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MEMBERSHIP INTEREST PURCHASE AGREEMENT

LLC Membership Agreement

MEMBERSHIP INTEREST PURCHASE AGREEMENT | Document Parties: NUTRACEA | AF Bran Holdings LLC | AF Bran Holdings-NL LLC | NUTRA SA, LLC You are currently viewing:
This LLC Membership Agreement involves

NUTRACEA | AF Bran Holdings LLC | AF Bran Holdings-NL LLC | NUTRA SA, LLC

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Title: MEMBERSHIP INTEREST PURCHASE AGREEMENT
Governing Law: New York     Date: 1/5/2011
Industry: Food Processing     Law Firm: Kirkland Ellis     Sector: Consumer/Non-Cyclical

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Exhibit 10.1

 

[*] Designates portions of this document that have been omitted pursuant to a request for confidential treatment filed separately with the Commission.

 

NUTRA SA, LLC

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

This Membership Interest Purchase Agreement (“ Agreement ”), is made as of December 29, 2010, by and among NutraCea, a California corporation (“ NutraCea ”), Nutra SA, LLC, a Delaware limited liability company (the “ Company ”), Industria Riograndese de Oleos Vegetais Ltda, a limited liability company organized under the laws of the Federative Republic of Brazil (“ Irgovel ”), and AF Bran Holdings-NL LLC and AF Bran Holdings LLC, in each case, a Delaware limited liability company (collectively, “ Investor ”).  The Parties agree as follows.

 

RECITALS

 

A.             LLC Agreement .  Effective as of the Initial Closing Date (as defined below), Investor shall have entered into the Amended and Restated Limited Liability Company Agreement for the Company in the form attached hereto as Exhibit B (the “ LLC Agreement ”).  The LLC Agreement sets forth the rights, preferences and privileges of the holders of the Company’s Units.

 

B.             Initial Unit Sales . On the Initial Closing Date and on the terms and conditions of this Agreement, (i) NutraCea shall sell to Investor Two Million (2,000,000) Units held by NutraCea, for a total purchase price of Four Million Dollars ($4,000,000), (ii) NutraCea shall sell to Investor Six Hundred Twenty Five Thousand (625,000) Units held by NutraCea, for a total purchase price of One Million Two Hundred Fifty Thousand Dollars ($1,250,000), (iii) Investor shall purchase from the Company One Million Two Hundred Thirty-Seven Thousand Five Hundred (1,237,500) Units, for a total purchase price of Two Million Four Hundred Seventy-Five Thousand Dollars ($2,475,000) and (iv) NutraCea shall purchase from the Company Six Hundred Twenty Five Thousand (625,000) Units, for a total purchase price of One Million Two Hundred Fifty Thousand Dollars ($1,250,000), such that immediately following the consummation of the foregoing transactions, the ownership of the Company shall be as follows:

 

Member

 

Number of Units

 

Percentage Interest

 

NutraCea

 

7,000,000 Units

 

 

64.4

%

Investor

 

3,862,500 Units

 

 

35.6

%

Total

 

10,862,500 Units

 

 

100.00

%

 

C.             Subsequent Unit Sales .  Following the Initial Closing, NutraCea shall sell additional Units to Investor, and each of NutraCea and Investor shall purchase additional Units from the Company, on the terms and subject to the conditions set forth in this Agreement.

 

D.             Denomination of Currency .  Unless specifically provided otherwise herein, all references herein to “dollars” shall refer to currency of the United States of America.

 

E.              Bankruptcy Approval .  NutraCea is the debtor and debtor-in-possession in Chapter 11 Case No. 2:09-bk-28817-CGC (the “ Bankruptcy Case ”), which is pending in the United States Bankruptcy Court for the District of Arizona (the “ Bankruptcy Court ”).  The obligations of the Company, Irgovel and NutraCea hereunder are subject to approval by the Bankruptcy Court in the Bankruptcy Case pursuant to 11 U.S.C. Section 105 and Article XII of the Plan, as reflected in the Order Granting Motion To Approve Sale of Minority Interest in Nutra S.A. and Make Findings and Conclusions that the Sale Satisfies All Applicable Plan Requirements entered by the Bankruptcy Court on December 15, 2010, the effectiveness of which has not been stayed or vacated by any court of competent jurisdiction.

 

 

 


 

 

AGREEMENT

 

SECTION 1.           DEFINED TERMS .  Certain terms used in this Agreement are defined in the Schedule of Defined Terms attached hereto as Schedule A (the “ Schedule of Defined Terms ”).  Unless otherwise expressly provided or unless the context otherwise requires, such defined terms shall have the meaning specified in the Schedule of Defined Terms when used in this Agreement.

 

SECTION 2.           PURCHASE AND SALE OF UNITS .

 

2.1        Initial Sale and Issuance of Units .  The following Units shall be sold on the Initial Closing Date (as defined below) upon the terms and subject to the conditions set forth in this Agreement:

 

(a)            Initial NutraCea Sale to Investor .  Investor shall purchase from NutraCea, and NutraCea shall sell to Investor, Two Million (2,000,000) Units held by NutraCea for an aggregate purchase price of Four Million Dollars ($4,000,000).

 

(b)            Second NutraCea Sale to Investor . Investor shall purchase from NutraCea, and NutraCea shall sell to Investor, Six Hundred Twenty Five Thousand (625,000) Units held by NutraCea for an aggregate purchase price of One Million Two Hundred Fifty Thousand Dollars ($1,250,000).

