Designates portions of this document have been omitted pursuant to a request for confidential treatment filed separately with the Commission] LIMITED LIABILITY COMPANY AGREEMENT FOR GRAIN ENHANCEMENT, LLC, a Delaware limited liability company
Exhibit
10.1
[*Designates
portions of this document have been omitted pursuant to a request for
confidential
treatment filed separately with the Commission]
FOR
GRAIN
ENHANCEMENT, LLC,
a
Delaware limited liability company
FOR
GRAIN
ENHANCEMENT, LLC,
A
DELAWARE LIMITED LIABILITY COMPANY
NutraCea,
a California corporation located at 0000 Xxxxx 00xx
Xxxxxx,
Xxxxx 000, Xxxxxxx, XX 00000 (“NutraCea”),
Pacific
Advisors Holdings Limited, a company incorporated under the laws of British
Virgin Islands,
located
at 00 Xxxxxxxxx Xxxx, Xxxxxxxxx Xxxxx #00-00, Xxxxxxxxx 000000 (“Pacific
Advisors”),
Theorem Group, LLC, a California limited liability company, located at 0000
Xxxxxxx Xxxx Xxxx, #0000 Xxx Xxxxxxx, XX 00000 (“Theorem”),
and
Ho’okipa Capital Partners, Inc., a California corporation (“Ho’okipa ”) agree,
effective as of June ___, 2007 (the “Effective
Date”),
as
follows:
ARTICLE
I
Background
and Purpose.
1.1. Certificate.
On or
about June 22, 2007 a Certificate of Formation for Grain Enhancement, LLC
(“Certificate”),
a
limited liability company formed under the laws of the State of Delaware
(“Company”),
was
filed with the office of the Delaware Secretary of State.
1.2. Adoption
of Agreement.
The
Members desire to adopt and approve a limited liability company agreement for
the Company under the Delaware Limited Liability Company Act upon the terms
and
subject to the conditions of this Agreement.
ARTICLE
II
Certain
Definitions.
The
following terms shall have the meanings set forth below unless the context
requires otherwise:
Act.
“Act”
means
the Delaware Limited Liability Company Act, Delaware Code Annotated Title 6,
Sections 18-101 through 18-1109, as amended from time to time and any
corresponding provisions of succeeding law.
Affiliate.
“Affiliate”
means
(i) any individual, partnership, corporation, trust or other entity or
association, that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with a Member, or that
holds a substantial beneficial interest in a Member, or (ii) any relative or
spouse of any person who holds a substantial beneficial interest in a Member.
The term “control,” as used above, means, with respect to a corporation or
limited liability company, the right to exercise, directly or indirectly, more
than fifty percent (50%) of the voting rights attributable to the controlled
corporation or limited liability company and, with respect to any individual,
partnership, trust, other entity or association, the possession, directly or
indirectly, of the power to direct or cause the direction of the management
or
policies of the controlled entity.
Agreement.
“Agreement”
means
this limited liability company agreement of Grain Enhancement, LLC, as
originally executed and as amended from time to time.
Assignee.
“Assignee”
means
a
person who has acquired a beneficial interest in the Company who is not a
substitute Member in accordance with the requirements of this
Agreement.
Bankruptcy.
“Bankruptcy”
means:
(a) the filing of an application by a Member for, or his or her consent to,
the
appointment of a trustee, receiver, or custodian of his or her other assets:
(b)
the entry of an order for relief with respect to a Member in proceedings under
the United States Bankruptcy Code, as amended or superseded from time to time;
(c) the making by a Member of a general assignment for the benefit of creditors;
(d) the entry of an order, judgment, or decree by any court of competent
jurisdiction appointing a trustee, receiver, or custodian of the assets of
a
Member unless the proceedings and the person appointed are dismissed within
ninety (90) days; or (e) the failure by a Member generally to pay his or her
debts as the debts become due within the meaning of Section 303(h)(1) of the
United States Bankruptcy Code, as determined by the Bankruptcy Court, or the
admission in writing of the Member’s inability to pay his or her debts as they
become due.
Capital
Account.
“Capital
Account”
means
an account initially reflecting the Capital Contribution of a Member which
the
Company establishes and maintains for such Member pursuant to Section
4.3.
Capital
Contribution.
“Capital
Contribution”
means
the total value of cash and fair market value of property (including promissory
notes or other obligation to contribute cash or property) contributed to the
Company by a Member or the Member’s predecessor in interest.
Certificate.
“Certificate”
means
the Certificate of Formation for the Company, as originally filed with the
Delaware Secretary of the State pursuant to Section 18-201 of the
Act.
Class
A Members. “Class
A Members”
means
NutraCea and Pacific
Advisors
and any
other Person admitted to the Company as a Class A Member with the unanimous
approval of the Class A Members or is an Assignee who has become a Class A
Member in accordance with Article IX, and has not resigned, withdrawn,
dissolved, or had its Membership Interest terminated for any other
reason.
Class
B Members. “Class
B Members”
means
Theorem
and
Ho’okipa and any other Person admitted to the Company as a Class B Member with
the unanimous approval of the Class A Members or is an Assignee who has become
a
Class B Member in accordance with Article IX, and has not resigned, withdrawn,
dissolved, or had its Membership Interest terminated for any other reason.
Except to the extent required by law, the Class B Members shall have no voting,
approval, consent or management participation rights and shall have no rights
to
information concerning the business and affairs of the Company.
Code.
“Code”
means
the Internal Revenue Code of 1986, as amended from time to time, the provisions
of succeeding law, and to the extent applicable, the Regulations. A reference
to
a specific section of the Code refers not only to that specific section but
any
corresponding provisions of any federal tax statute enacted after the date
of
this Agreement, as such specific section or corresponding provisions are in
effect on the date of application of this Agreement containing such
reference.
Company.
“Company”
means
Grain Enhancement, LLC, a Delaware limited liability company formed pursuant
hereto upon the filing the Certificate and execution of this
Agreement.
Disposition
Event.
“Disposition
Event”
means
one or more of the following with respect to a Member: the retirement,
resignation, Bankruptcy or dissolution of the Member, or occurrence of any
other
event which terminates the continued Membership of a Member other than pursuant
to a transfer or assignment by the Member pursuant to Article IX.
Distributable
Cash.
“Distributable
Cash”
means
cash from any source including the net revenues from operations, net proceeds
from any sales or other dispositions or refinancing of Company assets, and
all
principal and interest payments with respect to any note or other obligation
received by the Company in connection with sales and other dispositions of
Company assets, less any portion used to pay into or establish Working Capital
Reserves.
Distribution.
“Distribution”
means
the transfer of money or property by the Company to the Members or its Members
without consideration.
Economic
Interest.
“Economic
Interest”
means
a
Member’s share, or Economic Interest Owner’s share, of the Company’s Taxable Net
Income, Taxable Net Loss, and/or Distributions of the Company’s assets pursuant
to this Agreement and the Act, but shall not include any other rights of a
Member, including, without limitation, the right to vote or participate in
the
management, or any right to information concerning the business and affairs
of
the Company.
Economic
Interest Owner.
"Economic
Interest Owner"
means
the owner of an Economic Interest (i) who has not been admitted as a Member
in
accordance with the requirements of this Agreement, or (ii) whose Membership
Interest (but not that Member’s Economic Interest) has terminated.
Finance
Committee.
“Finance
Committee”
means
a
committee of two (2) individuals, of which NutraCea will appoint one member
and
Pacific
Advisors
shall
appoint the other member. NutraCea and Pacific Advisors each may replace their
respective designated appointees to the Finance Committee from time to time
by
written notice to the other Class A Member and the other member of the Finance
Committee.
Fiscal
Year.
“Fiscal
Year”
means
the Company’s fiscal year, which shall end on December 31.
Former
Member.
“Former
Member”
has
the
meaning set forth in Section 10.1.
Former
Member’s Interest.
“Former
Member’s Interest”
has
the
meaning set forth in Section 10.1.
Majority
in Interest.
“Majority
in Interest”
means
one or more Percentage Interests of Class A Members which exceed fifty one
percent (51%) of the aggregate of all Percentage Interests held by Class A
Members, except to the extent (and solely to the extent) otherwise required
by
applicable law. It is the intention of the Members that the Class B Members
shall have no voting rights.
Member.
“Member”
means
the Class A Members and the Class B Members.
Membership
Interest.
“Membership
Interest”
means
a
Member’s entire interest in the Company including the Member’s Economic
Interest, the right to vote on or participate in the management, and the right
to receive information concerning the business and affairs of the
Company.
Percentage
Interest.
“Percentage
Interest”
means
the percentage interest of a Member, as such percentage may be adjusted from
time to time. Initially, the Percentage Interests shall be NutraCea – forty-seven
and
one-half percent (47.5%), Pacific
Advisors –
forty-seven and
one-half percent (47.5%), Theorem–[*]
percent
([*]
%),
and
Ho’okipa –[*]
percent
([*]
%).
