AMENDED AND RESTATED LOAN AGREEMENT
This Amended and Restated Loan Agreement (the "Agreement"), is made
and entered into as of December 31, 1998, by and between The RiceX Company,
a Delaware corporation ("Borrower"), and FoodCeuticals, LLC, a Delaware
limited liability company, and its assigns or transferees pursuant to
Section 5.5 ("Lender"), and sets forth the terms and conditions of the loan
(the "Loan") evidenced by the Borrower's promissory notes, substantially in
the form attached hereto as Exhibit A (collectively, the "Notes").
WHEREAS, Borrower desires to enter into the Loan, and Lender desires
to make the Loan on the terms and subject to the conditions set forth
herein.
WHEREAS, the obligations of the Borrower under the Loan are secured by
those certain Security Documents between Borrower and Lender or Lender's
wholly owned subsidiary dated this date substantially in the forms listed
on Schedule A and attached hereto as Exhibits C (the "Security Documents").
WHEREAS, Borrower and Lender desire to make certain representations,
warranties and agreements in connection with the Loan.
WHEREAS, the outstanding principal of the Loan is to bear interest at
the rate of 18 % per annum with such interest to be prepaid at the time of
each advance under this Loan Agreement in shares (the "Shares") of the
Borrower's Common Stock, $.001 par value (the "Common Stock") on the basis
of 50,847.5 shares for each $100,000 advanced, in accordance with Section
1.2 of this Agreement and Section 2.1 of the Note.
WHEREAS, as and for a charge for placing and procuring the Loan as of
the date hereof, Borrower has agreed to issue to Lender warrants (the
"Warrants") to purchase 202,353.5 shares of Common Stock for each $100,000
advanced (which amount shall be rounded to the nearest whole share) (the
Warrant is in the form of Exhibit B hereto) , in accordance with Section
1.2 of this Agreement and Section 2.1 of the Note.
WHEREAS, Borrower desires to grant to Lender certain registration
rights in respect of the Shares and the Common Stock that may be acquired
on the exercise of the Warrant (the "Warrant Shares"), which registration
rights shall have the terms and be subject to the conditions set forth in
the Registration Rights Agreement dated this date substantially in the form
attached hereto as Exhibit D (the "Registration Rights Agreement").
WHEREAS, this Agreement, the Notes, the Warrant, the Security
Documents, and the Registration Rights Agreement are collectively referred
to herein as the "Transaction Documents".
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein, the parties agree as
follows:
ARTICLE I
THE LOAN
1.1 BORROWINGS UNDER THE LOAN. Subject to the terms of this Loan
Agreement, Lender agrees to loan to the Borrower at the Closing (as defined
herein), the sum of up to $1,850,000, of which the sum of $1,200,000 is to
be advanced at the Closing and the balance shall be advanced not later than
January 15,1999. All advances by Lender to Borrower shall be made by check
or wire transfer to the account of the Borrower.
1.2 PREPAID INTEREST; WARRANT. The Loan is to bear interest at the
rate of 18% per annum. Interest is to be prepaid by delivery of the Shares
at the time of each advance of the Loan, in accordance with Section 2.1 of
the Note. The applicable Warrants shall be delivered on the date of each
advance, in accordance with Section 2.1 of the Note.
1.3 FUTURE FINANCINGS. During the time that the Loan remains
outstanding, Borrower shall consult with Lender with respect to any
additional equity or debt financings of Borrower and shall initially
negotiate in good faith with Lender to provide any such financings prior to
engaging in negotiations with any other party.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower represents and warrants to Lender that each of the following
statements, except as set forth in the Borrower SEC Documents (as defined
below), (i) are true and correct on the date hereof and (ii) will be true
and correct in all material respects on the date each advance hereunder is
made:
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2.1 ORGANIZATION, STANDING AND QUALIFICATION. Borrower is a
corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation and has all requisite corporate
power and authority to own, lease and operate its properties and to carry
on its business as it is now being conducted. Borrower is licensed and
qualified to do business as a foreign corporation in each jurisdiction in
which the character of its properties, owned or leased, or the nature of
its activities makes such qualification or license necessary, except where
the failure to be so licensed or qualified would not have a material
adverse effect on the business of the Borrower. For purposes of this
agreement "Material Adverse Effect" means a material adverse effect on the
business, properties, assets, financial condition, liabilities or
operations of a Person or its Subsidiaries taken as a whole.