 

(c)            Contributory Purchases by Investor .  Investor shall purchase, and the Company shall sell and issue to Investor, One Million Two Hundred Thirty-Seven Thousand Five Hundred (1,237,500) Units for an aggregate purchase price for Investor of Two Million Four Hundred Seventy-Five Thousand Dollars ($2,475,000).

 

(d)            Contributory Purchases by NutraCea .  NutraCea shall purchase, and the Company shall sell and issue to NutraCea, Six Hundred Twenty Five Thousand (625,000) Units for an aggregate purchase price for NutraCea of One Million Two Hundred Fifty Thousand Dollars ($1,250,000).

 

2.2        Subsequent Sales and Issuances of Units .

 

(a)            Project Funding .  Subject to the terms and conditions of this Agreement, from time to time between the Initial Closing Date and the second anniversary of the Initial Closing Date (the “ Commitment Period ”), the Company may schedule one or more Subsequent Closings in accordance with Section 2.4(b) in order to obtain the equity proceeds necessary at such time (“ Required Funds ”), when combined with the funds provided by the Brazilian Loan, to fund the Phase I Projects Budget attached hereto as Exhibit D (as such budget may be modified by the Company with the prior written approval of Investor and NutraCea); provided , however , that no Subsequent Closing may be held unless the Required Funds applicable to such Subsequent Closing equals or exceeds $250,000.  At each Subsequent Closing, Investor shall purchase from the Company, and the Company shall sell and issue to Investor, a number of Units equal to the Subsequent Closing Units, for a cash price equal to Two Dollars ($2.00) per Unit.  With respect to each Subsequent Closing, the term “ Subsequent Closing Units ” shall mean the number of Units equal to (x) the Required Funds applicable to such Subsequent Closing divided by (y) $2.00.  Notwithstanding anything to the contrary contained herein, in no event shall Investor be required to pay, individually or in the aggregate, in excess of $4,175,000, if a Performance Purchase is completed, or $6,175,000 if a Performance Purchase is not completed, to acquire Units pursuant to this Section 2.2(a) and Section 2.2(b) , and Investor shall have no liability to any Person in excess of such aggregate amount.

 

 

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(b)            Investor’s Shortfall Purchase of Units from NutraCea .  If at the end of the Commitment Period (i) the aggregate purchase price actually paid by Investor for Units acquired from the Company and NutraCea pursuant to (A) Section 2.1 and Section 2.2(a) is less than Thirteen Million Nine Hundred Thousand Dollars ($13,900,000), if the Performance Purchase is not completed, or (B) Section 2.1 , Section 2.2(a) and Section 2.2(c) is less than Twelve Million Nine Hundred Thousand Dollars ($12,900,000), if a Performance Purchase is completed (such shortfall, in either case as applicable, the “ Unfunded Commitment Amount ”) and (ii) NutraCea and Investor have not agreed on an alternative use of the Unfunded Commitment Amount, then on the fifteenth (15th) Business Day after the last day of the Commitment Period, Investor may, at Investor’s sole discretion, purchase from NutraCea, and, in such event, NutraCea shall sell to Investor, for a price per Unit equal to Two Dollars ($2.00), such number of Units calculated by dividing (x) 49% of the Unfunded Commitment Amount by (y) $2.00.

 

(c)            Satisfaction of Performance Conditions .  If the Irgovel EBIDTA for the six (6) Month period beginning on October 1, 2010 and ending on March 31, 2011 is at [*] (“ Performance Condition ”), then, subject to the terms and conditions of this Agreement, Investor shall purchase from NutraCea, and NutraCea shall sell to Investor, Five Hundred Thousand (500,000) Units held by NutraCea for an aggregate purchase price of One Million Dollars ($1,000,000) (“ Performance Purchase ”).

 

2.3        [Intentionally Deleted]

 

2.4        Closing s.  The purchase and sale of the Units hereunder shall take place at one or more closings (each of which is referred to in this Agreement as a “ Closing ”).

 

(a)            Initial Closing .  Subject to the satisfaction or waiver of the conditions set forth in Sections 3.1 , 3.2 and 3.3 , the initial closing (“ Initial Closing ”) shall take place at the offices of Kirkland & Ellis, LLP, 601 Lexington Avenue, New York, New York 10022-4611, at 10:00 a.m. California Time, on the later of (i) January 18, 2011, (ii) the fifteenth (15th) day following the satisfaction of the conditions set forth in the last sentence of Section 3.1(i) , (iii) the first (1st) Business Day following the satisfaction of the conditions set forth in Sections 3.1 , 3.2 and 3.3 , or (iv) at such other time and place as the Company and Investor mutually agree upon, whether orally or in writing (which date is designated as the “ Initial Closing Date ”).

