SHAREHOLDERS' AGREEMENT

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

 

SHAREHOLDERS’ AGREEMENT

 

AMONG

 

NUTRACEA OFFSHORE, LTD.,

 

NUTRACEA,

 

BRIGHT FOOD INVESTMENT COMPANY LIMITED (HONG KONG).

 

AND

 

THE MINORITY SHAREHOLDERS NAMED HEREIN

 

DATED AS OF

 

JUNE 25, 2008

 

 

TABLE OF CONTENTS

 

			Page
ARTICLE 1.	DEFINITIONS		1
ARTICLE 2.	BUSINESS AND OPERATING STRUCTURE		5
Section 2.1	Business		5
Section 2.2	Operating Structure		5
Section 2.3	Business License		6
Section 2.4	Land-Use Right		6
Section 2.5	Construction and Operation		7
Section 2.6	Local Consultants		7
Section 2.7	Further Ventures		7
Section 2.8	Costs and Expenses		8
ARTICLE 3.	CAPITALIZATION		8
Section 3.1	Parent Contribution		8
Section 3.2	Bright Contribution		8
Section 3.3	Conditions Precedent		8
Section 3.4	Failure to Fulfill Conditions Precedent		9
Section 3.5	Minority Shareholder Contribution		9
Section 3.6	Financial Statements		10
ARTICLE 4.	BOARD OF DIRECTORS		10
Section 4.1	Board of Directors – Generally		10
Section 4.2	Removal		10
Section 4.3	Voting Agreement; Proxy		11
Section 4.4	Minority Shareholder Representative		11
Section 4.5	Actions of the Board of Directors		12
ARTICLE 5.	TRANSFER RESTRICTIONS		13
Section 5.1	Transfers Restricted		13
Section 5.2	Rights of First Refusal – Generally		14
Section 5.3	Company Right of First Refusal		14
Section 5.4	Parent and Bright Right of First Refusal		15
Section 5.5	Transfer Permitted		15
ARTICLE 6.	DRAG-ALONG RIGHTS		15
Section 6.1	Drag-Along Rights – Generally		15
Section 6.2	Drag-Along Notice		16
Section 6.3	Irrevocable Offer		16
Section 6.4	Cooperation		16
Section 6.5	Proxy		17

SHAREHOLDERS’ AGREEMENT

 

This SHAREHOLDERS’ AGREEMENT (the “ Agreement ”) is effective as of this 25 day of June, 2008 (the “ Effective Date ”), by and among NUTRACEA OFFSHORE, LTD., an exempted company organized under the laws of the Cayman Islands (the “ Company ”), NUTRACEA, a corporation organized under the laws of the State of California (“ Parent ”),   BRIGHT FOOD INVESTMENT COMPANY, LIMITED (HONG KONG)., a corporation organized under the laws of Hong Kong (“ Bright ”); and the Person or Persons listed on Schedule 1 (collectively, the “ Minority Shareholders ”). The Parent, Bright and the Minority Shareholders are referred to herein individually and collectively as a “ Party ” or the “ Parties. ”

 

RECITALS :

 

A.   Each of Parent, Bright and the Minority Shareholders has agreed to acquire shares of the Company’s capital stock, as set forth on Schedule 2 . Parent and Bright, and their permitted transferees, shall hold Shares of Class A Common Stock, and the Minority Shareholders, and their permitted transferees, shall hold Shares of Class B Common Stock, identical in all respects to Class A Common Stock except that Class B shares are non-voting Shares.

 

B.   The parties believe it is in the best interests of the Company and the other parties hereto to provide to Parent, Bright and the Minority Shareholders the rights, and to subject them to the obligations, specified in this Agreement.

 

AGREEMENT :

 

The following capitalized terms, as used herein, shall have the following respective meanings:

“ Acceptance ” has the meaning set forth in Section 5.4(b) .

“ Advance Permits ” has the meaning set forth in Section 2.3 .

“ Affiliate ” means, with respect to any Person, any other Person which directly, or indirectly though one or more intermediaries, controls, is controlled by or is under common control with such Person.

“ Agreement ” has the meaning set forth in the preamble.

“ Approval Certificate ” means the approval certificate of the Operating Company issued by the Examination and Approval Authority.

“ Articles ” has the meaning set forth in Section 4.1 .

“ Board of Directors ” means the board of directors of the Company.

 

“ Bright ” has the meaning set forth in the preamble.

“ Bright Acceptance ” has the meaning set forth in Section 5.4(b) .

“ Bright China ” means Bright Food (Group) Co., LTD., the PRC company which directly or indirectly owns Bright.

“ Business Day ” means any day that is not a Saturday, Sunday or other day on which banks are required or authorized by law to be closed in George Town, Grand Cayman.

“ Business License ” has the meaning set forth in Section 2.3 .

“ China ” or “ PRC ” means the People’s Republic of China. For the purpose of this Agreement, “ China ” shall include Taiwan, Hong Kong and Macau Special Administrative Region.

