[*] - Designates portions of this document that
have been omitted pursuant to a request for confidential treatment
filed separately with the commission.
ASSET PURCHASE
AGREEMENT
This Asset Purchase Agreement
(this "Agreement"), is dated as of December 1, 2008, is by
and between Farmers' Rice Cooperative, a cooperative association
organized under the California Food and Agricultural Code
("FRC" or "Seller"), with principal offices at 2525
Natomas Park Drive, Sacramento, California 95851, and NutraCea, a
California corporation with principal offices at 5090 40
th North Street, Suite 400, Phoenix, Arizona 85018
("Buyer"). Seller and Buyer agree as follows:
1.
Sale and Purchase.
1.1
Agreement . Seller agrees to sell, convey and transfer to
Buyer and Buyer agrees to purchase and assume from Seller certain
assets of Seller's business identified in Section 1.2 (the
"Assets"), for the Purchase Price (as defined below) and on the
terms and conditions set forth herein. The sale of the Assets is
entire and inseverable, and Buyer shall have no obligation to
purchase any of the Assets unless all Assets shall be
simultaneously sold.
1.2
The Assets . The Assets to be sold and purchased under this
Agreement are as follows:
(a) All
rights and interest in and to all of the accounts (the "Customer
Accounts") of the customers (the "Customers") of Seller
identified in that certain Stabilized Rice Bran Processing, Sales
and Marketing Agreement, dated September 1, 2005 (the "Prior
Marketing Agreement"), between the Seller and The RiceX Company
(as predecessor-in-interest to the Buyer) and listed on Schedule
A attached hereto; and
(b) All
rights in and title to the "Fiberice" trademark, and any associated
trade names, logos, common law trademarks and service mark
registrations and applications registrations and applications
therefore and all goodwill associated therewith throughout the
world identified on Schedule B attached hereto
(collectively, the "Trademarks").
The Customer
Accounts and the Trademarks are referred to collectively as the
"Assets".
For avoidance of doubt, all rights and claims of
Seller to collect accounts receivable from Customers for shipments
completed by Seller to such Customers prior to the Closing (as
defined below) and all obligations and liabilities of Seller with
regard to the Customer Accounts and Trademarks arising with regard
to any shipments, acts, omissions, or obligations for the period
prior to the Closing ("Retained Liabilities") are not part
of the sale and purchase contemplated hereunder, are excluded from
the Assets and assumed obligations and shall remain the property
and liabilities of Seller after the Closing.
1.3
Restated Stabilized Rice Bran Agreement . At the Closing,
the parties hereto further agree to enter into a Restated and
Amended Stabilized Rice Bran Processing, Sales and Marketing
Agreement in the form attached hereto as Exhibit B (the
"Restated Marketing Agreement"), to extend and amend the
Prior Marketing Agreement.
2.
Purchase Price and Payment .
2.1
Purchase Price . In consideration of the transfer of the
Assets and the covenant not to compete described in Section 7.2,
Buyer shall pay to Seller the aggregate purchase price of Three
Million One Hundred Thousand Dollars ($3,100,000) in cash (the
"Purchase Price").
2.2
Payment of Purchase Price . The Purchase Price shall be
delivered by Buyer to Seller as follows:
(a) At
the Closing, Buyer shall deliver to Seller One Million Dollars
($1,000,000) (the "Initial Payment") by wire transfer of
immediately available funds to the account specified by the
Seller.
(b) The
balance of the Purchase Price (i.e. $2,100,000) shall be payable in
twelve (12) equal quarterly installments of One Hundred and
Seventy-Five Thousand Dollars ($175,000) each, commencing on March
1, 2009 and continuing on each following June 1, September 1,
December 1, and March 1 thereafter until paid in full, such that
the entire Purchase Price shall be paid in full by December 1,
2011. Such payments shall be made by wire transfer of good and
valuable funds to the account specified by Seller.
2.3
Security Interest . As security for the prompt, complete and
indefeasible payment when due (whether on the payment dates or
otherwise) of the Purchase Price, Buyer grants to Seller a security
interest in the following personal property of Buyer (collectively,
the "Collateral"): (a) the Assets, and (b) to the extent not
otherwise included, all proceeds (as defined in the Uniform
Commercial Code as the same is, from time to time, in effect in the
State of California (the "UCC")) of the foregoing.
