Landlord promptly upon billing. Landlord shall use reasonable efforts to cause any necessary repairs to be made promptly; provided, however, that Landlord shall have no liability whatsoever for any reasonable delays in causing such repairs to be made, including, without limitation, any liability for injury to or loss of Tenant’s business, nor shall any reasonable delays entitle Tenant to any abatement of Basic Rent or damages or be deemed an eviction of Tenant in whole or in part. Notwithstanding anything contained herein to the contrary, Landlord shall, at Landlord’s cost and expense, re-carpet and paint the office areas of the Premises and will paint the laboratory areas of the Premises. The re-carpeting and painting work shall be completed by the Landlord within two (2) weeks from the commencement of the Term or the completion of the Commencement Environmental Audit, whichever is later.
6.6 Tenant Work/Compliance with Codes . Tenant shall promptly pay when due the entire cost of any Tenant Work and repairs in the Premises undertaken by Tenant, so that the Premises shall at all times be free of liens for labor and materials. Tenant shall procure all necessary permits before undertaking such work. Tenant shall perform all of such work in a good and workmanlike manner. Tenant shall employ materials of good quality and perform such work only with contractors previously approved of in writing by Landlord. Tenant shall comply with all governmental laws, ordinances and regulations including, but not limited to, building, health, fire and safety codes. Tenant hereby agrees to hold Landlord and Landlord’s agents harmless and indemnified from all injury, loss, claims, or damage to any person or property (including the cost for defending against the foregoing) occasioned by or growing out of such work.
6.7 Waste Prohibited . Tenant shall not lay waste to the Premises. Tenant shall not perform any action or practice which may injure the Premises or Property.
6.8 Rubbish Removal . Tenant shall keep the Premises and the Property surrounding Premises free and clear of all debris, garbage and rubbish. Tenant shall be responsible for contracting for and paying for trash and debris removal required by its business. However, Landlord shall provide limited waste disposal service for office-type waste and debris.
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6.9 Violations of Codes Prohibited . Landlord represents and warrants that as of the date of commencement of the Term, that there shall not exist any violation or alleged violation of law, ordinance or regulation of any portion of the Premises. In the event a governmental entity notifies Landlord or Tenant as to any violation or alleged violation of law, ordinance or regulation of any portion of the Premises other than foundation or exterior walls, it shall be Tenant’s sole obligation to cause same to be remedied, corrected or dismissed. Tenant shall hold Landlord harmless from costs or damages arising from any failure on Tenant’s part to correct or remedy same in a timely manner. In the event same relates to the foundation or exterior walls Landlord shall have a reasonable period of time to remedy, correct or dismiss said violation. Under no circumstances shall the existence of same be deemed to constitute an eviction or disturbance of Tenant’s use and possession of Premises or relieve Tenant from performing any obligations hereunder, including the obligation to pay Basic Rent.
6.10 Snow/Ice Removal . Landlord shall use reasonable efforts to cause snow to be removed from the parking areas and all walks of the Property but shall have no liability whatsoever for any failure to do so unless such failure is due to Landlord’s negligent or wilful misconduct. In addition to any snow removal by Landlord, Tenant shall cause snow to be removed from the sidewalks in front of the Premises as may be reasonably required for the safety of persons using such sidewalks. The costs of snow removal by Tenant shall be paid by Tenant.
6.11 Common Area Maintenance . Landlord shall use reasonable efforts to maintain and repair Common Areas of Property including walks and parking lots. The cost of any maintenance, repairs, or replacements necessitated by the act, neglect misuse or abuse by Tenant its employees, licensees, invitees, or contractors shall be paid by Tenant to Landlord. Landlord shall use reasonable efforts to cause any necessary repairs to be made promptly; provided, however, that Landlord shall have no liability whatsoever for any reasonable delays in causing such repairs to be made, including, without limitation, any liability for injury to or loss of Tenant’s business, nor shall any reasonable delays entitle Tenant to any abatement of Basic Rent or damages or be deemed an eviction of Tenant in whole or in part .
6.12 Delivery of Premises . The commencement date of the Term is a good faith estimate as to when the Tenant shall have possession of the Premises and the Landlord shall not be held responsible, and this Lease shall not be terminated, if the Landlord cannot deliver the Premises to the Tenant by the commencement date of the Term for reasons beyond the control of the Landlord (such as delay in completion of Work, refusal of previous tenant to vacate the Premises, etc.) In the event of such delay, Landlord shall use its best efforts to deliver possession of the Premises as soon as practicable thereafter. The Term shall not be extended, however, the Tenant shall not be liable for any rent during the Term prior to receipt of actual delivery of the Premises. In the event Landlord fails to deliver possession of the Premises to Tenant on or before March 1 , 2002, then the parties agree that upon delivery of the Premises to Tenant, Tenant shall be entitled to a rent abatement equivalent to the number of days after March 1, 2002 that possession is delivered to Tenant.
7. Damage to Premises and Property/Indemnification/Insurance .
7.1 Negligent Damages . Tenant shall be responsible for and reimburse Landlord for, any and all damages to the Premises or Property and persons and property therein, caused by the negligent, grossly negligent, reckless or intentional acts of itself, its employees, agents, invitees, licensees or contractors.
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7.2 Liability Indemnification/Insurance . Tenant shall save Landlord, Landlord’s agents and their respective successors and assigns, harmless and indemnified from all injury, loss, claims or damage to any person or property while on the Premises or any other part of the Property, or arising in any way out of Tenant’s business, which is occasioned by a negligent, intentional, or reckless act or omission of Tenant, its employees, agents, invitees, licensees or contractors. Tenant shall maintain public liability insurance, insuring Landlord. Landlord’s agents, as their interest may appear, against all claims, demands or actions for injury to or death in an amount of not less than $1 Million arising out of any one occurrence, made by or on behalf of any person, firm or corporation, arising from, related to, or connected with the conduct and operation of Tenant’s business, including but not limited to, events in the Premises, and anywhere upon the Property. Tenant shall also obtain coverage in the amount of $1 Million per occurrence covering Tenant’s contractual liability under the aforesaid hold harmless clauses.
7.3 Fire/Casualty Insurance . Tenant shall maintain plate glass insurance covering all exterior plate glass in the Premises, fire, extended coverage, vandalism, and malicious mischief insurance and such other insurance as Tenant may deem prudent, and also as Landlord may from time to time require, covering all of Tenant’s stock in trade, fixtures, furniture, furnishings, floor coverings and equipment in the Premises.
7.4 Insurance Requirements . All of said insurance shall be in the form and from responsible and well-rated companies satisfactory to Landlord, shall name Landlord as an additional insured thereunder, and shall provide that it will not be subject to cancellation, termination or change except after at least thirty (30) days prior written notice to Landlord. The policies or duly-executed certificates for the same shall be provided to Landlord prior to commencement of Term and upon request of Landlord.
7.5 Waiver of Liability . Landlord and Landlord’s agents and employees shall not be liable for, and Tenant waives all claims for, damage to property sustained by Tenant, employees, agents or contractors or any other person claiming through Tenant, resulting from any accident in or upon the Premises or the Property of which they shall be a part, including, but not limited to, claims for damage resulting from: (i) any equipment or appurtenances becoming out of repair; (ii) Landlord’s failure to keep the Property or the Premises in repair; (iii) injury done or occasioned by wind, water, or other natural element; (iv) any defect in or failure of plumbing, heating, or air-conditioning equipment, electric wiring or installation thereof, gas, water and steam pipes, stairs, porches, railings or walks (including wood stoves); (v) broken glass; (vi) the backing-up of any sewer pipe or downspout; (vii) the bursting, leaking or running of any tank, tub, sink, sprinkler system, water closet, waste pipe, drain or any other pipe or tank in, upon or about the Property or Premises; (viii) the escape of steam or hot water; (ix) water, snow, or ice being upon or coming through the roof, skylight, doors, stairs, walks, or any other place upon or near such Property or the Premises or otherwise; (x) the falling of any fixtures, plaster or stucco; (xi) fire or other casualty; and (xii) any act, omission or negligence of co-Tenants or of other persons or occupants of said Property or of adjoining or contiguous buildings or of adjacent or contiguous property.
7.6 Landlord Insurance . Insurance shall be procured by Landlord in accordance with its sole discretion. All awards and payments thereunder shall be the property of the Landlord and Tenant shall have no interest in same. Notwithstanding the foregoing, Landlord agrees to obtain building liability and hazard insurance required to be carried for the Property and Premises and adequate hazard insurance, which covers replacement cost of the Property and Premises.
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8. Condemnation .
8.1 Taking of Whole . In the event that the entire Premises shall be condemned or taken by the exercise of eminent domain, this Lease shall terminate on the date of the taking of possession by the condemning authority. All rents shall be prorated accordingly.
8.2 Partial Taking . In the event that less than the entire Premises shall be condemned or taken by the exercise of eminent domain, this Lease shall, at the option of the Landlord, either: (i) terminate on the date of the taking of possession by the condemning authority; all rent being pro-rated accordingly, or (ii) remain in full force and effect provided that the Basic Rent shall be reduced in proportion to the square footage lost by virtue of said condemnation. In the event of the exercise of option (ii), if necessary, Landlord at its cost, shall make such repairs and restorations so as to constitute the remaining Premises a complete architectural unit. Rents will be prorated accordingly. In the event that such partial taking constitutes Twenty-Five Percent (25%) or more of the square footage of the Premises, then Tenant shall have the option to terminate this Lease.
8.3 Condemnation Awards . All condemnation awards shall be the sole property of Landlord, except for any awards which Tenant may be entitled to, including awards covering Tenant’s leasehold improvements, loss of business and/or relocation expenses.
9. Damage/Restoration of Premises .
9.1 Irreparable Damage . If the Property or the Premises shall be destroyed in whole or in part by fire, the elements or other casualty so as to render the Premises wholly unfit for occupancy and if the parties agree that they cannot be repaired within six (6) months from the happening of said injury or if the Premises are damaged in any degree and Landlord informs Tenant it does not desire to repair same and desires to terminate Lease, then this Lease shall terminate on the date of such injury.
9.2 Repairable Damages/No Repair . If the Premises can be repaired within said six (6) months, Landlord informs Tenant it shall repair the Premises and Landlord fails to do so, then this Lease shall terminate on the expiration of said six (6) months without further liability on the part of either parties hereto. In the event of such termination, Tenant shall immediately surrender the possession of the Premises, and all rights therein to the Landlord and Landlord shall have the right immediately to enter into and take possession of said Premises and shall not be liable for any loss, damage or injury to the Property or persons of Tenant or occupancy of, in or upon said Premises. Tenant shall not be liable for rent for said period.
9.3 Repair of Damages . If Landlord repairs the Premises within said six (6) months, then this Lease shall continue in full force and effect Tenant shall not be required to pay rent for any portion of said six (6) months during which the Premises are wholly unfit for occupancy.
10. Tenant’s Additional Covenants .
10.1 Landlord Entry . Tenant shall permit Landlord, Landlord’s mortgagees and their agents to enter the Premises at reasonable times, upon reasonable notice, for the purpose of inspecting same, of making repairs, additions or alterations thereto or to the building in which the same are located and of showing the Premises to prospective purchasers, lenders and tenants. At any time less than ninety (90) days from the expiration of Term, Landlord may place signs upon Premises advertising the availability of same. In the event Landlord elects to offer Property for sale, Landlord may place reasonable “For Sale” signs upon Premises. The aforementioned right of entry and inspection shall be subject to Tenant’s reasonable restrictions to preserve its proprietary information and trade secrets.
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10.2 Removal of Fixtures/Redelivery . Tenant shall remove, at the termination of this Lease, provided Tenant is not in default, such of Tenant’s moveable trade fixtures, and other personal property, as are not permanently affixed to the Premises. Tenant shall remove such alterations, additions and signs which have been made by Tenant as Landlord may request and repair any damage to the Property or Premises caused by such removal. Tenant shall peaceably yield up the Premises, and all alterations and additions thereto (except such as Landlord has requested Tenant to remove) and all fixtures, furnishings, floor coverings and equipment which are permanently affixed to the Premises which, for the purpose of this Lease, shall be deemed to be permanently affixed to the Premises, which shall thereupon become the property of the Landlord. The Premises shall be returned in clean and good order, repair and condition, normal wear and tear excepted. Any personal property of Tenant not removed within five (5) days following such termination shall, at Landlord’s option, become the property of Landlord. Attached hereto and incorporated herein by this reference as Exhibit F is a listing of trade fixtures and items which the parties have agreed shall be removed by the Tenant upon expiration of the Term or other termination of the tenancy.
10.3 Subordination/Estoppel Letters . The rights and interest of Tenant under this Lease shall be subject and subordinate to any mortgages or trust deeds now existing or hereafter placed upon the Property and the Premises and to any and all extensions, renewals, refinancing and modifications thereof. Tenant shall execute and deliver whatever instruments may be reasonably required for such purposes or for the purpose of informing potential or existing lender(s) or purchaser(s) of the Property as to status of its tenancy. Any such instruments or estoppel letters shall contain all information as may be reasonably required by Landlord or any other entity in conjunction with such transaction. In the event Tenant fails to do so within ten (10) days after a demand in writing. Tenant does hereby make, constitute and irrevocably appoint Landlord as its attorney-in-fact and in its name, place and stead to execute same. Tenant agrees to attorn to a lender or any other party coming into title to Property upon written request of Landlord. Such attornment letter shall provide that: (i) the Lease is in full force and effect, that there exists no default (or if same exist, shall detail same); (ii) that Tenant shall look to lender or any other new party as Landlord under this Lease effective as of the date of attornment; and (iii) the new Landlord shall not be liable for any prior claims, offsets or defenses available against old Landlord.
10.4 Nondisturbance Agreement . On or before commencement of the Term, Landlord shall procure from its lender an acceptable form of nondisturbance agreement, wherein the lender shall agree that notwithstanding any other rights which is may have under applicable law to it shall honor the terms of this Lease and not terminate this Lease in the event of a foreclosure upon the Property. Said nondisturbance agreement may contain customary attornment and related covenants and other standard provisions which may typically be contained in nondisturbance agreements entered into by the lender. In the event a nondisturbance agreement is not obtained by Landlord from its lender on or before thirty (30) days from the execution of this Lease the Tenant may terminate this Lease.
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10.5 Assignment Prohibited . Tenant shall not sublet the Premises or any part thereof, nor assign this Lease or any interest therein, without the prior written consent of Landlord. Such consent shall not be unreasonably withheld. As a condition of assignment or sublease, Landlord may require the continued liability of Tenant or a separate personal guaranty by Tenant or its principal. In the event an assignment or sublease is permitted, all payments from assignee or sublessee shall be made directly by said party to Landlord, and not through Tenant. Furthermore, any increase in Basic Rent occasioned by a sublease or assignment ( i.e., any sums paid in excess of Basic Rent by said party), whether paid in lump sum or periodic monthly payments, and whether categorized as rent or not, shall be payable to, and be the sole property of Landlord to the extent that same is necessary to cover Landlord’s increased net operating expenses, any sums in excess of this amount shall be split between the Landlord and the Tenant. Notwithstanding the foregoing, in the event that Tenant, a publicly held company, is acquired, merges with or effects some other type of corporate restructuring, reorganization or consolidation which does not materially affect the financial condition of the surviving or remaining entity and this Lease is transferred to such entity, such an event shall not be deemed a prohibited assignment under this Lease; provided, further, that necessary and reasonable documentation may be required by Landlord, which shall memorialize such event, and effectively obligate the new entity to be bound under the terms and conditions of this Lease.
10.6 Storage . Tenant shall store all personal property entirely within the Premises. Tenant shall store all trash and refuse in adequate containers within the Premises which Tenant shall maintain in a neat and clean condition and so as not to be visible to members of the public in or about the Property, and so as not to create any health or fire hazard, and to attend to the daily disposal thereof in the manner designated by Landlord.
10.7 Landlord’s Representation and Warranty Regarding Environmental Conditions . Landlord represents and warrants that to the best of Landlord’s knowledge, the Premises and Property comply in all material respects with applicable and environmental laws; that the Premises and Property are not contaminated with Hazardous Materials; and that all drains, sinks and pipes on or connected to the Premises are intact and are not leaking. Landlord has not made an independent review or investigation relative to this representation and is based upon Landlord’s actual knowledge at the time of execution of this Lease. Landlord shall indemnify Tenant and hold Tenant harmless from and against any and all claims, costs and liabilities, including reasonable attorneys’ fees, arising out of or in connection with breach of this representation and warranty.
10.8 Hazardous Material Prohibited . Except as provided in Section 10.9 and Section 10.14, Tenant shall not cause or permit any Hazardous Material to be brought upon, kept or used in or about the Premises by Tenant, its agents, employees, contractors or invitees. If Tenant breaches the obligations stated in the preceding sentence, or if the presence of Hazardous Material on the Premises caused or permitted by Tenant results in contamination of the Premises, or if contamination of the Premises by Hazardous Material otherwise occurs for which Tenant is responsible to Landlord for damage resulting therefrom, then Tenant shall indemnify, defend and hold Landlord harmless from any and all claims, judgments, damages, penalties, fines, costs, liabilities or losses.
10.9 Permitted Hazardous Materials . Tenant requires the use of certain Hazardous Materials for the normal operation of its business. These Hazardous Materials will be limited to the listed materials included in Exhibit G , attached hereto and incorporated herein by this reference (the “ Permitted Hazardous Materials ”), unless additional consent is obtained pursuant to Section 10.14. Landlord consents to Tenant’s use and storage of the Permitted Hazardous Materials upon the Premises, provided that Tenant shall at all times use, store and dispose of such Permitted Hazardous Materials in a manner consistent with industry standards and in compliance with all applicable laws, regulations, rules and ordinances. Tenant shall also provide a report to the Landlord prepared by an industrial hygienist or other qualified person, which shall include, a disclosure of all required laws, regulations, rules and ordinances applicable to such materials and Right to Know obligations for such materials as may be imposed by federal, state or local laws. Such report shall also include a description and discussion of safe use and storage of such materials and other information, which may related to the health and safety of the Property and tenants of the Property with regard to Tenant’s use and storage of such materials. Tenant shall indemnify, defend and hold Landlord harmless from any and all claims, judgments, damages, penalties, fines, costs, liabilities or losses, which may arise either directly or indirectly from Tenant’s use, storage and/or disposal of Permitted Hazardous Materials.
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10.10 Environmental Audit upon Delivery of Premises . In order to assess the environmental condition of the Premises or Property (as it relates to the relative or affected portion of the Premises), Landlord and Tenant shall cause an investigation to be conducted by a licensed, certified environmental inspector agreed to and approved by both parties of a type customarily referred to in the industry as an “Exit Audit” (the “Commencement Environmental Audit” ) and shall split the cost of the audit. The Commencement Environmental Audit shall be prepared by such environmental inspector chosen by the parties and submitted to the parties at the commencement of this Lease. Such Commencement Environmental Audit shall include an evaluation of any evidence of environmental contamination arising from any prior use and occupancy of the Premises and information and guidance concerning the preparation of remediation plans or feasibility studies, if required, and the performance of cleanup, remedial, removal or restoration work, as may be necessary. Any cost of environmental cleanup remedial, removal or restoration work shall be at Landlord’s cost and expense. Landlord shall obtain Tenant’s prior written approval prior to undertaking any action required by this section, which approval shall not be unreasonably withheld, so long as the proposed actions will not have an avoidable material and adverse effect upon the Premises. In the event that Landlord cannot or does not effect such environmental cleanup within ninety (90) days from the completion of the Commencement Environmental Audit, then Tenant shall be entitled to terminate this Lease as its sole remedy.
10.11 Environmental Audit upon Re-Delivery of Premises . In order to assess the environmental condition of the Premises or Property (as it relates to the relative or affected portion of the Premises) Tenant shall, at its sole cost and expense, prior to vacation of the Premises, cause an investigation to be conducted by a licensed, certified environmental inspector agreed to and approved by both parties of a type customarily referred to in the industry as an “Exit Audit” (the “Environmental Audit.” ) The Environmental Audit shall be prepared by such environmental inspector chosen by the parties and submitted to Landlord prior to Tenant’s vacation of the Premises. Such Environmental Audit shall include an evaluation of any evidence of environmental contamination arising from Tenant’s use and occupancy of the Premises, and information and guidance concerning the preparation of remediation plans or feasibility studies, if required, and the performance of cleanup, remedial, removal or restoration work, as may be necessary. Any costs of environmental cleanup, remedial, removal or restoration work shall be at Tenant’s cost and expense. Tenant will obtain Landlord’s written approval prior to undertaking any action required by this section, which approval shall not be unreasonably withheld, so long as the proposed actions will not have an avoidable material and adverse effect upon the Premises or Property. Each party will indemnify and hold the other harmless from and against any and all claims, costs and liabilities, including reasonable attorneys’ fees, arising out of or in connection with any breach by such party of its covenants under this section. The parties’ obligations under this section will survive the expiration or early termination of the Term.
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10.12. Hazardous Material; Definition . As used herein, the term “ Hazardous Material ” means any hazardous or toxic substance, material or waste which is or becomes regulated by any local governmental authority, the State or the United States Government. The term “ Hazardous Material ” includes, without limitation, any material or substance that is (a) defined as a “hazardous substance” under appropriate state law provisions; (ii) petroleum; (iii) asbestos; (iv) designated as a “hazardous substance” pursuant to Section 311 of the Federal Water Pollution Control Act (33 U.S.C. § 1321); (v) defined as a “hazardous waste” pursuant to Section 1004 of the Federal Resource Conservation and Recovery Act (42 U.S.C. § 6903); (vi) defined as a “hazardous substance” pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601) or (vii) defined as a “regulated substance” pursuant to Subchapter IX, Solid Waste Disposal Act (Regulation of Underground Storage Tanks) (42 U.S.C. § 6991).
10.13. Hazardous Conditions . If Landlord shall become aware of any hazardous condition or the presence of any Hazardous Materials upon the Property other than those which have been consented to under the terms and conditions of this Lease, Landlord may immediately terminate this Lease, and shall return any portion of unused rent to Tenant on or before thirty (30) days thereafter. Landlord shall not be responsible for any claims, damages or costs of Tenant incurred by such circumstance.
10.14. Use of Hazardous Materials . If Tenant desires to use Hazardous Materials upon Premises in connection with its business beyond the Hazardous Materials allowed by Section 10.9, it may request permission to use same from Landlord in writing. Landlord, at its sole discretion, may approve or disapprove said request. In this event Landlord approves the request, Landlord may impose any conditions upon Tenant’s use of such Hazardous Materials and at all times Tenant shall comply with all Federal, State and Local laws, statutes, ordinances and regulations regarding the use, safety, storage and disposal of Hazardous Materials. In the event Landlord denies Tenant’s request, this Lease shall remain in full force and effect and such denial shall not give rise to any right of set-off, reduction or relieve Tenant from performing any obligation under this Lease. Such requirements or conditions may include, but not be limited to, requiring the Tenant to employ an industrial hygienist to evaluate the chemicals intended to be utilized in Tenant’s business upon the Premises, provide a report to Landlord and permit Landlord to evaluate the report and impose such further terms and conditions as may be appropriate for the safety of the Premises and other tenants upon the Property. Such report shall include a disclosure of the required regulations and Right to Know obligations for such materials as may be imposed by federal, state or local laws. Such report shall also include a description and discussion of safe use and storage of such materials and other information which may relate to the health and safety of the Property and tenants of the Property with regard to Tenant’s use and storage of such materials.
11.  Additional Covenants of Landlord .
11.1 Quiet Enjoyment . Landlord agrees that upon Tenant paying the rent and performing Tenant’s obligations under the Lease, Tenant shall peacefully and quietly have, hold and enjoy the Premises throughout the Term or until it is terminated pursuant to the terms contained herein.
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12.  Default .
12.1 Event of Default . Any of the following occurrences or acts shall constitute an “ Event of Default ” under this Lease:
(a) If Tenant shall:
(i) Default in making payment when due of any Basic Rent, utility charges or any other amount payable by Tenant hereunder; or
(ii) Default in the observance or performance of any other covenant, condition, rules, regulations or provision of this Lease to be observed or performed by Tenant hereunder; and if such default shall continue for thirty (30) days (or ten (10) days, in the event of an emergency), after Landlord shall have given to Tenant notice specifying such default and demanding that same be cured; or
(b) If the Premises are left vacant, unused and unmaintained pursuant to the obligations of the Tenant under the terms of this Lease for a consecutive period of thirty (30) days or more without permission of Landlord; or
(c) If an unconsented-to assignment or sublease occurs or is attempted, which is violative of Section 10.5 of this Lease; or
(d) If Tenant shall institute bankruptcy proceedings or be declared bankrupt or insolvent pursuant to federal or state law; or
(e) If any receiver be appointed for Tenant Tenant’s business or property, or if any assignment shall be made of the Tenants property for the benefit of creditors.
13. Remedies Upon Default .
13.1 Remedies . This Lease and the Term hereby granted are subject to limitation that whenever an Event of Default shall have occurred, Landlord may, at its election:
(a) Proceed by appropriate judicial proceedings, either at law or in equity, to enforce performance or observance by Tenant of the applicable provisions of this Lease and/or to recover actual and consequential damages for the breach thereof, plus all costs and attorneys’ fees; or
(b) Give Tenant seven (7) days written notice requiring payment of the Basic Rent or compliance with other terms or provisions of this Lease or delivery of possession of the Premises (such notice shall run concurrently with any other notice required in the previous paragraph). In the event said default remains uncorrected after seven (7) days written notice, Landlord at its option may terminate this Lease whereupon Tenant’s estate and all rights of Tenant to the use of the Premises shall forthwith terminate but Tenant shall remain liable as hereinafter provided; and thereupon Landlord shall have the immediate right of re-entry and possession of the Premises and the right to remove all persons and property therefrom, either with or without the assistance of legal process and instituting of a forcible entry and unlawful detainer action, and Landlord may thenceforth hold, possess and enjoy the Premises (including the right to lease or sell the Premises or any portion thereof upon any terms deemed satisfactory to Landlord) free from any rights of Tenant and any person claiming through Tenant and in addition shall have the right to recover forthwith from Tenant:
Lease Agreement, Railhead Partners, L.L.C. and NaPro BioTherapeutics, Inc., Page 13

