EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of the
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17th day of December 2004, by and between NutraCea, a California corporation
("Employer") and Xxxx Xxxxx ("Employee").
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WHEREAS, the officers, managers and/or directors of Employer are of the
opinion that Employee has education, experience and/or expertise which is of
value to Employer and its owners, and
WHEREAS, Employer and Employee desire to enter into this Employment
Agreement pursuant to which Employee shall be employed by Employer, to set forth
the respective rights, duties and obligations of the parties hereto.
NOW THEREFORE, In consideration of the promises and covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which the parties hereto acknowledge, Employer and Employee agree as follows:
1. EMPLOYMENT. Employer hereby to employ Employee and Employee
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hereby accepts such employment upon the terms and conditions
hereinafter set forth.
2. TERM. For purposes of this Agreement, "Term" shall mean the
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original term (as defined in Section 2.1 below) and the renewal term
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(as defined in Section 2.2 below), if applicable.
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2.1 ORIGINAL TERM. The Term of this Agreement shall commence on
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December 17, 2004 and expires on December 31, 2007, unless sooner
terminated pursuant to the terms and provisions herein stated.
2.2 RENEWAL TERM. This Agreement shall automatically be extended
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for two additional one (1) year renewal terms unless either party
gives written notice to terminate this agreement at least one
hundred eighty (180) days prior to the end of the preceding term.
3. COMPENSATION. Employer shall pay Employee a base annual salary of
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Fifty thousand Dollars ($50,000) for the first year of employment,
payable $4,157 per month. In accordance with Employer's normal
policies but in no event less often than semi-monthly (the "Salary").
Effective December 1, 2005, Employee's salary shall be increased to
one hundred fifty thousand dollars ($150,000) for the second year of
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employment payable $12,500 per month. Effective December 1, 2006,
Employee's salary shall be increased to two hundred and fifty thousand
dollars ($250,000), payable $20,833 per month for the third year of
employment, and adjust upwards 10% annually thereafter.
3.2 WARRANTS: Employer shall issue to Employee Warrant
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Certificates to purchase 6,000,000 common shares of the Company
at an exercise price of $0.30 per share. The certificates shall
be valid for ten years from the date of issue. The Certificates
shall vest to Employee upon this contract being executed by all
parties. A copy of the Warrant Agreement is attached as Addendum
C.
3.3 STOCK OPTION PLAN/STOCK PURCHASE PLAN: Employee shall be
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eligible to participate in Company's Stock Option Plan and Stock
Purchase Plan during the term of employment.
4. EMPLOYEE BENEFITS.
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4.1 GENERAL BENEFITS: Employee shall be entitled to receive or
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participate in all benefit plans and programs of Employer
currently existing or hereafter made available to executives or
senior management of Employer, including but not limited to,
dental and medical insurance, including coverage for dependents
of Employee, pension and profit sharing plans, 401 (k) plans,
incentive savings plans, stock option plans, group life
insurance, salary continuation plans, disability coverage and
other fringe benefits.
4.2 BUSINESS EXPENSE: Employee shall be provided with American
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Express and/or Visa/Master Card credit cards issued in the name
of Employer, for purposes of paying business expenses, including
without limitation, economy travel for domestic travel within the
United States, and business Class travel for travel outside the
country, entertainment, lodging and similar activities.
Additionally, Employee shall be entitled to receive proper
reimbursement for all reasonable out-of-pocket expenses incurred
directly by Employee in performing Employee's duties and
obligations under this Agreement. Employer shall reimburse
Employee for such expenses on a weekly basis, upon submission by
Employee of appropriate receipts, vouchers or other documents in
accordance with Employer's policy.
4.3 AUTOMOBILE EXPENSES: Employer shall provide Employee with an
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automobile allowance in the amount of $600.00 per month.
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4.4 CELLULAR TELEPHONE: Employer shall reimburse employee for
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the use of his cellular telephone.
4.5 ASSISTANCE: Employer shall furnish Employee with an office,
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and personal assistant, together with a portable computer and
office equipment and such other facilities and services as are
deemed by the Board of Directors of Employer to be suitable for
his position and adequate for the performance of his duties and
obligations under this Agreement.
4.6 VACATION: Employee shall be entitled during each twelve (12)
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month period during the Term of this Agreement to a vacation of
four (4) weeks during which time Employee's compensation will be
paid in full. Unused days of vacation will be compensated in
accordance with Employer's policy as established by Employer from
time to time. Employee may take the vacation periods at any time
during the year as long as Employee schedules time off as to not
create hardship on Employer. In addition, Employee shall have
such other days off as shall be determined by Employer and shall
be entitled to paid sick leave and paid holidays in accordance
with Employer's policy.
5. DUTIES/SERVICE
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5.1 POSITION: Employee is employed as President and shall
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perform such services and duties as are defined in Addendum B,
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Job Description, attached hereto, and as are normally associated
with such position, subject to the direction, supervision and
rules and regulations of Employer. The Employee will be made a
member of the Board of Directors of the Company effective upon
the contract being executed.
5.2 PLACE OF EMPLOYMENT: The permanent place of Employee's
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employment and the performance of Employee's duties will be at a
location in the Phoenix, Arizona Metropolitan area. Employee
agrees to make himself available for travel from time to time to
Employer's corporate headquarters in Sacramento.
5.3 EXTENT OF SERVICES: Employee shall at all times and to the
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best of his ability perform his duties and obligations under this
Agreement in a reasonable manner consistent with the interests of
Employer. Employer shall not alter Employee's title, duties,
obligations or responsibilities or transfer Employee outside of
the Phoenix area
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without Employee's prior written consent, said consent to be
at Employee's sole discretion.
5.3.1 It is understood and agreed that Employee's employment
is substantially fulltime and of a critical nature to the success
of Employer. Employer acknowledges that Employee presently, or
may in the future, serve on the Board of Directors of other
companies and such action shall not be a breach of this section;
provided, however, that such companies do not compete with
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employer.