2.2 AUTHORITY; NO DEFAULTS. Borrower has all requisite corporate
power and authority to enter into the Transaction Documents and to
consummate the transactions contemplated thereby. The execution and
delivery of the Transaction Documents and the consummation of the
transactions contemplated thereby have been duly authorized by all
necessary corporate action on the part of Borrower. The Transaction
Documents have been executed and delivered by Borrower and constitute the
valid and binding obligation of Borrower, enforceable in accordance with
their terms, subject to bankruptcy, insolvency, moratorium and other
similar laws affecting creditors' rights generally and general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law). The execution and delivery of the
Transaction Documents do not, and the consummation of the transactions
contemplated hereby and thereby will not, conflict with or result in a
breach of or the acceleration of any obligation under, or constitute a
default or event of default (or event which, with notice or lapse of time
or both, would constitute a default or event of default) under, any
provision of any charter, bylaw, indenture, mortgage, lien, lease,
agreement, contract, instrument, order, judgment, decree, ordinance or
regulation, or any restriction to which any property of Borrower is subject
or by which Borrower is bound, the effect of which would be materially
adverse to Borrower. Borrower is not, nor does Borrower have knowledge
that it is alleged to be, in material violation or default of any
applicable law, statute, order, rule or regulation promulgated or judgment
entered by any court, administrative agency or commission or other
governmental agency or instrumentality, domestic or foreign (a
"Governmental Entity"), relating to or affecting the operation, conduct or
ownership of the property or business of Borrower.
2.3 APPROVALS. There is no legal impediment to the execution and
delivery of the Transaction Documents by Borrower or to the consummation of
the transactions contemplated thereby, and no filing or registration with,
or authorization, consent or approval of, a Governmental Entity,
shareholders or any other third party is necessary for the consummation by
Borrower of the transactions contemplated thereby.
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2.4 CHARTER AND BYLAWS. Borrower has furnished to Lender true and
complete copies of its charter and bylaws, each as amended to date and as
presently in effect.
2.5 SEC DOCUMENTS.
(a) Borrower has made all filings with the Securities and
Exchange Commission ("SEC") that it has been required to make
under the Securities Act of 1933, as amended (the "Securities
Act"), and the Securities Exchange Act of 1934, as amended (the
"Exchange Act") since May 18, 1998. Lender has been provided with
the opportunity to review true, complete and correct copies of
Borrower's registration statement on Form 10-SB ("Form 10-SB"),
together with all amendments and exhibits thereto thereto,
Borrower's quarterly report on Form 10-QSB for the fiscal quarter
ended September 30, 1998, together with all amendments and
exhibits thereto, and all other filings with the SEC made by
Borrower (including all exhibits to such filings) since the
filing of said Form 10-QSB (all such documents that have been
filed with the SEC, as amended, are referred to as the "Borrower
SEC Documents"). Lender has reviewed the Borrower SEC Documents
to its satisfaction. As of their respective dates, and except as
amended, Borrower SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act,
as the case may be, and none of Borrower SEC Documents contained
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading.
(b) The financial statements of Borrower included in the
borrower SEC Documents comply as to form in all material respects
with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto
or, in the case of the unaudited statements, as permitted by Form
10-QSB) and fairly present (subject, in the case of the unaudited
statements, to normal recurring audit adjustments) the
consolidated financial position of Borrower as of the dates
thereof and the consolidated results of its operations and cash
flows for the periods then ended.
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Since September 30, 1998, (i) there have been no material adverse
changes in Borrower's business, operations or financial condition and
(ii) Borrower's operations have been conducted in the ordinary course
of business except as disclosed in writing to Lender.
2.6 LITIGATION. As of the date of this Agreement, there is no suit,
action, proceeding or investigation pending or, to the best knowledge of
Borrower, threatened against or affecting Borrower, except for litigation
arising in the ordinary course of Borrower's business which is neither
material with respect to any individual action nor material with respect to
all such actions in the aggregate, nor is there any outstanding judgment,
order, writ, injunction or decree against Borrower, which judgment would
have a material adverse effect on Borrower. Borrower is not subject to any
court order, writ, injunction, decree, settlement agreement or judgment
that contains or orders any on-going obligations, whether prohibitory or
mandatory in nature, the performance of which would have a material adverse
effect on Borrower.