 

 


 

(i) Any and all Basic Rent and all other amounts payable by Tenant hereunder, which may then be due and unpaid, and Basic Rent for the remainder of the Term, subject to Landlord’s duty to undertake reasonable measures to mitigate such damage; and
(ii) Any and all other costs, fees and expenses incurred or due under the provisions of this Lease (including, without limitation, reasonable attorneys’ fees and expenses); or
(c) Any and all other remedies afforded by law.
13.2 Cumulative Remedies . No right or remedy herein conferred upon or reserved to Landlord is intended to be exclusive of any other right or remedy, and every right and remedy shall be cumulative and in addition to any other legal or equitable right or remedy given hereunder.
14. Additional Provisions .
14.1 Option to Extend Term . Landlord grants Tenant an option to extend the Term under the terms and conditions set forth in this section. On or before one hundred twenty (120) days prior to the expiration of the Term. Tenant may provide written notice to Landlord of its desire to exercise an option to extend the Term for an additional five (5) years. If timely notice of such event is provided and no defaults exist under the Lease, then the Term shall be extended until January 31, 2012 (the “ Extended Term ”) pursuant to the same terms and conditions of this Lease except that the Basic Rent shall be increased by Four Percent (4.0%) over the then-existing Basic Rent and in each succeeding year of the Extended Term, the Basic Rent shall be similarly increased by Four Percent (4.0%) over the last year’s Basic Rent. The applicable rents for the Extended Term is reflected on Exhibit C .
14.2 Brokerage Commission . Pursuant to Colorado Real Estate Commission Rule E-35, the parties acknowledge that they have received the Definitions of Real Estate Brokerage Relationships and timely notice that Coldwell Banker Commercial NRT, Incorporated (the “ Tenant’s Broker ”) represents Tenant as a buyer’s agent and The Colorado Group (the “ Landlord’s Broker ”) represents the Landlord as a seller’s agent, which relationship is further defined and detailed in a separate agreement. Landlord agrees to compensate Tenant’s Broker through Landlord’s Broker in conformity with a commission letter exchanged between the Brokers. Landlord agrees to compensate Landlord’s Broker in accordance with the provisions of a separate agreement. The parties hereto represent and warrant that other than Landlord’s Broker and Tenant’s Broker, no other brokerage fees or commissions are due and owing as a result of this transaction and should any other claims arise to the contrary, the party incurring the initial obligation shall hold harmless the other party from such liability.
14.3 Costs of Negotiation . Except as otherwise expressly provided herein, each party will pay all of its expenses, including attorneys and accountants’ fees, in connection with the negotiation of this Lease, the performance of its obligations hereunder, and the consummation of the transactions contemplated by this Lease.
14.4 Confidentiality . The parties agree that they each shall keep confidential any and all information furnished by the other party in connection with the transactions contemplated hereby, except to the extent any such information may be generally available to the public, obtained from independent sources or as required by law or judicial order or decree or by any governmental agency or authority.
Lease Agreement, Railhead Partners, L.L.C. and NaPro Bio Therapeutics, Inc., Page 14

 

 


 

14.5 Notices . Any notice required or permitted to be given under this Lease shall be in writing and shall be deemed to have been given or delivered when delivered by hand, overnight courier or 3 days after being deposited in a United States Post Office, registered or certified mail, postage prepaid, return receipt required, and addressed as follows:
If to Tenant :
NaPro BioTherapeutics, Inc.
6304 Spine Road, Unit A
Boulder, Colorado 80301
Attn: Vice President/General Counsel
Tel: (303) 516-8500
Fax: (303) 530-1296
If to Landlord :
RAILHEAD PARTNERS, LLC
P.O. Box 358
Nederland, CO 80466
Attn: Andrew Cookler, Manager
Tel: (303) 258-3577
Fax: (303) 258-3577
WTTH A COPY TO:
Victor M. Grimm, Esq.
Victor M. Grimm, P.C.
1027 14 th Street
Boulder, Colorado 80302
Tel: (303) 413-0565
Fax: (303) 413-0681
or to such other address as either party may from time to time specify in writing to the other. All rental payments shall be directed to Landlord’s address as shown above. Notwithstanding anything to the contrary contained herein, nothing shall preclude Landlord or Tenant from providing pre-litigation notices or service of process by posting or service as permitted by applicable Colorado law.
14.6 Holdover . In the event Tenant remains in possession of the Premises after the expiration of the tenancy created hereunder, and without the execution of a new lease, Tenant, at the option of Landlord, shall be deemed to be occupying the Premises as a tenant from month-to-month, at one and one-half (1 1 / 2 ) times the Basic Rent, subject to all the other conditions, provisions and obligations of this Lease insofar as the same are applicable to a month-to-month tenancy.
Lease Agreement, Railhead Partners, L.L.C. and NaPro BioTherapeutics, Inc., Page 15

 

 


 

14.7 Cure by Landlord . Landlord may, but shall not be obligated to, cure, at any time, without notice, any default by Tenant under this Lease; and whenever Landlord so elects, all costs and expenses by Landlord including, without limitation, reasonable attorneys’ fees together with interest on the amount of costs and expenses so incurred at the statutory judgment rate of Eight Percent (8.0%) per annum shall be paid by Tenant to Landlord on demand.
14.8 Heirs and Assigns . This Lease shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors, heirs, administrators and assigns. However, notwithstanding the foregoing, Tenant may not assign this Lease except as specifically provided herein.
14.9 Amendment . Unless otherwise provided in this Lease, this Lease may be amended, modified or terminated only by a written instrument executed by Landlord and Tenant.
14.10 Governing Law . This Lease shall be governed by and construed in accordance with the laws of the State in which the Property is located. The parties stipulate that proper forum and venue for the adjudication of any issues relative to this Lease is State Court in the County in which the Property is located.
14.11 Sole Agreement . This Lease and attached Exhibits supersedes all prior agreements and understandings between the parties hereto relating to the subject matter hereof. The parties do not intend to confer any benefit on any person, firm, or corporation other than the parties to this Lease, except as and to the extent otherwise expressly provided herein.
14.12 Attorneys’ Fees . In the event either party hereto fails to perform any of its obligations under this Lease or in the event a dispute arises concerning the meaning or interpretation of any provision of this Lease, the defaulting party or the party not prevailing in such dispute, as the case may be, shall pay any and all costs and expenses incurred by the other party in enforcing or establishing its rights hereunder, including, without limitation, court costs and reasonable attorneys’ fees.
14.13 Captions . The section titles or captions in this Lease are for convenience only and shall not be deemed to be part of this Lease.
14.14 Interpretation . All pronouns and any variations of pronouns shall be deemed to refer to the masculine, feminine, or neuter, singular or plural, as the identity of the parties may require. Whenever the terms referred to herein are singular, the same shall be deemed to mean the plural, as the context indicates, and vice versa.
14.15 No Waiver . No right under this Lease may be waived except by written instrument executed by the party who is waiving such right. No waiver of any breach of any provision contained in this Lease shall be deemed a waiver of any preceding or succeeding breach of that provision or of any other provision contained in this Lease. No extension of time for performance of any obligations or acts shall be deemed an extension of the time for performance of any other obligations or acts.
14.16 Severability . If any term, covenant, condition, or provision of this Lease or the application thereof to any person or circumstance shall, at any time or to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those to which it is held Invalid or unenforceable, shall not be affected thereby, and each provision of this Lease shall be valid and shall be enforced to the fullest extent permitted by law.
Lease Agreement, Railhead Partners, L.L.C. and NaPro BioTherapeutics, Inc., Page 16

 

 


 

14.17 No Recordation . Neither this Lease nor a Memorandum thereof shall be recorded with the Clerk and Recorder of the County in which the Property is situated. However, notwithstanding the foregoing, nothing contained herein shall prohibit the recordation of a nondisturbance agreement referenced in this Lease.
14.18 Authority . In the event the Tenant is not a natural person, Tenant and part(y)(ies) executing this Lease on behalf of Tenant shall represent and warrant that: (i) Tenant is an entity in good standing or licensed to do business in the State which the Property is located, (ii) parties executing this Lease on behalf of Tenant are duly authorized to execute same. In the event said representations and warranties are not made, Landlord shall have all available remedies against parties and Tenant including, but not limited to, holding the existing parties personally responsible for all debts and obligations arising under this Lease.
14.19 Exhibits . This Lease shall consist of this writing and the following exhibits:
     
Exhibit A:
  Description of Property
 
Exhibit B:
  Description of Premises
 
Exhibit C:
  Escalation Rider
 
Exhibit D:
  Conceptual Plan
 
Exhibit E:
  Tenant Work Letter
 
Exhibit F:
  List of Trade Fixtures and Items of Tenant
 
Exhibit G:
  List of Permitted Hazardous Materials
All of the foregoing exhibits and this Lease shall be deemed to comprise one document. In the event of any conflict between the Lease and any exhibits, the language in the exhibits shall control.
14.20 Counterparts . This Lease may be executed in counterparts.
Lease Agreement, Railhead Partners, L.L.C. and NaPro BioTherapeutics, Inc., Page 17

 

 


 

                 
 
               
AGREED TO BY AND BETWEEN THE PARTIES as of the day and date first written above.
 
               
LANDLORD:       TENANT:
 
               
RAILHEAD PARTNERS, LLC, a Colorado
limited liability company
      NaPro BioTherapeutics, Inc., a Delaware corporation
 
               
By:
  /s/ Andrew Cookler       By:   (SIGNATURE GRAPHIC)
 
               
 
  Andrew Cookler       Its:   VP/CFO
Its:
  Manager            
Lease Agreement, Railhead Partners, L.L.C. and NaPro BioTherapeutics, Inc., Page 18

 

 


 

EXHIBIT A
Legal Description of Real Estate
Parcel A:
Lots 11 and 12, Colorado and Southern Industrial Park, County of Boulder, State of Colorado
Parcel B:
Lot 3, Block 1, Colorado and Southern Industrial Park Filing No. 2, County of Boulder, State of Colorado

 

 


 

EXHIBIT B
Description of Premises
See attached Floor Plan.

 

 


 

EXHIBIT C
Escalation Rider No. 2
After the first twelve (12) month period of the Term, and on each anniversary thereafter the Basic Rent shall be adjusted upward by Four Percent (4.0%) of the Basic Rent for the immediately preceding “Yearly Period,” according to the following schedule:
                 
Period   Annual Rent     Monthly  
2/1/02-1/31/03
  $ 212,100.00     $ 17,675.00  
2/1/03-1/31/04
  $ 220,584.00     $ 18,382.00  
2/1/04-1/31/05
  $ 229,407.36     $ 19,117.28  
2/1/05-1/31/06
  $ 238,583.65     $ 19,881.97  
2/1/06-1/31/07
  $ 248,126.99     $ 20,677.25  
Extended Term
                 
Period   Annual Rent     Monthly  
2/1/07-1/31/08
  $ 258,052.07     $ 21,504.34  
2/1/08-1/31/09
  $ 268,374.15     $ 22,364.51  
2/1/09-1/31/10
  $ 279,109.12     $ 23,259.09  
2/1/10-1/31/11
  $ 290,273.48     $ 24,189.46  
2/1/11-1/31/12
  $ 301,884.42     $ 25,157.03  

 

 


 

EXHIBIT D
Conceptual Plan
[SEE ATTACHED]

 

 


 

EXHIBIT E
Tenant Work Letter
Landlord shall re-carpet and repaint the interior office areas and repaint the laboratory areas of the Premises at Landlord’s sole cost and expense. Any additional work shall be at the sole cost and expense of Tenant.