5.3.2 Additionally, Employer recognizes that Employee has,
or may have in the future, non-passive equity positions in other
companies, which do not compete with Employer. Employer
recognizes that such equity positions may occasionally require
some attention from Employee during normal business hours.
However, Employee agrees that if such time is considered
excessive by the Board of Directors, Employee shall be so advised
and noticed by Employer and Employee shall be required to make
appropriate adjustments to ensure his duties and obligations
under this Agreement are fulfilled.
6. TERMINATION. The Term of this Agreement shall end upon its
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expiration pursuant to Section 2 hereof, provided that this Agreement
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shall terminate prior to such date: (a) upon the Employee's
resignation, death or permanent disability or incapacity; or (b) by
Employer at any time for "Cause" (as defined in Section 6.4 below) or
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without Cause.
6.1 BY RESIGNATION. If Employee resigns with "Good Reason" (as
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defined below), this Agreement shall terminate but: (a) Employee
shall receive the immediate payout of all salary through the end
of the term of this agreement, but in no event less than an
amount equal to the last twelve months of salary paid to Employee
and (b) all of Employee's "Options" (as such term is defined in
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this Agreement) shall be deemed vested. For purposes of this
Agreement, "Good Reason" shall mean: (i) the assignment to
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Employee of duties inconsistent with the position and nature of
Employee's employment, the reduction of the duties of Employee
which is inconsistent with the position and nature of Employee's
employment, or the change of Employee's title indicating a change
in the position and nature of Employee's employment; (ii) a
reduction in compensation and benefits of Employee without
Employee's written consent; (iii) the failure by Employer to
obtain from any successor, an agreement to assume and perform
this Agreement; or (iv) in the event that the current Chief
Executive Officer of the Employer for any reason no longer holds
such
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position, the failure of the Board of Directors of Employer
to appoint Employee as Chief Executive Officer of Employer; or
(v) a corporate "Change In Control" (as defined below). For
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purposes of this Agreement, "Change In Control" shall mean (1) a
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merger or consolidation (except those detailed in Addendum A,
section 2,) in which securities possessing more than fifty
percent (50%) of the total combined voting power of Employer's
outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately
prior to such transaction in a transaction approved by the
stockholders, or the sale, transfer, or other disposition of more
than fifty percent (50%) of the total combined voting power of
Employer's outstanding securities to a person or persons
different from the persons holding those securities immediately
prior to such transaction; or (2) the safe, transfer or other
disposition of all or substantially all of the Employer's assets
in complete liquidation or dissolution of Employer other than in
connection with a transaction described in Section 6.1(1) above.
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If Employee resigns without Good Reason, Employee shall be
entitled to receive Employee's Salary and Incentive Compensation
only through the date of such resignation and Employee's Options
shall be deemed vested only through the date of such resignation.
6.2 BY REASON OF INCAPACITY OR DISABILITY: If Employee becomes
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so incapacitated by reason of accident, illness, or other
disability that Employee is unable to carry on substantially all
of the normal duties and obligations of Employee under this
Agreement for a continuous period of one-hundred-eighty (180)
days (the "Incapacity Period"), this Agreement shall terminate
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but: (a) Employee shall continue to receive, through the end of
the fiscal year, Incentive Compensation in accordance with the
terms and conditions of this agreement (b) Employee shall
receive, during the Incapacity Period and for the six (6) month
period thereafter (the "Extended Period"), Employee's Salary
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payable in periodic installments on Employer's regular paydays,
at the rate then in effect, reduced only by the amount of any
payment(s) received by Employee pursuant to any disability
insurance policy proceeds; and (c) Employee's Options shall be
deemed vested through the Extended Period. For purposes of the
foregoing, Employee's permanent disability or incapacity shall be
determined in accordance with Employer's disability insurance
policy, if such a policy is then in effect, or if no such policy
is then in effect, such permanent disability or incapacity shall
be determined by Employer's Board of Directors in its good faith
judgment based upon Employee's inability to perform normal and
reasonable duties and obligations.
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6.3 BY REASON OF DEATH: If Employee dies during the Term of this
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Agreement, Employer shall: (a) pay to the estate of Employee,
through the end of the fiscal year, Employee's Incentive
Compensation in accordance with the terms and conditions of of
this agreement, (b) pay to the estate of Employee, for a period
of six (6) months beginning on the date of death (the "Extended
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Period"), Employee's Salary payable in periodic installments on
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Employer's regular paydays, at the rate then in effect; and (c)
Employee's Options shall be deemed vested through the date of the
Extended Period. Other death benefits will be determined in
accordance with the terms of Employer's benefit plans and
programs.
6.4 FOR CAUSE. If the Term of this Agreement is terminated by
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Employer for Cause: (a) Employee shall be entitled to receive
Employee's Salary and Incentive Compensation only through the
date of termination; and (b) Any additionally issued Employee's
Options shall be deemed vested only through the date of such
termination for Cause. However, if a dispute arises between
Employer and Employee that is not resolved within sixty (60) days
and neither party initiates arbitration proceedings pursuant to
Section 11.8. For purposes of this Agreement, "Cause" shall mean:
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(i) the conviction by Employee of: a felony, a crime involving
moral turpitude causing material harm to Employer's standing and
reputation, a fraud against the Company.
6.5 WITHOUT CAUSE. If, during the Term of this Agreement,
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Employer terminates the Employee's employment without Cause: (a)
Employee shall be entitled to receive, through the end of the
Term of this Agreement, Incentive Compensation in accordance with
the terms and conditions of this agreement, (b) An immediate
acceleration of all remaining base salary owed to Employee
through the end of the contract; but in no case an amount less
than the previous 12 month's of salary paid to Employee, and (c)
all of Employee's Options shall be deemed vested.