“ Class A Shareholder ” means Parent or Bright (and their permitted assigns), and “ Class A Shareholders ” means both Parent and Bright (and their permitted assigns).

“Class A Common Stock” has the meaning set forth in the recitals.

“Class B Common Stock” has the meaning set forth in the recitals.

“ Company ” has the meaning set forth in the preamble.

“ Company Acceptance ” has the meaning set forth in Section 5.3(a) .

“ Company Sale ” means any transaction or series of related transactions as a result of which Persons other than Parent, its Affiliates and Permitted Transferees (a) hold, in the aggregate, voting securities of the Company then outstanding, the holders of which are entitled to cast more than fifty percent of the votes in any election of the Board of Directors (whether such transaction is effected by merger, consolidation, recapitalization, sale or transfer of the Company’s equity or otherwise) or (b) acquire more than fifty percent of the assets of the Company.

“ Director ” means a member of the Board of Directors.

“ Drag-Along Right ” has the meaning set forth in Section 6.1 .

“ Drag-Along Notice ” has the meaning set forth in Section 6.2 .

“ Effective Date ” has the meaning set forth in the preamble.

“ Equity Securities ” has the meaning set forth in Section 8.2 .

“ Examination and Approval Authority ” means the Ministry of Commerce of the PRC or its local counterparts.

 

“ Exercising Shareholder ” means a Shareholder that has been granted preemptive rights for New Securities under Section 8.1 and which exercises such preemptive rights for New Securities in accordance with Section 8.4 .

“ Facility ” has the meaning set forth in Section 2.1 .

“ Force Majeure ” has the meaning set forth in Article 10 .

“ Initial Public Offering ” means the initial firm commitment underwritten public offering that, if offered within the United States, is made pursuant to an effective registration under the Securities Act of 1933 covering the offer and sale of Shares to the public or, if offered outside the United States, pursuant to an offering memorandum or prospectus required to be prepared or filed with the relevant governmental agency or body regulating or reviewing such offering.

“ Land-Use Right ” has the meaning set forth in Section 2.4 .

“ Minority Shareholders ” has the meaning set forth in the preamble.

“ Minority Shareholder Representative ” has the meaning set forth in Section 4.4 .

“ New Securities ” has the meaning set forth in Section 8.2 .

“ New Securities Notice ” has the meaning set forth in Section 8.3 .

“ Non-Exercising Shareholder ” means a Shareholder that has been granted preemptive rights for New Securities under Section 8.1 and which does not exercise such preemptive rights for New Securities in accordance with Section 8.4 .

“ NutraCea Hong Kong ” has the meaning set forth in Section 2.2(a) .

“ Operating Company ” has the meaning set forth in Section 2.2(a) .

“ Operational ” means the Facility is able to undertake its intended production activities and has obtained all required permits and approvals for its operation and production.

“ Offer Price ” has the meaning set forth in Section 5.2(a)(ii) .

“ Offered Shares ” has the meaning set forth in Section 5.2(a)(ii) .

“ Parent ” has the meaning set forth in the preamble.

“ Parent Acceptance ” has the meaning set forth in Section 5.4(b) .

“ Party ” and “ Parties ” have the meaning set forth in the preamble.

“ Person ” means any natural person, corporation, limited partnership, general partnership, limited liability company, exempt company, joint stock company, joint venture, association, company, trust or other organization, or any governmental authority.

 

“ Permitted Transfer ” means a Transfer by one Minority Shareholder to any one or more other Minority Shareholder(s) or a Transfer by Bright to one or more of its Affiliates.

“ Planning and Construction Permits ” has the meaning set forth in Section 2.3 .

“ Presenting Party ” has the meaning set forth in Section 2.7 .

“ Put Option ” has the meaning set forth in Section 9.1 .

“ Receiving Party ” has the meaning set forth in Section 2.7 .

“ Remaining Offered Shares ” has the meaning set forth in Section 5.4(a) .

“ Required Transfer ” has the meaning set forth in Section 6.4 .

“ SAFE ” means the PRC State Administration of Foreign Exchange or its authorized local affiliate.

“ Sale Notice ” has the meaning set forth in Section 7.2 .

“ Selling Shareholder ” has the meaning set forth in Section 6.1 .

“ Shareholder ” means Parent, Bright and each Minority Shareholder.

“ Shares ” mean the shares of common stock of the Company.

“ Tag-Along Notice ” has the meaning set forth in Section 7.3 .

“ Tag-Along Right ” has the meaning set forth in Section 7.1 .

“ Tagging Shareholder ” has the meaning set forth in Section 7.1 .

“ Third-Party Offer ” has the meaning set forth in Section 5.2(a)(i) .

“ Third-Party Purchaser ” has the meaning set forth in Section 6.1 .

“ Third-Party Terms ” has the meaning set forth in Section 6.2(d) .

“ Transfer ” means to sell, transfer, convey, or otherwise dispose of, whether by contract or operation of law, including any sale of equity, merger, recapitalization, reorganization, liquidation or other similar transaction.