 

 


 

EXHIBIT F
List of Trade Fixtures and Items of Tenant
Non-Attached trade fixtures and items including, but not limited to:
Refrigerator (lunch room)
Microwave (lunch room)
Computers
Phones
Office furniture
Office equipment (examples: copy machine, fax, etc.)
Laboratory equipment (examples: rotovaps, balances, etc.)
Flammable cabinets
Other non-attached storage cabinets (glassware, etc.)
Employee personal effects
Items belonging to Tenant which are non-permanently attached to the building to comply with equipment manufacturer’s installation instructions for safe and proper use:
Air compressor
Compressed gas switch gear
Milli-Q water purification system

 

 


 

EXHIBIT G
List of Permitted Hazardous Materials
The following classes of materials may be used in greater than de minimis quantities as defined in the regulations detailed in section 10.12.
Alcohols
Carboxylic Esters
Aromatic Hydrocarbons
Alipmatic Hydrocarbons
Chlorinated Hydrocarbons
Esters
Other classes of materials may be received, stored, used, and/or disposed which are defined as hazardous under section 10.12, but such materials shall only be received, stored, used, and/or disposed in quantities below the de minimis levels defined in section 10.12 of this Agreement.
Example: Lithiated bases.

 

 


 

RAILHEAD PARTNERS L.L.C.
P.O.B. 358
NEDERLAND, CO 80466
303/258-3577
Andrew Cookler
Manager
September 24, 2003
Mr. Hugh Dunkerley
Vice President of Corporate Development
ChromaDex Analytics, Inc.
Dear Hugh,
This letter shall serve as Amendment 1 to the Lease Agreement dated October 26, 2001, as amended and assigned, by and between ChromaDex Analytics, Inc. as Tenant and Railhead Partners LLC, as Landlord.
The above parties agree to amend the original lease as follows:
  1)   Tenant shall occupy the premises at 2830 Wilderness PI. Suite F. Such tenancy shall commence on November 1, 2003 and shall expire on January 31, 2011.
 
  2)   The monthly rent shall be:
         
November 1, 2003 to January 31, 2005
  $ 1929.17  
February 1, 2005 to January 31, 2006
  $ 1987.05  
February 1, 2006 to January 31, 2007
  $ 2046.66  
February 1, 2007 to January 31, 2008
  $ 2108.06  
February 1, 2008 to January 31, 2009
  $ 2171.30  
February 1, 2009 to January 31, 2010
  $ 2236.44  
February 1, 2010 to January 31, 2011
  $ 2303.53  
 
  3)   Tenant agrees to pay a security deposit to Landlord in the amount of $2000 on or before October 15, 2003.
 
  4)   Save and except for the foregoing provisions, all other paragraphs and covenants shall remain in effect as therein stated. In the event of a conflict between the provisions of this Amendment 1, or any other Amendments or Addendums, and the Lease agreement, then the provisions of this Amendment 1 shall prevail.
                 
Dated as of the 24 of SEPTEMBER, 2003        
 
               
Landlord:       Tenant:
Railhead Partners LLC       ChromaDex Analytics, Inc.
 
               
By:
  /s/ Andrew Cookler       By:   /s/ Hugh Dunkerley
 
               
Andrew Cookler       Title:   VP Corporate Development
Manager            

 

 


 

ADDENDUM
TO LEASE AGREEMENT
This Addendum to Lease Agreement is made as of this 30 th day of July 2003. This Addendum to Lease Agreement (hereinafter the “Addendum” ) modifies and amends the Lease Agreement dated October 26, 2001, as amended and assigned (collectively, the “ Lease ”) by and between ChromaDex Analytics, Inc.(hereinafter referred to as “Tenant” ) and Railhead Partners, LLC, a Colorado limited liability company (hereinafter referred to as “Landlord”) . The provisions of this Addendum shall modify and supersede any conflicting or contrary provisions of the Lease. All terms in the Addendum shall have the same meaning as set forth in the Lease except to the extent modified herein. The remaining provisions of the Lease shall continue in full force and effect.
RECITALS
A. The Lease between the parties originally contemplated that the Term of the Lease shall expire on January 31, 2007.
B. The parties are desirous of amending the Lease so as to specify their respective rights and obligations concerning the aforementioned issues relative to the tenancy.
NOW, THEREFORE, for good and valuable consideration, including mutual promises and covenants contained herein, the parties agree as follows:
1. Extension of Term. The Term of the Lease is hereby extended through and including January 31, 2011 (the extended term from February 1, 2007 through January 31, 2011 shall be referred to hereinafter as the “Extended Term.”)
2. Rent for Extended Term. Tenant shall pay to Landlord Annual Rent for the Extended Term based upon the last sum of Basic Annual Rent (for February 1, 2006 through January 31, 2007), increased by Four Percent (4.0%) for the first twelve (12) months of the Extended Term, each twelve (12) months thereafter, the Basic Annual Rent shall be increased by an additional Four Percent (4.0%) over the last year’s Basic Annual Rent.
3. Landlord Concession for Lease Extension. In consideration for Tenant’s agreement to extend the original Term of the Lease, Landlord hereby agrees to reimburse to Tenant certain costs to be incurred as a result of deferred maintenance upon the HVAC system currently located upon and serving the Premises. More specifically, Landlord agrees to be responsible and to pay for reimbursement of the following maintenance, service and repair items:
    Replace 40 Airguard box filters on MUA-1 and MUA-2
 
    Power wash MUA-1, MUA-2, RTU-1, CU-1 and Chiller-1
Page 1 of 2

 

 


 

    Cooling seasonal startup on MUA-1, MUA-2, RTU-1, Chiller-1, P-4, P-5, CU-1, AHU-1 and Compression Tank 1
 
    Change pre-filters on MUA-1, MUA-2 and RTU-1
 
    Installation of an ICM 450 Phase Monitor on MUA-1 and set-up of the new monitor to factory specifications
 
    Replace failed belts on EF-2 and EF-4
(hereinafter referred to as the “HVAC Repair Items.” ) Landlord is in receipt of bids provided by Timberline Mechanical Systems, LLC, which bid amounts total Fourteen Thousand Three Hundred Fifty-Eight and 29/100 Dollars ($14,358.29) (the “Bid Amount.”) Landlord agrees to reimburse to Tenant, upon the remittance of a final statement for work performed up to a maximum of the Bid Amount. Tenant agrees to be responsible for any amounts over the Bid Amount.
4. Tenant’s Continued Liability. Notwithstanding the foregoing Landlord concessions, payment of same shall in no way be deemed to be a waiver or release of Tenant’s continued liability relative to the HVAC and other items and systems within the Premises as required by the Lease.
5. Remaining Provisions. Except as explicitly modified and set forth herein, the remaining terms, provisions, covenants and agreements set forth in the Lease shall continue in full force and effect.
IN WITNESS WHEREOF, the parties heretofore duly executed this Addendum as of the date first above written.
                 
Tenant:       Landlord:
 
               
ChromaDex Analytics, Inc.       Railhead Partners, LLC, a Colorado limited
liability company
 
               
By:
  /s/ Hugh Dunkerly       By:   /s/ Andrew Cookler
 
               
 
  Hugh Dunkerly           Andrew Cookler
Its:
  Vice President, Corporate Development       Its:   Manager
 
               
Date:
  July 30 th , 2003       Date:   Aug 11, 2003
Page 2 of 2

 

 

Exhibit 10.9
LICENSING AGREEMENT
NUTRACEUTICAL STANDARDS
THIS AGREEMENT is made and entered into by and between The University of Mississippi, an education and research institution chartered under the laws of the State of Mississippi, with a principal address at University, Mississippi 38677 (“UNIVERSITY”) and ChromaDex, Inc. an incorporated company with a principal address at 8 Garzoni Aisle, Irvine California, 92606 (“CHROMADEX”).
RECITALS
1. UNIVERSITY leads a program of natural products discovery, development and commercialization, and its National Center for Natural Products Research is the nation’s only university-based research center dedicated to an integrated program of discovering, developing and commercializing new pharmaceuticals and agrochemicals derived from natural sources.
2. UNIVERSITY has developed and owns rights to Know-how, data, methods of analysis, trade secrets, technology, skill, and experience relating to the scientific investigation, extraction, purification of chemical constituents, analysis and development of reference standards from a wide variety of natural product sources which, to the extent not disclosed in issued patents, are confidential and proprietary.
3. CHROMADEX is a company engaged in the development, marketing and selling of reference standards for the Nutraceutical market and the identification and isolation of the constituents thereof and methodologies related thereto, and is interested in obtaining from UNIVERSITY an exclusive license to the Technology herein defined in the USA and foreign countries.

 

 


 

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants and agreements of the parties contained in this Agreement, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms will have those meanings set forth in this Article unless the context dictates otherwise:
1.01 “ Effective Date of this Agreement ” means December 31, 1999.
1.02 “ Technology ” means any and all information, and all patentable and non-patentable inventions, discoveries, improvements, claims, formulae, trade secrets, processes, methods, data and Know-how developed, conceived, first reduced to practice or demonstrated to have utility by or on behalf of UNIVERSITY on the compounds specified in the Research Project as detailed in Appendix A that relates to the extraction, isolation and purification of chemical constituents for use as reference standards and for the further purification or characterization of reference standards acquired from other sources. “Methods Technology” means all methods, processes and related data and Know-how included in the Technology, and “Products Technology” means all reference standards developed included in the Technology. Excluded from Technology are any and all information, and all patentable and non-patentable inventions, discoveries, improvements, claims, formulae, trade secrets, processes, methods, data and Know-how developed, conceived, first reduced to practice or demonstrated to have utility by or on behalf of UNIVERSITY on the compounds specified in the Research Project as detailed in Appendix A that relates to the research and development of new pharmaceutical or agrochemical ingredients or products.
1.03 “ Affiliate ” means any corporation, company, partnership, joint venture or other entity that controls, is controlled by or is under common control with CHROMADEX. For the purposes of this definition, “control” means the direct or indirect ownership of at least fifty percent (50%), or such lesser amount that is the maximum percentage allowed by applicable law, of the shares entitled to vote or of the ownership Interest.
1.04 “ Field of Use ” means the use of the Methods Technology for the identification, isolation and purification of chemical constituents for use as reference standards, and the commercialization thereof; and the development, manufacture, marketing and other commercialization of the Products Technology.

 

2


 

1.05 “ Territory ” means the entire world.
1.06 “ Reference Standard ” means any material sold for the purposes of providing a material in a purified or semi-purified form for use in analytical testing of materials from other sources.
1.07 “ Licensed Standard ” means any Reference Standard or part thereof originating directly from the conduct of the Research Project as detailed in Appendix A that (a) uses in whole or in part any information covered in the UNIVERSITY Know-how or any issued, unexpired claim or pending claim contained in the patent rights in the country in which any such standard or part thereof is made, used or sold; or (b) is covered in whole or in part or is manufactured using a process or is employed to practice a process covered in the UNIVERSITY Know-how or any issued, unexpired claim or pending claim contained in the Patent Rights in the country in which any such Reference Standard or part thereof is made, used or sold.
1.08 “ Gross Sales ” means the gross receipts from the sale of Licensed Standards by CHROMADEX, and its Affiliates, less allowances for:
  (a)   any cash, trade or quantity discounts;
 
  (b)   sales taxes, duties or similar taxes or levies;
 
  (c)   returns and replacements.
Licensed Standards will be considered “sold” when billed out or invoiced.
1.09 “ Net Profits ” shall be determined on a quarterly basis as follows: Net Profits shall equal the gross revenues of CHROMADEX for such fiscal quarter less all costs and expenses directly associated with the generation of revenue; provided, however, that depreciation and amortization shall not be a deduction, and capital expenditures, debt service payments of principal and interest and tax payments shall be deductions in calculating Net Profits for such quarter.
1.10 “ Know-how ” means all existing information, materials and devices, whether or not patented or patentable, pertaining to the claims that describe the Technology and any related patent rights that are owned or controlled by UNIVERSITY or its affiliates as of the date of this Agreement and all of the above developed by UNIVERSITY and delivered by UNIVERSITY to CHROMADEX during the term of the Research Project funded by CHROMADEX as detailed in Appendix A.

 

3


 

1.11 “ UNIVERSITY Personnel ” means any University of Mississippi employee, student, or independent contractor, including any consultant under obligation of confidentiality to UNIVERSITY.
1.12 “ CHROMADEX Personnel ” means any CHROMADEX employee or independent contractor, including any consultant under obligation of confidentiality to CHROMADEX.
1.13 “ Research Project ” means the project conducted by UNIVERSITY under a grant from CHROMADEX as detailed in Appendix A to develop specific botanical reference standards that is incorporated herein by reference. The Research Project may be amended by mutual agreement in writing by both parties. An amendment to the Research Project will be attached as an amendment to this Agreement unless the scope of the Research Project has changed such that either party requests a separate licensing agreement to cover the intellectual property that may result from the amended research plan.
1.14 “ Licensing Income ” means payments made by CHROMADEX to UNIVERSITY in consideration of the license rights granted by UNIVERSITY to CHROMADEX to make, have made, use and sell Licensed Standards and Technology.
ARTICLE II
LICENSE
2.1 Grant . UNIVERSITY grants to CHROMADEX the exclusive right and license to Technology originating from the Research Project in the Territory for the Field of Use, and to the extent not prohibited by patents owned by third parties to make, have made, use and sell Licensed Standards and Technology until the end of the Term of this Agreement (as hereinafter defined) unless CHROMADEX’s rights under this Agreement are sooner terminated according to the terms hereof.

 

4


 

2.2 Reservation . UNIVERSITY reserves the right to practice Methods Technology and utilize Products Technology and Know-how for research and product development purposes outside the Field of Use, UNIVERSITY reserves the right to practice Methods Technology and utilize Products Technology and Know-how for its own research purposes.
2.3 Sublicenses . CHROMADEX will have the right to enter into sublicensing agreements for the rights, privileges and licenses granted hereunder during the Term of this Agreement subject to advanced written consent of the UNIVERSITY. Such written consent will not be unreasonably withheld or delayed. CHROMADEX agrees that any sublicenses granted by it will provide that the obligations to UNIVERSITY including Articles 4, 5, 6, 7, 8 and, 9 of this Agreement will be binding upon the Sublicensee as if it were a party to this Agreement. CHROMADEX agrees to forward to UNIVERSITY a full and complete copy of any and all sublicense agreements within ten (10) days of execution by the parties, which UNIVERSITY will treat as Confidential Information. Upon any termination of this Agreement, rights of any sublicensees will also terminate, subject to Paragraph 6.5 hereof.
2.4 Equity Position . CHROMADEX grants UNIVERSITY a two percent (2%) equity position in CHROMADEX based on the capitalization of CHROMADEX as of the date hereof, as set forth in Appendix B which is incorporated herein by reference. In any transaction under which CHROMADEX’ capital stock is issued, CHROMADEX shall issue additional shares to UNIVERSITY at no cost, such that UNIVERSITY’s capital stock shall be undiluted until CHROMADEX has issued capital stock at a valuation of at least four million dollars ($4,000,000), but in any case UNIVERSITY’s capital stock shall not be treated in a manner less favorable than the capital stock of the founders. UNIVERSITY will accomplish vesting in the equity position by the completion of the specific milestone activities agreed to by both parties as defined in Appendix B, which is incorporated herein by reference. Should UNIVERSITY be unable to complete the milestones stipulated in Appendix B due to the lack of availability of, or delay in providing the raw materials that are to be supplied by CHROMADEX, then the parties will negotiate in good faith a modification of the milestone deadlines, which they will then agree to in writing.

 

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2.5 Licensing Income . In addition to the Equity Position stipulated in Paragraph 2.4 hereof, CHROMADEX will pay UNIVERSITY on a quarterly basis twenty-five (25) percent of the Net Profits of the company, including revenue generated by CHROMADEX from business activities outside the sale of Licensed Standards and Technology, or two (2) percent of the Gross Sales of the Licensed Standards and Technology whichever is greater, not to exceed a total annual payment of $325,000 per 12-month period until the total of such payments equals $487,500 and thereafter two (2) percent of the Gross Sales of the Licensed Standards. In addition to the two (2) percent payment referred to above on CHROMADEX’ Gross Sales, UNIVERSITY will be entitled to receive a “pass through royalty” (the “Pass Through Royalty”) of twenty (20) percent of all license fees, milestone payments, maintenance fees, and royalties received by CHROMADEX from sublicensees, but not in excess of two (2) percent of such sublicensees’ Gross Sales, and specifically excluding any payment to UNIVERSITY with regard to consideration received by CHROMADEX for research and development activities or the acquisition of securities of CHROMADEX. Payments will be paid by CHROMADEX within forty-five (45) days of the close of each quarter to The University of Mississippi, University, Mississippi 38677 or at such other places as UNIVERSITY may reasonably designate.
ARTICLE III
TECHNOLOGY TRANSFER, PUBLICATIONS AND INVENTIONS
3.0 Cooperation . UNIVERSITY agrees to provide assistance to CHROMADEX in the transfer of the methods, of preparing and analyzing the Licensed Standards and in presenting technical data at conferences and trade shows. The UNIVERSITY agrees to make Dr. Ikhlas Khan of UNIVERSITY available to CHROMADEX under the terms of a separate consulting agreement to be negotiated in good faith by both parties. Termination of the consulting agreement or Dr. Khan’s departure from UNIVERSITY is not a breach of this Agreement as described in Section 6.1.
3.1 Publications . UNIVERSITY will be free to publish or present any data generated on the Technology prior to the signing of this agreement. Both parties recognize that either party may wish to publish the results of its work under this Agreement. However, both parties recognize the importance of acquiring patent protection on inventions. Consequently, any proposed publication arising from work conducted under this Agreement by UNIVERSITY or CHROMADEX Personnel will comply with this section. At least thirty (30) days before a manuscript is to be submitted to a publisher, UNIVERSITY or CHROMADEX Personnel will provide the other party with a copy of the manuscript.

 

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If UNIVERSITY or CHROMADEX Personnel wish to make an oral presentation, they will provide the other party with a copy of the abstract (if one is submitted) at least thirty (30) days before it is submitted. UNIVERSITY or CHROMADEX Personnel will also provide the other party with a copy of the text of the presentation, including all slides, posters, and any other visual aids, at least thirty (30) days before the presentation is made. CHROMADEX or UNIVERSITY will review the manuscript, abstract, or text to determine if patentable subject matter is disclosed. CHROMADEX or UNIVERSITY will notify the party that desires to publish within twenty-one (21) days of receipt of the proposed Publication if they determine that patentable subject matter is or may be disclosed, or if they believe confidential or proprietary information is or may be disclosed. If it is determined by CHROMADEX or UNIVERSITY that patent applications should be field, UNIVERSITY or CHROMADEX Personnel will delay its publication or presentation for a period not to exceed ninety (90) days from CHROMADEX’s or UNIVERSITY’s receipt of the proposed Publication to allow time for the filing of patent applications covering patentable subject matter. In the event that the delay needed to complete the filing of any necessary patent application will exceed the ninety (90) day period, UNIVERSITY or CHROMADEX Personnel will discuss with the party that desires to publish the need for obtaining an extension of the publication delay beyond the ninety (90) day period. The publication delay will not exceed 120 days from the date that the proposed publication was first submitted to CHROMADEX or UNIVERSITY for review, except that, by mutual agreement, as provided in this Section, this delay may be extended past the 120 day period for purposes of filing patent applications. If it is determined by CHROMADEX and UNIVERSITY that confidential or proprietary information is being disclosed, the parties will consult among themselves in good faith to arrive at agreement on mutually acceptable modifications to the proposed publication to avoid such disclosure.
3.2 Ownership of Inventions . It is recognized that inventions may be developed, conceived, first reduced to practice or demonstrated to have utility during the conduct of or arising from or resulting from the work conducted under the Research Plan. As a guide to allocation of ownership of such inventions, whether patentable or unpatentable, the parties agree that:
  (a)   Inventions made solely by employees of CHROMADEX (“CHROMADEX Inventions”) shall be owned by CHROMADEX.