2.7 CAPITALIZATION. Borrower has authorized capital stock of (a)
100,000,000 shares of Common Stock, par value $.001 per share, of which, as
of the date hereof, there are 19,805,500 shares issued and outstanding, and
(b) shares of preferred stock, par value $.001 per share, of which, as of
the date hereof, there are no shares issued and outstanding. All of the
issued and outstanding shares of Common Stock were duly and validly issued
and are fully paid and non-assessable. None of the outstanding shares of
Common Stock has been issued in violation of any preemptive rights of the
current or past stockholders of Borrower. As of the date hereof, Borrower
has reserved for issuance an aggregate of 7,239,000 shares of Common Stock
issuable on the exercise of outstanding warrants, options, or conversion of
convertible securities (including shares issuable to CF Corporation) other
than those issuable on exercise of the Warrants. Except as described above
or in the Borrower SEC Documents, there are no outstanding options,
warrants or rights to subscribe for, or commitments of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of the capital stock of Borrower or contracts,
commitments, understandings or arrangements by which Borrower is or may be
obligated to issue additional shares of its capital stock or options,
warrants, or rights to purchase or acquire any additional shares of its
capital stock. All of the Shares and the Warrant Shares will be fully
paid, non-assessable and free and clear of any Encumbrances. As used in
this Agreement, the term "Encumbrance" means and includes (i) any security
interest, mortgage, deed of trust, lien, charge, pledge, proxy, adverse
claim, equity, power of attorney, or restriction of any kind, including but
not limited to, any restriction or servitude on the use, transfer, receipt
of income, or other exercise of any attributes of ownership, and (ii) any
Uniform Commercial Code financing statement or other public filing, notice
or record that by its terms purports to evidence or notify interested
parties of any of the matters
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referred to in clause (i) that has not been terminated or released by
another proper public filing, notice or record.
2.8 SUBSIDIARIES. Food Extrusion Montana, Inc., a Montana corporation
("Subsidiary"), is the only Subsidiary of Borrower. The address of its
principal executive office is 0000 Xxxxxxx Xxxx, Xxxxxx, Xxxxxxx. The
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, has all
requisite corporate power and authority to own, to lease or to operate its
properties and to carry on its business as it is now being conducted and is
duly qualified or licensed to do business in each jurisdiction in which the
character of its properties, owned or leased, or the nature of its
activities makes such qualification or license necessary, unless the
failure to be so licensed or qualified would not have a material, adverse
effect on Borrower. All outstanding shares of capital stock of the
Subsidiary were duly and validly issued and are fully paid, non-assessable
and owned by Borrower, free and clear of all Encumbrances. There are no
options, warrants or other rights, agreements or commitments (including
preemptive rights) obligating Borrower or the Subsidiary to issue, to sell
or to transfer any shares of capital stock or other securities of the
Subsidiary. There one (1) share of capital stock of Subsidiary issued and
outstanding.
2.9 LIABILITIES. Borrower has no liabilities or obligations, either
accrued, absolute, contingent, or otherwise that have a Material Adverse
Effect, and Borrower has no knowledge of any potential liability that it
reasonably believes would likely result in a Material Adverse Effect, other
than those (a) reflected or reserved against in the balance sheets reported
on Borrower's Form 10-QSB for the fiscal quarter ended September 30, 1998,
or (b) incurred in the ordinary course of business since September 30,
1998.
2.10 LICENSES, PERMITS, AUTHORIZATIONS, ETC. Borrower holds all
material approvals, authorizations, consents, licenses, orders, franchises,
rights, registrations and permits of any type required to operate its
business as presently conducted. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will
not result in any revocation, cancellation, suspension or modification of
any such approval, authorization, consent license, order, franchise, right,
registration or permit.
2.11 TITLE TO ASSETS; ENCUMBRANCES.
(a) Borrower has good and indefeasible title to its assets,
whether real, personal or intangible, free and clear of all
Encumbrances except (i) liens for current taxes and assessments
not yet due or being contested in good faith by appropriate
proceedings, (ii) mechanic's liens arising under the operation of
law for actions contested in good faith or for which payment
arrangements have been
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made, (iii) liens granted or incurred by Borrower in the ordinary
course of its business or financing of equipment, office space,
furniture and computers in the ordinary course of its business, and
(iv) easements, rights of way, encroachments or other restrictions or
matters affecting title which do not prevent the assets from being
used for the purpose for which they are currently being used;
(b) There are no parties in possession of any of the assets
of Borrower other than personal property held by third parties in
the reasonable and ordinary course of business. Borrower enjoys
full, free and exclusive use and quiet enjoyment of its assets
and its rights pertaining thereto. Borrower enjoys peaceful and
undisturbed possession under all leases under which it is a
lessee, and all such leases are legal, valid and binding
obligations of Borrower, enforceable against Borrower in
accordance with its terms.
2.12 TAXES AND RETURNS. Borrower has filed all required tax
returns and reports. Borrower has paid all taxes, assessments and
governmental charges and penalties which it has incurred, except such as
are being or may be contested in good faith by appropriate proceedings.
Borrower is not delinquent in the payment of any tax, assessment or
governmental charge. No deficiencies for any taxes have been proposed,
asserted, or assessed against Borrower, and no requests for waivers of the
time to assess any such tax are pending. For the purposes of this
Agreement, the term "tax" (including, with correlative meaning, the terms
"taxes" and "taxable") shall include all federal, state, local and foreign
income, profits, franchise, gross receipts, payroll, sales, employment,
use, property, withholding, excise and other taxes, duties or assessments
of any nature whatsoever, together with all interest, penalties and
additions imposed with respect to such amounts.