6.6 EFFECT OF TERMINATION ON UNUSED VACATION TIME: Upon the
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termination of this Agreement for any reason whatsoever, Employee
shall also have the right to receive any accrued but unused
vacation time, and any benefits vested under the terms of any
applicable benefit plans.
6.7 AUTHORITY TO TERMINATE:
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Termination of Employee by Employer, pursuant to the terms
hereof, shall only occur by decision of the Board of Directors at a
duly noticed and convened meeting of the Board of Directors of
Employer.
7. NON-DISCLOSURE AND INVENTION AND COPYRIGHT ASSIGNMENT AGREEMENT.
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Employee's employment is subject to the requirement that Employee
sign, observe and agree to be bound, both during and after Employee's
employment by the provisions of Employer's Non-Disclosure and
Invention and Copyright Assignment Agreement. Employee further agrees
to execute, deliver and perform, during the Term of Employee's
employment with Employer and thereafter, any other reasonable
confidentiality and non-disclosure agreements concerning Employer and
any of its affiliates and its business and products, which Employer
promulgates for other key employees and executives.
8. RETURN OF EMPLOYER PROPERTY: Employee agrees that upon any
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termination of his employment, Employee shall return to Employer
within a reasonable time not to exceed two (2) weeks, any of
Employer's property in his possession or under his control.
9. RELATIONSHIP OF PARTIES: The parties intend that this Agreement
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create an employee-employer relationship between the parties.
10. NOTICES: All notices, required and demands and other
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communications hereunder must be in writing and shall be deemed to
have been duly given when personally delivered or when placed in the
United States Mail and forwarded by Registered or Certified Mail,
Return Receipt Requested, postage prepaid, or when forwarded via
reputable overnight carrier, addressed to the party to whom such
notices is being given at the following address:
AS TO EMPLOYER:
Attn: Chairman of the Board
0000 Xxxxx Xxxxxx Xxxxx,
Xx Xxxxxx Xxxxx, XX
AS TO EMPLOYEE:
Xxxx Xxxxx
0000 X. 00xx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx, 00000
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ADDRESS CHANGE: Any party may change the address(es) at which
notices to it or him, as the case may be, are to be sent by giving the
notice of such change to the other parties in accordance with this
Section 10.
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11.
Indemnification, The company shall maintain D&O liability coverage pursuant to
which Employee shall be a covered insured. Employee shall receive
indemnification in accordance with the Company's Bylaws in effect as of the date
of this Agreement. Such indemnification shall be contractual in nature and shall
remain in effect notwithstanding any future change to the Company's Bylaws.
To the extent not otherwise limited by the Company's Bylaws in effect as of the
date of this Agreement, in the event that Employee is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding (including those brought by or in the right of the Company) whether
civil, criminal, administrative or investigative ("proceeding"), by reason of
the fact that he is or was an officer, employee or agent of or is or was serving
the Company or any subsidiary or the Company, or is or was serving at the
request of the Company or another corporation, or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or agent, Employee shall
be indemnified and held harmless by the Company to the fullest extent authorized
by law against all expenses, liabilities and losses) including attorneys fee,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by Employee in connection
therewith. Such right shall be a contract right and shall include the right to
be paid by the Company expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however, that the payment of such
expenses incurred by Employee in his capacity as a director or officer (and not
in any other capacity in which service was or is rendered by Employee while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of such proceeding will be
made only upon delivery to the Company of an undertaking, by or on behalf of the
Employee, to repay all amounts to Company so advanced if it should be determined
ultimately that Employee is not entitled to be indemnified under this section or
otherwise. However, under no circumstance shall Employee not be entitled to
indemnification for any action prior to Employee's position with the Company.
Promptly after receipt by Employee if notice of the commencement of any action,
suit or proceeding for which Employee may be entitled to be indemnified,
Employee shall notify the Company in writing of the commencement thereof (but
the failure to notify the Company shall not relieve it from any liability which
it may have under Section 11 unless and to the extent that it has been
prejudiced in a material respect by such failure or from the forfeiture of
substantial rights and defenses). If any such action, suit or proceeding is
brought against Employee and he notifies the Company of the commencement
thereof, the Company will be entitled to participate therein, and, to the extent
it may elect by written notice delivered to Employee promptly after receiving
the aforesaid notice from Employee, to assume the defense thereof with counsel
reasonably satisfactory to Employee, which may be the same counsel as counsel to
the Company. Notwithstanding
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the foregoing, Employee shall have the right to employ his own counsel in any
such case, but the fees and expenses of such counsel shall be at the expense of
Employee unless (i) the employment of such counsel shall have been authorized in
writing by the Company, (ii) the Company shall not have employed counsel
reasonably satisfactory to Employee to take charge of the defense of such action
within a reasonable time after notice of commencement of the action or (iii)
Employee shall have reasonably concluded, after consultation with counsel to
Employee, that a conflict of interest exists which makes representation by
counsel chosen by the Company not advisable (in which case the Company shall not
have the right to direct the defense of such action on behalf of Employee), in
any of which events such fees and expenses of one additional counsel shall be
borne by the Company. Anything in the Section 11 to the contrary
notwithstanding, the Company shall not be liable for any settlement of any claim
or action effected without its written consent.
12. MISCELLANEOUS:
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12.1 ENTIRE AGREEMENT. This Agreement and the Addendums hereto
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contain the entire agreement of the parties. This Agreement may
not be altered, amended or modified except in writing duly
executed by the parties.
12.2 ASSIGNMENT. Neither party, without the written consent of
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the other party, can assign this Agreement.
12.3 BINDING. This Agreement shall be binding upon and inure to
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the benefit of the parties, their personal representative,
successors and assigns.
12.4 NO WAIVER. The waiver of the breach of any covenant or
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condition herein shall in no way operate as a continuing or
permanent waiver of the same or similar covenant or condition.