 

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  (b)   Inventions made solely by employees of UNIVERSITY (“University Inventions”) shall be owned by UNIVERSITY; and
  (c)   Inventions made jointly by UNIVERSITY personnel and CHROMADEX personnel (“Joint Inventions”) will be jointly owned by UNIVERSITY and CHROMADEX. All UNIVERSITY Inventions and Joint Inventions shall constitute Technology hereunder licensed exclusively to CHROMADEX in accordance with the terms of this Agreement
ARTICLE IV
CONFIDENTIALITY
4.0 Confidentiality; Exceptions . Except to the extent expressly authorized by this Agreement or as otherwise agreed to in writing, UNIVERSITY and CHROMADEX agree that any technical information, data and Materials which they exchange in connection with this Agreement will be treated as Confidential Information, and that each party will not use such Confidential Information for its own purposes except as permitted hereunder, nor disclose it to others, except to the extent that it can be established by the receiving party by competent proof that such Confidential Information:
(a) was a part of the public domain at the time of its disclosure to the receiving party; or
(b) became a part of the public domain after its disclosure to the receiving party, but not due to some unauthorized act by or omission of such party; or
(c) was already known to the receiving party, other than under an obligation of confidentiality at the time of disclosure by the other party, as evidenced by its written records; or
(d) was disclosed to the receiving party, other than under an obligation of confidentiality, by a third party who has the right to make such disclosure.

 

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Not withstanding the foregoing, each party may disclose the other’s Confidential Information to the extent such disclosure is reasonably necessary in filing or prosecuting patent applications, prosecuting or defending litigation, complying with applicable governmental regulations or as required by other applicable laws, provided that if a party is required to make any such disclosure of the other party’s Confidential Information it will give reasonable advance notice to the other party of such disclosure requirement and, except to the extent inappropriate in the case of patent applications, will use its best efforts to secure confidential treatment of such Confidential Information required to be disclosed.
4.1 Term . The confidentiality obligations under Section 4.0 will remain in effect during the Term of this Agreement and for a period of five years thereafter.
ARTICLE V
WARRANTY; INDEMNIFICATION; PATENT INFORCEMENT
5.0 Warranty . EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, THE UNIVERSITY OF MISSISSIPPI, ITS TRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES AND AFFILIATES MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OF PATENT RIGHTS CLAIMS, ISSUED OR PENDING, AND THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION MADE OR WARRANTY GIVEN BY THE UNIVERSITY OF MISSISSIPPI THAT THE PRACTICE BY CHROMADEX OF THE LICENSE GRANTED HEREUNDER SHALL NOT INFRINGE THE PATENT RIGHTS OF ANY THIRD PARTY. IN NO EVENT SHALL THE UNIVERSITY OF MISSISSIPPI, ITS TRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES AND AFFILIATES BE LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING ECONOMIC DAMAGE OR INJURY TO PROPERTY AND LOST PROFITS, REGARDLESS OF WHETHER THE UNIVERSITY OF MISSISSIPPI SHALL BE ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE POSSIBILITY. UNIVERSITY WARRANTS THAT IT HAS NOT RECEIVED WRITTEN NOTICE OF INFRINGEMENT OF THE PATENT RIGHTS OF ANY THIRD PARTY.

 

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5.1 Indemnification . CHROMADEX will defend, indemnify, and hold UNIVERSITY its trustees, officers and employees and Affiliates harmless from and against any and all claims, suits or demands for liability, damages, costs and expenses (including the costs and expenses of attorneys and other professionals) resulting from personal injury, product liability or property damage relating to or arising from the development, manufacture, use or sale of Licensed Standards or Technology by CHROMADEX, its Affiliates or its sublicensees.
5.2 UNIVERSITY Representation by Attorney General . In the event that UNIVERSITY seeks indemnification under Section 5.1, UNIVERSITY agrees to: (i) promptly inform CHROMADEX of any claim, suit or demand threatened or filed, (ii) jointly cooperate in the defense of any litigation or claims resulting there from, and (iii) cooperate as requested (at the expense of the indemnifying party) in the defense of the claim. However, nothing in this Section would prohibit the Office of the Attorney General of the State of Mississippi from providing legal representation to UNIVERSITY.
5.3 Patent Enforcement . CHROMADEX and/or its sublicensees will have the first right to institute patent infringement actions against third parties based on any applicable patent or patent application licensed under this Agreement. If CHROMADEX does not institute an infringement proceeding against an offending third party, UNIVERSITY will have the right, but not the duty, to institute such an action. The costs and expenses of any such action (including fees of attorneys and other professionals) will be borne by the party instituting the action, or if the parties elect to cooperate in instituting and maintaining such action, such costs and expenses will be borne by the parties in such proportions as they may agree in writing. Each party will execute all necessary and proper documents and take such action as will be appropriate to allow the other party to institute and prosecute such infringement actions. Any award paid by third parties as a result of such an infringement action (whether by way or settlement or otherwise) will be paid to the party who instituted and maintained such action, or, if both parties instituted and maintained such action, such award will be allocated among the parties in proportion to their respective contributions to the costs and expenses incurred in such action; except that if CHROMADEX institutes and maintains such action such an award, after deducting CHROMADEX’s out-of-pocket expenses for instituting and maintaining such an action, shall be considered Gross Sales for the purposes of determining royalties due to UNIVERSITY pursuant to Paragraph 2.5.

 

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ARTICLE VI
TERM; TERMINATION
6.0 Term of Agreement . This Agreement will commence as of the Effective Date of this Agreement and all rights licensed to CHROMADEX hereunder shall last for twenty (20) years or until the last to expire patent which covers a Licensed Standard whichever is longer unless this Agreement is terminated by UNIVERSITY according to Sections 6.1 or 6.2. This Agreement may be extended by mutual agreement by both parties.
6.1 Termination by Breach . Either party may terminate this Agreement if the other party materially breaches it. The party claiming a material breach will give 60 days written notice of termination to the other party setting forth the alleged breach. If the party alleged to be breaching the Agreement does not cure the breach within such 60-day period, then the non-breaching party will have the right to terminate this Agreement by giving a second written notice to the breaching party of such termination, and such termination will be effective upon receipt of the second written notice. Any failure to cancel the Agreement or notify of any breach will not constitute a waiver by the aggrieved party of the right to terminate the Agreement for any other breach, whether or not similar.
6.2 Termination by UNIVERSITY . UNIVERSITY will have the right to terminate this Agreement if CHROMADEX fails to pay any amount of the payments due and payable under the terms of this Agreement. UNIVERSITY shall give written Notice of its decision to terminate this Agreement specifying the failure. Unless CHROMADEX has remedied such failure thirty (30) days after receipt of such Notice, this Agreement will be deemed to terminate as of the expiration of such thirty (30) day period.
6.3 Termination by CHROMADEX . CHROMADEX will have the right to terminate this Agreement at any time on six (6) months’ notice to UNIVERSITY, and upon payment of all amounts due UNIVERSITY through the effective date of the termination. Such termination by CHROMADEX will not affect the equity position of UNIVERSITY or Licensing Income owed UNIVERSITY by CHROMADEX or any sublicensees on the sale of Licensed Standards.

 

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6.4 Payments After Termination . CHROMADEX will continue to pay UNIVERSITY all Licensing Income due UNIVERSITY on the sale of Licensed Standards and Technology.
6.5 Surviving Rights .
(a) Any termination under this Agreement will not relieve CHROMADEX or UNIVERSITY of any obligation or liability accrued hereunder prior to such termination, including specifically UNIVERSITY’S right to indemnification set forth in Section 5.1, CHROMADEX’S right and license to Licensed Standards, Technology, Patent Rights and Know How developed prior to the date of termination, and CHROMADEX’S obligation to continue to pay UNIVERSITY Licensing Income with respect thereto; nor rescind or give rise to any right to rescind anything done or any payments made or other consideration given hereunder prior to the time of such termination and will not affect in any manner any rights of either party arising out of this Agreement prior to such termination.
(b) Unless expressly provided to the contrary, the following provisions will survive the termination of this Agreement: Sections 2.4, 2.5, 3.1, 4, 5, 6, 7, 8 and 9 as well as any other provisions which by their intent or meaning are intended to have a validity beyond the termination of this Agreement.
6.6 Rights of Sublicensees After Termination . Upon termination of this Agreement for any reason, any sublicensee not then in default shall have the right to obtain a license from UNIVERSITY on the same terms as specified in this Agreement and University agrees to grant such licenses.
ARTICLE VII
ACCOUNTING; AUDITING
7.0 Accounting . CHROMADEX will deliver to UNIVERSITY within forty-five (45) days after the termination of each calendar quarter following the Effective Date of this Agreement, a true and accurate report in writing setting forth the Gross Sales of Licensed Standards and Technology, the Net Profits of CHROMADEX (until University has received payments pursuant to Section 2.05 totally to $487,500), and the amount of Licensing Income due to UNIVERSITY with respect to the previous calendar quarter by CHROMADEX. With each such report submitted, CHROMADEX will pay to UNIVERSITY the payments due and payable under this Agreement. If no payments are due, CHROMADEX will so report.

 

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7.1 Auditing . CHROMADEX will keep, and will cause its Affiliates and sublicensees to keep, full, true and accurate books of account in accordance with current generally accepted accounting procedures containing all particulars that may be necessary for the purpose of showing the amounts payable to UNIVERSITY hereunder. Said books of account will be kept at CHROMADEX’s principal place of business or the principal place of business of the appropriate division of CHROMADEX to which this Agreement relates. Said books and the supporting data will be open at all reasonable times and on reasonable notice twice each calendar year for two (2) years following the end of the calendar year to which they pertain, to the inspection of UNIVERSITY or its agents for the purpose of verifying CHROMADEX’s milestone payments or compliance with other respects of this Agreement. Should such inspection lead to the discovery of a greater than five percent (5%) discrepancy to UNIVERSITY’s detriment, CHROMADEX will pay the full cost of such inspection; otherwise the cost will be borne by UNIVERSITY.
ARTICLE VIII
RESOLUTION OF DISPUTES
8.0 Mandatory Mediation . If CHROMADEX and UNIVERSITY are unable to reach agreement by negotiating in good faith concerning any matter under this Agreement, or if any other dispute arises under this Agreement, the parties agree to attempt to resolve the dispute themselves, and if they fail to do so, they agree that any dispute remaining hereunder will first be subject to a mandatory mediation process to occur not more than ninety (90) days after determination that an unresolved dispute has arisen, such mediation to be conducted in accordance with the commercial mediation rules of the American Arbitration Association.
ARTICLE IX
MISCELLANEOUS
9.0 Force Majeure . Neither party to this Agreement shall be liable for or be in breach of any provision hereof for any failure or delay on its part to perform any obligation (other than the obligation to make payments when due and except for any obligations either party may have in connection with the license rights granted pursuant to Section 1(d) above) under any provision of this Agreement because of an event of “force majeure”, including, but not limited to, any act of God, fire, flood, explosion, unusually severe weather, war, insurrection, riot, sabotage, labor unrest, strikes or work stoppages or any other cause whatsoever, whether similar or dissimilar to those enumerated herein, beyond any reasonable possibility of control of such party, if and only if the party affected shall have used all reasonable efforts under the circumstances to avoid such occurrence and to remedy it promptly if it shall have occurred.

 

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9.1 Agency/Partnership . Nothing in this Agreement is to be construed or interpreted as creating an agency, joint venture, partnership, or similar relationship between UNIVERSITY, UNIVERSITY Personnel, and CHROMADEX and in no case will UNIVERSITY Personnel be deemed to be employees of CHROMADEX.
9.2 Public Announcements . Except as required by law, neither party will make any public announcement or press release concerning this Agreement or the subject matter of this Agreement without the prior written consent of the other party. Such written consent will not be unreasonably withheld or delayed. In the event of a required public announcement or press release, the party making such announcement will provide the other with a copy of the proposed text prior to such announcement.
9.3 Use of Name . Neither party will have any right to use the name or other designation of the other party for any purpose without the express written consent of such party, as appropriate.
9.4 Binding Effect . This Agreement will not be binding upon the parties until it has been signed below by or on behalf of each party, in which event it will be effective as of the Effective Date of this Agreement.
9.5 Assignment . Except as provided below, neither this Agreement nor any right or obligation arising hereunder may be assigned by either party, in whole or in part, without the prior written consent of the other party, provided that CHROMADEX, upon written notice to UNIVERSITY, may assign this Agreement to a subsidiary or affiliate, or to the purchaser of substantially all of its assets, or to another company with which CHROMADEX consolidates or is merged. This Agreement will be binding upon any assignor and, subject to the restrictions on assignment set forth in this Agreement will inure to the benefit of the successors and assigns of each of the parties hereto.

 

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9.6 Amendment . This Agreement may not be amended, supplemented or otherwise modified except by an instrument in writing signed by both parties.
9.7 Waiver . No provision of this Agreement will be waived by any act, omission or knowledge of a party or its agents or employees, except by an instrument in writing expressly waiving such provision and signed by the waiving party.
9.8 Severability . If any provision of this Agreement is or becomes or is deemed invalid, illegal, or unenforceable in any jurisdiction, such provision will be deemed amended to conform to applicable laws so as to be valid and enforceable or, if it cannot be so amended without materially altering the intention of the parties, it will be stricken and the remainder of this Agreement will remain in full force and effect.
9.9 Notices . Any payment, notice, or other communication required or permitted to be made will be deemed given on the date personally delivered or mailed if sent to such party by hand delivery, facsimile (receipt verified), overnight courier (receipt verified) or certified or registered mail, postage prepaid, addressed to it at its address set forth below or to such other address as it will designate by written notice to the other party as follows:
In the case of UNIVERSITY, to:
Walter G. Chambliss, Ph.D.
Associate Director
National Center for Natural Products Research
School of Pharmacy
The University of Mississippi
University, Mississippi 38677

 

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with a copy to:
Alice M. Clark, Ph.D.
Director
National Center for Natural Products Research
School of Pharmacy
The University of Mississippi
University, Mississippi 38677
In the case of CHROMADEX, to:
Frank Jaksch
CEO
ChromaDex, Incorporated
8 Garzone Aisle
Irvine, CA 92606
with a copy to:
Mark S. Germain
81 Main Street
White Plains, N.Y. 10601
9.10 Governing Law . This Agreement will be construed and the legal relations between the parties determined in accordance with the law of the State of Mississippi. The parties hereby irrevocably submit to the exclusive jurisdiction of any Mississippi State or Federal court sitting in the State of Mississippi. The parties hereby irrevocably waive the defense of an inconvenient forum to the maintenance of any such action or proceeding.
9.11 No Conflicts . Each of UNIVERSITY and CHROMADEX represent that they have executed no agreement that is in conflict with this Agreement, and agree that no option or license will be granted on any basis to any third party that is in conflict with this Agreement unless and until this Agreement is terminated.

 

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9.12 Entire Understanding . This Agreement embodies the entire understanding of the parties and will supersede all previous communication, representations, or undertakings, either verbal or written, between the parties relating to the subject matter of this Agreement.
9.13 Headings . The Article and Section headings contained in this Agreement are inserted for convenience of reference only, and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.
9.14 Counterparts . This Agreement may be executed in two counterparts, either one of which need not contain the signature of more than one party, but both such counterparts will constitute the same agreement.
9.15 Due Authority . The persons executing this Agreement on behalf of UNIVERSITY and CHROMADEX represent and warrant that they are duly authorized to legally bind UNIVERSITY and CHROMADEX, respectively, to the terms and conditions of this Agreement.

 

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed by its legally authorized agent on the day and year indicated below.
THE UNIVERSITY OF MISSISSIPPI
         
/s/ Ronald F. Borne
  Date:   8/14/00
 
       
Ronald F. Borne
       
Interim Vice Chancellor for Research
 
       
Acknowledged by:
       
 
       
/s/ Ikhlas Khan
  Date:   8/11/00
 
       
Ikhlas Khan
       
Research Assistant Professor, National Center for Natural Products Research
 
       
/s/ Alice M. Clark
  Date:   8/11/00
 
       
Alice M. Clark
       
Director, National Center for Natural Products Research
 
       
/s/ Robert D. Sindelar
  Date:   8-17-00
 
       
Robert D. Sindelar, Ph.D., Interim Dean, School of Pharmacy
 
       
CHROMADEX
       
 
       
/s/ Frank Jaksch
  Date:   8/22/00
 
       
Frank Jaksch
       
CEO
       

 

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APPENDIX A
Research Grant

 

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(CHROMADEX LOGO)  
8 Garzoni Aisle
Irvine, CA 92606

Phone: (949)955-3912
Fax:      (949)955-3913
E-mail: chromadex@home.com
LETTER OF AWARD FROM CHROMADEX
     
Submitted to:  
University of Mississippi
   
National Center for Natural Products Research
   
 
Proposal Title:  
Isolation of Reference Compounds and Their Isolation Procedures
   
 
Investigator:  
Dr. Ikhlas Khan
   
 
Amount Requested:  
$525,000
   
 
Award Payment Terms:  
 
6 Quarterly payments of $87,500
Award Payment Dates:
  1)   January 15, 2000
 
  2)   April 15, 2000
 
  3)   July 15, 2000
 
  4)   October 15, 2000
 
  5)   January 15, 2001
 
  6)   April 15, 2001
Dear Dr. Khan,
We are pleased to announce the acceptance, of your research proposal. ChromaDex is committed to the future of dietary supplement/natural product analysis and we believe that collaborations such as this will help push the natural products industry to the next level.
We look forward to working with the university and yourself over the next few years.
         
/s/ Frank L. Jaksch Jr.
  12/7/99    
 
       
Frank L. Jaksch Jr.
  Date    
President and CEO
       
ChromaDex, Inc.
       