Person.
“Person”
means
any individual, corporation, partnership, association, limited liability
company, trust, estate or other entity.
Product.
“Product”
means
the SRB and other SRB derivative products listed on Exhibit
B
and any
additional products added to such Exhibit
B
by the
mutual agreement of the Class A Members, for which products the Company shall
have rights to manufacture, advertise, promote, market, sell and/or otherwise
distribute the products throughout the Territory pursuant to the
Project.
Project.
“Project”
has
the
meaning set forth in Section 3.5.
Remaining
Member(s).
“Remaining
Member(s)”
has
the
meaning set forth in Section 10.1.
SRB.
“SRB”
has
the
meaning set forth in Section 3.6.1.
Taxable
Net Income and Taxable Net Loss.
“Taxable
Net Income”
and
“Taxable
Net Loss”
means
the income, gain, loss, deductions and credits of the Company in the aggregate
or separately, as appropriate, determined by certified public accountants for
the Company and in accordance with United States generally accepted accounting
principals, consistently applied, at the close of each Fiscal Year, reflected
on
the Company’s information tax return filed for federal income tax
purposes.
Territory.
“Territory”
means
the Republic of Indonesia, Vietnam, Thailand,
Malaysia, Australia, New Zealand and Singapore.
Unreturned
Capital Contributions.
“Unreturned
Capital Contributions”
means
the aggregate Capital Contributions of a Member as they exist from time to
time,
less the aggregate amount of Distributions to date to the Member.
Working
Capital Reserve.
“Working
Capital Reserve”
means
any cash reserve for normal expenses and contingencies maintained by the Finance
Committee pursuant to Section 7.3.
Qualifying
Event.
“Qualifying
Event”
shall
mean the first to occur of the following: (A) the closing of an underwritten
public offering of the Company or any successor thereto, in which the gross
proceeds of such public offering are equal to or greater than [*]
U.S.
Dollars ($ [*]),
(B)
the equity securities of the Company becoming listed or publicly traded on
any
of The Nasdaq Stock Market, the New York Stock Exchange, the American Stock
Exchange, the London Stock Exchange, the Indonesia Stock Market, the
Over-the-Counter Bulletin Board, or any other recognized stock exchange; (C)
a
private equity offering in which the gross proceeds received by the Company
is
equal to or greater than [*]
U.S.
Dollars ($ [*]);
or (D)
a merger, consolidation or reorganization of the Company with or into any other
entity or entities, or a sale of all or substantially all of the assets of
the
Company, or a series of related similar such transactions in which the Members
prior to the consummation of such event hold less than 50% of the voting power
of the surviving entity.
ARTICLE
III
Organization
of the Company
3.1. Formation. The
Members hereby establish this limited liability company under the Act by the
filing the Certificate and by entering into this Agreement for the purpose
of
establishing the Project, on the terms and conditions set forth herein. This
Agreement controls all rights and obligations of the Members and the Economic
Interest Owners to the fullest extent permitted by law. This Agreement shall
not
be effective and the Company shall not exist until the later of the Effective
Date set forth above and, if different, the date that the Certificate has been
properly filed with the office of the Delaware Secretary of State.
3.2. Name.
The
name of the Company shall be “Grain Enhancement, LLC.” The Company may conduct
business under that name or any other name determined by the Class A
Members.
3.3. Term.
The
term of the Company will commence on the date of the filing of the Certificate
and shall terminate as provided under Section 12.
3.4. Registered
Office and Agent.
The
Company shall continuously maintain a registered agent in the State of Delaware
as required by Section 18-104(a)(2) of the Act. The initial registered office
of
the Company shall be “Grain Enhancement, LLC, care of The Corporation Trust
Company, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000”. The initial registered
agent shall be the Corporation Trust Company, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxx 00000. A Member may change the registered office and/or the registered
agent at any time and from time to time, as permitted under the Act, upon
approval of the Class A Members.
3.5. Purpose
of the Company; The Project.
The
purposes of the Company are: (i) to sublicense
or otherwise acquire from Pacific Advisors all of the of rights granted to
Pacific Advisors under that certain License Agreement between NutraCea and
Pacific Advisors dated June 22, 2007 (and specifically including, without
limitation, all of Pacific Advisors’ rights to commercialize SRB and related
products in the Territory and to use certain intellectual property rights in
the
Territory with respect to such products), the form of which license agreement
is
attached hereto as Exhibit
D
(the
“License
Agreement”);
(ii)
within the Territory, to establish, construct, and operate (directly or through
one or more subsidiaries or other entities) one or more
rice
bran stabilization facilities (“Facilities”)
utilizing
the proprietary technologies licensed in the License Agreement,;
(iii)
to
manufacture, distribute, sell, advertise, promote, market and otherwise
commercialize the Products throughout the Territory; and (iv)
to
engage in any and all other activities reasonably related to the foregoing
(collectively, the “Project”).
In
addition, the Company may purchase from, and thereafter distribute in the
Territory certain rice bran derivative products manufactured by NutraCea (the
“Stage
2 Products”).
If
NutraCea is unable to provide the Company with the amount of such Stage 2
Products that the Company may, from time to time order from NutraCea, the
Company may also consider establishing its own Stage 2 Products manufacturing
facilities in the Territory. The Company shall have all the powers necessary
or
convenient to affect any purpose for which it is formed, including all powers
granted under the Act.
Without
the unanimous written consent to all of the Class A Members, the Company shall
not engage in any business other than the Project.
3.6. Special
Covenants Regarding the Operation of the Company
3.6.1. Supply
Agreement; Raw Bran Supply Agreements.
Until
the Company produces sufficient Products for its marketing and distribution
needs in the Territory, the Company shall purchase Products exclusively from
NutraCea, as set forth in the Supply Agreement of even date herewith attached
hereto as Exhibit C. Pacific
Advisors
has
advised NutraCea that it has relationships with numerous rice xxxxx in the
Territory. Pacific Advisors agrees to use commercially
reasonable
efforts
to establish agreements between the Company and rice xxxxx located in the
Territory to provide an adequate supply of raw rice bran to provide for the
Company’s requirements for the establishment and operation of the Facilities and
the production of stabilized rice bran from the Facilities of a quality and
nature that meets NutraCea’s published specifications (“SRB”)
as
contemplated for the successful implementation and operation of the
Project.
3.6.2. Sublicense/Assignment.
Pacific
Advisors
agrees
to sublicense to the Company all of its rights and interests under the
License
Agreement.
The form
of sublicense agreement to be entered into between the Company and Pacific
Advisors is attached hereto as Exhibit
D
(the
“Sublicense
Agreement”).
As
more specifically set forth in the Sublicense Agreement, upon a Qualifying
Event, the Company shall acquire all of Pacific Advisors’ rights under the
License Agreement (but not its obligations to pay licensing fees to NutraCea)
for a price of [*] U.S.
Dollars ($ [*]),
and
Pacific Advisors hereby agrees to assign to the Company all of its rights under
the License Agreement for such payment of [*]
U.S.
Dollars ($ [*])
3.6.3. Equipment.
The
Company initially intends to engage in the production of stabilized rice bran
for distribution in the Territory. In order to enable the Company to produce
the
stabilized rice bran, NutraCea agrees to lease to the Company, subject to
availability, for a fifteen year lease term, the rice bran stabilization
equipment (“Equipment”)
necessary for and required for each Facility in connection with stabilizing,
cooling, handling, grinding, sifting and packaging of stabilized rice bran.
The
fee that will be payable by the Company to NutraCea to lease such Equipment
shall be equal to [*]
and
shall
be payable [*],
due and
payable within thirty (30) days following the installation of the Equipment
at
each Facility. The Members and the Company acknowledge that NutraCea will retain
all rights, title and interest in the leased Equipment installed at each
Facility. The lease for the Equipment shall be pursuant to the form of Lease
attached hereto as Exhibit
E.
If the
Company, as provided in Section 3.5 above, in the future elects to produce
Stage
2 Products under the License Agreement, NutraCea agrees to lease the equipment
to the Company to produce the Stage 2 Products for a lease price equal to
[*]
and on
such other terms and conditions as the parties may agree upon in good faith
negotiations; provided, however, the NutraCea shall not be required to lease
or
otherwise provide such Stage 2 Product equipment to the Company if, as a result,
NutraCea’s intellectual property rights in Stage 2 Product equipment or
technology would be jeopardized.
3.6.4. Staffing.
Until
the Company has hired sufficient employees to conduct its operations,
Pacific
Advisors
or an
Affiliate of Pacific
Advisors
shall
make available or cause to be provided to the Company at Pacific
Advisors’
actual
cost all staff reasonably necessary to operate and maintain the
Facilities.
3.6.5. Compliance
with Laws.