12.5 SEVERABILITY. If any provision of this Agreement is held to
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be invalid or unenforceable for any reason, the remaining
provisions will continue in full force without being impaired or
invalidated in any way. The parties hereto agree to replace any
invalid provision with at valid provision which most closely
approximates the intent of the invalid provision.
12.6 INTERPRETATION. This Agreement shall not be construed more
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strongly against any party hereto regardless of which party may
have been more responsible for the preparation of Agreement.
12.7 GOVERNING LAW This Agreement shall be governed by and
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construed under the (laws of the State of California, without
reference to the choice of law principles thereof.
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12.8 ARBITRATION.
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12.8.1 Any controversy, dispute or claim of whatever nature in
any way arising out of or relating to Employee's
employment with Employer, including, without limitation
(except as expressly excluded below in Section 11.8.2)
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any claims or disputes by Employee against Employer, or
by Employer against Employee, concerning, arising out
of or relating to the separation of that employment;
any other adverse personnel action by Employer; any
federal, state or local law, statute or regulation
prohibiting employment discrimination or harassment;
any public policy; any Employer disciplinary action;
any Employer decision regarding a Employer policy or
practice, including but not limited to Employee's
compensation or other benefits; and any other claim for
personal, emotional, physical or economic injury
(individually or collectively, "Covered Claims") shall
be resolved, at the request of any party to this
Agreement, by final and binding arbitration in,
California before Judicial Arbitration Mediation
Services ("JAMS") in accordance with JAMS' then-current
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policies and procedures for arbitration of employment
disputes.
12.8.2 The only claims or disputes excluded from binding
arbitration under this Agreement are the
following; any claim by Employee for workers'
compensation benefits or for benefits under a Employer
plan that provides its own arbitration procedure; and
any claim by either party for equitable relief,
including but not limited to, a temporary restraining
order, preliminary injunction or permanent injunction
against the other party.
12.8.3 This agreement to submit all Covered Claims to binding
arbitration in no way alters the exclusivity of
Employee's remedy under Section 6.5 in the event of any
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termination without Cause or the exclusivity of
Employee's remedy under Section 6.4 in the event of any
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termination with Cause, and does not require Employer
to provide Employee with any type of progressive
discipline.
12.9 LEGAL FEES. In the event of a dispute between Employee and
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Employer which results in legal action, the legal fees for both
parties shall be assumed and paid by Employer.
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12.9 TITLES. Titles to the sections of this Agreement are solely
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for the convenience of the parties and shall not be used to
explain, modify, simplify, or aid in the interpretation of the
provisions of this Agreement
12.10 COUNTERPARTS. This Agreement may be executed in
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counterparts, each of which shall be deemed an original but
together which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
Employer: NutraCea,
a California corporation
By: /s/ Xxxxxxxx XxXxxx
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(Signature)
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(Type/Print name)
CHIEF EXECUTIVE OFFICER
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(Office held)
Employee: By: /s/ Xxxx Xxxxx
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Xxxx Xxxxx
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(Type/Print name)
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ADDENDUM A
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EMPLOYEE INCENTIVE COMPENSATION PLAN
This Employee Incentive Compensation Agreement (this "Agreement") is entered
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into this 17th day of December, 2004, by and between NutraCea, a California
corporation (the "Employer"), and Xxxx Xxxxx ("Employee"), as follows:
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WHEREAS, It is in the best interest of Employer and Employee to enter into a
contracting arrangement to cover annual Employee Incentive bonuses, and
WHEREAS, both parties to this Agreement desire to memorialize various aspects of
their relationship:
NOW, THEREFORE, the parties hereby agree as follows:
1. ADDENDUM. This Agreement is in an addendum to that certain Employment
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Agreement effective of even date herewith.
2. TRANSACTION SUCCESS FOR: If a combination occurs between the RiceX
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Corporation and NutraCea, (including but not limited to a merger,
acquisition, asset purchases) concurrent with the closing of that
transaction a cash fee equal to 2.25% of the value placed on the RiceX
Corporation, as determined by the total amount of compensation paid for the
company by NutraCea, shall be paid to Xxxx Xxxxx as a success bonus.
3. EMPLOYEE INCENTIVE BONUSES: Employee Incentive Bonuses granted
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pursuant to this Agreement shall be paid annually, within ten (10) days of
the completion of the annual independent audit of Employer. Such Bonuses
shall be one percent (1) percent of Employer's "Gross Sales over
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$25,000,000." However, in no event shall such bonus be paid unless the
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company reports a positive EBITDA for the period. For the purposes of this
section, no non-cash charges will be included in the calculation of EBITDA.
The bonus amount in section 3, will be limited to a maximum of $750,00 in
any calendar year.
5. TERMINATION: Termination of employment with Employer, whether
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voluntary or involuntary, shall not affect any bonus earned but not paid.
If employment is terminated, a proportionate share of any bonus earned
shall be paid to Employee on the next regular bonus payment date.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
Employer: NutraCea Corporation,
a California corporation
By: /s/ Xxxxxxxx XxXxxx
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(Signature)
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(Type/Print name)
Chairman and CHIEF EXECUTIVE OFFICER
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(Office held)
Employee: By: /s/ Xxxx Xxxxx
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Xxxx Xxxxx
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(Type/Print name)
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ADDENDUM B
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JOB DESCRIPTION FOR XXXX XXXXX
JOB TITLE: President
Other Title: Member of the Board of Directors
DEPARTMENT: Executive
REPORTS TO: Board of Directors
SUMMARY
The President has primary responsibility for planning, organizing, staffing, and
operating the Corporation ("NutraCea") toward its primary objectives, based on
profit and return on capital, and is accountable only to the Board of Directors
for the results of performance of all employees.
The President's written approval is required for all corporate legal and
fiduciary activities.