2.4
Events of Default . The occurrence of any one or more of the
following events shall be an "Event of Default" " with
respect to Buyer or Seller, as applicable:
(a) Buyer
fails to pay Seller any portion or installments of the Purchase
Price and such failure continues for more than ten (10) days after
written notice of default from Seller to Buyer specifying the
amounts past due in sufficient detail to allow Buyer the reasonable
opportunity to cure within such ten (10) day period;
(b) Buyer
or Seller breaches or defaults in the performance of any covenant
or obligation under this Agreement or the Restated Marketing
Agreement, and such breach or default continues for more than
thirty (30) days after written notice of such default from Seller
to Buyer, or Buyer to Seller, as applicable, specifying the breach
or default in sufficient detail to allow Buyer or Seller, as
applicable, the reasonable opportunity to cure within such thirty
(30) day period; or
(c) Buyer
or Seller (A) (i) shall file a voluntary petition in bankruptcy; or
(ii) shall seek or consent to or acquiesce in the appointment of
any trustee, receiver, or liquidator of Buyer or Seller, as
applicable, or of all or substantially all of the assets or
property of Buyer or Seller, as applicable; or (iii) ninety (90)
days shall have expired after the commencement of an involuntary
action against Buyer or Seller, as applicable, seeking
reorganization, liquidation, dissolution or similar relief in
bankruptcy without such action being dismissed; or (iv) Buyer or
Seller, as applicable, shall file any answer admitting or not
contesting the material allegations of a petition filed against
Buyer or Seller, as applicable, in any such proceedings; or (v) the
court in which such proceedings are pending shall enter a decree or
order granting the relief sought in any such
proceedings.
2.5
Remedies Upon an Event of Default.
2.5.1. Event of
Default of Buyer .
(a)
General . Upon the occurrence and during the continuance of
any one or more Events of Default of Buyer, Seller may, at its
option, accelerate and demand payment of all or any part of the
Purchase Price and declare it to be immediately due and payable.
Seller may exercise all rights and remedies with respect to the
Collateral available to it under the UCC and other applicable law,
including the right to release, hold, sell, lease, liquidate,
collect, realize upon, or otherwise dispose of all or any part of
the Collateral and the right to occupy, utilize, process and
commingle the Collateral. All Seller's rights and remedies shall be
cumulative and not exclusive.
(b)
Collection; Foreclosure . Upon the occurrence and during the
continuance of any Event of Default of Buyer, Seller may, at any
time or from time to time, apply, collect, liquidate, sell in one
or more sales, lease or otherwise dispose of, any or all of the
Collateral, in its then condition or following any commercially
reasonable preparation or processing, in such order as Seller may
elect. Any such sale may be made either at public or private sale
at its place of business or elsewhere. Buyer agrees that any such
public or private sale may occur upon ten (10) calendar days' prior
written notice to Buyer. The proceeds of any sale, disposition or
other realization upon all or any part of the Collateral shall be
applied by Seller in the following order of priorities:
First,
to Seller in an amount sufficient to pay in full Seller's
reasonable attorneys' fees and expenses;
Second, to Seller in an amount equal to
the then unpaid amount of the Purchase Price; and
Finally, to Buyer or its
representatives.
Seller shall be deemed to have acted reasonably
in the custody, preservation and disposition of any of the
Collateral if it complies with the obligations of a secured party
under the UCC.
(c)
Termination of Covenant Not to Compete . Upon the occurrence
of any Event of Default of Buyer, the covenant not to compete set
forth in Section 7.2 shall immediately terminate and be suspended
until Seller shall have received the full amount of the Purchase
Price, after which it shall again apply as set forth in Section
7.2; provided that if Buyer cures all existing Events of Default
later than six months after the first event giving rise to any
existing Event of Default, Buyer's covenant not to compete shall be
reinstated and once again take effect only if Buyer also reimburses
Seller for all costs and expenditures expended in good faith in an
effort to obtain an alternate source of stabilized rice bran for
distribution to the Customers.
(d)
No Waiver . Seller shall be under no obligation to marshal
any of the Collateral for the benefit of Buyer or any other person,
and Buyer expressly waives all rights, if any, to require Seller to
marshal any Collateral.
(e)
Cumulative Remedies . The rights, powers and remedies of
Seller hereunder shall be in addition to all rights, powers and
remedies given by statute or rule of law and are cumulative. The
exercise of any one or more of the rights, powers and remedies
provided herein shall not be construed as a waiver of or election
of remedies with respect to any other rights, powers and remedies
of Seller.
2.5.2. Event of
Default of Seller .