The
Company shall comply with applicable laws and regulations with respect to
marketing, labeling, distributing, and selling the Products in the Territory,
and in any of its dealings with respect to the Products. The Company shall
also
obtain all appropriate governmental and legal permits and consents required
for
the market and sale of the Products.
3.6.6. Export.
The
Company shall not export, directly or indirectly, any Products to any other
country or province outside of the Territory without the approval of all of
the
Class A Members.
3.6.7. Feasibility
Study.
The
Company shall engage a prominent independent market consulting firm within
thirty (30) days after the Effective Date to complete a comprehensive market
analysis to determine the size of the potential market in the Territory for
(i)
the stage 1 SRB to be manufactured by the Company at its Facilities, and (ii)
all other products that the Company will have the right to manufacture or sell
under the License.
ARTICLE
IV
Capital
Contributions; Percentage Interests.
4.1. Initial
Capital.
Each of
NutraCea and Pacific
Advisors
agree to
contribute to the Company Five Million U.S. Dollars ($5,000,000) (for a total
maximum of Ten Million U.S. Dollars ($10,000,000)) (the “Initial
Capital Contribution”)
pursuant to the schedule of required contributions set forth in Section 4.2.
The
Initial Capital Contribution shall be used by the Company to purchase
SRB in accordance with Section 3.6.1 above,
to
market and sell the Products, to construct, maintain and operate up to two
Facilities,
and to otherwise
initiate
and conduct the operation of the Project. In the event that not all of the
Initial Capital Contributions are needed to fully fund the Company’s operations,
such Initial Capital Contributions shall, upon the approval of the Finance
Committee, be returned pro rata to NutraCea and Pacific
Advisors.
In
consideration for the Initial Capital Contributions to be made by each Class
A
Member, each such member will be allocated a Percentage Interest of forty seven
and one-half percent (47.5%), which Percentage Interest is subject to reduction
in the event that the full Initial Capital Contribution is not paid as provided
in this Agreement. The Class B Members shall not make an Initial Capital
Contribution.
4.2 Initial
Capital Contribution Schedule; Failure to Make Contribution.
4.2.1 Schedule;
Notice.
The
Class A Members shall make the Initial Capital Contributions as follows:
(i) One
Million Five Hundred Thousand U.S. Dollars ($1,500,000) each (for a total of
Three Million U.S. Dollars ($3,000,000)) on or before June 30, 2007;
(ii) Two
Million U.S. Dollars ($2,000,000) each (for a total of Four Million U.S. Dollars
($4,000,000)) on or before October 30, 2007; and
(iii) One
Million Five Hundred U.S. Dollars ($1,500,000) each (for a total of Three
Million U.S. Dollars ($3,000,000)) on or before August 31, 2008.
Payments
not received by the Company within fifteen (15) calendar days of each payment
date shall be deemed delinquent.
4.2.2 Failure
to make Initial Capital Contributions.
In the
event that (and on each occasion that) a Class A Member (“Defaulting
Member”)
fails
to make, and becomes delinquent in all or any portion of any Initial Capital
Contribution payment as and when required to be made under Section 4.2.1, and
(ii) the other Class A Member timely makes its Initial Capital Contribution
payment, the Defaulting Member’s Percentage Interest shall be reduced as
follows:
(a) If
a
Class A Member fails to make a One Million Five Hundred Thousand U.S. Dollars
($1,500,000) Initial Capital Contribution payment if, as and when due pursuant
to Section 4.2.1, the Percentage Interest of that Defaulting Member shall be
immediately reduced to a Percentage Interest equal to (i) the number comprising
the Defaulting Member’s Percentage Interest immediately prior to such default,
minus (ii) seventeen and 8125/10,000 (17.8125). A separate reduction under
this
subsection (a) shall apply for each failure of a Class A Member to make a One
Million Five Hundred Thousand U.S. Dollars ($1,500,000) Initial Capital
Contribution payment pursuant to Section 4.2.1. If the Defaulting Member fails
to contribute only a portion of such amount, the Defaulting Member’s Percentage
Interest will be reduced by a portion of the foregoing amount equal to the
portion of the One Million Five Hundred Thousand U.S. Dollar ($1,500,000)
Initial Capital Contribution payment not timely made by the Defaulting Member.
(b) If
a
Class A Member fails to make the Two Million U.S. Dollars ($2,000,000) Initial
Capital Contribution payment as and when due pursuant to Section 4.2.1, the
Percentage Interest of that Defaulting Member shall be immediately reduced
to
(i) the number comprising the Defaulting Member’s Percentage Interest
immediately prior to such default, minus (ii) twenty three and 3/4 (23.75).
If
the Defaulting Member fails to contribute only a portion of such amount, the
Defaulting Member’s Percentage Interest will be reduced by a portion of the
foregoing amount equal to the portion of the Two Million U.S. Dollars
($2,000,000) Initial Capital Contribution payment not timely made by the
Defaulting Member.
Upon
a
reduction of the Percentage Interest of a Defaulting Member, the Percentage
Interests of the other Class A Member shall be increased by an amount equal
to
the reduction of the Defaulting Member. The Percentage Interest of each Member
as of the Effective Date is set forth on Exhibit
A
hereto.
The Percentage Interests of the Class A Members set forth on Exhibit
A
shall be
adjusted as set forth in this Section 4.2.2 in the event of each and every
failure by any Class A Member to make any Initial Capital Contribution payments.
Each of the Class A Members agrees that the provisions of this Section 4.2.2
are
fair and reasonable under the circumstances.
4.3. Percentage
Interests.
The
Members
shall receive the Percentage Interests set forth in
the
definition of Percentage Interest.
The
Members shall receive no Capital Account credit for the assignment of rights
under any license unless specifically agreed in writing by the Class A
Members.
4.4. Capital
Accounts.
The
Company shall establish an individual Capital Account for each Member. The
Company shall determine and maintain each Capital Account in accordance with
Treasury Regulations Section 1.704-1(b)(2)(iv). Each Member’s Capital Account
shall initially be credited with the cash Capital Contribution made by such
Member pursuant to Section 4.1 and the fair market value of the net value of
contributed property for which a value is specifically agreed upon by the
Members (if no value is agreed upon, the item shall not be credited to the
Capital Account.) If a Member transfers the Member’s Membership Interest in
accordance with this Agreement, such Member’s Capital Account shall carry over
to the new owner of such Membership Interest pursuant to Treasury Regulations
Section 1.704-1(b)(2)(iv)(1).
4.5. Additional
Capital Contributions.
From
time to time, the Members may be permitted to make additional Capital
Contributions if and to the extent they so desire, and if the Finance Committee
determines that such additional Capital Contributions are necessary or
appropriate for the conduct of the Company Project, including without
limitation, expansion or diversification. In that event, each of the Members
shall have the opportunity, but not the obligation, to participate in such
additional Capital Contributions on a pro rata basis in accordance with their
Percentage Interests for a period of thirty (30) days following notice of the
decision to permit an additional Capital Contribution. Immediately following
such Capital Contributions, the Percentage Interests of the Members shall be
adjusted to reflect the additional Capital Contributions based upon the needs
of
the Company, the net value of the Company’s assets, the Company’s financial
condition and the benefits anticipated to be realized by the additional Capital
Contributions, all as determined by the Finance Committee.
4.6 Loans.
In the
event additional capital is necessary to meet operating expenses and capital
expenditures or as otherwise reasonably determined by the Finance Committee,
the
Members, from time to time, may loan money to the Company from third parties
or
Members for all or a portion of such cash needs. Such loans may be unsecured
or
secured by all or a portion of the Company’s assets. Any loan from a Member
shall be subject to the requirements of Section 5.6. The Members specifically
acknowledge that no such loans shall be obtained without the express prior
consent of the Finance Committee.
4.7 Return
of Capital Contribution.
No time
is agreed upon as to when the Capital Contributions of the Members are to be
returned or whether the Capital Contributions of the Members will be returned.
The Members shall not have the right to withdraw or demand return of their
Capital Contributions nor shall the Members have the right to demand and receive
property other than cash in return for their Capital Contributions.
4.8 Adjustment
upon Grant of Profits Interest.
In
connection with the grant of a profits interest in the Company, whether as
consideration for the provision of services or the grant of other rights to
or
for the benefit of the Company by an existing Member acting in a Member
capacity, or by a new Member acting in a Member capacity or in anticipation
of
being a Member, the Company shall increase or decrease the Capital Accounts
of
the existing Members to reflect a revaluation of Company property (including
intangible assets such as goodwill) on the Company's books effective as of
the
date immediately before the date the grant of the profits interest in the
Company occurs. This provision is intended to comply with Treas. Regulation
Section 1.704-1(b)(2)(iv)(f)(5)(iii). Each of the Members hereby elects to
apply
this provision whenever there is a grant of a profits interest in the
Company.
ARTICLE
V
Members.
5.1. Classes
of Members.