The President establishes and communicates the management style, corporate
culture, business philosophy and ethical values by which the Company will
operate.
The President manages and directs all employees except for the CEO by performing
the following duties personally or through subordinate managers.
ESSENTIAL DUTIES AND RESPONSIBILITIES include the following. Other duties may be
assigned
Plans the overall business strategy and goals of the Company that will assure a
defined rate of return on stockholder investment and establishes objectives for
each function to meet those goals, with the cooperation of the Board of
Directors.
Plans, coordinates, and controls the daily operation of the Company through its
managers.
Establishes current and long range goals, objectives, plans and policies.
Determines the appropriate organization structure and staffing responsibilities
required to meet the Company's objectives. Dispenses advice, guidance,
direction, and authorization to carry out major plans, standards and procedures,
consistent with established policies.
Oversees the adequacy and soundness of the company's financial structure.
Reviews operating results of the Company, compares them to established
objectives, and takes steps to ensure that appropriate measures are taken to
correct unsatisfactory results.
Plans and directs all investigations and negotiations pertaining to mergers,
joint ventures, the acquisition of businesses, or the sale of major assets.
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Fulfills responsibility to the Board of Directors to inform or seek approval for
significant matters such as financing, , and appointment of officers.
Ensures that Company business transactions are conducted in accordance with
prevailing legal and regulatory requirements.
Reviews and determines approval of all recommendations for compensation of
officers, managers and employees.
Presides over stockholders meetings.
Responsible for overseeing and evaluating performance of executives for
compliance with established policies and objectives of firm and contributions in
attaining objectives.
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ADDENDUM C
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES USABLE UPON THE
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (OR
ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED EXCEPT UPON DELIVERY TO THE
CORPORATION OF AN OPINION OF COUNSEL SATISFACTORY IN FORM AND SUBSTANCE TO IT
THAT SUCH TRANSFER WILL NOT VIOLATE THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE STATE SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.
NUTRACEA, a California corporation
Warrant for the Purchases of Common Stock,
par value $0.001 per Share
No. WC-[__]
Issuance Date: December 17, 2004 6,000,000 Shares
THIS CERTIFIES that, for values received, Xxxx Xxxxx (the "Holder") is
entitled to subscribe for and purchase from NutraCea, a California corporation
(the "Company"), upon the terms and conditions set forth herein, 6,000,000
shares of the Company's Common Stock, par value $0.001 per share ("Common
Stock"), at a price of $0.30 per share (the "Exercise Price"). As used herein
the term "this Warrant" shall mean and include this Warrant and any Common Stock
or Warrants hereafter issued as a consequence of the exercise or transfer of
this Warrant in whole or in part. The number of Warrant Shares may be adjusted
from time to time as hereinafter set forth.
1. EXERCISE PERIOD. This Warrant may be exercise at any time or from time
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to time during the period commencing on the Issuance Date and ending at 5:00
P.M. Central time on December 16, 2014 (the "Exercise Period").
2. PROCEDURE FOR EXERCISE EFFECT OF EXERCISE
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(a) CASH PURCHASE. This Warrant may be exercised, in whole or in
part, by the Holder during normal business hours on any business day during the
Exercise Period by (i) the presentation and surrender of this Warrant to the
Company at its principal office along with a duly executed Notice of Exercise
(in the form attached to this Warrant) specifying the number of Warrant Shares
to be purchased, (ii) delivery of payment to the Company of the Exercise Price
for the number of Warrant Shares specified in the Notice of Exercise by cash,
wire,
1
transfer of immediately available funds to a bank account specified by the
Company, or by certified or bank cashier's check.
(b) Cashless Exercise. This Warrant may also be exercised by the
------------------
Holder through a cashless exercise, as described in this Section 2(b). This
Warrant may be exercised, in whole or in part, by the Holder during normal
business hours on any business day during the Exercise Period by the
presentation and surrender of this Warrant to the Company at its principal
office along with a duly executed Notice of Exercise specifying the number of
Warrant Shares to be applied to such exercise. The number of Warrant Shares to
be delivered upon exercise of this Warrant pursuant to this Section 2(b) shall
equal the value of this Warrant (or the portion thereof being canceled) computed
as of the date of delivery of this Warrant to the Company using the following
formula:
X = Y(A-B)
------
A
Where:
X = the number of shares of Common Stock to be issued to
Holder under this Section 2(b);
Y = the number of Warrant Shares identified in the Notice of
Exercise as being applied to the subject exercise;
A = the Current Market Price on such date; and
B = the Exercise Price
For purposes of this Section 2(b) and Section 6, the "Current Market Price" per
--------------------
share of Common Stock on any date shall mean the average closing price of the
last three trading days with respect to securities listed on the principal
national securities exchange on which such security is listed or admitted to
trading or, if such security is not listed or admitted to trading on any
national securities exchange, the average closing price of such security on the
three (3) consecutive trading days immediately preceding such date in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System or such other system then in use or,
if such security, is not quoted by any such organization, the three day average
closing price of such security as of the three (3) consecutive trading days
immediately preceding such date furnished by a New York Stock Exchange member
firm selected by the Company, or if such security is not quoted by any such
organization and no such New York Stock Exchange member firm is able to provide
such prices, such price as is determined by the Board of Directors in good
faith.
The Company acknowledges and agrees that this Warrant was issued on the Issuance
Date. Consequently, the Company acknowledges and agrees that, if the Holder
conducts a cashless exercise pursuant to this Section 2(b), the period during
which the Holder held this Warrant may, for purposes of Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Securities Act"), be "tacked"
--------------
to the period during which the Holder holds the Warrant Shares received upon
such cashless exercise.
2
Notwithstanding the foregoing, except in connection with a transaction
described in the proviso in the first sentence of this Section 2(b), the Holder
may conduct a cashless exercise pursuant to this Section 2(b) only after the
first anniversary of the Issuance Date.