2.13 INSURANCE. Each policy of property, fire and casualty,
product liability, worker's compensation, professional liability and title
insurance and other forms of insurance (except group, health and life
policies) and each bond issued or posted by any person with respect to any
operations or other activities of Borrower is, to the knowledge of
Borrower, the legal, valid and binding obligation of the insurer or bond
issuer, enforceable in accordance with its terms, and is in an amount and
provides for coverage as is customary in the ordinary business practices of
Borrower's industry.
2.14 PATENTS, TRADEMARKS, ETC. Schedule 2.14 lists all patents,
trademarks, service marks, works of authorship, tradenames, brandnames or
copyrights. Such patents, trademarks, service marks, works of authorship,
tradenames, brandnames, and copyrights are referred to as the "Intellectual
Property". Borrower is not using, and does not have any plan to
manufacture, use or sell anything which would violate or infringe on any
patent or proprietary right (of which
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Borrower is aware) of any other person, firm or corporation or which would
require a license under any such patent or proprietary right. Borrower has
not received any communications alleging that Borrower has violated or, by
conducting its business as proposed, would violate any of the patents,
trademarks, service marks, tradenames, copyrights, works of authorship or
trade secrets or other proprietary rights in processes of any other person
or entity.
2.15 MATERIAL CONTRACTS AND OBLIGATIONS. Borrower has provided Lender
an opportunity to review, and Lender has reviewed to its satisfaction all
material agreements of any nature to which Borrower is a party or by which
it or any of its properties is bound, all employment and consulting
agreements, loan agreements, leases, purchase contracts, employee benefit,
bonus, pension, stock option, stock purchase and similar plans and
arrangements, and distributor and sales representative agreements. True
and complete copies of such written agreements have been provided to
Lender. All such agreements and contracts are valid, binding and in full
force and effect. Borrower is not in default on any of such agreements.
2.16 COMPLIANCE. Borrower has complied in all material respects with
all laws, and is not in violation of any charter or other corporate
restrictions or any law, ordinance, requirement, regulation, judgment,
injunction, award, decree, or other order applicable to its business.
There is no term or provision of any mortgage, indenture, contract,
agreement or instrument to which Borrower is a party or by which it is
bound, any provision of any state or federal judgment, decree, order,
injunction, writ, statute, rule or regulation applicable to or binding upon
Borrower, which would have a Materially Adverse Effect on Borrower. To the
knowledge of Borrower, no employee of Borrower is in violation of any term
of any employment contract, patent or other proprietary information
disclosure agreement or any other contract or agreement relating to the
employment of such employee with Borrower.
2.17 EMPLOYEES. Borrower has obtained agreements, which contain
nondisclosure and assignment of invention provisions and non-competition
provisions, from each of its employees and consultants whose
responsibilities require access to confidential and proprietary information
of Borrower. Borrower has complied in all material respects with all
applicable and material state and federal laws respecting employment and
employment practices, terms and conditions of employment, wages and hours
and other laws related to employment, and there are no arrears in the
payment of wages, or social security taxes.
2.18 TRANSACTIONS WITH AFFILIATES AND STOCKHOLDERS. No stockholder,
officer, director or employee of Borrower, nor any "affiliate" or
"associate" of such persons (as such terms are defined in the rules and
regulations promulgated under the Securities Act), is presently a party to
any transaction with Borrower, including without limitation, any contract,
agreement or other
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arrangement providing for the employment of, furnishing of services by,
rental of real or personal property from or otherwise requiring payments
to, any such person or entity.
2.19 BOOKS AND RECORDS. The minute books of Borrower furnished to
counsel to Lender for review contain complete and accurate records of all
meetings and other corporate actions of its stockholders and its Board of
Directors and committees thereof. The stock ledger and stock transfer
records of Borrower furnished by American Stock Transfer & Trust Company to
counsel to Lender for review is complete and reflects all issuances,
transfers of which Borrower is aware, repurchases and cancellations of
shares of capital stock of Borrower.
2.20 STOCKHOLDER AGREEMENTS. There are no agreements, written or
oral, which are (i) between Borrower and any holder of its capital stock,
or (ii) to the knowledge of Borrower, among any persons holding five
percent (5%) or more of Borrower's capital stock, relating to the
acquisition, disposition or voting of the capital stock of Borrower.
2.21 ERISA. Borrower has no employee benefit plans subject to the
Employment Retirement Income Security Act of 1974.