There
shall be two classes of Members, Class A Members and Class B Members. Each
class
shall share in all rights of Members hereunder in proportion to their Percentage
Interests with the exception that the Class B Members shall have no voting,
approval, consent or management participation rights and, to the maximum extent
allowed by law, shall have no rights to information concerning the business
and
affairs of the Company. The initial Members of the Company shall be NutraCea,
Pacific
Advisors, Theorem,
and
Ho’okipa, each of whom is admitted to the Company as a Member effective upon the
execution by such person of a counterpart signature page to this Agreement.
NutraCea and the Pacific
Advisors shall
be
Class A Members and Theorem
and
Ho’okipa shall be Class B Members.
5.2. Admission
of Additional Members.
Other
than substitute Members admitted pursuant to Article IX, additional Members
may
be admitted to the Company, only with the consent of all Class A Members and
as
set forth below. Any additional Members shall obtain Membership Interests and
will participate in the management, Taxable Net Income, Taxable Net Losses,
and
Distributions of the Company on such terms as are set forth herein. Substitute
Members and assignees of Members may be admitted only in accordance with Article
IX. Upon admission of a new or substitute Member, this Agreement shall be
amended to set forth the name, class of Membership Interest, Capital
Contribution and Percentage Interest of the new Member and the new Member shall
enter into this Agreement as amended, subject to the following:
(a) Capital
Contribution.
Each
additional Member shall make a Capital Contribution in such amount and on such
terms as the Finance Committee determines to be as appropriate based upon the
needs of the Company, the net value of the Company’s assets, the Company’s
financial condition and the benefits anticipated to be realized by the
additional Member;
(b) No
Deemed Termination.
No
Member shall be admitted if the effect of admission would be termination of
the
Company under Code Section 708(b);
(c) Compliance
with Law.
The
Members shall comply with all applicable state and federal securities and all
other applicable laws; and
(d) Agreement.
Each
additional Member shall agree to be bound by the terms of this
Agreement.
5.3. Withdrawals
or Resignations.
Any
Member may withdraw or resign from the Company upon written notice to the other
Member(s) of the withdrawing Member’s desire to withdraw. Upon such notice, the
withdrawing Member’s Membership Interest shall immediately terminate and the
Member shall retain solely an Economic Interest. Such withdrawal shall not
entitle the withdrawing Member to the return of any of the withdrawing Member’s
capital contribution.
5.4. Management
Assistance by Pacific
Advisors;
Management Fee.
5.4.1. Management
Assistance, Management Fee and Product Net Revenue.
Pacific
Advisors shall
assist the Company with overseeing the operation and maintenance of the Project,
including supervising
the selection of the Facilities and the
production of the Products. The Company shall pay to Pacific
Advisors a
“Management
Fee”
consisting of (i) a monthly fee facility supervisory management fee (the
“Facility
Fee”),
and
(ii) an incentive fee equal to [*]
Dollars
($ [*])
(the
“Incentive
Fee”).
The
Incentive Fee shall be payable upon a Qualifying Event. The Facility Fee shall
initially be equal to [*]
U.S.
Dollars ($ [*])
per
month until the first Facility is operational. The Facility Fee shall increase
to [*]
Dollars
($[*])
after
the first facility is operational. Thereafter, as additional Facilities are
established, the Facility Fee shall, from time to time, increase in an amount
jointly agreed to by the Company and Pacific Advisors, which increase shall
be
based on the number and type of additional Facilities and such other factors
as
the parties, in good faith negotiations, may consider. The Facility Fee shall
be
paid monthly commencing on August 1, 2007 and continuing until the closing
of a
Qualifying Event. The management agreement between Pacific Advisors and the
Company shall terminate upon a Qualifying Event. The management agreement,
including the rights and obligations under that agreement, may be assigned
by
Pacific Advisors. In the event that Pacific Advisors elects to assign the
management agreement, the Company agrees to negotiate in good faith with the
assignee for such modifications to the Management Fee as the assignee shall
reasonably request.
5.4.2. Other
Payments and Third Party Costs.
Except
as approved in writing by the Finance Committee or specifically authorized
herein, no Member or Affiliate of a Member is entitled to remuneration for
services rendered or goods provided to the Company. Upon approval by the Finance
Committee, the Company shall reimburse the Members and their Affiliates for
the
actual cost of goods and materials used by the Company and for organizational
expenses incurred to form the Company and prepare the Certificate and this
Agreement, including, without limitation, legal and accounting fees and
costs.
Nothing
contained herein is intended to limit the Company’s obligation to pay directly
for third party costs payable to non-Affiliates as specified in Section 5.4.1
that are pre-approved by the Class A Members.
5.5. Termination
of Membership Interest.
Upon
(i) the transfer of a Member’s Membership Interest in violation of this
Agreement, (ii) the occurrence of a Disposition Event as to such Member that
does not result in the dissolution of the Company or (iii) the withdrawal or
resignation of a Member in accordance with Section 5.3, the Membership Interest
of that Member shall be terminated and thereafter that Member only shall be
an
Economic Interest Owner, unless such Membership Interest is purchased by the
Company and/or one or more of the Remaining Members as provided in Section
10.
Each Member acknowledges and agrees that such termination or purchase of a
Membership Interest upon the occurrence of any of the foregoing events is not
unreasonable under the circumstances existing as of the date
hereof.
5.6. Loans
and Other Transactions with the Company.
With
the express prior approval of the Finance Committee, a Member may loan money
to
the Company. Interest shall be payable on any such loans at competitive rates
for loans of similar character and amount, but not to exceed the maximum usury
rate permitted for loans as to which no exemption from usury applies. No such
loan shall constitute a Capital Contribution or increase the Percentage Interest
of the lending Member unless otherwise agreed by the Finance Committee.
5.7. Meetings
of Members.
No
annual or regular meetings of the Members are required. However, if meetings
are
held, then such meetings shall be held in accordance with this Section 5.7
and
applicable law.
5.7.1 Place
of Meetings.
Meetings of Members shall be held at any place stated in any proper notice
of
meeting.
5.7.2 Power
to Call Meetings.
Meetings of the Members may be called by any Class A Member for the purpose
of
addressing any matters on which the Members may vote.
5.7.3 Notice
of Meetings.
Whenever Members are required or permitted to take any action at a meeting,
a
written notice of the meeting shall be given not less than ten (10) days not
more than sixty (60) days before the date of the meeting to each Member entitled
to vote at the meeting. The notice shall state the place, date and hour of
meeting and the general nature of the business to be transacted. No other
business may be transacted at such meeting. Notice of a Members’ meeting shall
be given either personally or by mail or other means of written communication,
addressed to the Member at the address of Member appearing on the books of
the
Company or given by the Member to the Company for the purpose of notice. The
notice or report shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by other means of written
communication. When a Members’ meeting is adjourned to another time or place,
except as provided in the last sentence of this paragraph, notice need not
be
given of the adjourned meeting if the time and place thereof are announced
at
the meeting at which the adjournment is taken. At the adjourned meeting, the
Company may transact any business that may have been transacted at the original
meeting. If the adjournment is for more than forty-five (45) 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 Member of record entitled to
vote at the meeting.
5.7.4 Action
without a Meeting.
Any
action that may be taken at any meeting of the Members may be taken without
a
meeting if a written consent setting forth the action so taken is executed
and
delivered to the Company by Members having not less than the minimum number
of
votes that would be necessary to authorize or take that action at a meeting
at
which all Members entitled to vote thereon were present and voting. Any Member
giving a written consent, or the Member’s proxy holder, may revoke the consent
by a writing received by the Company prior to the time that the written consents
of Members having the minimum number of votes that would be required to
authorize the proposed action have been filed with the Company, but may not
do
so thereafter. Such revocation is effective upon its receipt at the office
of
the Company.
5.7.5 Proxies.
The use
of proxies in connection with this Section 5.7 will be governed in the same
manner as in the case of corporations formed under the Delaware General
Corporation Law.
5.8. Competing
Activities.
The
Members and their Affiliates may not engage or invest in, independently or
with
others, any business activity of any type or description that might be in direct
or indirect competition with the Project within the Territory; provided, that
NutraCea may purchase raw rice bran from suppliers in the Territory,
and
provided further that the activities of Pacific Advisors and its Affiliates
in
connection with producing, distributing and selling wheat flour shall not be
deemed to be a competitive activity.
ARTICLE
VI
Management
and Control of the Company.
6.1. Management
by Members.
Subject
to the provisions of this Agreement relating to actions required to be approved
by the Finance Committee, the Project and affairs of the Company shall be
managed and all powers of the Company shall be exercised by or under the
direction of the Class A Members. Except to the extent that this Agreement
expressly requires the approval, consent or determination of all Members or
Class A Members or of Members holding a specified number of Percentage
Interests, every act or decision done or made by a Majority in Interest of
the
Class A Members is the act of the Members.
6.2. Finance
Committee.
Initially the members of the Finance Committee shall be Xxxx Xxxxx and
[*].