(c) Effect of Exercise. Upon receipt by the Company of this Warrant
---------------------
and a notice of Exercise, together with proper payment of the Exercise Price, as
provided in this Section 2, the Company agrees that such Warrant Shares shall be
deemed to be issued to the Holder as the record holder of such Warrant Shares as
of the close of business on the date on which this Warrant has been surrendered
and payment has been made for such Warrant Shares in accordance with this
Warrant and the Holder shall be deemed to be the holder of record of the Warrant
Shares, notwithstanding that the stock transfer books of the Company shall then
be closed or that certificates representing such Warrant Shares shall not then
be actually delivered to the Holder. A stock certificate or certificates for the
Warrant Shares specified in the Notice of Exercise shall be delivered to the
Holder as promptly as practicable, and in any event within seven (7) business
days, thereafter. The stock certificate(s) so delivered shall be in any such
denominations as may be reasonably specified by the Holder in the Notice of
Exercise. If this Warrant should be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and deliver within
seven (7) business days a new Warrant evidencing the right of the Holder to
purchase the balance of the Warrant Shares subject to purchase hereunder.
3. Registration of Warrants; Transfer of Warrants. Any Warrants issued
-----------------------------------------------
upon the transfer or exercise in part of this Warrant shall be numbered and
shall be registered in a Warrant Register as they are issued. The Company shall
be entitled to treat the registered holder of any Warrant on the Warrant
Register as the owner in fact thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Warrant on the
part of any other person, and shall not be liable for any registration or
transfer of Warrants which are registered or to be registered in the name of a
fiduciary or the nominee of a fiduciary unless made with the actual knowledge
that a fiduciary or nominee is committing a breach of trust in requesting such
registration or transfer, or with the knowledge of such facts that its
participation therein amounts to bad faith. This Warrant shall be transferable
only on the books of the Company upon delivery thereof duly endorsed by the
Holder or by its duly authorized attorney or representative, or accompanied by
proper evidence of succession, assignment, or authority to transfer. In all
cases of transfer by an attorney, executor, administrator, guardian, or other
legal representative, duly authenticated evidence of his or its authority shall
be produced. Upon any registration of transfer, the Company shall deliver a new
Warrant or Warrants to the person entitled thereto. This Warrant may be
exchanged, at the option of the Holder thereof, for another Warrant, or other
Warrants of different denominations, of like tenor and representing in the
aggregate the right to purchase a like number of Warrant Shares, upon surrender
to the Company or its duly authorized agent.
4. Restrictions on Transfer. (a) The Holder, as of the date of
---------------------------
issuance hereof, represents to the Company that such Holder is acquiring the
Warrants for its own account for investment purposes and not with a view to the
distribution thereof or of the Warrant Shares.
3
Notwithstanding any provisions contained in this Warrant to the contrary, this
Warrant and the related Warrant Shares shall not be transferable except pursuant
to the proviso contained in the following sentence or upon the conditions
specified in this Section 4, which conditions are intended, among other things,
to insure compliance with the provisions of the Securities Act and applicable
state law in respect of the transfer of this Warrant or such Warrant Shares. The
Holder by acceptance of this Warrant agrees that the Holder will not transfer
this Warrant or the related Warrant Shares prior to delivery to the Company of
on opinion of the Holder's counsel or until registration of such Warrant Shares
under the Securities Act has become effective or after a sale of such Warrant or
Warrant Shares has been consummated pursuant to Rule 144 or Rule 144A under the
Securities Act; provided, however, that the Holder may freely transfer this
Warrant or such Warrant Shares (without delivery to the Company of an opinion of
Counsel) (i) to one of its nominees, affiliates or a nominee thereof, (ii) to a
pension or profit-sharing fund established and maintained for its employees or
for the employees of any affiliate, (iii) from a. nominee to any of the
aforementioned persons as beneficial owner of this Warrant or such Warrant
Shares, or (iv) to a qualified institutional buyer, or accredited investor, so
long as such transfer is effected in compliance with Rule 144A under the
Securities Act; provided, in each case, that such transferee agrees to be bound
by the transfer restrictions set forth herein.
Holder shall be entitled to transfer this Warrant and/or such Warrant
Shares in accordance with the intended method of disposition specified in the
notice to the Company.
(c) Each stock certificate representing Warrant Shares issued upon
exercise or exchange of this Warrant shall bear the following legend unless the
opinion of counsel referred to in Section 4(b) states such legend is not
required:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY NOT
BE TRANSFERRED EXCEPT UPON DELIVERY TO THE CORPORATION OF AN OPINION OF
COUNSEL SATISFACTORY IN FORM AND SUBSTANCE TO IT THAT SUCH TRANSFER WILL
NOT VIOLATE THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS."
5. Reservation of Shares. The Company shall at all times during
------------------------
the Exercise Period reserve and keep available out of its authorized and
unissued Common Stock, solely for the purpose of providing for the exercise of
the rights to purchase all Warrant Shares granted pursuant to the Warrants, such
number of shares of Common Stock as shall, from time to time, be sufficient
therefor. The Company covenants that all shares of Common Stock issuable upon
exercise of this Warrant, upon receipt by the Company of the full Exercise Price
therefor, and all shares of Common Stock issuable upon conversion of this
Warrant, shall be validly issued, fully paid, non-assessable, and free of
preemptive rights.