 

 

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(b)            Subsequent Closings .  During the Commitment Period, the Company may from time to time schedule one or more additional Closings in order to effectuate the purchase and sale of Units pursuant to Section 2.2(a) (each, a “ Subsequent Closing ”).  The Company shall provide Investor with at least fifteen (15) Business Days’ prior written notice of each Subsequent Closing.  Such notice (each, a “ Subsequent Closing Notice ”) shall specify the proposed date of the Subsequent Closing, the amount of the Required Funds and Subsequent Closing Units applicable to such Closing, and wire transfer instructions for the relevant payments to be made at such Closing based on such amounts.  Subject to the satisfaction or waiver of the conditions set forth in Sections 3.3 , 3.4 and 3.5 , each Subsequent Closing shall take place on the date specified in the Subsequent Closing Notice (the actual date of each Subsequent Closing being referred to as, a “ Subsequent Closing Date ”).  Notwithstanding anything contained herein to the contrary, if the Company has not commenced the Phase I Projects within ninety (90) days after the Initial Closing Date, then promptly upon the written request of Investor, the Company shall (i) commence the Phase I Projects and (ii) schedule Subsequent Closings on dates, and in such amounts, selected by Investor based on the Required Funds.

 

(c)            Closing Deliveries .  Subject to the terms and conditions set forth herein, (i) Investor shall, at the Initial Closing and any Subsequent Closings, pay the relevant purchase price to the Company, and, at the Initial Closing and the Supplemental Closing, pay the relevant purchase price to NutraCea, in each case, for the Units being purchased by Investor from NutraCea and/or the Company at such Closing (as applicable), (ii) at the Initial Closing, NutraCea shall pay the relevant purchase price to the Company for the Units being purchased by NutraCea from the Company, and (iii) at each Closing, the Company, Investor and, as applicable, NutraCea shall deliver such documentation as is required hereunder or reasonably necessary to effectuate such transactions.  All payments of purchase price hereunder shall be made by wire transfer of immediately available funds.

 

(d)            Direct Payment .  NutraCea hereby directs Investor to wire the purchase price directly to the Company, for Units purchased by Investor from NutraCea pursuant to Section 2.1(b) .

 

(e)            Investor Allocation .  At each Closing, all Units purchased by Investor shall be allocated 87.7353% to AF Bran Holdings-NL LLC and 12.2647% AF Bran Holdings LLC.

 

(f)            Supplemental Closing .  Subject to the satisfaction or waiver of the conditions set forth in Sections 3.3 , 3.4 and 3.5 , the closing of any Performance Purchase or purchase pursuant to Section 2.2(b) (in each case, a “ Supplemental Closing ”) shall take place at the offices of Kirkland & Ellis, LLP, 601 Lexington Avenue, New York, New York 10022-4611, at 10:00 a.m. California Time, on April 15, 2011 in the case of the Performance Purchase and 15 business days after the end of the Commitment Period in the case of the purchase pursuant to Section 2.2(b), or at such other time and place as the Company and Investor mutually agree upon, whether orally or in writing (which date is designated as the “ Supplemental Closing Date ”).

 

 

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SECTION 3.            CONDITIONS TO CLOSINGS/TERMINATION .

 

3.1        Conditions to the Obligations of Investor at the Initial Closing .  The obligations of Investor in Section 2 with respect to the Initial Closing are subject to the fulfillment (or written waiver by Investor) on or before the Initial Closing of each of the following conditions:

 

(a)            Representations and Warranties of the Company .  The representations and warranties of the Company contained in Section 4 shall be true and correct as of the Initial Closing.

 

(b)            Representations and Warranties of NutraCea .  The representations and warranties of NutraCea contained in Section 6 shall be true and correct as of the Initial Closing.

 

(c)            Performance .  The Company and NutraCea shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by each of them on or before the Initial Closing Date.

 

(d)            Compliance Certificate .  The Chief Executive Officer of the Company shall have delivered to Investor a certificate stating, on behalf of the Company, that the conditions specified in Sections 3.1(a) and 3.1(b) have been satisfied.

 

(e)            Appointment of Management Committee Members .  W. John Short, Leo Gingras, Dale Belt, Juan Lucena Maguire and Ana Paula Bannwart shall have been appointed, effective as of the Closing, to serve as the members of the Company’s Management Committee.

 

(f)             LLC Agreement .  The LLC Agreement shall have been duly executed by each party thereto and delivered to Investor.

 

(g)            Investor Rights Agreement .  The Investor Rights Agreement shall have been duly executed by each party thereto and delivered to Investor.

 

(h)            License Agreement .  NutraCea and Irgovel, on the other hand, shall have entered into a License Agreement in the form attached hereto as Exhibit E .

 

(i)             Proceedings and Documents .  All corporate and other proceedings in connection with the transactions contemplated at the Initial Closing hereby and all documents incident thereto shall be reasonably satisfactory in form and substance to Investor and its counsel, and Investor and its counsel shall have received all such counterpart original and certified or other copies of such documents as they may reasonably request. Investor shall have received all of the Exhibits and Disclosure Schedules mentioned in the Agreements, in each case, in form and substance reasonably satisfactory to Investor.

 

(j)            Other Assurances .  Investor shall have received such other certificates, documents and filings as Investor shall reasonably request.

 

(k)            Emergence .  All conditions precedent to the First Amended Plan of Reorganization Proposed by NutraCea and the Unsecured Creditors Committee, dated August 10, 2010 (DE # 548), as amended from time to time, pursuant to Chapter 11 of Title 11 of the United States Code (the “ Plan ”), becoming effective have been satisfied, and the Effective Date (as defined in the Plan) has occurred.

 

 

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(l)            Investment Committee Approval . This Agreement, the other agreements set forth herein and the transactions contemplated hereby and thereby shall have been approved by Investor’s investment committee, in its sole discretion; provided , this Section 3.1(m) shall cease to be effective in the event the latest possible Termination Date set forth in Section 3.6 below shall have occurred without notice of termination being provided in accordance therewith.