2.22 ACCOUNTS RECEIVABLE. All accounts receivable of Borrower
(including those reflected on the Balance Sheet or acquired on or prior to
the Closing Date) arose in the ordinary and usual course of business of
Borrower, represent valid obligations due to Borrower and have been
collected or are, to Borrower's best knowledge, collectible in the ordinary
and usual course of business of Borrower in the aggregate recorded amounts
thereof in accordance with their terms less in the case of accounts
receivable reflected in the Financial Statements, all allowance for
doubtful accounts marked therein, and in the case of accounts receivable
thereafter, all allowances for doubtful accounts consistent with past
practices of Borrower.
2.23 HAZARDOUS WASTES AND SUBSTANCES. Neither the operations of
Borrower nor the use of its assets violates any applicable federal, state
or local law, statute, ordinance, rule, regulation, memorandum of
understanding, order or notice requirement pertaining to the collection,
transportation, storage, treatment, discharge, release or disposal of
hazardous or non-hazardous waste or substances, including without
limitation (i) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C, Sections 9601 ET SEQ.), as amended from
time to time on or before the Closing Date ("CERCLA") (including, without
limitation, as amended pursuant to the Superfund Amendments and
Reauthorization Act of 1986), and such regulations promulgated under CERCLA
on or before the Closing Date, (ii) the Resources Conservation and Recovery
Act of 1976 (42 U.S.C. Sections 6901 ET SEQ.), as amended from time to time
("RCRA") on or before the Closing Date, and such regulations promulgated
under RCRA, or (iii) any applicable federal, state or local laws or
regulations relating to the
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environment in effect or on the Closing Date (collectively, the "Applicable
Environmental Laws"). None of the operations of Borrower has ever been
conducted nor have any of its assets been used in such a manner as to
constitute a violation of any of the Applicable Environmental Laws. No
notice has been served on Borrower by any person or Governmental Entity
regarding any existing, pending or threatened investigation or inquiry
related to violations under any Applicable Environmental Law, or regarding
any claims for corrective action, remedial obligations or contribution for
removal costs or damages under any Applicable Environmental Law, or
regarding the designation of Borrower or any of its affiliates as a
potentially responsible party for any facility under the Applicable
Environmental Laws, nor does any fact or circumstance exist which, if
disclosed publicly, would be reasonably likely to result in the service on
Borrower of any such notice. There has been no action taken, or omitted to
be taken by Borrower which has caused, or would be reasonably likely to
cause, a "release" of any "hazardous substance" at any "facility," without
limitation, within the meaning of such terms as defined in the Applicable
Environmental Laws.
2.24 DISCLOSURES. Neither this Agreement nor any Exhibit hereto, nor
any certificate or other instrument furnished to Lender or its counsel by
Borrower in connection with the transactions contemplated hereby, contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein, in
the light of the circumstances under which they were made, not misleading.
ARTICLE III
INVESTMENT REPRESENTATIONS
3.1 INVESTMENT REPRESENTATIONS. This Agreement is made with the
Lender in reliance on the following specific representations to the
Borrower that:
(a) The Notes, Shares and the Warrants issued to
Lender hereunder will be acquired for the Lender's own account,
not as a nominee or agent, and the Lender has no present
intention of selling, granting participation in, or otherwise
distributing the same in violation of the registration
requirements of the Securities Act of 1933, as amended (the
"Act").
(b) The Lender understands that the Notes, Shares and
the Warrants represent a speculative investment, and the Lender
is able, without impairing its financial condition, to hold the
Notes, Shares and the Warrants for an indefinite period of time
and to suffer a complete loss of the Lender's investment. The
Lender is aware of and has investigated the Borrower's business,
management and financial condition, has had the opportunity to
inspect the
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Borrower's facilities and has had access to such other information
about the Borrower as the Lender has deemed necessary or desirable to
reach an informed and knowledgeable decision to acquire the Notes,
Shares and the Warrants.
(c) The Lender understands, except as set forth in the
Registration Rights Agreement, that the Shares, the Warrants and
the Warrant Shares will not be registered under the Act by reason
of, among other things, reliance upon certain exemptions
therefrom, and that the reliance of the Borrower on such
exemptions is predicated upon, among other things, the bona fide
nature of the Lender's investment intent as expressed herein.
(d) The management of the Lender is experienced in
evaluating and investing in securities of companies in the
development stage and has made investments in securities other
than those of the Borrower. The Lender acknowledges that by
reason of its business or financial experience, it has the
ability to bear the economic risk of its investment pursuant to
this Agreement.