Any act
of the Finance Committee shall require approval of both members of the Finance
Committee. Nothing in this Section 6 or in this Agreement is intended to require
that meetings of the Finance Committee be held, it being the intent of the
Members that meetings are not
required. Action taken by the Finance Committee may be taken in telephonic
meetings, personal meetings or by other means, provided that all action take
and
approved by the Finance Committee shall be evidenced in writing in a document
executed by both members of the Finance Committee. No
member
of the Finance Committee or other Company officer shall be liable, responsible
or accountable to the Company or to any Member for any mistake of fact or
judgment, or doing of failing to do any act, or any loss or damage sustained
by
the Company or any Member, unless the loss or damage shall have been the result
of reckless or intentional misconduct committed fraudulently or in bad faith
or
a knowing violation of law by the Finance Committee member. Each of the Members
acknowledges and agrees that except as provided above, the Finance Committee
members and any officers shall have no additional fiduciary duties to the
Company or the Members. In addition to the duties of the Finance Committee
specifically set forth in this Agreement, the Finance Committee shall be
responsible for establishing the 12-month and 3-month forecasts of SRB to be
purchased under the Supply Agreement between NutraCea and the Company.
6.3. Transactions
between the Company and the Members.
Notwithstanding that it may constitute a conflict of interest, a Member may,
and
may cause its Affiliates to, engage in any transaction with the Company so
long
as such transaction is approved by the Finance Committee and is not expressly
prohibited by this Agreement and so long as the terms and conditions of such
transaction, on an overall basis, are fair and reasonable to the Company and
are
at least as favorable to the Company as those that are generally available
from
Persons capable of similarly performing them and in similar transactions between
parties operating at arm’s length.
6.4. Conflicts
of Interest.
Except
as expressly prohibited hereunder, each Member of the Company at any time and
from time to time may engage in and possess interests in other business ventures
of any and every type and description, independently or with others, with no
obligation to offer to the Company or any Member the right to participate
therein. To the fullest extent permissible under applicable law, each Member
waives any claims against the other Members or Manager based on a breach of
fiduciary duty with respect to any other business ventures of any and every
type
and description, independently or with others, except those in competition
with
the Company within the Territory.
6.5. Acts
of Two Members as Conclusive Evidence of Authority.
Any
note, mortgage, evidence of indebtedness, contract, certificate, statement,
conveyance, or other instrument in writing, and any assignment or endorsement
thereof, executed or entered into between the Company and any other Person,
when
signed by two (2) Class A Members or both Finance Committee members is not
invalidated as to the Company by any lack of authority of in the absence of
actual knowledge on the part of the other Person that the signing Persons had
no
authority to execute the same.
6.6. Limited
Liability.
No
person who is a Member of the Company, or any officers, directors, employees
or
agents of a Member of the Company, shall be personally liable under any judgment
of a court, or in any other manner, for any debt, obligation, or liability
of
the Company, whether that liability or obligation arises in contract, tort,
or
otherwise, solely by reason of being a Member of the Company or an officer,
director, Finance Committee member, employee or agent of a Member of the
Company.
6.7. Officers
of the Company; Expenditures. The
Members may, from time to time, appoint one or more individuals to be officers
of the Company. Any officers so appointed shall have such authority and perform
such duties as the Members may, from time to time specifically delegate to
them;
provided that no officer shall be entitled to act on behalf of the Finance
Committee or to take any action requiring the approval of the Finance Committee.
The use of a title shall not constitute the delegation to such officer of the
authority and duties that are normally associated with that office. The officer
shall only have the specific authority and duties established by the Members.
Any officer may be removed as such, either with or without cause, by the Members
or the Finance Committee. Officers and other employees of the Company shall
be
entitled to such compensation that may be approved by the Finance Committee.
No
Member or officer shall have the authority to pay, bind or commit the Company
with respect to any expenditure without approval of the Finance
Committee.
ARTICLE
VII
Distributions
of Distributable Cash.
7.1. Distribution
of Distributable Cash.
No
Distributions shall be made to the Members until the Company repays all loans
to
the Company by any of the Members under Section 4.6. Thereafter, except as
otherwise provided in Section 12.3 with respect to Distributions upon
dissolution and liquidation, Distribution of Distributable Cash shall be made
in
the following priority:
(a) Unreturned
Capital Contributions.
First,
to the Members in proportion to,
and to
the extent of, the Members’ Unreturned Capital Contributions; and
(b) Percentage
Interests. Thereafter,
to the
Members and holders of Economic Interests in accordance with their Percentage
Interests.
7.2. No
Restoration of Deficit Capital Account Balance.
No
Member shall be obligated to contribute to the Company to restore a deficit
in
that Member’s Capital Account balance.
7.3. Maintenance
of Working Capital Reserve.
The
Finance Committee may set aside out of operating revenues and cash from capital
transactions, a Working Capital Reserve for repayment of any Company
indebtedness, for operating expenses and for the replacement or preservation
of
any Company asset. Any portion of such Working Capital Reserve that the Finance
Committee, in its sole discretion, deems unnecessary for the prudent conduct
of
Company business may be distributed to the Members in accordance with this
Section 7.
7.4. Limitations
on Distributions.
No cash
or property shall be distributed to a Member to the extent that the Distribution
is prohibited by Section 18-607 of the Act. Any Member who receives a
distribution from the Company, all or a portion of which is determined to have
been prohibited by Section 18-607 of the Act, shall, within thirty (30) days
following notice, return such prohibited portion of the distribution to the
Company.
ARTICLE
VIII
Allocations
of Taxable Net Income and Taxable Net Loss.
8.1. Taxable
Net Income.
Taxable
Net Income shall be allocated to the Members as follows:
(a) Restoration
for Prior Net Loss.
In
accordance with, and to the extent of, the aggregate Taxable Net Loss allocated
pursuant to Section 8.2(b) and then that aggregate Taxable Net Loss allocated
pursuant to Section 8.2(a); and
(b) Percentage
Interests.
Thereafter,
in
accordance with
their
Percentage Interests.
8.2 Taxable
Net Loss.
Except
as provided in this Section 8.2 or Section 8.3, Taxable Net Loss shall be
allocated to the Members as follows:
(a) Positive
Capital Accounts.
First,
in accordance with their positive Capital Account balances and to the extent
thereof; and
(b) Percentage
Interests.
Then,
in accordance with their
Percentage Interests.
Notwithstanding
the previous sentence, loss allocations to a Member shall be made only to the
extent that such loss allocations will not create a deficit Capital Account
balance for that Member in excess of an amount, if any, equal to such Member’s
share of Company minimum gain, as such term is used in Treasury Regulations
Section 1.704-2(g)(2), that would be realized on a foreclosure of the Company’s
property. Any loss not allocated to a Member because of the foregoing provision
shall be allocated to the other Members (to the extent the other Members are
not
limited in respect of the allocation of losses under this Section 8.2). Any
Taxable Net Loss reallocated under this Section 8.2 shall be taken into account
in computing subsequent allocations of Taxable Net Income and Losses pursuant
to
this Section 8, so that the net amount of any item so allocated and the Taxable
Net Income and Losses allocated to each Member pursuant to this Section 8,
to
the extent possible, shall be equal to the net amount that would have been
allocated to each such Member pursuant to this Section 8 if no reallocation
of
Taxable Net Losses had occurred under this Section 8.2.
8.3. Special
Allocations.
8.3.1. Minimum
Gain Chargeback.
Notwithstanding Sections 8.1 and 8.2, if there is a net decrease in Company
minimum gain, as such term is used in Treasury Regulations Section
1.704-2(g)(2), during any Fiscal Year, each Member shall be specially allocated
items of Company income and gain for such Fiscal Year (and, if necessary, in
subsequent Fiscal Years) in an amount equal to the portion of such Member’s
share of the net decrease in Company minimum gain that is allocable to the
disposition of Company property subject to a nonrecourse liability, which share
of such net decrease shall be determined in accordance with Treasury Regulations
Section 1.704-2(g)(2). Allocations pursuant to this Section 8.3.1 shall be
made
in proportion to the amounts required to be allocated to each Member under
this
Section 8.3.1. The items to be so allocated shall be determined in accordance
with Treasury Regulations Section 1.704-2(f). This Section 8.3.1 is intended
to
comply with the minimum gain chargeback requirement contained in Treasury
Regulations Section 1.704-2(f) and shall be interpreted consistently
therewith.
8.3.2. Chargeback
of Minimum Gain Attributable to Member Nonrecourse Debt.