 

3.2        Conditions to the Obligations of NutraCea at the Initial Closing . The obligations of NutraCea in Section 2 with respect to the Initial Closing are subject to the fulfillment (or written waiver by NutraCea) on or before the Initial Closing of each of the following conditions:

 

(a)            Representations and Warranties of Investor .  The representations and warranties of Investor contained in Section 5 shall be true and correct as of the Initial Closing.

 

(b)            Performance .  Investor shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Initial Closing.

 

(c)            LLC Agreement .  The LLC Agreement shall have been duly executed by each party thereto and delivered to NutraCea.

 

(d)            Investor Rights Agreement .  The Investor Rights Agreement shall have been duly executed by each party thereto and delivered to NutraCea.

 

(e)            Payment of Purchase Price .  Investor shall have delivered the purchase price for the Units purchased from NutraCea at the Initial Closing.

 

(f)             Proceedings and Documents .  All corporate and other proceedings in connection with the transactions contemplated at the Initial Closing hereby and all documents incident thereto shall be reasonably satisfactory in form and substance to NutraCea and its counsel, and NutraCea and its counsel shall have received all such counterpart original and certified or other copies of such documents as they may reasonably request.

 

(g)            Other Assurances .  NutraCea shall have received such other certificates, documents and filings NutraCea shall reasonably request.

 

(h)            Emergence .  All conditions precedent to the Plan becoming effective have been satisfied, and the Effective Date (as defined in the Plan) has occurred.

 

3.3        Conditions to the Obligations of the Company at each Closing .  The obligations of the Company to Investor in Section 2 with respect to a Closing are subject to the fulfillment on or before such Closing of each of the following conditions:

 

 

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(a)            Representations and Warranties .  The representations and warranties of Investor contained in Section 5 shall be true and correct in all material respects as of the Initial Closing.

 

(b)            Performance .  Investor shall have performed and complied in all material respects with all agreements, obligations and conditions contained in this Agreement and the other Related Documents if required to be performed or complied with by them at any time prior to such Closing.

 

(c)            LLC Agreement .  The LLC Agreement shall have been duly executed by each party thereto and delivered to the Company.

 

(d)            Investor Rights Agreement .  The Investor Rights Agreement shall have been duly executed by each party thereto and delivered to the Company.

 

(e)            Payment of Purchase Price .  Investor and NutraCea shall have delivered to the Company the purchase price for all Units purchased from the Company hereunder at the applicable Closing.

 

3.4        Conditions to the Obligations of Investor at each Subsequent Closing and at the Supplemental Closing .  The obligations of Investor in Section 2 with respect to each Subsequent Closing and at the Supplemental Closing are subject to the fulfillment (or written waiver by Investor) on or before the applicable Subsequent Closing or Supplemental Closing of each of the following conditions:

 

(a)            Maximum Amount Purchased .  The amount to be paid by Investor to purchase Units at a Subsequent Closing, when added to the amount previously paid by Investor to purchase Units hereunder, shall not exceed (i) Thirteen Million Nine Hundred Thousand Dollars ($13,900,000) if a Performance Purchase has not occurred or (ii) Twelve Million Nine Hundred Thousand Dollars ($12,900,000) if a Performance Purchase has occurred.

 

(b)            Representations and Warranties of NutraCea .  The representations and warranties of the Company contained in Section 4 and of NutraCea contained in Section 6 shall be true and correct in all material respects as of the applicable Subsequent Closing Date or Supplemental Closing Date.

 

(c)            Subsequent Closing Notice .  A Subsequent Closing Notice shall have been delivered in accordance with Section 2.4(b) if the Closing is a Subsequent Closing.

 

(d)            Performance .  The Company, NutraCea and Irgovel shall have performed and complied in all material respects with all agreements, obligations and conditions contained in this Agreement and the other Related Documents if required to be performed or complied with by them at any time prior to such Closing.

 

(e)            Event of Default .  No Event of Default shall have occurred since the immediately prior Closing.

 

 

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(f)             Performance Condition .  If the Closing is a Supplemental Closing pursuant to a Performance Purchase, the Performance Condition shall have been satisfied.

 

3.5        Conditions to the Obligations of NutraCea at a Supplemental Closing .  The obligations of NutraCea in a Supplemental Closing are subject to the fulfillment (or written waiver by NutraCea) on or before such Closing of each of the following conditions:

 

(a)            Representations and Warranties of Investor .  The representations and warranties of Investor contained in Section 6 shall be true and correct in all material respects as of the applicable Supplemental Closing Date.

 

(b)            Performance .  Investor shall have performed and complied in all material respects with all agreements, obligations and conditions contained in this Agreement and the other Related Documents if required to be performed or complied with by them at any time prior to such Closing.

 

(c)            Payment of Purchase Price .  Investor shall have delivered to NutraCea the purchase price for the Units purchased from NutraCea at the Closing in accordance with Section 2.2(b) or Section 2.2(c) , as applicable.

 

3.6        Termination .  This Agreement may be terminated by Investor by providing written notice to the other Parties at any time prior to the later of (a) December 31, 2010 and (b) five (5) Business Days after Investor’s receipt of the Disclosure Schedule, in accordance with Section 3.1(i) (the later of such dates, the “ Termination Date ”).  In the event of termination of this Agreement as provided in this Section 3.6 , this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto, provided , however, that (i) this Section 3.6 , Section 7.6 and Section 9 shall survive any such termination, and (ii) nothing herein shall relieve any party hereto from liability for any breach of this Agreement occurring prior to such termination.