(a)
Offset Against or Satisfaction of Purchase Price . In
addition to any other rights at law or in equity, upon the
occurrence of any one or more Events of Default of Seller, Buyer's
payment obligations under Section 2.2(b) shall be reduced by the
greater of (i) Buyer's actual damages resulting from such Event of
Default or (ii) if Seller's breach consists in whole or in part of
a breach of the covenant not to compete, two times the amount of
Seller's net profits earned in violation of the covenant not to
compete; provided, if Seller breaches this Agreement a third time
after two prior breaches for which Buyer has given notice of
default and such third breach is not cured within the applicable
cure period and a third Event of Default occurs, the Purchase Price
shall be deemed satisfied and paid in full, and all obligations of
Seller under this Agreement shall continue in full force and
effect.
(b)
Cumulative Remedies . The rights, powers and remedies of
Buyer hereunder shall be in addition to all rights, powers and
remedies given by statute or rule of law and are cumulative. The
exercise of any one or more of the rights, powers and remedies
provided herein shall not be construed as a waiver of or election
of remedies with respect to any other rights, powers and remedies
of Buyer.
2.6
Assumed Liabilities . At the Closing, Buyer assumes and
agrees to discharge all obligations under the Customer Accounts
arising with regard to any shipments, acts, omissions, or
obligations for the period on and after the Closing (the
"Assumed Liabilities").
2.7
Allocation of Purchase Price . The Purchase Price shall be
allocated as provided on Schedule C . Buyer shall provide
Seller with an allocation of the Purchase Price among the Assets,
which shall be determined in accordance with Treasury Regulation
Section 1.1060-1T and which, absent manifest error, shall apply for
purposes of completing IRS Form 8594 (as provided for below).
Except in the event of a subsequent adjustment to the Purchase
Price which adjustment shall be reflected in the allocation
hereunder in a manner consistent with the Treasury Regulations,
neither Seller nor Buyer shall file any return or take a position
with any taxing authority that is inconsistent with any allocation
pursuant hereto. "Treasury Regulations" means the Treasury
Regulations (including Temporary Regulations) promulgated by the
United States Department of Treasury with respect to the Internal
Revenue Code of 1986, as amended to the date hereof (the
"Code"), or other federal tax statutes.
2.8
Payments Received After Closing; Pending Shipments . In the
event that, after the Closing, (a) Buyer shall receive any payment
of any amount from a Customer that is not an Asset acquired
hereunder or (b) Seller shall receive any payment from a Customer
that is included in the Assets or shall hold a deposit for
shipments not completed prior to the Closing, the party receiving
such payment (or deposit amount) shall promptly deliver it to
Seller (in the case of any such amounts received by Buyer) or Buyer
(in the case of any such amounts received by Seller), endorsed
where necessary, without recourse in favor of such other party,
provided, however, that Seller's obligations under this Section 2.8
shall automatically cease and terminate upon an Event of Default.
In addition, if all or any portion of any Customer orders are
pending as of the Closing, then for the product shipments that are
not completed as of the Closing Buyer shall reimburse Seller for
Seller's third-party expenses (excluding items of salary and other
overhead) with respect to such pending shipments and Buyer shall be
entitled to all Customer payments for such shipments.
3.
Closing . The closing of the purchase and sale contemplated
by this Agreement and transfer of possession of the Assets shall be
given to Buyer (the "Closing") at the offices of Weintraub
Genshlea Chediak Law Corporation, 400 Capitol Mall, 11
th Floor, Sacramento, California, on the date
hereof (the "Closing Date"). At the Closing:
3.1
Seller . At the Closing, Seller shall deliver to
Buyer:
(a) All
documents and instruments necessary to carry out the terms and
provisions of this Agreement and to effectuate the purpose of the
transactions, including, without limitation, properly executed
assignments of Seller's rights to the Customer Accounts, a list of
the following information related to the Customer Accounts: names,
titles, addresses, e-mail addresses, phone numbers, and complete
account history for each such client and customer, conveyances of
all of its right, title and interest in and to the Trademarks,
including without limitation, the Assignment of Trademark
instrument attached hereto as Exhibit A , and the duly
executed Restated Marketing Agreement; and
(b) Resolutions
of the Board of Directors of Seller authorizing the execution and
delivery of this Agreement and the performance of the transactions
contemplated hereby, certified by its Secretary.
3.2
Buyer . Buyer shall deliver to Seller the Initial Payment by
wire transfer to an account specified by Seller.
3.3
Other Documents . Each of Seller and Buyer shall execute and
deliver each of the agreements and documents required to be
executed and delivered by such party pursuant to Section
8.
3.4
Form and Content . Unless otherwise provided herein, all
such instruments so delivered shall be dated the Closing Date and
be satisfactory as to form and content to each party and their
respective counsel; provided however that neither party shall
disapprove any instrument that gives that party the substance of
what the party is entitled to receiv