Notwithstanding Sections 8.1 and 8.2 of this Agreement, if there is a net
decrease in Company minimum gain attributable to a Member nonrecourse debt,
during any fiscal year, each Member who has a share of the Company minimum
gain
attributable to such Member nonrecourse debt (which share shall be determined
in
accordance with Treasury Regulations Section 1.704-2(i)(5)) shall be specially
allocated items of Company income and gain for such Fiscal Year (and, if
necessary, in subsequent fiscal years) in an amount equal to that portion of
such Member’s share of the net decrease in Company minimum gain attributable to
such Member nonrecourse debt that is allocable to the disposition of Company
property subject to such Member nonrecourse debt (which share of such net
decrease shall be determined in accordance with Treasury Regulations Section
1.704-2(i)(5)). Allocations pursuant to this Section 8.3.2 shall be made in
proportion to the amounts required to be allocated to each Member under this
Section 8. The items to be so allocated shall be determined in accordance with
Treasury Regulations Section 1.704-2(i)(4). This Section 8.3.2 is intended
to
comply with the minimum gain chargeback requirement contained in Treasury
Regulations Section 1.704-2(i)(4) and shall be interpreted consistently
therewith.
8.3.3. Nonrecourse
Deductions.
Notwithstanding Section 8.3.2, any nonrecourse deductions (as defined in
Treasury Regulations Section 1.704-2(b)(1)) for any fiscal year or other period
shall be specially allocated to the Members in proportion to their Percentage
Interests.
8.3.4. Member
Nonrecourse Deductions.
Notwithstanding Section 8.3.2, those items of Company loss, deduction, or Code
Section 705(a)(2)(B) expenditures which are attributable to Member nonrecourse
debt for any fiscal year or other period shall be specially allocated to the
Member who bears the economic risk of loss with respect to the Member
nonrecourse debt to which such items are attributable in accordance with
Treasury Regulations Section 1.704-2(i).
8.3.5. Qualified
Income Offset.
Notwithstanding Section 8.2, if a Member unexpectedly receives any adjustments,
allocations, or distributions described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6), or any other event creates a deficit
balance in such Member’s Capital Account in excess of such Member’s share of
Company minimum gain, items of Company income and gain shall be specially
allocated to such Member in an amount and manner sufficient to eliminate such
excess deficit balance as quickly as possible. Any special allocations of items
of income and gain pursuant to this Section 8.3.5 shall be taken into account
in
computing subsequent allocations of income and gain pursuant to this Section
8,
so that the net amount of any item so allocated and the income, gain, and losses
allocated to each Member pursuant to this Section 8.3.5 to the extent possible,
shall be equal to the net amount that would have been allocated to each such
Member pursuant to the provisions of this Section 8 if such unexpected
adjustments, allocations, or distributions had not occurred.
8.4. Code
Section 704(c) Allocations.
Notwithstanding any other provision in this Section 8, in accordance with Code
Section 704(c) and the Regulations promulgated thereunder, income, gain, loss,
and deduction with respect to any property contributed to the capital of the
Company shall, solely for tax purposes, be allocated among the Members so as
to
take account of any variation between the adjusted basis of such property to
the
Company for federal income tax purposes and its fair market value on the date
of
the contribution.
8.5. Allocation
of Taxable Net Income and Loss and Distributions On Transferred
Interest.
If any
Economic Interest is transferred, or is increased or decreased by reason of
the
admission of a new Member or otherwise, during any Fiscal Year, each item of
income, gain, loss, deduction, or credit of the Company for such Fiscal Year
shall be assigned pro rata to each day in the particular period of such Fiscal
Year to which such item is attributable (i.e., the day on or during which it
is
accrued or otherwise incurred) and the amount of each such item so assigned
to
any such day shall be allocated to the Member based upon his or her respective
Economic Interest at the close of such day.
8.6. Recapture
Chargeback.
In the
event the Company has taxable income chargeable as ordinary income under the
recapture provisions of the Code, each Member’s share of taxable gain or loss as
a result of gain from sales shall be allocated, to the extent possible, pro
rata
among the Members who received depreciation or cost recovery allocations which
gave rise to the recapture income until the amount of such prior allocations
has
been charged back to such Members.
8.7. Section
754 Adjustment.
To the
extent an adjustment to the adjusted tax basis of and Company asset pursuant
to
Code Section 734(b) or Code Section 743(b) is required to be taken into account
in determining Capital Accounts, the amount of such adjustment to the Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and such
gain or loss shall be specially allocated to the Members in a manner consistent
with the manner in which their Capital Accounts are required to be adjusted
pursuant to such section of the Treasury Regulations.
8.8. Obligations
of Members to Report Allocations.
The
Members acknowledge and agree to the allocations made by this Section 8 and
agree to be bound by the provisions of this Section 8 in reporting their shares
of Company income and loss for income tax purposes.
ARTICLE
IX
Transfer
and Assignment of Interests.
9.1 Transfer
and Assignment of Interests.
No
Member shall be entitled to transfer, assign, convey, sell, encumber or in
any
way alienate the Member’s Membership Interest (collectively, “transfer”)
except
with the prior approval of all the other Member(s) that are Class A Members,
which approval may be given or withheld as the other Member(s) may determine
in
its sole discretion. Transfers in violation of this Section 9 shall only be
effective to the extent set forth in Section 9.4. After the consummation of
any
transfer of any part of a Membership Interest, the Membership Interest so
transferred shall continue to be subject to the terms and provisions of this
Agreement and any further transfers shall be required to comply with all the
terms and provisions of this Agreement.
9.2 Substitution
of Members.
An
Assignee shall have the right to become a substitute Member only if (i) consent
of the Members is given in accordance with Section 9.1, (ii) such person
executes an instrument satisfactory to the Members accepting and adopting the
terms and provisions of this Agreement, and (iii) such person pays any
reasonable expenses in connection with his or her admission as a new Member.
The
admission of a substitute Member shall not release the Member who assigned
the
Membership Interest from any liability that such Member may have to the
Company.
9.3 Affiliate
Transfers.
The
Membership Interest of any Member may be transferred subject to compliance
with
Section 9.2 by a Member to any Affiliate of the Member.
9.4 Transfers
in Violation of this Agreement and Transfers of Partial Membership
Interests.
Upon a
transfer in violation of this Section 9, the transferee shall have no right
to
vote or participate in the management of the Company or to exercise any rights
of a Member. Such transferee shall only be entitled to receive the share of
the
Company’s Taxable Net Income, Taxable Net Losses and distributions of the
Company’s assets to which the transferor would otherwise be entitled.
Notwithstanding the immediately preceding sentences, if, in the determination
of
a Majority in Interest of the Remaining Members, a transfer in violation of
this
Section 9 would cause the termination of the Company under the Code, the
transfer shall be null and void.
ARTICLE
X
Consequences
of a Disposition Event.
10.1 Disposition
Event.
Upon
the occurrence of a Disposition Event, the Company and/or the Class A Members
other than the Former Member (“Remaining
Members”)
shall
have the option to purchase, and the Member (or his or her legal representative)
whose actions or conduct resulted in the Disposition Event (“Former
Member”)
shall
sell, the Former Member’s Membership Interest (“Former
Member’s Interest”)
as
provided in this Section 10.
10.2 Purchase
Price.
The
purchase price for the Former Member’s Interest shall be the fair market value
of the Former Member’s Interest as determined by an independent appraiser
jointly selected by the Former Member and by the Remaining Members and located
in the United States of America. The Company and the Former Member shall each
pay one-half of the cost of the appraisal. Notwithstanding the foregoing, if
the
Disposition Event results from a breach of this Agreement by the Former Member,
the purchase price shall be reduced by an amount equal to the damages suffered
by the Company or the Remaining Members as a result of such breach.
10.3 Notice
of Intent to Purchase.
Within
thirty (30) days after the fair market value of the Former Member’s Interest has
been determined in accordance with Section 10.2, each Remaining Member shall
notify the Class A Members in writing of his or her desire to purchase a portion
of the Former Member’s Interest. The failure of any Remaining Member to submit a
notice within the applicable period shall constitute an election on the part
of
the Remaining Member not to purchase any of the Former Member’s Interest. Each
Remaining Member so electing to purchase shall be entitled to purchase a portion
of the Former Member’s Interest in the same proportion that the Membership
Interest of the Remaining Member bears to the aggregate of the Membership
Interests of all of the Remaining Members electing to purchase the Former
Member’s Interest.
10.4 Election
to Purchase Less than All of the Former Member’s Interest.
If any
Remaining Member elects to purchase none or less than all of his or her pro
rata
share of the Former Member’s Interest, then the Remaining Members can elect to
purchase more than their pro rata share. If the Remaining Members fail to
purchase the entire interest of the Former Member, the Company shall purchase
any remaining share of the Former Member’s Interest.
10.5 Payment
of Purchase Price.
The
Company or the Remaining Members, as the case may be, shall pay the purchase
price within thirty (30) days following the notice set forth in Section 10.3.
10.6 Closing
of Purchase of Former Member’s Interest.
The
closing for the sale of a Former Member’s Interest pursuant to this Section 10
shall be held no later than sixty (60) days after the determination of the
purchase price. At the closing, the Former Member shall deliver to the Company
or the Remaining Members an instrument of transfer (containing warranties of
title and no encumbrances) conveying the Former Member’s Interest. The Former
Member, the Company and the Remaining Members shall do all things and execute
and deliver all papers as may be necessary fully to consummate such sale and
purchase in accordance with the terms and provisions of this
Agreement.