 

 


 

A PROPOSAL
FROM THE UNIVERSITY OF MISSISSIPPI
     
SUBMITTED TO:  
CHROMADEX
   
 
PROPOSAL TITLE:  
Isolation of Reference Compounds and Their Isolation Procedure
   
 
PRINCIPAL INVESTIGATOR(S)/DEPARTMENT(S):
   
 
   
Dr. Ikhlas Khan
   
Department of Pharmacognosy
   
National Center for Natural Products Research
   
 
AMOUNT REQUESTED:  
$525,000
   
 
CONTACTS:  
 
     
For Administrative Matters:
  For Fiscal Matters:
 
   
Ronald F. Borne, Ph.D.
  Richard D. Douglas
Interim Vice Chancellor for Research
  Chief Accountant
125 Old Chemistry
  303 Martindale
University, MS 38677
  University, MS 38677
(662) 915-7482
  (662) 915-7045
Fax (662) 915-7577
   
SIGNATORIES:
Authorizing University Official:
         
/s/ Ikhlas Khan
  662-915-7821   11/11/99
 
       
Principal Investigator(s)
  Telephone Number(s)   Date
 
       
/s/ Ronald F. Borne
      11/11/99
 
       
Ronald F. Borne, Ph.D.
      Date
Interim Vice Chancellor for Research
       

 

 


 

ISOLATION OF REFERENCE COMPOUNDS AND THEIR ISOLATION PROCEDURE
RESEARCH PROPOSAL
The specific aims of the proposed research are:
  a.   To isolate and supply the reference compounds (~ 500 mg each) that can be used as a marker for DIETARY SUPPLEMENTS/ NUTRACEUTICALS (see Table 1).
  b.   To confirm the structure of the isolated ( marker ) compounds by utilizing physical and spectroscopic means.
  c.   To validate the isolation/ analytical procedure for the isolated major ( marker ) compounds from each plant.
  d.   To confirm structure and purity of existing reference standards provided by chromadex as needed
Plant Material/ Plant Extracts
The plant material/ crude extracts of the plants under investigation will be provided by CHROMADEX.
Isolation of Major ( marker ) Compounds
The initial separation of compounds will be obtained by using a sequence of solvent extraction and solvent partition to separate extracts into fractions which differ in polarity. For alkaloidal extraction, an acid-base partition procedure, as needed, will be utilized prior to further separation. Further purification of the semi-pure fractions will be typically achieved by large-scale column chromatography over silica gel (flash)/ alumina (A1 2 O 3 ), or gel permeation on Sephadex LH-20, depending on the nature of the compounds to be separated. The final purification as needed will be accomplished by Centrifugal Preparative Thin Layer Chromatography (using a Chromatotron ® ) and /or C-18 or C-8 coated silica (reverse-phase mode) columns. The purity of all the isolated compounds will be validated by HPLC and NMR spectrometry. The target purity for the standards will be 95% with a minimum acceptable purity of 85%. If the standard is below the target purity of 95%, the quality testing or characterization method will be very specific in establishing precise purity as well as identifying key “impurities” in the standard.

 

 


 

Structure Elucidation
All isolated major compounds will be subjected to thorough physical (melting points and optical rotations, [ a ] D ) and spectral characterization (UV, IR, 1 H and 13 C NMR, and MS [EIMS/ CIMS]). All compounds will be identified unambiguously by using a 500 MHz 2D NMR spectroscopic techniques, notably COSY, HETCOR, HMQC, HMBC, NOESY, CCC2DQ etc., as needed and the data of all known compounds will be compared and verified with the relevant literature/ published values.
Specific Aims for the First Six Months Research-
The following four plants will be investigated for the isolation and characterization of major ( marker ) compounds during the first six months-
1- Echinacea species
2- Uncaria tomentosa (Cat’s claw)
3- Piper methysticum (Kava)
4- Silybum marianum (Milk thistle)
The initial research work will be focused on the isolation and characterization of the major compounds present in the four plants mentioned above. This will be done according to the methodology described above and a total of ten compounds will be supplied. Every effort will be made to target 1 gram of each marker but both parties are aware that the 1 gram target may not be achievable for certain markers. The minor compounds will also be isolated and their structures will be determined during the course of isolating the major constituents and their isolation procedure will also be optimized for future large-scale isolation work. The supply of the minor compounds in large quantities can not be guaranteed due to time and cost constraints, but a validated isolation method/ analytical scheme will be provided for all investigated plants.
The two major ( marker ) compounds, namely cichoric acid and echinacoside will be isolated initially from Echinacea species and will be supplied. In addition, any other major compound isolable from this plant will also be provided.
The oxindole alkaloids, namely isopteropodine, pteropodine, isomitraphylline, uncarine F, mitraphylline, speciophylline, rhynchophylline, isorhynchophylline and others from Uncaria tomentosa (cat’s claw) (Fam. Rubiaceae) will be isolated and only the major oxindole alkaloids, each around 500 mg, will be supplied. The non-alkaloidal constituents, ie. flavanoids, tritepenes and quinovic acid glycosides will also be isolated and all other major compounds will also be provided.
Likewise, constituents from kava (ie. kava-lactone from Piper methysticum ) and Milk thistle ( Silybum marianum ) will be isolated and the major ( marker ) compounds will be supplied.

 

 


 

The isolation procedure for isolates will be revised and modified to make it more economical and easier for scale-up. We will be focussing on isolation, but we will explore other options to reach our goal economically by synthesizing certain markers or purchasing from different vendors and purify according to our purity criteria.
Furthermore we will make an effort to release marker compounds to Chromadex as they isolated and well characterized.
A report on progress of the project will be provided to Chromadex every two months.
Time Line
We expect that an eighteen month period, beginning on January 17, 2000 for 18 month period till June 16, 2001, will be required to accomplish the proposed work.
Budget
The total cost of this study will be $ 525,000 for eighteen months based on $350,000 for a year expenses, which includes personnel and supplies.

 

 


 

TABLE 1
LIST OF NUTRACEUTICALS FOR ISOLATION OF MARKER COMPOUNDS
         
    Duration    
Name of the Plants   (Months)   No. of Compounds
 
       
Echinacea angustifolia
  1-6    
Kava ( Piper methysticum )
  1-6    
Milk thistle ( Silybum marianum )
  1-6    
Cat’s claw ( Uncaria tomentosa )
  1-6    
 
      10 compounds
 
       
Feverfew ( Tanactum parthenium )
  7-12    
Astraglus spp
  7-12    
Ginkqo biloba
  7-12    
Black cohosh ( Cimicifuga racemosa )
  7-12    
 
      10 compounds
 
       
Valariana officinalis
  13-18    
Ginseng root ( Panax quinquefolum )
  13-18    
Dong quai ( Angelica sinensis )
  13-18    
Siberian ginseng ( E. senticosus )
  13-18    
 
      10 compounds
 
       
No. of plants=12
  Months=18   Compounds=30
(each around 500 mg)

 

 


 

APPENDIX B
MILESTONES FOR EQUITY VESTING
One-third vesting (0.67% equity position) at completion of first set of 10 licensed standards
Additional one-third vesting (total of 1.34% equity position) at completion of second set of 10 licensed standards
Additional one-third vesting (total of 2% equity position) at completion of third set of 10 licensed standards

 

20

Exhibit 10.10
Amendment Agreement to the Equity-based License Agreement between ChromaDex, Inc. and Bayer Innovation Beteiligungsgesellschaft mbH dated October 25/26, 2001
The parties agree as follows:
The original section 8.3 shall be canceled and replaced by this amended section 8.3.:
8.3  
BAYER is entitled to terminate this Agreement prematurely without notice period if CHROMADEX
  A)  
fails to provide BAYER with financial performance reports, which show the latest actual economic performance of the company versus the then current business plan, such financial performance reports to be received by BAYER by June 30 and December 31 of each corresponding year; or
 
  B)  
fails to generate product sales of an accumulated amount of at least 50.000 USD (fifty thousand U.S. Dollar) by exploiting the license granted under this Agreement until July 31, 2006; or
 
  C)  
becomes insolvent. Such a case is deemed to exist when an application has been filed for the commencement of bankruptcy proceedings or other insolvency proceedings against the assets of Chomadex and Chromadex has either filed the application itself or is insolvent or otherwise in a situation which justifies the opening of such proceedings.

 

 


 

This Amendment shall become effective on the date of the last signing party’s signature under this Amendment.
         
Leverkusen,
Date: 20/10/2003
  Laguna Hills,
Date:
   
Bayer Innovation
  ChromaDex, Inc.    
Beteiligungsgesellshaft mbH
       
 
/s/ Fred-Robert Heiker
 
       
Prof. Fred-Robert Heiker
       
         
Leverkusen,
       
Date: 10/30/2003
       
Bayer Innovation
       
Beteiligungsgesellschaft mbH
       
 
/s/ Dr. R. Dujardin
 
       
Dr. R. Dujardin
       

 

 


 

Equity-based License Agreement
This Agreement is effective as of the 25th day of October, 2001
between
ChromaDex, Inc.
26081 Merit Circle, Suite 102
Laguna Hills, CA 92653
U. S. A.
— hereinafter referred to as CHROMADEX —
and
Bayer Innovation Beteiligungsgesellschaft mbH
51368 Leverkusen
Federal Republic of Germany
— hereinafter referred to as BAYER —.
WHEREAS, BAYER is an 100% affiliate of Bayer AG, 51368 Leverkusen, Federal Republic of Germany — hereinafter referred to as BAYER AG —.
WHEREAS, BAYER AG has developed a Thin Layer Chromatography (TLC)-Bioluminescence Assay Technology based on vibrio fisheri bioluminescence and BAYER is in the possession of know-how and intellectual property rights concerning this technology;
WHEREAS, CHROMADEX is interested to use BAYER’s know-how related to the TLC-Bioluminescense Assay Technology in order to perform Quality Assurance and Quality Control to detect, identify or quantify toxic/adultering compounds in Botanic-Natural Products and Nutritional Supplements;

 

 


 

WHEREAS, BAYER is prepared to grant such a license to CHROMADEX;
NOW, therefore, in consideration of the rights and obligation set forth herein, the parties hereto agree as follows:
Article I — Definitions
Whenever written in capital letters the following terms shall have the meaning as specified by Article 1.1 through 1.12 hereof for the purposes of this Agreement.
1.1  
EFFECTIVE DATE shall mean the date first above written, which is at the same time the date of the last signing party’s signature under this Agreement.
 
1.2  
KNOW-HOW shall mean all information owned by BAYER or BAYER AG and known as TLC Bioluminescence Assay Technology based on vibrio fisheri bioluminescence as of the EFFECTIVE DATE. Beside the PATENTS, Annex I sets forth the volume of the information available on the EFFECTIVE DATE.
 
1.3  
TERRITORY shall mean worldwide.
 
1.4  
BAYER AFFILIATE(S) shall mean any business entity which directly or indirectly controls, is controlled by, or is under common control with BAYER or BAYER AG. A business entity shall be deemed to “control” another business entity if it owns, directly or indirectly, more than fifty percent of the outstanding voting securities, capital stock, or other comparable equity or ownership interest of such business entity. If the laws of the jurisdiction in which such entity operates prohibit ownership by a party of more than 50% “control” shall be deemed to exist at the maximum level of ownership allowed by such jurisdiction.

 

- 2 -


 

1.5  
CHROMADEX AFFILIATE(S) shall mean any business entity in the TERRITORY which directly or indirectly is controlled by, or is under common control with CHROMADEX. A business entity shall be deemed to “control” another business entity if it owns, directly or indirectly, more than fifty percent of the outstanding voting securities, capital stock, or other comparable equity or ownership interest of such business entity. If the laws of the jurisdiction in which such entity operates prohibit ownership by a party of more than 50% “control” shall be deemed to exist at the maximum level of ownership allowed by such jurisdiction.
 
1.6  
FIELD shall mean quality control for raw, intermediate or finished botanic-natural products, nutritional supplements, natural drugs, food products and pharmaceutical products in terms of detecting, identifying and/or quantifying of toxic/adultering substances. FIELD shall expressly exclude discovery of and screening for drugs for use in health care, animal health and/or crop protection.
 
1.7  
PATENTS shall mean the patents and patent applications of BAYER set forth in Annex I as far as and to the extent that one claim of said patents and patent applications reads on KNOW-HOW.
 
1.8  
BAYER INFORMATION shall mean KNOW-HOW and technical and economic information of BAYER, whether disclosed in writing, orally or otherwise. BAYER INFORMATION shall include e.g., without being limited to these examples, recipes, data, know-how, processes, equipment, samples and test results on samples.
 
1.9  
CHROMADEX INFORMATION shall mean technical and economic information of CHROMADEX, whether disclosed in writing, orally or otherwise. CHROMADEX INFORMATION shall include e.g., without being limited to these examples, recipes, data, know-how, processes, equipment, samples and test results on samples.

 

- 3 -


 

1.10  
INFORMATION shall mean BAYER INFORMATION or CHROMADEX INFORMATION.
 
1.11  
RECEIVING PARTY shall mean the respective party receiving INFORMATION.
 
1.12  
DISCLOSING PARTY shall mean the respective party disclosing INFORMATION.
Article II — Grant of License
2.1  
Subject to the terms and conditions of this Agreement BAYER agrees to grant and hereby grants — with the exception of Article 2.2 hereto — to CHROMADEX for the TERRITORY a fully-paid up, non-royalty bearing, exclusive, non-transferable license in the FIELD to use KNOW-HOW, to use, offer and sell the method claimed in PATENTS and to produce, offer and sell products based on the method claimed in PATENTS. However, CHROMADEX has the right to sublicense the rights under license to CHROMADEX AFFILIATES. CHROMADEX shall have the right to have sold the products based on KNOW-HOW and PATENTS by distributor in the TERRITORY, not transferring any rights to KNOW-HOW and PATENTS acquired under this license. CHROMADEX needs the written approval of BAYER prior to any merger or sale of the relevant business, to be allowed to transfer the license under the PATENTS to the corporate merger or buyer, which consent will not be unreasonably withheld or delayed.
 
2.2  
Irrespective of the license granted to CHROMADEX according to Article 2.1, BAYER shall still have the right to use or have used KNOW-HOW for or by itself, BAYER’s parent company BAYER AG, BAYER AFFILIATES, and clients of BAYER and BAYER AFFILIATES in the TERRITORY under the PATENTS. However, BAYER shall not use KNOW-HOW in the TERRITORY to sell in the FIELD the method claimed in PATENTS and/or products based on the method claimed in PATENTS.

 

- 4 -


 

2.3  
BAYER grants to CHROMADEX the first right of refusal on improvements and replacement technologies in the FIELD for the TERRITORY, which will be developed by BAYER or BAYER AG during the term of this Agreement. The terms and conditions of such first right of refusal shall be negotiated in good faith on the basis of a fair market evaluation.
 
2.4  
CHROMADEX’s rights to use certain trademarks of BAYER or BAYER AG in the TERRITORY upon or in relation to the TLC-Bioluminescence Assay Technology shall be set forth in a separate license agreement between the parties.
Article III — Transmittal of KNOW-HOW
3.1.1  
Subject to receipt of the initial payment according to Article 4.2, BAYER shall disclose KNOW-HOW to CHROMADEX within six (6) weeks after the EFFECTIVE DATE at Leverkusen, Germany or at any other place that seems BAYER appropriate.
 
3.1.2  
KNOW-HOW respectively will include so much information that an experienced company doing business in the respective type of work will be able to carry out the TLC Bioluminescence Assay Technology for Phase I set forth in Annex II.
 
3.1.3  
All documents will be prepared in English. All documents and drawings will be prepared according to German standards (DIN). All dimensions will be in S.I. units.
 
3.2.1  
BAYER shall be prepared to explain to CHROMADEX in detail KNOW-HOW. For this purpose BAYER shall make available expert(s) for five (5) man-days at the place according to Article 3.1.1 in order to discuss KNOW-HOW with up to five (5) experts of CHROMADEX.

 

- 5 -


 

3.2.2  
All expenses for the stay of CHROMADEX’s experts at Leverkusen or at any other place shall be borne by CHROMADEX.
Article IV — Consideration
4.1  
In consideration of, and subject to, the grant of the license according to Article II, and the transmittal of KNOW-HOW according to Article III, CHROMADEX assigns ten percent (10%) of all company shares of CHROMADEX, including founder, preferred and non-preferred shares, to BAYER according to Articles 4.2 and 4.3, outstanding as at the EFFECTIVE DATE. Annex III shall show the structure of CHROMADEX’ issued share capital as of the EFFECTIVE DATE.
 
4.2  
Within a period of three (3) months after the EFFECTIVE DATE, CHROMADEX assigns to BAYER five percent (5%) of all company shares of CHROMADEX.
 
4.3  
Upon the demonstration that the TLC Bioluminescence Assay Technology works for Phase I sensitivity for Ginkgolic and Aristolochic acids, as set forth in Annex II, CHROMADEX assigns to BAYER further five percent (5%) of all company shares of CHROMADEX without delay.
Article V — Secrecy
5.1  
The RECEIVING PARTY agrees that any INFORMATION received under this Agreement shall be maintained in confidence and shall not be disclosed to any third party without the written consent of the DISCLOSING PARTY.

 

- 6 -


 

   
The RECEIVING PARTY shall not use INFORMATION received for any purpose other than provided for in this Agreement.
   
The foregoing obligations of this Article 5.1 shall not apply to INFORMATION or to any part thereof for which the RECEIVING PARTY proves that it
  a)  
was in the public domain at the time of disclosure to the RECEIVING PARTY by the DISCLOSING PARTY;
 
  b)  
after such disclosure became part of the public domain through no act or omission on the part of the RECEIVING PARTY;
 
  c)  
was in the RECEIVING PARTY’S possession prior to disclosure by the DISCLOSING PARTY;
 
  d)  
was received by the RECEIVING PARTY from any third party having the right to disclose such information without direct or indirect secrecy obligation to the DISCLOSING PARTY;
 
  e)  
was specified by the DISCLOSING PARTY as being of non-confidential nature.
   
The above exclusion shall not apply to a combination of items which individually may qualify for exclusion, unless the combination itself qualifies for exclusion.
 
   
A particular INFORMATION shall not be excluded from confidentiality merely because it is embraced by more general INFORMATION qualifying for exclusion, unless the INFORMATION itself qualifies for exclusion.

 

- 7 -


 

5.2  
The obligations of this Article V shall remain in force for ten (10) years from the EFFECTIVE DATE or until five (5) years after the expiration of this Agreement, whichever periods ends later.
Article VI — Warranties and Indemnity
6.1  
BAYER warrants that it has the legal power to license out KNOW-HOW to CHROMDEX.
 
6.2  
CHROMADEX has been demonstrated the successful operation of KNOW-HOW by BAYER. BAYER makes no warranties whatsoever with reference to KNOW-HOW or their freedom from infringement of any patent or other similar rights of any third party. It is the sole responsibility of CHROMADEX to commercialize and/or practice KNOW-HOW and PATENTS in the TERRITORY. BAYER represents that, at the EFFECTIVE DATE, it has not received written notice of and is not in actual knowledge of any infringement of any third party’s rights by commercializing or practicing KNOW-HOW and PATENTS.
 
6.3  
BAYER shall not be liable to CHROMADEX for any losses, expenses, costs, direct damages, sequential or consequential damages including environmental damages, or personal injury or property damage arising out of or resulting from the use of any information so disclosed by BAYER for or to CHROMADEX, since the measurements and sales are the sole risk of CHROMADEX.

 

- 8 -


 

Article VII — Prosecution, Maintenance, Defence and Enforcement of PATENTS
7.1  
BAYER agrees to prosecute or have prosecuted by BAYER AG the PATENTS up to the grant thereof, to maintain the PATENTS and to defend same against attack from third parties. If BAYER or BAYER AG intends to abandon any of the PATENTS it will inform CHROMADEX accordingly in writing and at CHROMADEX’s request transfer such PATENTS to CHROMADEX. CHROMADEX will bear the costs of the transfer of the patent concerned.
 