 

SECTION 4.            REPRESENTATIONS AND WARRANTIES OF THE COMPANY .  The Company hereby represents and warrants to Investor that, as of the date hereof and as of the date of the applicable Closing:

 

4.1        Organization, Good Standing and Qualification .  Each of the Company and the Subsidiaries (the name and jurisdiction of organization of each of which is identified on Section 4.1 of the Disclosure Schedule) is a corporation, limited liability company or limited partnership duly organized, validly existing and in good standing under the laws of its jurisdiction of organization.  Each of the Company and Subsidiaries is duly qualified to transact business under the Laws of each jurisdiction in which the failure to be so qualified could reasonably be expected to result in a Material Adverse Change.

 

4.2        Power and Authority .  The Company and each Subsidiary have the requisite entity power and authority (a) to own, lease and operate its properties and assets, (b) to carry on its business as presently conducted, (c) to execute and deliver this Agreement, the Related Documents, and (d) to carry out and perform its obligations under the terms of this Agreement and the Related Documents.

 

 

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4.3        Subsidiaries .  Except as set forth in Section 4.3 of the Disclosure Schedule, the Company has no Subsidiaries and does not otherwise own or control, directly or indirectly, or have any other equity Investment in or other interest in, any other Person.

 

4.4        Capitalization .

 

(a)            Section 4.4(a) of the Disclosure Schedule lists for the Company and each Subsidiary the authorized Capital Securities, the names of the holders of such Capital Securities and the number and class of any outstanding Capital Securities so held.

 

(b)           Except as set forth in Section 4.4(b) of the Disclosure Schedule, the outstanding Capital Securities of the Company and each Subsidiary have been (i) duly authorized, validly issued and fully paid (ii) issued in compliance with Applicable Law, and (iii) issued in compliance with applicable preemptive, preferential or contractual rights.  Upon purchase by Investor, the Investor Units shall have been duly authorized and issued in compliance with Applicable Law and any applicable preemptive, preferential or contractual rights.

 

(c)           Except as set forth in the Agreement, the Related Documents or Section 4.4(c) of the Disclosure Schedule, there are no outstanding options, subscriptions, warrants, calls, preemptive rights, conversion rights, exchange rights, redemption rights, registration rights, co-sale rights, buy-sell rights, rights of first refusal or similar rights, agreements or undertakings in effect or committed to by the Company, any of its Subsidiaries or any of their respective stockholders, members or partners with respect to the Capital Securities of the Company or any of its Subsidiaries.

 

(d)           Except as set forth in Section 4.4(d) of the Disclosure Schedule, there is no proxy, voting trust, members’ agreement or similar agreement or arrangement with respect to the exercise of the Voting Power of the Company or any Subsidiary other than the LLC Agreement.

 

4.5        Authorization; Enforceability .  The Company has been duly authorized by all requisite limited liability company action to execute and deliver this Agreement and the Related Documents to which it is a party, and to perform its obligations hereunder and thereunder.  This Agreement and each Related Document, when executed and delivered by the Company will constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their respective terms, subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar Laws relating to the availability of specific performance, injunctive relief or other equitable remedies.  The Investor Units, when purchased and delivered in accordance with the terms of this Agreement will be free of Liens and restrictions on transfer other than restrictions on transfer under this Agreement, the Related Document and applicable securities laws or liens or encumbrances created by or imposed by Investor.

 

4.6        No Conflict .  Except as set forth in Section 4.6 of the Disclosure Schedule, the execution, delivery and performance by the Company and its Subsidiaries, as applicable, of this Agreement and the Related Documents do not and will not (a) violate or conflict with the provisions of the Charter Documents of the Company or the Subsidiaries, (b) conflict with or violate any Applicable Law or any judgment, order, decree, stipulation or injunction to which such Party is subject, (c) result in the breach of, or constitute a default under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of any Lien on any of its assets or properties pursuant to, any note, bond, contract, lease, license, permit, indenture, mortgage, or any other instrument or agreement to which the Company or any Subsidiary is a party or by which any of their respective property is bound (other than in favor of Investor) or (d) trigger any “change of control” or similar provision in any Charter Document or Material Contract; except, in the case of each of clauses (b) and (c), such as could not reasonably be expected to be material and adverse to the Company or any of its Subsidiaries.

 

 

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4.7            Governmental Consents .  Except as set forth in Section 4.7 of the Disclosure Schedule, no Consent with any Governmental Authority is required in connection with the Company’s or any Subsidiary’s execution, delivery and performance of this Agreement and the Related Documents, or the Company’s or any Subsidiary’s consummation of any transaction contemplated hereby or thereby.

 

4.8            Offering .  Subject to the truth and accuracy of the representations of Investor set forth in Section 5 , the offer, sale and issuance of the Investor Units as contemplated by this Agreement are exempt from the registration requirements of the Securities Act and will not result in a violation of the qualification or registration requirements of the California Law or other applicable state securities Laws, and neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemption.