ARTICLE
XI
Accounting,
Records, Reporting by Members
11.1. Books
and Records; Audit.
The
books and records of the Company shall be kept, and the financial position
and
the results of its operations recorded, in accordance with the accounting
methods followed for U.S.
federal
income tax purposes. The books and records of the Company shall reflect all
the
Company transactions and shall be appropriate and adequate for the Company’s
business. The Company shall maintain at its principal office, in 0000 Xxxxx
00xx
Xxxxxx, Xxxxx 000, Xxxxxxx, XX 00000, all of the following and any other
information required by Section 18-305 of the Act: (i) a current list of the
full name and last known business, residence or mailing address of each Member
and Members, both past and present; (ii) a copy of the Certificate and all
amendments thereto, together with any power of attorney pursuant to which any
amendment thereto has been executed; (iii) copies of the Company’s federal,
state and local income tax or information returns and reports, if any, for
the
three most recent Fiscal Years; (iv) copies of this Agreement and any amendments
hereto, and copies of any writings permitted or required under the Act; (v)
copies of any financial statements of the Company for the three most recent
Fiscal Years; (vi) minutes of any meetings of Members and any written consents
obtained from Members; (vii) true and full information regarding the amount of
cash and a description and statement of the agreed value of any other property
or services contributed by each Member and which each Member has agreed to
contribute in the future, and the date on which each became a Member; and (viii)
the books and records of the Company as they relate to the internal affairs
of
the Company for at least the current and past four Fiscal Years. The Company
shall complete an annual audit by certified public accountants selected by
NutraCea in accordance with U.S.
generally
accepted accounting principles, consistently applied. Complete copies of the
audit report shall be provided to all of the Class A Members.
11.2 Inspection
by Members.
(a) Inspection.
Except
as provided in Section 11.2(b), any Company records are subject to inspection
and copying at the reasonable request, and at the expense, of any Member during
ordinary business hours by such Member or Member’s agent. The Company may impose
a reasonable charge, not to exceed the estimated cost of labor and material
for
production or reproduction, for copies of any documentation provided to a
Member.
(b) Confidentiality.
Each
Member shall have the right to keep confidential from the other Members and
the
Company, for such period as the Member deems reasonable, any information that
the Member reasonably believes to be in the nature of trade secrets or other
information the disclosure of which the Member in good faith believes is not
in
the best interest of the Member, of its business, or which the Member is
required by law or by agreement with a third party to keep
confidential.
11.3 Reports.
The
Company shall cause to be prepared at least annually information necessary
for
the preparation of the Members’ federal and state income tax returns. The
Company shall send or cause to be sent to each Member within ninety (90) days
after the end of each taxable year such information as is necessary to complete
federal and state income tax or information returns.
11.4 Bank
Accounts.
The
Company shall maintain the funds of the Company in one or more separate bank
accounts in the name of the Company, and shall not permit the funds of the
Company to be commingled in any fashion with the funds of any other person.
The
Finance Committee members, acting alone, are authorized to endorse checks,
drafts, and other evidences of indebtedness made payable to the order of the
Company, but only for the purpose of deposit into the Company’s accounts. All
checks, drafts, and other instruments obligating the Company to pay money shall
be signed in accordance with the requirements of this Agreement.
11.5. Tax
Matters Member.
The
Members shall from time to time cause the Company to make such tax elections
as
they deem to be in the best interests of the Company and the Members. A Person
selected by the Finance Committee shall be the “Tax Matters Partner,” as defined
in Code Section 6231.
ARTICLE
XII
Dissolution
and Winding Up;
Conversion to Corporation
12.1 Conditions
of Dissolution.
The
Company shall dissolve upon the occurrence of any of the following
events:
(a) Election.
The
election of the Class A Members or the Finance Committee; or
(b) Sale.
The
sale or other disposition of all or substantially all of the assets of Company
and the distribution of the proceeds of the sale or other disposition to the
Members.
12.2 Winding
Up.
Upon
the dissolution of the Company under the Act or this Agreement, the Company’s
assets shall be disposed of and its affairs wound up and the conduct of the
Company’s business shall be limited to those matters consistent with the
disposition of assets and winding up of affairs.
12.3. Order
of Payment of Liabilities, Distribution of Assets, Upon
Dissolution.
After
determining that all known debts and liabilities of the Company in the process
of winding-up, including, without limitation, debts and liabilities to Members
who are creditors of the Company, have been paid or adequately provided for,
the
remaining assets shall be liquidated and the proceeds distributed, after taking
into account Taxable Net Income and Loss allocations for the Company’s taxable
year during which the liquidation occurs, to the Members,
first
in
accordance with and
to
the extent of their Unreturned Capital Contributions and then, in accordance
with their remaining
positive
Capital Account balances. Such liquidating distributions shall be made by the
earlier of (i) the end of the Company’s taxable year in which the Company is
liquidated, or (ii) ninety (90) days after the date of such liquidation.
12.4 Limitations
on Payments Made in Dissolution.
Except
as otherwise specifically provided in this Agreement, each Member shall be
entitled to look solely to the assets of the Company for the return of the
Member’s positive Capital Account balance and shall have no recourse for his or
her Capital Contribution and/or share of Company profits against any other
Member except as provided in Section 13.
12.5 Conversion
to Corporation. If
the
Class A Members determine that it is in the interest of the Company to become
a
corporation, the Company shall become a corporation in such manner as may be
selected by the Class A Members. The other Members agree to fully cooperate
and
hereby provide the Class A Members with a power of attorney to execute all
documents on their behalf that may be necessary in order to effectuate the
conversion. As part of the conversion, the Class A Members shall receive
preferred stock with a liquidation preference and/or redemption right equal
to
their Unreturned Capital Contribution and all of the Members shall receive
the
common stock to be issued to the Company or directly to the Members in
accordance with their Percentage Interests.
ARTICLE
XIII
Indemnification
of Agents.
13.1 Indemnification
of Members.
The
Company, its receiver, or its trustee shall indemnify and hold harmless the
officers, the Class A Members and the Finance Committee members, and each of
them, and each of their employees, agents, representatives and successors,
to
the fullest extent permitted by law, from and against any loss, expense, damage,
claim, liability, expense or injury suffered or sustained by them because of
any
act or omission arising our of their activities on behalf of the Company or
in
furtherance of the interests of the Company or their status as a Member,
officer, Finance Committee member or agent of the Company, including without
limitation any judgment, award, settlement, attorneys’ fees, and other costs or
expenses incurred in connection with the defense of any actual or threatened
action, proceeding, or claim, regardless of whether the indemnified party ceases
to act in the capacity at the time the liability or expense is paid or incurred
and regardless of the identity of the party bringing the claim or action.
Reasonable expenses incurred by an indemnified party in connection with the
foregoing matters, to the fullest extent permitted by law, shall be paid or
reimbursed by the Company in advance of the final disposition of such
proceedings. A Person shall not be denied indemnification hereunder because
such
person had an interest in the action to which the indemnification applies,
if
the Person is otherwise entitled to indemnity hereunder.
13.2 Limitation
on Indemnification.
Notwithstanding subsection 13.1 above, no Person shall be entitled to or shall
receive indemnification in respect to any matters that proximately result from
the person’s fraud, bad faith, gross negligence or willful misconduct or the
Person’s material breach of this Agreement, unless, and only to the extent that,
a court or arbitrator of competent jurisdiction determines upon application
that, despite the misconduct of such Person, under the circumstances, the Person
is fairly and reasonably entitled to indemnity for those expenses that the
court
shall deem proper.
13.3 Indemnification
on Successful Defense.
To the
extent that the Person entitled to indemnification is successful on the merits
or otherwise in defense of any action, suit, or proceeding referred to in
Sections 13.1, or in the defense of any claim, issue or matter therein, the
Company shall indemnify the Person against the expenses, including attorney’s
fees, actually and reasonably incurred in connection therewith.
ARTICLE
XIV
Investment
Representations.
Each
Member hereby represents and warrants to, and agrees with, the other Members
and
the Company as set forth below.
14.1. Preexisting
Relationship or Experience.
He, she
or it has a preexisting personal or business relationship with the Company
or
the Members, or by reason of his, her or its business or financial experience,
or the business or financial experience of the financial advisor who is
unaffiliated with and who is not compensated, directly or indirectly, by the
Company or any Affiliate or selling agent of the Company, he, she, or it is
capable of evaluating the risks and merits of an investment in the Company
and
of protecting his, her or its own interests in connection with this
investment.
14.2. No
Advertising.
He, she
or it has not seen, received, been presented with, or been solicited by any
leaflet, public promotional meeting, article or any other form of advertising
or
general solicitation with respect to the sale of the Membership
Interest.