4
6. Adjustments. The number of shares of Common Stock issuable upon
------------
exercise of the Warrants shall be adjusted from time to time as follows:
(a) (i) In the event that the Company shall (A) pay a dividend
or make a distribution, in shares of Common Stock, on any class of capital stock
of the Company or any subsidiary which is not directly or indirectly wholly
owned by the Company, (B) split or subdivide its outstanding Common Stuck into a
greater number of shares. (C) combine its outstanding Common Stock into a
smaller number of shares, then in each such case the number of shares issuable
upon exercise of this Warrant shall be adjusted so that the Holder of a Warrant
thereafter surrendered for exercise shall be entitled to receive the number of
shares of Common Stock that such Holder would have owned or have been entitled
to receive after the occurrence of any of the events described above had such
Warrant been exercised immediately prior to the occurrence of such event. An
adjustment made pursuant to this Section 6(a)(i) shall become effective
immediately after the close of business on the record date in the case of a
dividend or distribution (except as provided in Section 6(e) below) and shall
become effective immediately after the close of business on the effective date
in the case of such subdivision, split or combination, as the case may be.
(ii) No adjustment in the Exercise Price shall be required
unless the adjustment would require an increase or decrease of at least 1% in
the Exercise Price then in effect; provided, however, that any adjustments that
by reason of this Section 6(a) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 6{a) shall be made to the nearest cent or nearest 1/100th of
a share.
(iii) In the event that, at any time as a result of an
adjustment made pursuant to Sections 6(a)(i) and 6(a)(ii) above, the Holder of
any Warrant thereafter surrendered for exercise shall become entitled to receive
any shares of the Company Other than shares of the Common Stock, thereafter the
number of such other shares so receivable upon exercise of any such Warrant
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Common
Stock contained in Sections 6(a)(i) and 6(a)(ii) above, and the other provisions
of this Section 6(a) with respect to the Common Stock shall apply on like terms
to any such other shares.
(b) In case of any reclassification of the Common Stock (other
than in a transaction to which Section 6(a)(i) applies), any consolidation of
the Company with, or merger of the Company into, any other entity, any merger of
another entity into the Company (other than a merger that does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock of the Company), any sale or transfer of all or substantially all
of the assets of the Company or any compulsory share exchange which does not
result in the cashless exercise or cancellation of this Warrant pursuant to
Section 2(b), pursuant to which share exchange the Common Stock is converted
into other securities, cash or other
5
property, then lawful provision shall be made as part of the terms of such
transaction whereby the Holder of a Warrant then outstanding shall have the
right thereafter, during the period such Warrant shall be exercisable, to
exercise such Warrant only for the kind and amount of securities, cash and other
property receivable upon the reclassification, consolidation, merger, sale,
transfer or share exchange by a holder of the number of shares of Common Stock
of the Company into which a Warrant might have been able to exercise for
immediately prior to the reclassification, consolidation, merger, sale, transfer
or share exchange assuming that such holder of Common Stock failed to exercise
rights of election, if any, as to the kind or amount of securities, cash or
other property receivable upon consummation of such transaction subject to
adjustment as provided in Section 6(a) above following the date of consummation
of such transaction. The Company shall not effect any such reclassification,
consolidation, merger, sale, transfer, share exchange or other disposition
unless prior to or simultaneously with the consummation thereof the successor
corporation (if other than the Company) resulting from such consolidation or
merger, or the corporation purchasing, or otherwise acquiring such assets or
other appropriate corporation or entity shall assume, by written instrument
executed and delivered to the Holder, the obligation to deliver to the Holder
upon its exercise of the Warrant such shares of stock, securities or assets as,
in accordance with the foregoing provisions, the Holder may be entitled to
purchase and the other obligations under this Warrant. The provisions of this
Section 6(b) shall similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
(c) If:
(i) the Company shall take any action which would require
an adjustment pursuant to Section 6(a); or
(ii) the Company shall authorize the granting to the holders
of its Common Stock generally of rights, warrants or options
to subscribe for or purchase any shares of any class or any
other rights, warrants or options; or
(iii) there shall be any reclassification or change of the
Common Stock (other than a subdivision or combination of its
outstanding Common Stock or a change in par value) or any
consolidation, merger or statutory share exchange to which
the Company is a party and for which approval of any
stockholders of the Company is required, or the sale or
transfer of all or substantially all of the assets of the
Company; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
6
then, the Company shall cause to be filed with the transfer agent for the
Warrants and shall cause to be mailed to each Holder at such Holder's address as
shown on the books of the transfer agent for the Warrants, as promptly as
possible, but at least 30 days prior to the applicable date hereinafter
specified, a notice stating (A) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of rights, warrants or
options, or, if a record is not to be taken, the date as of which the holders of
Common Stock of record to be entitled to such dividend, distribution or rights,
warrants or options are to be determined, or (B) the date on which such
reclassification, change, consolidation, merger, statutory share exchange, sale,
transfer, dissolution, liquidation or winding-up is expected to become effective
or occur, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such reclassification, change,
consolidation, merger, statutory share exchange, sale, transfer, dissolution,
liquidation or winding up. Failure to give such notice or any defect therein
shall not affect the legality or validity of the proceedings described in this
Section 6(c).
(d) Whenever an adjustment is made as herein provided, the Company
shall promptly file with the transfer agent for the Warrants a certificate of an
officer of the Company setting forth the adjustment and setting forth a brief
statement of the facts requiring such adjustment and a computation thereof. The
Company shall promptly cause a notice of such adjustment to be mailed to each
Holder.
(e) In any case in which Section 6(a) provides that an adjustment
shall become effective immediately after a record date for an event and the date
fixed for such adjustment pursuant to Section 6(a) occurs after such record date
but before the occurrence of such event, the Company may defer until the actual
occurrence of such event (i) issuing to the Holder of any Warrants exercised
after such record date and before the occurrence of such event the additional
shares of Common Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable upon such
exercise before giving effect to such adjustment, and (ii) paying to such holder
any amount in cash in lieu of any fraction pursuant to Section 6(g).
(f) Upon each adjustment of the Exercise Price, this Warrant shall
thereafter evidence the right to purchase, at the adjusted Exercise Price, that
number of shares (calculated to the nearest thousandth) obtained by dividing (i)
the product obtained by multiplying the number of shares purchasable upon
exercise of this Warrant prior to adjustment of the number of shares by the
Exercise Price in effect prior to adjustment of the Exercise Price, by (ii) the
Exercise Price in effect after such adjustment of the Exercise Price.