3.2 RULE 144. The Lender understands that the Notes, the Shares,
the Warrants, and the Warrant Shares, are restricted securities within
the meaning of Rule 144 under the Act; that such securities are not
registered and must be held indefinitely unless they are subsequently
registered or an exemption from such registration is available; that,
in any event, the exemption from registration under Rule 144 will not
be available for at least one year, and even then will not be
available unless: (i) a public trading market then exists for the
Notes, the Shares, the Warrants and the Warrant Shares, (ii) adequate
information concerning the Company is then available to the public;
and (iii) the other terms and conditions of Rule 144 are complied
with, including, among other things, the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions
directly with a "market maker" and the number of shares being sold in
any three-month period shall not exceed specified limitations; and
that any sale of such securities may be made by the Lender only in
limited amounts in accordance with such terms and conditions if the
Lender is an affiliate of the Borrower or has held such securities
less than two years.
3.3 INDEPENDENT INVESTIGATION: ACCREDITED INVESTOR. The Lender
has had a reasonable opportunity to ask questions of and receive
answers from the Borrower concerning the Borrower and the purchase
hereunder, and all such questions, if any, have been answered to the
full satisfaction of the undersigned. In making its investment
decision to purchase the Notes, the Shares, and the Warrants, the
Lender is not relying on any oral or written representations or
assurances from the Borrower or any other person
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other than as set forth in this Agreement or in a document executed by a
duly authorized representative of the Borrower making reference to this
Agreement. The Lender has such experience in business and financial
matters that it is capable of evaluating the risk of its investment and
determining the suitability of its investment. The Lender is an
"accredited investor" as defined in Rule 501 of Regulation D and by reason
of the Lender's professional advisors, has the capacity to protect its own
interest in connection with this purchase.
3.4 ECONOMIC RISK. The Lender understands and acknowledges that
an investment in the Notes and the Warrant involves a high degree of
risk, including a possible total loss of investment in the Notes and
the Warrant. In making this statement, the Lender hereby represents
and warrants that the Lender has adequate means of providing for the
Lender's current needs and contingencies and the Lender is able to
afford to hold the Notes and the Warrant for an indefinite period.
3.5 NO GOVERNMENT RECOMMENDATION OR APPROVAL. The Lender
understands that no United States federal or state agency or similar
agency of any other country has passed up or made any recommendation
or endorsement of the Borrower, this transaction or the purchase of
the Notes and Warrant.
3.6 RELIANCE ON REPRESENTATION. This Agreement is made by the
Borrower with the Lender in reliance upon the Lender's representations
and covenants made in this Article III.
3.7 NO REGISTRATION. The Lender understands that the Notes,
the Shares, and the Warrants have not been registered under the Act
and are being issued pursuant to an exemption from registration
contained in the Act, which is based, in part, upon the
representations of the Lender contained herein.
3.8 NO PUBLIC SOLICITATION. The Lender knows of no public
solicitation or advertisement of an offer in connection with the
issuance of the Notes, the Shares and the Warrants.
3.9 INVESTMENT INTENT. The Lender represents and warrants to
the Borrower that the Lender has no present plan or intention of
selling the Notes, the Shares, and the Warrants in violation of the
registration requirements of the Act, has made no predetermined
arrangements to sell the Notes, the Shares, and the Warrants in
violation of the terms of this Agreement, and that the purchase and
sale hereunder, together with any
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subsequent resale of the Notes, the Shares and the Warrants, is not part of
a plan or scheme to evade the registration provisions of the Act.
3.10 NO SALE IN VIOLATION OF THE ACT. The Lender further
covenants that the Lender will not make any sale, transfer or other
disposition of the Notes, the Shares and the Warrants in violation of
the Act, the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or the rules and regulations of the Securities and
Exchange Commission (the "Commission") promulgated thereunder.
3.11 NO RELIANCE ON TAX ADVICE. The Lender has reviewed with
its own tax advisors foreign, federal, and state and local tax
consequences of this investment, where applicable, and the
transactions contemplated by this Agreement. The Lender is relying
solely on such advisors and not on any of its agents and understands
that the Lender (and not the Borrower) shall be responsible for the
Lender's own tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.
3.12 INDEPENDENT LEGAL ADVICE. The Lender acknowledges that
the Lender has had the opportunity to review this Agreement and the
transactions contemplated by this Agreement with its own legal
counsel. The Lender is relying solely on such counsel and not on any
statements or representations of the Borrower or any of its agents for
legal advice with respect to this investment or the transactions
contemplated by this Agreement.
3.13 NOT AN AFFILIATE. The Lender is not an officer, director
or "Affiliate" (as the term defined in Rule 405 and Rule 501(b) of the
Act) of the Borrower.
ARTICLE IV
THE CLOSING
4.1 TIME AND PLACE. Subject to the provisions hereto, the initial
closing and the closing of subsequent advances of the purchase and sale of
the Notes, the Shares and the Warrants (the "Closings") will take place on
the dates agreed to by the parties (the "Closing Dates"), at the offices of
Xxxxxx & Xxxxx LLP, Sacremento, California, unless another time and place
are agreed to by the parties.