7.2  
The parties will inform each other of any infringement of the PATENTS of which they become aware. BAYER or BAYER AG will take either judicial or extrajudicial action against any infringers of the PATENTS if BAYER or BAYER AG consider the action involved to be sufficiently likely to succeed and BAYER or BAYER AG will bear the costs of any action taken.
 
   
If BAYER and BAYER AG decide not to take action against an infringer the parties will jointly decide what procedure to take. CHROMADEX can only take independent action against the infringer with BAYER’S prior consent, which consent will not be unreasonably withheld or delayed.
 
7.3  
Unless otherwise agreed between the parties, any damages or compensation possibly to be paid by the infringer shall be applied first to the each party to this Agreement taking action against the infringement concerned and thus bearing the corresponding costs, then to CHROMADEX to the extent of the damages sustained by CHROMADEX and caused by the infringement, and then, if there would be any damages or compensation possibly to be paid by the infringer left over, to both parties in equal shares.
 
7.4  
CHROMADEX shall not challenge the validity of PATENTS or support third parties in such a challenge.

 

- 9 -


 

Article VIII — Term of the Agreement
8.1.1  
This Agreement shall become effective at the EFFECTIVE DATE and shall be in force thereafter unless otherwise terminated as provided for herein, during a period of ten (10) years after the EFFECTIVE DATE.
 
8.1.2  
This Agreement shall be automatically renewed for successive periods of two (2) years each unless written notice of termination is given by one of the parties to the other at least six (6) months prior to the expiration of the original ten (10) year period or the expiration of one of the successive two (2) year periods. Any license granted pursuant to this Agreement shall not survive termination of this Agreement.
 
8.2  
This Agreement may be terminated prematurely, as provided for below, upon the failure of either CHROMADEX or BAYER to fulfill its obligations under this Agreement. The party aggrieved by such default shall give to the other party notice of such default (such notice to refer specifically to the aggrieved party’s intention to terminate this Agreement in the event of continued default) and, if after two (2) months from the date of such notice the defaulting party has failed or refused to remedy such default, this Agreement shall be open to termination by notice given to the defaulting party not later than four (4) months after the date of notice of such default, and such termination shall be without prejudice to any other rights or claims the aggrieved party may have against the defaulting party.
 
8.3  
BAYER is entitled to terminate this Agreement prematurely by giving notice to CHROMADEX in the event that CHROMADEX fails to generate product sales of at least 50,000 USD (fifty thousand U. S. Dollar) by exploiting the license granted under this Agreement within two (2) years after the EFFECTIVE DATE or in the event that CHROMADEX becomes bankrupt, insolvent or liquidated or if the business of CHROMADEX is placed in the hands of a receiver, assignee or trustee in bankruptcy, whether by the voluntary act of CHROMADEX or otherwise.

 

- 10 -


 

8.4  
Termination of the Agreement by reason of expiration or express termination as provided for in this Article VIII shall be without prejudice to any rights or obligations of the parties hereto which have accrued as of the date of expiration or express termination.
 
8.5  
If this Agreement is terminated pursuant to Article 8.2 or 8.3, such termination shall have the effect of terminating the rights of CHROMADEX except that any work in process or any contract resulting from a firm bid issued prior to the effective termination date may be completed by CHROMADEX under the terms and conditions of this Agreement.
Article IX — Miscellaneous
9.1  
The parties’ performance of their respective obligations hereunder shall be subject to force majeure, including, but not limited to, acts of God, insurrections, riots, wars and warlike operations, acts of any public enemy or any similar occurrence beyond the reasonable unavoidable control of the respective party.
 
   
However, the party affected by force majeure as set forth in this Article 9.1 shall use its best efforts to avoid, remove or cure such circumstances. Any party temporarily excused from performance hereunder by any such circumstances shall resume performance with utmost dispatch when such circumstances are removed or cured. Any party claiming such circumstances as an excuse for delay in performance shall give prompt notice in writing thereof to the other party.
 
9.2  
This Agreement and Annexe I, II and III attached hereto constitute the final expression of the entire understanding between CHROMADEX and BAYER relating to the subject matter hereof and may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement. No change in, addition to or waiver of the terms and provisions hereof shall be binding upon either CHROMADEX or BAYER unless confirmed in writing by the party to be charged.

 

- 11 -


 

9.3  
This Agreement and the license granted herein shall, unless otherwise provided for herein, not be assignable by either party without the prior written consent of the other party which consent shall not be unreasonably withheld or delayed.
 
9.4  
The invalidity or unenforceability of one provision of this Agreement will not cause the invalidity of the whole Agreement. The parties will in such case agree on a substitution of such invalid or unenforceable provisions by a valid and enforceable one, that resembles as closely as possible the economic effect of the invalid or unenforceable one, that resembles as closely as possible the economic effect of the invalid or unenforceable provision.
 
9.5  
The parties agree that the validity of this Agreement and their respective rights and obligations under it shall be governed by the laws of the Federal Republic of Germany.
 
9.6  
The parties are obligated to undertake all reasonable efforts in order to solve in an amicable way any controversy arising in connection with this Agreement.
 
   
Any controversy arising in connection with this Agreement that cannot be settled amicably shall be finally settled by arbitration according to the rules of settlement and arbitration of the International Chamber of Commerce. Arbitration shall be held in Zurich. The law of the Federal Republic of Germany shall apply to such arbitration.

 

- 12 -


 

9.7  
The correspondence addresses will be:
ChromaDex, Inc.
26081 Merit Circle, Suite 102
Laguna Hills, CA 92653
U.S.A.
Fax ++1-949-955 3913
   
In case of CHROMADEX and in case of BAYER
Bayer Innovation Betelligungsgesellschaft mbH
51368 Laverkusen
Federal Republic of Germany
Fax ++49-214-30 52172
   
or as to each party, such other address for such party as it shall have furnished theretofore in writing to the other party.
 
   
If sent by mail, telefax, telex or telegram, the date of mailing or transmission shall be the date on which such notice or request is sent.
IN WITNESS WHEREOF, CHROMADEX and BAYER have caused this Agreement to be duly executed as of the EFFECTIVE DATE .
     
Leverkusen,
Date: 10/25/01
  Laguna Hills,
Date: 10/26/01
Bayer Innovation
  ChromaDex, Inc.
Betelligungsgesellschaft mbH
   
             
/s/ J. Mokee
  /s/ Dr. R. Dujardin   /s/ Mark S. Germain   /s/ Frank L. Jaksch Jr.
 
           
J. Mokee
  Dr. R. Dujardin   Mark S. Germain   Frank L. Jaksch Jr.
Managing Director
  VP Intellectual   Co-Chairman   President & CEO
 
  Property-Management        

 

- 13 -


 

ANNEX I
List of PATENTS
         
 
       
EP 0 588 139 B1
  filed 1993-08-30    
 
  granted 1998-01-21    
 
  designated countries: BE, CH, DE, ES, FR, GB, IT    
 
       
US 6,238,928
  filed 1993-09-02    
 
  granted 2001-05-29    
 
       
JP 0 246 032-93
  filed 1993-09-08    
 
  application pending in prosecution    
KNOW-HOW
KNOW-HOW consists of all company secret knowledge developed by BAYER and relating to practicing the TLC-Bioluminescence Assay Technology based on vibrio fisheri bioluminescence in form of research and development reports as well as reference files and records limited to the related analytical method development by BAYER’S Central Research.

 

- 14 -


 

ANNEX II
Phase I: Measure presence of the toxic/adulterating compounds Ginkgolic acids and Aristolochic acids in Botanical-Natural Products in Top 20 Nutritional Supplements/ Natural Drugs in natural plant material: extracts and finished products
1.  
Vibrio fischeri’s sensitivity (limits of detection) against Ginkgolic acids and Aristolochic acids: CHROMADEX shall establish the detection limits required for the assay based upon regulatory and market need. BAYER/CHROMADEX shall test vibrio fischeri’s capability for meeting these limits as the first step of the project, therefore establishing a go/no-go situation. Assuming that vibrio fischeri’s bioluminescence will be inhibited by Ginkgolic acids and Aristolochic acids with a suitable limit of detection CHROMADEX can proceed with further development of the method.
 
2.  
Develop Standardized Methods: CHROMADEX will develop standardized testing protocols and materials for all required Ginkgolic acids and Aristolochic acids in priority order according to the “Top 20 list of nutritional supplements/natural drugs” (see Exhibit 1 of this ANNEX II).

 

- 15 -


 

Exhibit 1 of ANNEX II
Top 20 list of nutritional supplements/natural drugs:
1)  
St. Johns Wort
 
2)  
Ginkgo Biloba
 
3)  
Saw Palmetto
 
4)  
Echinacea
 
5)  
Milk Thistle
 
6)  
Valerian
 
7)  
Black Cohosh
 
8)  
Garlic
 
9)  
Kava Kava
 
10)  
Ma Huang/Ephedra
 
11)  
Ginseng (Panax)
 
12)  
Ginseng (Eleutherococcus)
 
13)  
Green Tea
 
14)  
Soy
 
15)  
Bilberry
 
16)  
Ginger
 
17)  
Red Clover
 
18)  
Grape seed
 
19)  
Feverfew
 
20)  
Schisandra

 

- 16 -


 

ANNEX III
Structure of CHROMADEX’ issued share capital
___% of capital stock is owned by Frank L. Jaksch Jr.
___% of capital stock is owned by ___
See Below
                     
61.11% or 6,111,000 shares by Frank L. Jaksch Jr.
18.0% or 1,799,995 shares by Margery Germain
9.96% or 696,335 shares by Lauren Germain
6.96% or 696,335 shares by Emily Germain
6.96% or 696,335 shares by Lucie Germain

 

- 17 -

Exhibit 10.12
Option Agreement
This Option Agreement (the “AGREEMENT”) is made between the BOARD OF REGENTS (“BOARD”), of the UNIVERSITY OF TEXAS SYSTEM (“SYSTEM”), an agency of the State of Texas, whose address is 201 West 7th Street, Austin, Texas 78701, and ChromaDex (“OPTIONEE”), a corporation, with its principal place of business at 2952 Daimler St., Santa Ana, CA 92705.
RECITALS
A. BOARD owns certain PATENT RIGHTS and TECHNOLOGY RIGHTS which were developed at the University of Texas at El Paso (“UNIVERSITY”), a component institution of SYSTEM.
B. BOARD desires to have PATENT RIGHTS and TECHNOLOGY RIGHTS developed and used for the benefit of OPTIONEE, the BOARD, INVENTOR, and the public as outlined in BOARD’S Intellectual Property Policy.
C. OPTIONEE wishes to obtain an option to negotiate and acquire a license from BOARD to practice PATENT RIGHTS and TECHNOLOGY RIGHTS and sell and distribute products derived therefrom.
NOW THEREFORE, in consideration of the mutual covenants and premises herein contained, the parties agree as follows:
1. EFFECTIVE DATE AND OPTION PERIOD
This AGREEMENT is effective as of July 25, 2005 (“EFFECTIVE DATE”) for a period of 12 months (the “OPTION PERIOD”),
2. DEFINITIONS
2.1 PATENT RIGHTS mean BOARD’S rights in improvements to information or discoveries covered by U.S. Patent # 6,017,722 entitled, “Luminous Bacteria and Methods for the Isolation, Identification and Quantification of Toxicants,” U.S. Patent # 6,340,572, entitled, “Kit for the Isolation, Identification and Quantification of Toxicants,” and U.S. Patent #6,673,563 entitled “Luminous Bacteria and Methods for the Isolation, Identification and Quantification of Toxicants”, all corresponding foreign patent applications; and all re-examinations or extensions thereof.
2.2 TECHNOLOGY RIGHTS mean BOARD’S rights in any technical information, know-how, process, procedure, composition, method, formula, protocol, technique or data developed by Dr. James Becvar, Laura Becvar, and Olga Valerio (“INVENTORS”) at UNIVERSITY prior to the EFFECTIVE DATE relating to Lumibiotic Assay (UTEP No. 05-001), LumiGel Overlay (UTEP No. 05-002), and Multiplex Lumitection Analysis (UTEP No. 05-003) which are not covered by PATENT RIGHTS.

 

 


 

2.3 LICENSED PRODUCT means any product which cannot be developed, manufactured, used or sold without utilizing PATENT RIGHTS or TECHNOLOGY RIGHTS.
3. WARRANTIES
3.1 Except for the rights, if any of the Government of the United States, as set forth below, BOARD hereby represents that it has the full right and power to enter into this AGREEMENT and to grant the exclusive option set forth in this AGREEMENT. BOARD makes no other warranties concerning its rights covered by this AGREEMENT. BOARD makes no expressed or implied warranty of merchantability or fitness for a particular purpose as to any LICENSED PRODUCT. BOARD makes no warranty or representation as to the validity or scope of the PATENT RIGHTS or that any LICENSED PRODUCT will be free from an infringement of patents of third parties, or that no third parties are in any way infringing PATENT RIGHTS.
3.2 OPTIONEE understands that the PATENT RIGHTS and TECHNOLOGY RIGHTS may have been developed under a funding agreement with the Government of the United States of America and, if so, that the Government may have certain rights relative thereto. This AGREEMENT is explicitly made subject to the Government’s rights under any such agreement and any applicable law or regulation. To the extent that there is a conflict between any such agreement, applicable law or regulation and this AGREEMENT, the terms of such Government agreement, applicable law or regulation will prevail.
4. OPTION FOR EXCLUSIVE LICENSE
4.1 BOARD hereby grants OPTIONEE an exclusive option to acquire an exclusive, worldwide license to practice PATENT RIGHTS and TECHNOLOGY RIGHTS under terms set forth in the License Agreement attached as Attachment A.
5. TERMINATION
5.1 OPTIONEE may terminate this AGREEMENT by giving 30 days written notice to UNIVERSITY.
5.2 UNIVERSITY may terminate this AGREEMENT upon 30 days written notice to OPTIONEE if OPTIONEE breaches or defaults on its payments under Article 6 or its payments and obligations (including, but not limited to, payment of patent expenses) as set forth in any related agreement between OPTIONEE and UNIVERSITY covering PATENT RIGHTS and/or TECHNOLOGY RIGHTS, unless, before the end of the 30 day period, OPTIONEE has cured the breach or default to the satisfaction of UNIVERSITY and so notifies UNIVERSITY in writing, stating the manner of the cure.

 

 


 

6. PAYMENT
6.1 In consideration for the option granted herein, OPTIONEE agrees to pay BOARD an option fee equal to any out-of-pocket patent and licensing expenses, credible toward a license fee upon election of the option to license, to be payable in four equal payments the first due upon execution of this Agreement by Licensee and the other three payments due every calendar quarter;
6.2 All payments under this AGREEMENT are to be paid in U.S. dollars, checks payable to the order of UNIVERSITY and mailed to the address in Section 8.6.
7. CONFIDENTIAL INFORMATION
7.1 As soon as possible following the execution of this AGREEMENT, UNIVERSITY, through INVENTOR, will disclose all relevant Confidential Information as defined in Section 7.2 below, other information, and data relating to PATENT RIGHTS and TECHNOLOGY RIGHTS, to enable OPTIONEE to evaluate the potential commercial significance of the PATENT RIGHTS and TECHNOLOGY RIGHTS.
7.2 In addition to the initial disclosure described in Section 7.1, the parties may disclose other Confidential Information to each other, from time to time, in connection with work contemplated under this AGREEMENT. All such information whether disclosed Initially or during the OPTION PERIOD will be referred to as “Confidential Information.” Each party will use reasonable efforts to prevent the disclosure of any of the other party’s Confidential Information to third parties for a period of three (3) years after the termination of this AGREEMENT, provided that the recipient party’s obligation will not apply to information that:
a. is not disclosed in writing or reduced to writing and so marked with an appropriate confidentiality legend within thirty (30) days of disclosure;
b. is already in the recipient party’s possession at the time of disclosure thereof and not obtained directly or indirectly from the other, as proven by the receiving party’s written records;
c. is or later becomes published through no fault of the recipient party;
d. is lawfully acquired from a third party having no obligations of confidentiality to the disclosing party;
e. is independently developed by the recipient party; or
f. is required by law or regulation to be disclosed.

 

 


 

7.3 In the event that information is required to be disclosed under Section 7.2(f) above, the party required to make disclosure will notify the other to allow that party to assert whatever exclusions or exemptions may be available to it under such law or regulation.
8. GENERAL PROVISIONS
8.1 This AGREEMENT may not be assigned by OPTIONEE without the prior written consent of BOARD, which consent may not unreasonably be withheld. However, OPTIONEE may assign any and all of the rights granted to it pursuant to this AGREEMENT to a successor of all or substantially all of its business to which this AGREEMENT relates without the approval from or prior notice to BOARD.
8.2 This AGREEMENT constitutes the entire and only agreement between the parties relating to an option to acquire a license, and all prior negotiations, representations, agreements and understandings are superseded hereby. No agreements altering or supplementing the terms hereof may be made except by written mutual agreement by the parties.
8.3 The relationship between UNIVERSITY and OPTIONEE is that of independent contractors. UNIVERSITY and OPTIONEE are not joint ventures, partners, principal and agent, master and servant, employer or employee, and have no other relationship other than independent contracting parties. UNIVERSITY will have no power to bind or obligate OPTIONEE in any manner, other than as is expressly set forth in this AGREEMENT. Likewise OPTIONEE will have no power to bind or obligate UNIVERSITY in any manner, other than as is expressly set forth in this AGREEMENT.
8.4 If any provision of this AGREEMENT is ultimately held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby.
8.5 Any delay in enforcing a party’s right under this AGREEMENT or any waiver as to a particular default or other matter will not constitute a waiver of such party’s rights to the future enforcement of its rights under this AGREEMENT, except only as to an express written and signed waiver to a specific matter for a specific period of time.

 

 


 

8.6 Any notice required by this AGREEMENT will be given by personal delivery (including delivery by reputable messenger services such as Federal Express) or by prepaid, first class, certified mail, return receipt requested, addressed to:
The University of Texas at El Paso
Technology Transfer Office
Burges Hall, Room 404
500 W. University
El Paso, Texas 79968
Attn: Technology Transfer Manager
Ph: 915/747-7901
Fax: 915/747-5931
or in the case of OPTIONEE to:
ChromaDex
2952 Daimler St.
Santa Ana, California 92705
Attn: Frank Jaksch
Fax: 949/419-0894
Phone: 949/419-0288
or at such other addresses as may be given from time to time in accordance with the terms of this notice provision.
8.7 This AGREEMENT will be governed by, construed, and enforced in accordance with the internal laws of the State of Texas.
IN WITNESS WHEREOF, the parties have caused this AGREEMENT to be executed by their duly authorized representatives.
                     