 

4.9            Legal Proceedings .  Except as set forth in Section 4.9 of the Disclosure Schedule, neither the Company nor any Subsidiary is (a) subject to any outstanding injunction, judgment, order, decree or ruling, whether or not subject to appeal, or (b) a party or, to the Company’s Knowledge, threatened to be made a party, to any action, suit, proceeding, hearing, audit or investigation, of or before any court, quasi-judicial agency, administrative agency or arbitrator.

 

4.10            Title to Property Assets; Sufficiency of Assets .   Section 4.10(a) of the Disclosure Schedule sets forth the description, location and value of all personal property of the Company or Irgovel with a value in excess of Fifty Thousand Brazilian Reais (R$ 50,000). Except as set forth in Section 4.10(b) of the Disclosure Schedule, the Company and the Subsidiaries have good and marketable title to, or valid leasehold interests in, all personal property necessary for the conduct of their business or used, owned, occupied or held for use by the Company and the Subsidiaries in the operation of their business, free and clear of all Liens, except Permitted Liens.  The personal property owned and leased by the Company and each Subsidiary is in good operating condition and repair, ordinary wear and tear excepted. With respect to the personal property they lease, the Company and the Subsidiaries are in compliance with such leases in all material respects and hold a valid leasehold interest free of any liens, claims or encumbrances, other than Permitted Liens.  There are no assets, tangible or intangible, which are necessary to conduct the business of the Company or the Subsidiaries, that are owned by any Affiliates of the Company other than the Company and the Subsidiaries.

 

 

 

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4.11      Leased Real Properties; Owned Real Property .

 

(a)            Leased Real Property .   Section 4.11(a) of the Disclosure Schedule contains a complete and correct list of all real property leases and subleases pursuant to which the Company or a Subsidiary is a lessor, lessee, sublessor or sublessee (the “ Leased Real Property ”).  Each lease or sublease set forth in Section 4.11(a) of the Disclosure Schedule is legal, valid, binding, enforceable and in full force and effect, subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar Laws relating to the availability of specific performance, injunctive relief or other equitable remedies.  Except as set forth in Section 4.11(a) of the Disclosure Schedule, neither the Company nor any Subsidiary, nor, to the Knowledge of the Company, any other party, is in default, violation or breach in any material respect under any such lease or sublease, and no event has occurred and is continuing thereunder that constitutes or, with notice or the passage of time or both, would constitute a default, violation or breach in any material respect thereunder.  The Company and the Subsidiaries, as applicable, have good and valid title to the leasehold estate under each lease and sublease set forth in Section 4.11(a) of the Disclosure Schedule, free and clear of all Liens other than Permitted Liens.  All of the improvements situated in whole or in part at any Leased Real Property are in good operating condition, in a state of good maintenance and repair and are adequate and suitable for the purposes for which they are presently being used.

 

(b)            Owned Real Property .   Section 4.11(b) of the Disclosure Schedule sets forth the address and legal description of each parcel of Owned Real Property.  With respect to each parcel of Owned Real Property: (A) the Company or one of its Subsidiaries has good and marketable fee simple title, free and clear of all Liens, except Permitted Liens; (B) neither of the Company nor any of its Subsidiaries has leased or otherwise granted to any Person the right to use or occupy such Owned Real Property or any portion thereof; and (C) there are no outstanding options, rights of first offer or rights of first refusal to purchase such Owned Real Property or any portion thereof or interest therein.

 

4.12      Financial Statements .  The consolidated financial statements of Irgovel for the Fiscal Years 2008 and 2009, audited in the case of the Fiscal Year 2008 financial statements, copies of which have been previously made available to Investor (collectively the “ Irgovel Financial Statements ”), (a) are correct and complete in all material respects, (b) have been prepared in accordance with GAAP except for such deviations as are referred to in the notes thereto, and (c) fairly present in all material respects the financial position and results of operations, and cash flows of Irgovel as of each date and for the respective periods covered by the Irgovel Financial Statements.  The only Capital Securities owned by the Company are the Capital Securities of Irgovel. The Company has no liabilities other than those created by this Agreement and the Related Documents.  The Company’s sole material asset is the Capital Securities of Irgovel.

 

4.13      Undisclosed Liabilities .  Except as set forth in Section 4.13 of the Disclosure Schedule, neither the Company nor any Subsidiary has any Indebtedness or liability, except for liabilities reflected or reserved against on the most recent Irgovel Financial Statements and liabilities incurred since that date in the Ordinary Course of Business, none of which is material.  Neither the Company nor any Subsidiary is liable upon or with respect to, or obligated in any other way to provide funds in respect of, or to guaranty or assume in any manner any debt or obligation of any other Person.

 

 

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4.14      Changes .  Except as set forth in Section 4.14 of the Disclosure Schedule or as specifically contemplated by this Agreement or the Related Documents, since December 31, 2009, there has not been:

 

(a)           any change in the assets, liabilities, financial condition or operating results of the Company or any Subsidiary from that reflected in the Irgovel Financial Statements, except changes in the Ordinary Course of Business that have not been, in the aggregate, materially adverse;

 

(b)           any damage, destruction or loss, whether or not covered by insurance, that resulted in or that could result in a Material Adverse Change;

 

(c)           any waiver by the Company or any Subsidiary of a material right or of a material debt owed to it;

 

(d)           any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by the Company or any Subsidiary, except in the Ordinary Course of Business and that is not material to the assets, properties, financial condition, operating results or business of the Company or any Subsidiary (as such business is presently conducted and as it is proposed to be conducted);