4.2 CONDITIONS TO THE OBLIGATION OF BORROWER. The obligation of
Borrower to effect each Closing is subject to Lender delivering, or causing
to be delivered, to Borrower at the Closing the following:
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4.2.1 The sum of $1,200,000 as provided in Section 1.1
hereof on the first Closing Date and the sum of $650,000 on January 15,
1999 (the "Second Closing Date")..
4.2.2 The Agreement.
4.3 CONDITIONS TO THE OBLIGATION OF LENDER. The obligation of
Lender to effect the Closing is subject to Borrower delivering, or causing
to be delivered, to Lender at the initial Closing the following documents:
4.3.1 copies of the charter of Borrower and all
amendments thereto and a certificate of an Officer of Borrower
certifying that there have been no amendments to such charter since
such date, and copies, certified by the Secretary of Subsidiary as of
the Closing Date, of the charter of Subsidiary and all amendments
thereto. Copies of the charter of Borrower certified by the Secretary
of State of Delaware will be provided on or before January 8, 1999;
4.3.2 copies, certified by the Secretary of each of
Borrower and Subsidiary as of the Closing Date, of the bylaws of
Borrower, and all amendments thereto;
4.3.3 the Agreement;
4.3.4 the Note in the principal amount of up to $1,850,000;
4.3.5 the Warrant to purchase 2,428,242 shares of Common
Stock;
4.3.6 the Security Agreement of Borrower;
4.3.7 the Registration Rights Agreement;
4.3.8 a certificate of an Officer of Borrower to
the effect that the representations and warranties of Borrower
herein contained shall be true as of and at the Closing Date with
the same effect as though made at such date, except as affected
by transactions permitted or contemplated by this Agreement; and
further to the effect that Borrower shall have performed and
complied with all covenants required by this Agreement to be
performed or complied with by each before the Closing Date;
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4.4. SUBSEQUENT ADVANCES. Upon the advance by Lender of the
additional $650,000 on or before January 15, 1999, additional Warrants
and Shares will be issued in accordance with Section 1.2 and the
Recitals under this Agreement.
4.5. POST-CLOSING COVENANTS. The Borrower agrees to comply
with the following post-closing covenants:
4.5.1. As soon as reasonably practicable, Borrower will
deliver, or cause its transfer agent to deliver, a certificate
representing 610,170 shares of Common Stock, dated December 31, 1998,
representing prepaid interest on the initial $1,200,000 advance.
4.5.2. In the event that the Lender timely satisfies all
conditions under this Agreement and lends an additional $2,350,000 on
or prior to March 1, 1999, Lender will be issued an aggregate of
8,545,532 in shares (for prepaid interest) and five-year warrants
exercisable at $.75 per share to purchase common shares on terms
substantially similar to those in this Agreement.
4.5.3 On or prior to January 8, 1999, Lender will
be provided with copies, certified by the Secretary of Borrower
as of the initial Closing Date, of resolutions duly adopted by
the board of directors of Borrower authorizing the execution and
delivery by Borrower of the Transaction Documents and all other
agreements attached hereto as Exhibits or contemplated herein,
the completion of the sale of the Note, the Shares and Warrants
and the taking of all such other corporate action as shall have
been required as a condition to, or in connection with, the sale
of the Note, the Shares and Warrants;
4.5.4. Financing statements on Form UCC -1 as Lender
may request, and such other assignments, agreements and other
documents (including documents for filing or recording) as Lender
may request so as to perfect its security interest in the
collateral described in the Security Agreement will be provided
to Lender upon request, including, execution and delivery to
Lender of all documentation requested by Lender to perfect a
security interest in and to and in favor of Lender as to all
Intellectual Property in such manner and form as required to
allow the same to be perfected by filing and/or recording in
accordance with all laws, rules, and regulations of the United
States Patent Office pertaining thereto;
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4.5.5 As soon as reasonably practicable, Borrower
shall take steps to cause the appointment or election of two
persons to the Borrower's Board of Directors as designated by
Lender to serve until the Borrower's 1999 annual meeting of
stockholders and until their successors have been elected and
qualified.
ARTICLE V
GENERAL PROVISIONS
5.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations, warranties and agreements contained in this Agreement
shall survive the Closing and each advance hereunder.
5.2 NOTICES. All notices or other communications which are required
or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given when delivered in person, transmitted by
telecopier (with receipt confirmed) or mailed by registered or certified
first class mail, postage prepaid, return receipt requested to the parties
hereto at the address set forth below (as the same may be changed from time
to time by notice similarly given) or the last known business or residence
address of such other person as may be designated by either party hereto in
writing.