BOARD OF REGENTS OF THE
UNIVERSITY OF TEXAS SYSTEM
      CHROMADEX    
 
                   
By
          By   /s/ Frank Jaksch    
 
                   
 
  Diana S. Natalicio, President           Frank Jaksch, President    
 
                   
Date:
          Date:   August 19, 2005    
 
                   
 
                   
Approved as to Content:                
 
                   
By
                   
 
                   
 
  Paul C. Maxwell, Vice President                
 
  For Research & Sponsored Projects                
 
                   
Date:
                   
 
                   

 

 


 

ATTACHMENT A

 

 


 

PATENT LICENSE AGREEMENT
THIS Agreement is between the Board of Regents (“Board”) of The University of Texas System (“System”), an agency of the State of Texas, whose address is 201 West 7th Street, Austin, Texas 78701, and ChromaDex, a corporation having a principal place of business located at 2952 Daimler St., Santa Ana, CA 92705 (“Licensee”).
TABLE OF CONTENTS
         
RECITALS
    2  
 
       
1. EFFECTIVE DATE
    2  
 
       
2. DEFINITIONS
    2  
 
       
3. WARRANTY, SUPERIOR RIGHTS AND REPRESENTATIONS
    4  
 
       
4. LICENSE
    5  
 
       
5. PAYMENTS AND REPORTS
    5  
 
       
6. TERM AND TERMINATION
    8  
 
       
7. INFRINGEMENT BY THIRD PARTIES
    10  
 
       
8. ASSIGNMENT
    10  
 
       
9. PATENT MARKING
    10  
 
       
10. INDEMNIFICATION AND INSURANCE
    10  
 
       
11. USE OF BOARD AND COMPONENT’S NAME
    11  
 
       
12. CONFIDENTIAL INFORMATION AND PUBLICATION
    11  
 
       
13. PATENTS AND INVENTIONS
    12  
 
       
14. ALTERNATE DISPUTE RESOLUTION
    13  
 
       
15. GENERAL
    13  
 
       
SIGNATURES
    14  

 

 


 

RECITALS
A. Board owns certain Patent Rights and Technology Rights related to Licensed Subject Matter, which was developed at The University of Texas El Paso (“University”), a component institution of System.
B. Board desires to have the Licensed Subject Matter developed and used for the benefit of Licensee, Inventor, Board, and the public as outlined in Board’s Intellectual Property Policy.
C. Licensee wishes to obtain a license from Board to practice Licensed Subject Matter.
NOW, THEREFORE, in consideration of the mutual covenants and premises herein contained, the parties agree as follows:
1. EFFECTIVE DATE
This Agreement is effective August 19, 2005 (“Effective Date”).
2. DEFINITIONS
As used in this Agreement, the following terms have the meanings indicated:
2.1 “Affiliate” shall mean any individual or entity directly or indirectly controlling, controlled by or under common control with, a party to this Agreement. For purposes of this Agreement, the direct or indirect ownership of over fifty percent (50%) of the outstanding voting securities of an entity, or the right to receive over fifty percent (50%) of the profits or earnings of an entity shall be deemed to constitute control. Such other relationship as in fact gives such Individual or entity the power or ability to control the management, business and affairs of an entity shall also be deemed to constitute control.
2.2 “Licensed Field” means all fields.
2.3 “Licensed Product” means any product, composition, method or process which, in the course of manufacture, use, practice, sale or Import is:
(a) within the scope of one or more claims of the Patent Rights; or
(b) a product containing any one or more of the following or similar elements and which is intended to be used as part of any product, composition, method or process which is within the scope of one or more claims of the Patent Rights:
(i) Analytical chemistry media (i.e. TLC plates);

 

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(ii) luminescent bacteria for detection (stabilized);
(iii) chemicals and reagents for performing steps covered under the Patent Rights;
(iv) detection devices or media; and/or
(v) instruction manual describing or inducing one to perform the steps covered under the Patent Rights.
2.4 “Licensed Subject Matter” means Inventions and discoveries covered by Patent Rights or Technology Rights within Licensed Field.
2.5 “Licensed Territory” means the worldwide.
2.6 “Net Sales” means the gross revenues received by Licensee, affiliates, or sublicensees from the Sale of Licensed Products less sales and/or use taxes actually paid, import and/or export duties actually paid, outbound transportation prepaid or allowed, and amounts allowed or credited due to returns (not to exceed the original billing or invoice amount). Transfer of a licensed product within licensee or between licensee and an affiliate for sale by the transferee shall not be considered a Net Sale for purposes of ascertaining royalty charges. In such circumstances, the gross sales price and resulting net sales price shall be based upon the sale of the licensed product by the transferee.
2.7 “Patent Rights” means Board’s rights in improvements to information or discoveries covered by U.S. Patent # 6,017,722 entitled, “Luminous Bacteria and Methods for the Isolation, Identification and Quantification of Toxicants,” U.S. Patent # 6,340,572, entitled, “Kit for the Isolation, Identification and Quantification of Toxicants,“and U.S. Patent #6,673,563 entitled “Luminous Bacteria and Methods for the Isolation, Identification and Quantification of Toxicants”, all corresponding foreign patent applications; and all re-examinations or extensions thereof.
2.8 “Sale, Sell or Sold” means the transfer or disposition of a Licensed Product for value to a party other than Licensee.
2.9 “Technology Rights” means Board’s rights in any technical information, know-how, process, procedure, composition, method, formula, protocol, technique or data developed by Dr. James Becvar, Laura Becvar, and Olga Valerio and other employees (“INVENTORS”) at UNIVERSITY prior to or subsequent to the EFFECTIVE DATE relating to Lumibiotic Assay (UTEP No. 05-001), LumiGel Overlay (UTEP No. 05-002), and Multiplex Lumitection Analysis (UTEP No. 05-003) which are not covered by PATENT RIGHTS.

 

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2.10 “Improvements” means Board’s rights in any technical information, know-how, process, procedure, composition, method, formula, protocol, technique or data developed by University which are not covered by Patent Rights but which would require the use of Patent Rights to execute.
2.11 “Calendar Quarter” means the respective periods of three (3) consecutive calendar months ending on: March 31, June 30, September 30 and December 31.
3. WARRANTY: SUPERIOR-RIGHTS
3.1 Except for the rights, if any, of the Government of the United States, as set forth below, Board represents and warrants its belief that (i) it is the owner of the entire right, title, and interest in and to Licensed Subject Matter, (ii) it has the sole right to grant licenses thereunder, and (iii) it has not knowingly granted licenses thereunder to any other entity that would restrict rights granted to Licensee except as stated herein.
3.2 Licensee understands that the Licensed Subject Matter may have been developed under a funding agreement with the Government of the United States of America and, if so, that the Government may have certain rights relative thereto. This Agreement is explicitly made subject to the Government’s rights under any agreement and any applicable law or regulation. If there is a conflict between an agreement, applicable law or regulation and this Agreement, the terms of the Government agreement, applicable law or regulation shall prevail.
3.3 Licensee understands and acknowledges that Board, by this Agreement, makes no representation as to the operability or fitness for any use, safety, efficacy, ability to obtain regulatory approval, patentability, and/or breadth of the Licensed Subject Matter. Board, by this Agreement, also makes no representation as to whether there are any patents now held, or which will be held, by others or by Board in the Licensed Field, nor does Board make any representation that the inventions contained in Patent Rights do not infringe any other patents now held or that will be held by others or by Board.
3.4 Licensee, by execution hereof, acknowledges, covenants and agrees that it has not been induced in any way by Board, System, University or its employees to enter into this Agreement, and further warrants and represents that (i) it has conducted sufficient due diligence with respect to all items and issues pertaining to this Article 3 and all other matters pertaining to this Agreement; and (ii) Licensee has adequate knowledge and expertise, or has utilized knowledgeable and expert consultants, to adequately conduct the due diligence, and agrees to accept ail risks inherent herein.

 

4


 

4. LICENSE
4.1 Board hereby grants to Licensee a royalty-bearing, exclusive license under Licensed Subject Matter including all improvements from the effective date going forward without any increase in Royalty rate percentage, to manufacture, have manufactured, to sell or have sold, to use and have used, to practice and have practiced any Licensed Products within the Licensed Territory for use within Licensed Field. This grant is subject to the payment by Licensee to Board of all consideration as provided herein, and is further subject to rights retained by Board to:
  a.   Publish the general scientific findings from research related to Licensed Subject Matter subject to the terms of Section 12, Confidential Information; and
 
  b.   Use Licensed Subject Matter for research, teaching and other educationally-related purposes, subject to the terms of Section 12.
4.2 Licensee may extend the license granted herein to any Affiliate if the Affiliate consents to be bound by this Agreement to the same extent as Licensee.
4.3 Licensee may grant sublicenses consistent with this Agreement if Licensee is responsible for the operations of its sublicensees relevant to this Agreement as if the operations were carried out by Licensee, including the payment of royalties whether or not paid to Licensee by a sublicensee. Licensee must deliver to Board a true and correct copy of each sublicense subject to confidentiality granted by Licensee, and any modification or termination thereof, within 30 days after execution, modification, or termination. When this Agreement is terminated, all existing sublicenses granted by Licensee must be assigned to Board and Board agrees to accept and honor such sublicenses.
5. PAYMENTS AND REPORTS
5.1 In consideration of rights granted by Board to Licensee under this Agreement, Licensee will pay Board the following:
  a.   A nonrefundable license documentation in the amount of ______, to be payable in four equal payments the first due upon execution of this Agreement by Licensee and the other three payments due the end of the first month of each Calendar Quarter, every successive Calendar Quarter until paid in full;

 

5


 

  b.   A running royalty equal to one and three quarters percent (1.75%) of world wide Net Sales of Licensed Products by Licensee, its Affiliates and Sublicensees, to be decreased by twenty-five percent (25%) of the percentage of any additional licenses from third parties reasonably required to commercialize any given Licensed Product, but only as to such Licensed Product, and in no event to be reduced to less than one and one half percent (1.50%) of Net Sales. Royalties will be paid on all products world wide, without regard to whether there are Patent Rights in any country other than the United States. The Antistacking provision would not apply to license agreements cross referenced in this agreement, (the Becvar/ChromaDex) Products sold by Licensee and protected by a valid claim included within Patent Rights.
5.2 In consideration of rights granted by Board to Licensee under this Agreement, Licensee further agrees to pay Board the following after the execution of a sublicense hereunder:
  a.   Within 30 days after the execution of the sublicense, a sublicense fee of 5% of any up-front cash payment made to Licensee in consideration of the sublicense, excluding funds paid to Licensee for research and development purposes.
 
  b.   Within 60 days after the execution of the sublicense, a sublicense fee constituting a cash payment equal to 10% of any non-cash consideration received by Licensee from a sublicensee, such consideration to include, without limitation, equity in other companies. The value of an equity investment will be calculated as the average market value of the class of stock involved for 5 consecutive days preceding the execution of the sublicense agreement. In cases where the sublicense agreement calls for payment to Licensee of a premium over the market value, Board will also share 10% of the premium paid to Licensee.
5.3 During the Term of this Agreement and for 1 year thereafter, Licensee agrees to keep complete and accurate records of its and its sublicensees’ Sales and Net Sales of Licensed Products under the license granted in this Agreement in sufficient detail to enable the royalties payable hereunder to be determined. Licensee agrees to permit Board or its representatives, at Board’s expense, to periodically but no more than once per annum examine Its books, ledgers, and records during regular business hours for the purpose of and to the extent necessary to verify any report required under this Agreement. Any such audit shall be coordinated with auditing requirements under the Becvar/ChromaDex. agreement cross referenced in this agreement, to prevent duplicate audits in any calendar year. If the amounts due to Board are determined to have been underpaid by more than 5%, Licensee will pay the cost of the examination and accrued interest at the highest allowable rate but not more prime rate plus three percent (3%) interest compounded daily on the amount underpaid.

 

6


 

5.4 Within 60 days following the close of each Calendar Quarter, beginning immediately after the Effective Date, Licensee must deliver to Board a true and accurate written report, even if no payments are due Board, giving the particulars of the business conducted by Licenses and its sublicensee(s), if any exist, during the preceding 3 calendar months under this Agreement as are pertinent to calculating payments hereunder. This report will Include at least:
  a.   the country of sale
  b.   the date sold;
  c.   the applicable deductions and calculation of royalties thereon; and
  d.   the total royalties computed and due Board.
Simultaneously with the delivery of each report, Licensee must pay to Board the amount, if any, due for the period of each report.
5.5 On or before each anniversary of the Effective Date, irrespective of having a first Sale or offer for Sale, Licensee must deliver to Board a written progress report as to Licensee’s (and any sublicensee’s) efforts and accomplishments during the preceding year in diligently commercializing Licensed Subject Matter in the Licensed Territory and Licensee’s (and, if applicable, sublicensee’s) commercialization plans for the upcoming year.
5.6 All amounts payable here by Licensee for Licensed Products sold in the United States must be paid in United States funds without deductions for taxes, assessments, fees, or charges of any kind. Checks must be payable to the University of Texas at El Paso.
5.7 Currency Conversions/Tax Withholding : Payments shall be made in United States dollars to the extent that conversions to United States dollars are permitted. The rate of exchange to be used in any such conversion from the currency in the country where such Net Sales are made shall be the commercial rate of exchange prevailing in the United States on the last day of the Calendar Quarter calculated using the exchange rate (local currency, per US$1) published in The Wall Street Journal, Western Edition, under the heading “Currency Trading.” If due to restrictions or prohibitions Imposed by national or international authority, royalties in any country cannot be remitted to Licensor within six (6) months after the end of the Calendar Quarter during which they are earned, then Licensee shall be obligated to deposit the royalties in a bank account in such country in the name of Licensor or Licensor’s designee. If Licensee concludes that tax withholdings under the laws of any country are required with respect to payments to Licensor, Licensee may deduct and pay to the appropriate governmental authorities the amount required to be withheld from the amount due Licensor and provide to Licensor reasonable evidence of such_payment.

 

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5.8 Licensee must reimburse Board for all its out-of-pocket expenses thus far incurred in filing, prosecuting, enforcing and maintaining exclusively licensed Patent Rights and must pay all future expenses so long as and in the countries its license remains exclusive.
6. TERM AND TERMINATION
6.1 The term of this Agreement is from the Effective Date to the full end of the term or terms for which Patent Rights have not expired or, if only Technology Rights are licensed and no Patent Rights are applicable, for a term of 15 years.
6.2 Any time after 2 years from the Effective Date, Board and University have the right to terminate the exclusivity of this license in any national political jurisdiction in the Licensed Territory if Licensee, within 90 days after receiving written notice from University of intended termination of exclusivity, fails to provide written evidence satisfactory to University that Licensee or its sublicensee’s has commercialized or is actively attempting to commercialize a licensed invention in such jurisdiction(s), provided, however, that, notwithstanding the foregoing, if Licensee has reported Net Sales of the following amounts for the periods indicated Licensee will be deemed to have satisfied the commercialization requirements of this paragraph for all territories:
  (i)   Second year: two hundred thousand dollars ($200,000)
  (ii)   Third and Fourth years; five hundred thousand dollars ($500,000) each year
  (iii)   Fifth and Sixth years: one million dollars ($1,000,000) each year
  (iv)   Thereafter $2,000,000 each year
6.3 Any time after 3 years from the Effective Date, Board and University have the right to terminate this license in any national political jurisdiction in the Licensed Territory if Licensee, within 90 days after receiving written notice from University of intended termination, fails to provide written evidence satisfactory to University that Licensee or its sublicensees has commercialized or is actively attempting to commercialize a licensed invention in such jurisdiction(s), provided, however, that, notwithstanding the foregoing, if Licensee has reported Net Sales of the following amounts for the periods indicated Licensee will be deemed to have satisfied the commercialization requirements of this paragraph for all territories:
  (i)   Second year: two hundred thousand dollars ($200,000)
  (ii)   Third and Fourth years: five hundred thousand dollars ($500,000) each year
  (iii)   Fifth and Sixth years: one million dollars ($1,000,000) each year
  (iv)   Thereafter $2,000,000 each year

 

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6.4 The following definitions apply to Article 6: (i) “Commercialize” means having Sales of Licensed Products in such jurisdiction; and (ii) “Active attempts to commercialize” means having Sales of Licensed Products or an effective, ongoing and active research, development, manufacturing, marketing or sales program as appropriate, directed toward obtaining regulatory approval, production or Sales of Licensed Products in any jurisdiction, and plans acceptable to University, in its sole discretion, to commercialize licensed inventions in the jurisdiction(s) that University intends to terminate.
6.5 This Agreement will earlier terminate automatically if Licensee becomes bankrupt or insolvent and/or if the business of Licensee is placed in the hands of a receiver, assignee, or trustee, whether by voluntary act of Licensee or otherwise; or
  a.   upon 90 days written notice from Board if Licensee breaches or defaults on its obligation to make payments (if any are due) or reports, in accordance with the terms of Article 5, unless, before the end of the 90 day period, Licensee has cured the default or breach and so notifies Board, stating the manner of the cure and provided that if there is a dispute submitted to arbitration, the notice and cure period will not commence until the later of the completion of the arbitration; or
  b.   upon 90 days written notice if Licensee breaches or defaults on any other obligation under this Agreement, unless, before the end of the 90 day period, Licensee has cured the default or breach and so notifies Board, stating the manner of the cure and provided that if there is a dispute submitted to arbitration, the notice and cure period will not commence until the later of the completion of the arbitration; or
  c.   at any time by mutual written agreement between Licensee, University and Board, upon 180 days written notice to all parties and subject to any terms herein which survive termination; or
  d.   under the provisions of Paragraphs 6.2 and 6.3 if invoked.
6.6 If this Agreement is terminated for any cause:
  a.   nothing herein will be construed to release either party of any obligation matured prior to the effective date of the termination;
  b.   after the effective date of the termination, Licensee may sell all Licensed Products and parts therefore it has on hand at the date of termination, if it pays earned royalties thereon according to the terms of Article 5; and
  c.   Licensee will be bound by the provisions of Articles 10 (Indemnification), 11 (Use of Board and Component’s Name), and 12 (Confidential Information) of this Agreement.

 

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7. INFRINGEMENT BY THIRD PARTIES
7.1. If either PARTY becomes aware of potential infringement of any PATENT RIGHTS, then that PARTY will notify the other PARTY as soon as possible and the PARTIES agree to discuss and determine how best to end such infringement. Licensee must pay Board a royalty on any monetary recovery if the monetary recovery is for damages less any legal expense or a reasonable royalty in lieu thereof. If Licensee does not file suit against a substantial infringer of a patent within 6 months of knowledge thereof, then Board may enforce any patent licensed hereunder on behalf of Itself and Licensee, Board retaining all recoveries from such enforcement.
7.2 In any infringement suit or dispute, the parties agree to cooperate fully with each other. At the request and expense of the party bringing suit, the other party will permit access to all relevant personnel, records, papers, information, samples, specimens, etc., during regular business hours.
8. ASSIGNMENT
Except in connection with the sale of substantially all of Licensee’s assets to a third party, this Agreement may not be assigned by Licensee without the prior written consent of Board, which will not be unreasonably withheld; provided, however, Licensee may, without such consent, assign the Agreement and its rights and obligations hereunder in connection with the transfer or sale of all or substantially all of its assets related to the division or the subject business, or in the event of its merger or consolidation or change in control or similar transaction.
9. PATENT MARKING
Licensee must permanently and legibly mark all products and documentation manufactured or sold by it under this Agreement with a patent notice as may be permitted or required under Title 35, United States Code.
10. INDEMNIFICATION AND INSURANCE
10.1 Licensee agrees to hold harmless and indemnify Board, System, University, its Regents, officers, employees and agents from and against any claims, demands, or causes of action whatsoever, including without limitation those arising on account of any injury or death of persons or damage to property caused by, or arising out of, or resulting from, the exercise or practice of the license granted hereunder by Licensee, its Affiliates or their officers, employees, agents or representatives.
10.2 In no event shall Board be liable for any indirect, special, consequential or punitive damages (including, without limitation, damages for loss of profits or expected savings or other economic losses, or for injury to persons or property) arising out of or in connection with this Agreement or its subject matter, regardless of whether Board knows or should know of the possibility of such damages.