 

(e)           any termination or material amendment to any Material Contract;

 

(f)            any change in any compensation arrangement or agreement with any current or former officer, director, employee or contractor;

 

(g)           any sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets (other than the sale or license of the Company’s or any Subsidiary’s products and services in the Ordinary Course of Business);

 

(h)           any resignation or termination of employment of any officer or key employee of the Company or any Subsidiary;

 

(i)            any mortgage, pledge, transfer of a security interest in, or lien, created by the Company or any Subsidiary, with respect to any of their material properties or assets, except liens for Taxes not yet due or payable;

 

(j)            any loans or guarantees made by the Company or any Subsidiary to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel advances and other advances made in the Ordinary Course of Business;

 

(k)           any liability incurred, assumed or guaranteed by the Company or any Subsidiary except for those incurred in the Ordinary Course of Business in the aggregate);

 

 

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(l)            any declaration, payment or setting aside for payment of any dividend or other distribution with respect to, or any redemption, retirement or other purchase of, any equity securities of the Company or any of its Subsidiaries;

 

(m)          any failure to conduct the Company’s business in the Ordinary Course of Business;

 

(n)           any Indebtedness incurred by the Company or any of its Subsidiaries;

 

(o)           any change in any accounting policies, procedures or practices other than changes required by GAAP;

 

(p)           aggregate Capital Expenditures paid or incurred in excess of Fifty Thousand Dollars ($50,000);

 

(q)           modified any bonus, severance, termination, pension, insurance or other employee benefit plan, payment or arrangement made to, for or with any of its current or former directors, managers, employees, contractors or consultants other than in the ordinary course of business for non-member employees;

 

(r)            entered into any employment (other than offer letters and letter agreements entered into in the ordinary course of business consistent with past practice with employees who are terminable “at-will”), severance or termination agreement;

 

(s)           established, adopted, entered into, amended or terminated any employee benefit plan or any collective bargaining, thrift, compensation or other plan, agreement, trust, fund, policy or arrangement for the benefit of any of its current or former directors, managers, employees, contractors, or consultants of the Company or its Subsidiaries;

 

(t)            made any tax election, change its method of tax accounting or settle any claim relating to Taxes;

 

(u)           been party to any merger, acquisition, consolidation, recapitalization, liquidation, dissolution or similar transaction;

 

(v)           accelerated any billing of customers or collection of receivables or delayed, postponed or canceled the payment of accounts payable or any other liability, the purchase of inventory or the replacement of inoperable, worn out or obsolete assets with assets of comparable quality, in each case, other than in the ordinary course of business substantially consistent with past practice;

 

(w)          any other event or condition of any character that might result in a Material Adverse Change; or

 

(x)           any other material transaction or any agreement or commitment by the Company or any Subsidiary to do any of the things described in this Section _4.14 .

 

 

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4.15      Taxes . Except as set forth in Section 4.15 of the Disclosure Schedule, the Company and each Subsidiary have timely filed or caused to be filed all Tax returns required under Applicable Law and such returns are true, correct and complete in all material respects.  No audit of the Company’s or any Subsidiary’s Tax returns is in progress, or to the Company’s Knowledge, is being proposed, threatened or discussed.  The Company and each Subsidiary have paid or made provision for payment of all Taxes and assessments that have been or are accrued, due or levied, and there are no assessed Tax deficiencies against the Company or any Subsidiary.  All Taxes that the Company or any Subsidiary is required to withhold or collect have been duly withheld or collected, and, to the extent required by Applicable Law, have been paid to appropriate Governmental Authorities or Persons.  Neither the Company nor any Subsidiary has waived, or been requested to waive or extend, any statute of limitations relating to the payment or assessment of Taxes or deficiencies.  The Company is and has been treated for its entire existence as a “disregarded entity” under Treasury Regulations Section 301.7701-3.  Irgovel is treated as a corporation for U.S. federal income tax purposes.

 

4.16      Intellectual Property .

 

(a)            Section 4.16(a) of the Disclosure Schedule contains a complete list of all pending or issued patents, registered trademarks, and registered copyrights (international and domestic) in which the Company or its Subsidiaries hold any rights.   The Company and the Subsidiaries own or possess sufficient legal rights to Intellectual Property necessary to the business of the Company and the Subsidiaries as presently conducted, the lack of which could reasonably be expected to result in a Material Adverse Change. Except for standard end-user license agreements, support/maintenance agreements and agreements entered in the Ordinary Course of Business, there are no outstanding options, licenses or agreements relating to the Intellectual Property of the Company and the Subsidiaries, and neither the Company nor any Subsidiary is bound by or a party to any options, licenses or agreements with respect to the Intellectual Property of any other person or entity.  Neither the Company nor any Subsidiary has received any written communication alleging that the Company has violated or, by conducting their businesses as currently conducted, would violate any of the Intellectual Property of any other person or entity.

 

(b)           To the Company’s Knowledge, Section 4.16(b) of the Disclosure Schedule contains a complete list of current and past employees and contractors of NutraCea, the Company or its Subsidiaries who own patents or have developed trade secrets related to technology used by, and material to, the Company or its Subsidiaries.