(g) The Company shall not be required to issue fractions of shares of
Common Stock or other capital stock of the Company upon the exercise of this
Warrant. If any fraction of a share would be issuable on the exercise of this
Warrant (or specified portions thereof), the Company shall purchase such
fraction for an amount in cash equal to the same fraction of the Current Market
Price of such share of Common Stock on the date of exercise of this Warrant.
7
(h) In case the Company shall take any action affecting the Common
Stock, other than actions described in this Section 6, which in the opinion of
the Board of Directors would materially adversely affect the exercise right of
the Holder, the Exercise Price may be adjusted, to the extent permitted by law,
in such manner, if any, and at such time, as the Board of Directors may
determine to be equitable in the circumstances; provided, however, that in no
event shall the Board of Directors be required to take any such action.
7. Transfer Taxes. The issuance of any shares or other securities
---------------
upon the exercise of this Warrant, and the delivery of certificates or other
instruments representing such shares or other securities, shall be made without
charge to the Holder for any tax or other charge in respect of such issuance.
The Company shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of any certificate
in a name other than that of the Holder and the Company shall not be required to
issue or deliver any such certificate unless and until the person or persons
requesting the issue thereof shall have paid to the Company the amount of such
tax or shall have established to the satisfaction of the Company that such tax
has been paid.
8. Loss or Mutilation of Warrant. Upon receipt of evidence satisfactory
--------------------------------
to the Company of the loss, theft, destruction, or mutilation of any Warrant
(and upon surrender of any Warrant if mutilated), and upon reimbursement of the
Company's reasonable incidental expenses, the Company shall execute and deliver
to the Holder thereof a new Warrant of like date, tenor, and denomination.
9. No Rights as a Stockholder. The Holder of any Warrant shall not
-------------------------------
have, solely on account of such status, any rights of a stockholder of the
Company, either at law or in equity, or to any notice of meetings of
stockholders or of any other proceedings of the Company, except as provided in
this Warrant.
10. Governing Law. This Warrant shall be construed in accordance with
--------------
the laws of the State of Arizona applicable to contracts made and performed
within such State, without regard to principles of conflicts of law.
11. Beneficial Ownership. The Company shall not effect the exercise
----------------------
of this Warrant by any Holder, and no person who is a holder of this Warrant
shall have the right to exercise this Warrant, to the extent that after giving
effect to such exercise, such person (together with such person's affiliates)
would beneficially own in excess of 10% of the shares of the Common Stock
outstanding immediately after giving effect to such exercise, for purposes of
the foregoing sentence, the aggregate number of shares of Common Stock
beneficially owned by such person and its affiliates shall include, without
limitation, the number of shares of Common Stock issuable upon, exercise of this
Warrant with respect to which the determination of such sentence is being made,
but shall exclude shares of Common Stock which would be issuable upon (a)
exercise of the remaining, unexercised portion of this Warrant beneficially
owned by such person and its affiliates, and (b) exercise or conversion of the
unexercised or
8
unconverted portion of any other securities of the Company beneficially owned by
such person and its affiliates (including, without limitation, any debentures,
convertible notes or convertible preferred stock or warrants) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein. Except as set forth in the preceding sentence, for purposes of this
Section 11, beneficial ownership shall be calculated in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this
Warrant, in determining the number of outstanding shares of Common Stock, a
Holder may rely on the number of outstanding shares of Common Stock as reflected
in (i) the Company's most recent Form 1O-Q, Form 10-K or other public filing
with the Securities and Exchange Commission, as the case may be, (ii) a more
recent public announcement by the Company or (iii) any other notice by the
Company or its transfer agent setting forth the number of shares of Common Stock
outstanding. For any reason at any time, upon the written or oral request of the
Holder of this Warrant, the Company shall within two business days confirm
orally and in writing to the Holder of this Warrant the number of shares of
Common Stock then outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the conversion or
exercise of securities of the Company by the Holder of this Warrant and its
affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. In effecting the exercise of this Warrant, the
Company shall be entitled to rely on a representation by the Holder of this
Warrant as to the number of shares that it beneficially owns for purposes of the
above 10% limitation calculation.
9
Dated: December [_], 2004
NUTRACEA,
a California Corporation
By: /s/ Xxxxxxxx XxXxxx
---------------------------
Signature
President
[Signature Page to Warrant]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, hereby sells,
-------------------------------------------
assigns, and transfers unto a Warrant to purchase shares of
----------- ------------
Common Stock, par value $[0.001] per share, of NUTRACEA. (the "Company"),
together with all right, title, and interest therein, and docs hereby
irrevocably constitute and appoint
----------------------------------------------
attorney to transfer such Warrant on the books of the Company, with full power
of substitution.
Dated:
---------------------------
By:
------------------------------
Signature
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.
To: NutraCea.
---------
1261 Hawks' Flight Court
------------------------
Xx Xxxxxx Xxxxx, XX 00000
-------------------------
Attention: Chief Executive Officer
NOTICE OF EXERCISE
The undersigned hereby exercises his or its rights to purchase Warrant
-----------
Shares covered by the within Warrant and tenders payment herewith in the amount
of $ by [tendering cash or delivering a certified check or bank cashier's
--------
check, payable to the order of the Company] [surrendering shares of Common
----
Stock received upon exercise of the attached Warrant, which shares have a
Current Market Price equal to such payment] in accordance with the terms
thereof, and requests that certificates for such securities be issued in the
name of, and delivered to:
-------------------------------
-------------------------------
-------------------------------
(Print Name, Address and Social Security or
Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated:
------------------------
By:
---------------------------
Print Name
------------------------------
Signature
Address:
------------------------------------
------------------------------------
------------------------------------