 

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10.3 Insurance
  a.   Beginning at the time when any Licensed Subject Matter is being distributed or sold (including for the purpose of obtaining regulatory approvals) by Licensee or by a sublicensee, Licensee shall, at its sole cost and expense, procure and maintain commercial general liability insurance in amounts not less than $2,000,000 per incident and $2,000,000 annual aggregate, and Licensee shall use reasonable efforts to have the Board, System, University, its Regents, officers, employees and agents named as additional insured’s. Such commercial general liability insurance shall provide (i) product liability coverage; (ii) broad form contractual liability coverage for Licensee’s indemnification under this Agreement; and (iii) coverage for litigation costs. The minimum amounts of insurance coverage required shall not be construed to create a limit of Licensee’s liability with respect to its indemnification under this Agreement.
  b.   Licensee shall provide Board with written evidence of such insurance upon Board’s request. Licensee shall provide Board with written notice of at least fifteen (15) days prior to the cancellation, non-renewal or material change in such insurance.
  c.   Licensee shall maintain such commercial general liability insurance beyond the expiration or termination of this Agreement during (i) the period that any Licensed Subject Matter developed pursuant to this Agreement is being commercial distributed or sold by Licensee or by a sublicensee or agent of Licensee; and (ii) the five (5) year period immediately after such period.
11. USE OF BOARD AND COMPONENT’S NAME
Licensee may not use the name of University, System or Board without express written consent.
12. CONFIDENTIAL INFORMATION AND PUBLICATION
12.1 Board and Licensee each agree that all information contained in documents marked “confidential” and forwarded to one by the other (i) be received in strict confidence, (ii) be used only for the purposes of this Agreement, and (iii) not be disclosed by the recipient party, its agents or employees without the prior written consent of the other party, except to the extent that the recipient party can establish competent written proof that such information;
  a.   was in the public domain at the time of disclosure;
  b.   later became part of the public domain through no act or omission of the recipient party, it’s employees, agents, successors or assigns;

 

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  c.   was lawfully disclosed to the recipient party by a third party having the right to disclose it;
  d.   was already known by the recipient party at the time of disclosure;
  e.   was independently developed by the recipient; or
  f.   is required by law or regulation to be disclosed.
12.2 Each party’s obligation of confidence hereunder shall be fulfilled by using at least the same degree of care with the other party’s confidential information as it uses to protect its own confidential information. This obligation shall exist while this Agreement is in force and for a period of 3 years thereafter.
12.3 University will submit its manuscript for any proposed publication of research related to Licensed Subject Matter to Licensee at least 30 days before publication, and Licensee shall have the right to review and comment upon the publication in order to protect Licensee’s confidential information. Upon Licensee’s request. publication will be delayed up to 60 additional days to enable Licensee to secure adequate intellectual property protection of Licensee’s property that would be affected by the publication. For the purposes of this clause “publication” shall mean any public disclosure as defined under patent law.
13. PATENTS AND INVENTIONS
13.1 Both parties agree to fully cooperate with each other concerning patent matters, including selection and use of patent counsel. If after consultation with Licensee, both parties agree that a patent application should be filed for Licensed Subject Matter, Board will prepare and file the appropriate patent applications, and Licensee will pay the cost of searching, preparing, filing, prosecuting and maintaining same. If Licensee notifies Board that it does not intend to pay the cost of an application, or if Licensee does not respond or make an effort to agree with Board on the disposition of rights in the subject invention, then Board may file an application at its own expense and Licensee will have no rights to the invention in the territory in question; provided, however, that If Licensee has filed applications in the United States, at least three major territories within the European Union and Japan, Licensee will retain exclusive rights worldwide. Board will provide Licensee a copy of any patent application for which Licensee has paid the cost of filing, as well as copies of any documents received or filed with the respective patent office during the prosecution thereof.

 

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14. ALTERNATE DISPUTE RESOLUTION
14.1 Any dispute or controversy arising out of or relating to this Agreement, its construction or its actual or alleged breach will be decided by mediation, If the mediation does not result in a resolution of such dispute or controversy, it will be finally decided by an appropriate method of alternate dispute resolution, including without limitation, arbitration, conducted in the city of El Paso, Texas in accordance with the Commercial Dispute Resolution Procedures of the American Arbitration Association . The arbitration panel will include members knowledgeable in the evaluation of biotechnology and chemical technology. Judgment upon the award rendered may be entered in the highest court or forum having jurisdiction, state or federal. The provisions of this Article 14 will not apply to decisions on the validity of patent claims or to any dispute or controversy as to which any treaty or law prohibits such arbitration. The decision of the arbitration must be sanctioned by a court of law having jurisdiction to be binding upon and enforceable by the parties.
15. GENERAL
15.1 This Agreement constitutes the entire and only agreement between the parties for Licensed Subject Matter and all other prior negotiations, representations, agreements, and understandings are superseded hereby. No agreements altering or supplementing the terms hereof may be made except by a written document signed by both parties.
15.2 Any notice required by this Agreement must be given by prepaid, first class, certified mail, return receipt requested and addressed to:
The University of Texas at El Paso
Technology Transfer Office
Burges Hall, Room 404
500 W. University
El Paso, Texas 79968
Attn: Technology Transfer Manager
Ph: 915/747-7901
Fax: 915/747-5931
or in the case of Licensee to:
ChromaDex
2952 Daimler St.
Santa Ana, California 92705
Attn: Mr. Frank Jaksch
Fax: 949/419-0894
Phone: 949/419-0288
or other addresses as may be given from time to time under the terms of this notice provision.

 

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15.3 Licensee must comply with all applicable federal, state and local laws and regulations in connection with its activities pursuant to this Agreement.
15.4 This Agreement will be construed and enforced in accordance with the laws of the United States of America and of the State of Texas.
15.5 Failure of Board to enforce a right under this Agreement will not act as a waiver of that right or the ability to later assert that right relative to the particular situation involved.
15.6 Headings are included herein for convenience only and shall not be used to construe this Agreement.
15.7 If any part of this Agreement is for any reason found to be unenforceable, all other parts nevertheless remain enforceable.
IN WITNESS WHEREOF, parties hereto have caused their duly authorized representatives to execute this Agreement.
                     
BOARD OF REGENTS OF THE       CHROMADEX    
UNIVERSITY OF TEXAS SYSTEM                
 
                   
By
          By   /s/ Frank Jaksch    
 
                   
 
  Diana S. Natalicio, President           Frank Jaksch, President    
 
                   
Date:
          Date:        
 
                   
 
                   
Approved as to Content:                
 
                   
By
                   
 
                   
 
  Paul C. Maxwell, Vice President for Research                
 
  and Sponsored Projects                
 
                   
Date:
                   
 
                   

 

14

Exhibit 10.13
STOCK REDEMPTION AGREEMENT
This STOCK REDEMPTION AGREEMENT (this “ Agreement ”) is made and entered into as of this 18 th day of June 2008, by and between ChromaDex, Inc., a California corporation (the “ Corporation ”), and Bayer Innovation GmbH (formerly named Bayer Innovation Beteiligungsgesellschaft mbH), a German corporation (“ Shareholder ”).
R E C I T A L S
A. Shareholder is the owner of 1,222,795 shares of the Common Stock of the Corporation (the “ Shares ”).
B. The Corporation desires to redeem from Shareholder, and Shareholder desires to sell to the Corporation, all of the Shares, on the terms and subject to the conditions of this Agreement.
A G R E E M E N T
In consideration of the foregoing recitals and the mutual covenants contained herein, the parties, intending to be legally bound, agree as follows:
1 Redemption of Securities. Shareholder hereby sells, transfers and assigns to the Corporation, and the Corporation hereby purchases and redeems from Shareholder, all of Shareholder’s right, title and interest in and to the Shares.
2. Consideration . As consideration for the sale to the Corporation of the Shares hereunder, on or before December 20, 2008 (the “ Payment Date ”), the Corporation shall pay to Shareholder US$1,002,691.90 (the “ Purchase Price ”), or US$0.82 per share of Common Stock, by the Corporation’s delivery to Shareholder of a wire transfer of immediately available funds in such amount. Concurrently with the execution of this Agreement, the Corporation shall issue a promissory note in favor of Shareholder reflecting the Corporation’s payment obligations under this Section 2, in the form attached to this Agreement as Annex A (the “ Promissory Note ”). As set forth in the Promissory Note, and not in addition thereto, if the principal amount of the Promissory Note, or any part thereof, is not paid in full when due, the Corporation shall pay interest on the overdue principal amount at the rate of one and one half percent (1 1/2%) per month beginning January 1, 2009 until all amounts outstanding under this Promissory Note have been paid in full, or at the maximum rate permitted by applicable law, whichever is less. Interest shall be computed on the basis of the actual number of days outstanding on the basis of a year consisting of 360 days. Borrower may prepay the Promissory Note without premium or penalty. All payments received on account of the Promissory Note shall be first applied to accrued and unpaid interest, if any, and the remainder shall be applied to the reduction of principal.

 

 


 

3. Representations and Warranties. Shareholder hereby represents and warrants to the Corporation as follows:
3.1 Authorization. All action has been taken on the part of Shareholder necessary for the authorization, execution and delivery of this Agreement. Shareholder has taken all action required to make all the obligations of Shareholder reflected herein the valid and enforceable obligations they purport to be.
3.2 Compliance with Other Instruments. The authorization, execution, delivery and consummation of this Agreement will not constitute or result in a default or violation of any law or regulation applicable to Shareholder or any term or provision of Shareholder’s charter documents, or any material agreement or instrument by which it is bound or to which its properties or assets are subject.
3.3 Ownership; Right to Transfer. Shareholder owns beneficially the Shares free and clear of all liens, encumbrances, security interests, claims, options or limitations affecting its ability to transfer the Shares to the Corporation. Shareholder has the unrestricted right to enter into this Agreement and to consummate the transactions described in this Agreement without obtaining the consent or approval of any third party.
3.4 Exclusion of Liability. Shareholder does not provide any other representations or warranties and any and all claims for breach of representations or warranties other than the ones specified above shall be waived by the Corporation and excluded to the extent legally possible.
4. Representations and Warranties. The Corporation hereby represents and warrants to Shareholder as follows:
4.1 Authorization. All action has been taken on the part of the Corporation necessary for the authorization, execution and delivery of this Agreement. The Corporation has taken all action required to make all the obligations of the Corporation reflected herein the valid and enforceable obligations they purport to be.
4.2 Compliance with Other Instruments. The authorization, execution, delivery and consummation of this Agreement will not constitute or result in a default or violation of any law or regulation applicable to the Corporation or any term or provision of the Corporation’s charter documents, or any material agreement or instrument by which it is bound or to which its properties or assets are subject.
4.3 Agreement and Plan of Merger. The Merger (as defined in that certain Agreement and Plan of Merger, dated May 21, 2008, by and among Cody Resources, Inc., a Nevada corporation, CDI Acquisition, Inc., a California corporation, and the Corporation) has not yet been made effective and will not be made effective before the Effective Time (as defined in Section 5).
4.4 Exclusion of Liability. The Corporation does not provide any other representations or warranties and any and all claims for breach of representations or warranties other than the ones specified above shall be waived by Shareholder and excluded to the extent legally possible.

 

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5 . Closing .
5.1 Closing; Effective Time . The consummation of the transactions contemplated herein (the “ Closing ”) shall take place remotely by exchange of documents and signature pages via facsimile or electronic mail, to be coordinated from the offices of Manatt, Phelps & Philips, LLP, 695 Town Center Drive, Fourteenth Floor, Costa Mesa California 92626, and shall be effective upon delivery and release of the documents and instruments set forth in Sections 5.2 and 5.3 (the “ Effective Time ”).
5.2 Shareholder’s Obligations at Closing . At the Closing, Shareholder shall deliver, or cause to be delivered, to the Corporation, the following documents and instruments, in form and substance reasonably satisfactory to the Corporation and its counsel:
(a) A counterpart signature page to this Agreement, duly executed by Shareholder;
(b) A stock assignment separate from certificate, duly executed by Shareholder, assigning all of its right, title and interest in and to the Shares, as evidenced by Stock Certificate No. 24 of the Corporation; and
(c) Such other documents and instruments as the Corporation or its counsel may reasonably request to better evidence or effectuate the transactions contemplated hereby.
5.3 Obligations of the Corporation at Closing . At the Closing, the Corporation shall deliver to Shareholder the following documents and instruments, in form and substance reasonably satisfactory to Shareholder and his counsel:
(a) A counterpart signature page to this Agreement, duly executed by the Corporation;
(b) The Promissory Note, duly executed by the Corporation; and
(c) Such other documents and instruments as Shareholder or its counsel may reasonably request to better evidence or effectuate the transactions contemplated hereby.
5.4 Obligations of the Parties After Closing . As soon as practicable after the Closing, but in no event more than three business days thereafter, (a) each of the Corporation and Shareholder shall send by courier to the other, an originally executed counterpart of the documents and instruments set forth in Sections 5.2 and 5.3, and (b) Shareholder shall send by courier to the Corporation for cancellation, the original Stock Certificate No. 24 of the Corporation.

 

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6. General Provisions.
6.1 Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties shall be governed, construed and interpreted in accordance with the laws of the State of California.
6.2 Entire Agreement. This Agreement, together with the exhibits attached hereto, sets forth the entire understanding of the parties relating to the subject matter herein and merges all prior discussions between them.
6.3 Enforcement of Rights. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.
6.4 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.
6.5 Severability. Should one or more provisions of this Agreement be or become invalid, illegal or unenforceable in whole or in part or should it turn out that this Agreement is incomplete, the validity or enforceability of the remaining provisions hereof shall not be affected. In such event the parties hereto shall be obliged to replace the invalid, illegal or unenforceable provision by, or to complete this Agreement with, a valid and enforceable provision which most closely resembles the economic and legal purpose of the invalid or unenforceable provision.
IN WITNESS WHEREOF , the parties have executed this Agreement effective as of the date first set forth above.
                     
THE “CORPORATION”:       “SHAREHOLDER”    
 
                   
CHROMADEX, INC.,       BAYER INNOVATION GMBH,    
a California corporation       a German corporation    
 
                   
By:
  /s/ Frank Jaksch, Jr.       By:   /s/ Dr. Detlef Wollweber    
 
                   
 
  Frank Jaksch, Jr.           Name: Dr. Detlef Wollweber    
 
  Chief Executive Officer         Title: Managing Director/Geschäftsführer    

 

4

Exhibit 10.14
ANNEX A
FORM OF PROMISSORY NOTE
Promissory Note
     
US$1,002,691.90   Irvine, California
    June 18, 2008
FOR VALUE RECEIVED, ChromaDex, Inc., a California corporation having its principal place of business at 10005 Muirlands Blvd., Suite G, First Floor, Irvine, CA 92618 USA (“Borrower”), promises to pay to the order of Bayer Innovation GmbH (“Lender”), on or before December 20, 2008 (the “Maturity Date”), the principal sum of US$1,002,691.90, such amount evidencing the purchase price payable by Borrower to Lender pursuant to that certain Stock Redemption Agreement dated as of June 18, 2008 between Borrower and Lender.
This Note shall be due and payable in full, and shall be non-interest bearing provided that Borrower timely repays the entire principal sum owing, on or before the Maturity Date. If this Note is not paid in full when due, Borrower shall pay interest on the overdue principal at the rate of one and one half percent (1 1/2%) per month beginning January 1, 2009 until all amounts outstanding under this Note have been paid in full, or at the maximum rate permitted by applicable law, whichever is less. Interest shall be computed on the basis of the actual number of days outstanding on the basis of a year consisting of 360 days. Borrower may prepay this Note without premium or penalty. All payments received on account of this Note shall be first applied to accrued and unpaid interest, if any, and the remainder shall be applied to the reduction of principal.
If any amount due under this Note is not timely paid in accordance with this Note, Lender may in its discretion exercise any and all rights and remedies, now or in the future available to it, whether under this Note, at law or in equity.
All payments of principal and interest hereunder shall be made to Bayer Innovation GmbH, Deutsche Bank Leverkusen for credit to Lender’s account or such other account as directed by Lender, in lawful money of the United States of America and in immediately available funds, without setoff, counterclaim, withholding or deduction of any kind whatsoever. Any payment due hereunder on a day which is not a business day shall be made on the next succeeding business day.
Exhibit A

 

 


 

Borrower hereby waives presentment, demand, notice, protest and all other demands or notices in connection with the delivery, acceptance, performance, default or enforcement of the Note. No course of action or delay or omission of the holder in exercising any right or remedy shall constitute or be deemed to be a waiver of any right or remedy hereunder, and a waiver on one occasion shall not operate as a bar to or waiver of any such right or remedy on any future occasion. The Borrower agrees to pay on demand all reasonable costs and expenses, including attorneys’ costs and fees, incurred or paid by the holder in connection with the enforcement of this Note. This Note shall be binding upon the successor to Borrower as a result of any merger or consolidation to which Borrower may be a party. This Note shall be governed by the laws of the Commonwealth of Pennsylvania, without regard to its conflict of laws principles. Borrower submits to the exclusive jurisdiction of the state and federal courts located in Pittsburgh, Pennsylvania in respect of any enforcement action or other dispute arising in respect of this Note.
         
  ChromaDex, Inc.
 
 
  By:   /s/ Frank Jaksch    
    Name:   Frank Jaksch   
    Its: President & CEO   
 
Exhibit A
Page 2 of 2

 

 

Exhibit 16.1
MOORE & ASSOCIATES, CHARTERED
ACCOUNTANTS AND ADVISORS
PCAOB REGISTERED
June 3, 2008
Office of Chief Accountant
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
RE: Cody Resources, Inc
We have read the statements that we understand Cody Resources, Inc will include under Item 4 of the Form 8-K it will file regarding the recent change of auditors. We agree with such statements made regarding our firm. We have no basis to agree or disagree with other statements made under Item 4.
Sincerely,
/s/ Moore & Associates, Chartered
Moore & Associates, Chartered
Las Vegas, Nevada
2675 S. JONES BLVD. SUITE 109, LAS VEGAS, NEVADA 89146 (702) 253-7499 Fax: (702)253-7501

 

 

Exhibit 21.1
(FLOW CHART)