 

4.17      Material Contracts .   Section 4.17 of the Disclosure Schedule lists all Material Contracts.  With respect to each Material Contract, (a) such agreement is in full force and effect and constitutes the legal, valid and binding obligation of the Company or a Subsidiary, as applicable, and, to the Company’s Knowledge, the other parties thereto, enforceable in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies and to general principles of equity, (b) such agreement will not be terminated as a result of this Agreement, (c) neither the Company nor any Subsidiary is in default in any material respect under such agreement and no event has occurred which, with the passage of time, would constitute such a default, and (d) to the Company’s Knowledge, no other party is in default in any material respect under such agreement.

 

 

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4.18      Transactions with Affiliates .  Except as set forth on Section 4.18 of the Disclosure Schedule, no officer, shareholder, director, member, manager, partner or Affiliate of the Company or any Subsidiary, or any Family Group member of any such person, (a) is indebted to the Company or any Subsidiary, nor is the Company or any Subsidiary indebted (or committed to make loans or extend or guarantee credit) to any of them other than in the case of officers, directors, employees and managers for accrued salaries, reimbursable business expenses and other employee benefits accrued in the ordinary course of business; (b) owns any material asset used or held for use by the Company or any of its Subsidiaries; or (c) is directly or indirectly interested in any material contract with the Company or any of its Subsidiaries.

 

4.19      Insurance .   Section 4.19 of the Disclosure Schedule sets forth a complete and accurate list and description of all policies of insurance presently in effect with respect to the assets and/or business of the Company and its Subsidiaries.  The Company and each Subsidiary maintains and has maintained such insurance as is required by Applicable Law and such other insurance, in amounts and insuring against hazards and other liabilities, as is customarily maintained by companies similarly situated.

 

4.20      Compliance with Laws .  Except as set forth in Section 4.20 of the Disclosure Schedule, each of the Company and the Subsidiaries is, and at all times since February 19, 2008 has been, in compliance with all Applicable Laws in all material respects.

 

4.21      Licenses .  Except as set forth in Section 4.21 of the Disclosure Schedule, the Company and the Subsidiaries hold, and at the Closing will hold, all Licenses necessary to own their assets and to conduct their business as it is now being conducted, and believe they can obtain, without undue burden or expense, any required Licenses for the conduct of their business as presently planned to be conducted.  A list of all material Licenses is set forth in Section 4.21 of the Disclosure Schedule, and each such License is in full force and effect.

 

4.22      Labor Relations; Employee Compensation .  Neither the Company nor any Subsidiary is a party to or bound by any collective bargaining or other labor agreement, and there are no organizational efforts affecting its employees.  There are no material unremedied violations of any federal, state or local labor or employment Laws or regulations, including wages, hours, collective bargaining, Taxes and the like by the Company or any Subsidiary.  There are no strikes or other labor disputes pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries.  Except as set forth in Section 4.22 of the Disclosure Schedule, there are no (a) effective employment agreements, deferred compensation agreements, bonus plans, incentive plans, profit sharing plans, severance arrangements or retirement agreements covering the current or former employees of the Company or any of its Subsidiaries, or (b) agreements for managerial, consulting or similar services to which the Company or any of its Subsidiaries is a party or by which it is bound.  The Company is not aware that any officer or key employee, or that any group of key employees, intends to terminate their employment with the Company or any Subsidiary, nor does the Company or any Subsidiary have a present intention to terminate the employment of any of the foregoing.  The employment of each officer and employee of the Company and any Subsidiary is terminable at the will of the Company or any Subsidiary.

 

 

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4.23      Employee Benefit Plans .   Section 4.23 of the Disclosure Schedule sets forth a complete and correct list of each Benefit Plan to which the Company or its Subsidiaries has any obligation.  Except as set forth in Section 4.23 of the Disclosure Schedule, each of the Company and its Subsidiaries (a) has made all payments or contributions due to date under each of its Benefit Plans, and has recorded on its books amounts accrued to date as liabilities with respect to each such Benefit Plan and the requirements of applicable Law, (b) has performed all material obligations required to be performed under each such Benefit Plan and applicable Law, and is not in default in any material respect of any such Benefit Plan and (c) is in compliance in all material respects with requirements of Applicable Law with respect to such Benefit Plans. No Benefit Plan has any unfunded or underfunded liabilities.

 

4.24      Investment Company .  Neither the Company nor any Subsidiary is an “investment company” as defined in the Investment Company Act of 1940, as amended.

 

4.25      Brokerage Fee .  Except as set forth in Section 4.25 of the Disclosure Schedule, neither the Company nor any Subsidiary has, with respect to the sale of Units, engaged any investment banker, finder, broker or similar agent that may give rise to any brokerage fee, finder’s fee, commission or similar liability, nor will either the Company or any Subsidiary otherwise be required, with respect to the sale of Units, to pay any investment banker, finder, broker or similar agent any brokerage fee, finder’s fee, commission or similar liability.

 

4.26      Foreign Corrupt Practices .  Except as set forth in Section 4.26 of the Disclosure Schedule, the Company and its Subsidiaries have not, and to the Company’s Knowledge, no agent or other person acting on behalf of the Company or any Subsidiary, has (i) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company or its Subsidiaries (or made by any person acting on their behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

 

4.27      Environmental and Safety Matters .

 

(a)           The Company and its Subsidiaries have at all times complied in all material respects with all applicable Environmental and Safety Requirements, which compliance has included obtaining and complying in all material respects at all times with all material permits, licenses and other authorizations required pursuant to Environmental and Safety R


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