14.3. Investment
Intent.
He, she
or it is acquiring the Membership Interest for investment purposes for his,
her
or its own account only and not with a view to or for sale in connection with
any distribution of all or any part of the Membership Interest. No other Person
will have any direct or indirect beneficial interest in or right to the
Membership Interest.
ARTICLE
XV
Miscellaneous.
15.1. Entire
Agreement.
This
document (including any exhibits and schedules hereto) constitutes the entire
agreement between the parties
with
respect to the subject matter herein and therein,
all
oral agreements being merged herein, and supersedes all prior representations.
There are no representations, agreements, arrangements, or understandings,
oral
or written, between or among the parties relating to the subject matter of
this
Agreement that are not fully expressed herein.
15.2. Interpretation.
All
pronouns shall be deemed to refer to the masculine, feminine, or neuter,
singular or plural, as the context in which they are used may require. All
headings herein are inserted only for convenience and ease of reference and
are
not considered in the interpretation of any provision of this Agreement.
Numbered or lettered articles, sections and subsections herein contained refer
to articles, sections and subsections of this Agreement unless otherwise
expressly stated. In the event any claim is made by any Member relating to
any
conflict, omission or ambiguity in this Agreement, no presumption or burden
of
proof or persuasion shall be implied by virtue of the fact that this Agreement
was prepared by or at the request of a particular Member or his or her
counsel.
15.3. Severability.
If any
provision of this Agreement is held by a court of competent jurisdiction to
be
invalid, void, or unenforceable, the remaining provisions shall nevertheless
continue in full force and effect without being impaired or invalidated in
any
way.
15.4. Notice.
Any
notice under this Agreement shall be in writing, and any written notice or
other
document shall be deemed to have been duly given (i) on the date of personal
service on the parties, (ii) on the fifth
business
day after mailing, if the document is mailed by registered or certified mail,
(iii) two
days
after
being sent by professional or overnight courier or messenger service, with
receipt confirmed by the courier, or (iv) on the date of transmission if sent
by
telegram, telex, telecopy or other means of electronic transmission resulting
in
written copies, with receipt confirmed. Any such notice shall be delivered
or
addressed to the parties at the addresses set forth below or at the most recent
address specified by the addressee through written notice under this provision.
Failure to conform to the requirement that mailings be done by registered or
certified mail shall not defeat the effectiveness of notice actually received
by
the addressee.
If
to
NutraCea:
NutraCea
0000
Xxxxx 00xx
Xxxxxx,
Xxxxx 000
Xxxxxxx,
XX 00000
Attn:
Xxxx Xxxxx
With
a
copy to:
Xxxxxxxxx
Genshlea Chediak Law Corporation
000
Xxxxxxx Xxxx, Xxxxx 0000
Xxxxxxxxxx,
XX 00000
Attn:
Xxxxx Xxxxxxx
If
to
Pacific Advisors Holdings Limited:
Pacific
Advisors Holdings Limited
00
Xxxxxxxxx Xxxx
Xxxxxxxxx
Xxxxx #00-00
Xxxxxxxxx
000000
Singapore
Attn:
President
With
copy
to:
Xxxx
& Xxxxx
0000
Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx
Xxxxx
15.5. Amendment.
Except
as specifically provided herein, the provisions of this Agreement may be
modified, in whole or in part, at any time by consent of a Majority in Interest
of the Class A Members; provided, however that the unanimous consent of all
Members affected by the amendment (including the Class B Members, if applicable)
shall be required for any amendment that would: (i) impose a new material
obligation on a Member, (ii) reduce the Capital Account of a Member, (iii)
reduce a Member’s rights to allocations or distributions under this Agreement,
(iv) modify any provision hereof that imposes a unanimous or super majority
vote
of the Members, or (v) amend this Section 15.5. Any such agreement hereafter
made shall be ineffective to modify this Agreement in any respect with regard
to
the matters specified in items (i), (ii), (iii), (iv) or (v) above, unless
in
writing and signed by the parties against whom enforcement of the modification
is sought. In the event that this Agreement is amended and the vote of all
Members has not been solicited in connection with such amendment, notice of
any
approved amendment shall be provided to the Members whose vote was not solicited
not less than five (5) business days after the amendment becomes effective.
15.6. Counterparts.
This
Agreement may be executed in any number of counterparts with the same effect
as
if the parties had all signed the same document. All counterparts shall be
construed together and shall constitute one agreement.
15.7. Attorneys’
Fees; Prejudgment Interest.
If the
services of an attorney are required by any party to secure the performance
of
this Agreement or otherwise upon the breach or default of another party to
this
Agreement, or if any judicial remedy or arbitration is necessary to enforce
or
interpret any provision of this Agreement or the rights and duties of any Person
in relation thereto, the prevailing party shall be entitled to reasonable
attorneys’ fees, costs and other expenses, in addition to any other relief to
which such party may be entitled. Any award of damages following judicial remedy
or arbitration as a result of the breach of this Agreement or any of its
provisions shall include an award of prejudgment interest from the date of
the
breach at the maximum amount of interest allowed by law.
15.8. Remedies
Cumulative.
No
remedy or election hereunder shall be deemed exclusive but shall whenever
possible be cumulative with all other remedies at law or in equity.
15.9. Succession.
Subject
to the provisions otherwise contained in this Agreement, this Agreement shall
inure to the benefit of and be binding on the successors and assigns of the
respective parties.
15.10.
Specific
Performance.
Each
party’s obligations under this Agreement are unique. The parties each
acknowledge that, if any party should default in performance of the duties
and
obligations imposed by this Agreement, it would be extremely impracticable
to
measure the resulting damages. Accordingly, the nondefaulting party, in addition
to any other available rights or remedies, may xxx in equity for specific
performance, and the parties each expressly waive the defense that a remedy
in
damages will be adequate.
15.11.
Captions.
All
paragraph captions are for reference only and shall not be considered in
construing this Agreement.
15.12.
Time.
Time is
of the essence of this Agreement.
15.13.
Parties
in Interest.
Nothing
in this Agreement, whether express or implied, is intended to confer any rights
or remedies under or by reason of this Agreement on any persons other than
the
parties to it and their respective successors and assigns, nor is anything
in
this Agreement intended to relieve or discharge the obligation or liability
of
any third persons to any party to this Agreement, nor shall any provision give
any third persons any right of subrogation or action against any party to this
Agreement.
15.14.
Further
Assurances.
The
Members shall execute and deliver all such further documents and instruments,
and take all further actions as may be necessary to consummate the transactions
contemplated hereby.
15.15.
Choice
of Law.
The
laws of the State of Delaware, including, without limitation, the Act, shall
govern the organization and internal affairs of the Company and the liability
of
the Members. Nevertheless, to the extent that reference need be made to the
law
of any state to enforce the decision made in any legal proceeding brought
pursuant hereto, the internal laws of the State of California (without reference
to the rules regarding conflict or choice of laws of such State) shall be
utilized for such purpose.
15.16.
Survival.
The
indemnification provisions herein shall survive the termination or expiration
of
this Agreement.
| NutraCea, a California corporation | ||
|
By:
|
||
|
Xxxx
Xxxxx
|
||
|
Address:
0000 Xxxxx 00xx Xxxxxx, Xxxxx 000
|
||
|
Xxxxxxx,
XX 00000
|
||
|
Pacific
AdvisorsHoldings Limited, a British
Virgin
Islands company
|
||
|
By:
|
||
|
|
(_____________________________)
|
|
|
Address:
|
|
|
| Theorem Group, LLC, a California limited | ||
| liability company | ||
|
By:
|
|
|
|
(_____________________________)
|
||
| Address: 0000 Xxxxxxx Xxxx Xxxx, #0000 | ||
| Xxx Xxxxxxx, XX 00000 | ||
| Ho’okipa Capital Partners, Inc. | ||
| a California corporation | ||
|
By:
|
|
|
|
(_____________________________)
|
||
| Address: 0000 Xxxxxxx Xxxx Xxxx, #0000 | ||
| Xxx Xxxxxxx, XX 00000 | ||
EXHIBIT
A
Initial
Capital Contributions
|
Member
|
Contribution
|
Initial Percentage Interest
|
|||||
|
NutraCea
|
$
|
5,000,000
|
47.5
|
%
|
|||
|
Pacific
Advisors Holdings Limited
|
$
|
5,000,000
|
47.5
|
%
|
|||
|
Theorem
Group, LLC
|
$
|
0
|
[*]
|
%
|
|||
|
Ho’okipa
Capital Partners, Inc.
|
$
|
0
|
[*]
|
%
|
|||
EXHIBIT
B
Products
Stabilized
rice bran and stabilized rice bran derivative products.
EXHIBIT
C
Supply
Agreement
EXHIBIT
D
License
Agreement
EXHIBIT
E
Lease
Agreement
EXHIBIT
F
Sublicense
Agreement
