Option Agreement

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:

This Agreement is effective August 19, 2005 (“Effective Date”).

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);

(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.

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.

3.1 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