(a) If to Borrower: The RiceX Company
0000 Xxxx'x Xxxxxx Xxxxx
Xx Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention:Xxxxxx XxXxxx, Chairman of the
Board
(b) If to Lender: FoodCeuticals, LLC.
The Abbey
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xx. Xxxxxx Xxxxxxxxxx
5.3 MISCELLANEOUS. This Agreement (i) constitutes the entire
agreement and supersedes all other prior agreements and understandings,
both written and oral, among the parties, or any of them, with respect to
the subject matter hereof, and (ii) shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns and is not intended to confer upon any other person any rights or
remedies hereunder.
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5.4 PUBLICITY. Borrower and Lender promptly shall advise and
cooperate with the other prior to issuing, or permitting any of its
directors, officers, employees or agents to issue, any press release with
respect to this Agreement or the transactions contemplated hereby, provided
that Borrower shall be permitted to issue any press release or make such
other public disclosure as may be required by law without the consent of
the Lender. Notwithstanding the foregoing, without the prior consent of
Lender, neither Borrower nor any of its directors, officers, employees or
agents shall issue any press release which includes the name of Lender or
any of Lender's affiliates, unless otherwise required by applicable law.
5.5 ASSIGNMENT.
(a) Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by Borrower (whether
by operation of law or otherwise) without the prior written
consent of the Lender.
(b) Lender may assign its rights and obligations hereunder,
under the Notes, or any of them, the Warrant or any other
Transaction Document, subject to any applicable restrictions
under Federal and state securities laws, to any other person who
shall participate with Lender in the purchase of the Notes and
Warrant, subject to the terms hereof and upon prior written
notice to Borrower. Each such assignee (an "Assignee") shall
execute an Assignment and Acceptance and upon the execution of
such Assignment and Acceptance by such Assignee, (i) the Assignee
shall be a "Lender" hereunder and, to the extent provided in the
Assignment and Acceptance, shall have the rights and obligations
of a Lender hereunder, and (ii) the assigning Lender (an
"Assignor") shall, to the extent provided in the Assignment and
Acceptance, be released from its obligations hereunder.
(c) An Assignor hereunder shall, if requested by the
Assignee, deliver the Notes and Warrant in favor of such Assignor
to the Borrower, and the Borrower shall issue replacement Notes
and Warrant in favor of the Assignor and the Assignee in the
amounts and for such shares as are indicated in the Assignment
and Acceptance. The replacement Warrant shall be issued for an
exercise price per share equal to the exercise price set forth in
the Warrant to be delivered to Borrower under this Section
5.5(c).
5.6 SCHEDULES. All statements contained in any exhibit, schedule,
appendix, certificate or other instrument delivered by or on behalf of the
parties hereto, or in connection with the
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transactions contemplated hereby, are an integral part of this Agreement
and shall be deemed representations and warranties hereunder.
5.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which constitutes an original execution and, in the
aggregate, constitute a single document.
5.8 EXPENSES OF DISPUTE RESOLUTION. If any action at law or in
equity is necessary to enforce or interpret the terms of this Agreement or
any of the other Transaction Documents, the prevailing party shall be
entitled to reasonable attorneys' fees, costs, and necessary disbursements
in addition to any other relief to which it may be entitled.
5.9 SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of such provision in every other respect and of
the remaining provisions contained herein shall not be affected or impaired
thereby.
5.10 ADDITIONAL AGREEMENTS. It is understood and agreed that
promptly after the Closing the following additional agreement shall be
entered into:
5.10.1 a Distribution Agreement between the Borrower and
Lender (or its designee) whereby Lender or its designee shall
have the right to distribute the Borrower's products on terms no
less favorable than are granted to other persons.
5.11 GOVERNING LAW This Agreement and the Note shall be governed
by and construed in accordance with the laws of the State of New
Jersey without giving effect to applicable principles of conflicts of
laws to the extent that the application of the law of another
jurisdiction would be required thereby.
5.12 DEFAULT. Any default under the Note shall operate as a
default under this Agreement.
5.13. FURTHER ASSURANCES. Each of the parties hereto
covenants, without the need for any additional consideration, that it
will take such further actions and execute upon request any further
documents as may be reasonably required to fully effectuate the terms,
conditions and intent of this Agreement.
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BORROWER'S SIGNATURE PAGE
IN WITNESS WHEREOF, Borrower has signed this Agreement as of the date first
written above.
The RiceX Company
By: /s/ Xxxxxx X. XxXxxx
---------------------------------------
Xxxxxx X. XxXxxx, Chairman of the Board
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LENDER'S SIGNATURE PAGE
IN WITNESS WHEREOF, Lender has signed this Agreement as of the date
first written above.
FoodCeuticals, LLC
By: /s/ Xxxxxx Xxxxxxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxxxxxx
Title: Managing Member
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