“ Transfer Notice ” has the meaning set forth in Section 5.2(a)(ii) .

“ Transferring Shareholder ” has the meaning set forth in Section 5.2(a)(i) .

Section 2.1   Business . The purpose of the Company is to develop, construct and operate facilities in China (the first of which is referred to as the “ Facility ”) to produce, market, distribute and sell (at market prices) rice oil, extracted defatted rice bran, meat and poultry additives derived from rice bran and other relevant products produced at the facilities to meet the growing demands of consumers inside of China as well as beyond its borders; to apply the Parties’ know-how and management techniques relating to product quality, production efficiency and cost controls; to utilize the competitive strengths of the Parties or their affiliates to develop and expand existing markets and increase sales of the products described above inside and outside of China; and to strengthen economic cooperation and technical exchange, so as to enable the Parties to achieve satisfactory economic results. The Parties currently anticipate that the Company will ultimately have three such facilities operating in China. The business scope of the Operating Company is producing, marketing, distributing and selling rice oil, extracted defatted rice bran, meat and poultry additives derived from rice bran and other related products (excluding those prohibited by the Chinese government; in case certain permits are required in relation to any of the above, the corresponding permits shall be obtained for its operation). The business scope above is subject to the same being included in the Business License, but the Parties agree to use commercially reasonable efforts to have the full scope described above included in the Business License.

 

Section 2.3   Business License Within fifteen days after the Approval Certificate and any other approval, permit or governmental authorization known by any Party to be necessary for the Operating Company to pursue any restricted business described in Section 2.1 , which may include the other permits identified in Section 2.2 above, if any, (collectively, the “ Advance Permits ”) have been obtained, Bright shall oversee and facilitate the Company’s submission of an application to the State Administration for Industry and Commerce or its authorized local administration for industry and commerce for the approval for the Operating Company to obtain the business scope in China as described in Section 2.1 above (the “ Business License ”). Bright shall use all commercially reasonable efforts to oversee and facilitate the Operating Company’s activities in securing the Advance Permits required for the Operating Company to obtain the Business License and in prosecuting such applications vigorously. As soon as practicable following the issuance of the Business License, Bright and/or its Affiliate shall oversee and facilitate the Operating Company’s applications for any other approvals, registrations or filings with the relevant PRC authorities, including all permits, approvals or governmental authorizations necessary for the Operating Company to commence construction of the Facility (collectively, the “ Planning and Construction Permits ”), in a timely fashion in accordance with PRC laws and regulations.

Section 2.5   Construction and Operation . Parent, directly or through its Affiliates, shall be responsible for overseeing and facilitating the Operating Company’s activities in constructing the Facility in timely fashion and shall take all commercially reasonable efforts to oversee and facilitate the Operating Company’s efforts to complete such construction [*] . Parent shall take the lead in overseeing and facilitating the Operating Company’s efforts to market the sale of rice oil, both within China and beyond, and Parent and Bright shall jointly cooperate to assist the Operating Company in marketing the sale of defatted rice bran and other products, which is expected to be both inside and outside of China. Bright shall use the channels of distribution to which it and its Affiliates have access in order to oversee and facilitate the Operating Company’s efforts in selling products within China, and Bright shall also oversee and facilitate the Operating Company’s efforts in obtaining any necessary regulatory approvals that may be required in connection with the export of any of the Operating Company’s products.

Section 2.6   Local Consultants . Both Parent and Bright may represent the Operating Company to engage local consultants to assist them in accomplishing or facilitating the achievement of any objective assigned to it under this Agreement. The Operating Company shall pay such local consultants the reasonable, documented fees charged to it.

Section 2.7   Further Ventures . In the event that Parent or Bright (in such capacity, the “ Presenting Party ”), directly or through its Affiliates, desires to pursue any future venture to construct and operate additional stabilized rice bran facilities in China or produce meat and poultry additives derived from rice bran in the PRC [*] . Other than participating in a new venture pursuant to the foregoing sentences, each of Bright and Parent agree that neither it, nor its officers, directors, supervisors, subsidiaries or Affiliates, will compete, directly or indirectly, with the business of the Company anywhere for a period [*] . The provisions of this Section 2.7 (a) shall not restrict Bright or Parent, or any Affiliate of Bright or Parent from continuing to operate in any business it was already engaged in prior to the execution of this Agreement, which in the case of Parent includes the production and sale of rice bran, rice oil, and products derived therefrom anywhere in the world outside of China, (b) shall not restrict the Government of China from engaging in any business through entities unrelated to Bright or Parent, so long as Bright or Parent did not present the business opportunity in question to, or otherwise encourage the participation of, the Government of China, and (c) shall not restrict the Operating Company from engaging in the full scope of its business as identified in Section 2.1 above. For purposes of this Section 2.7 , “compete” will include

 

(i) making any investment (other than a less than 5% investment in a public company) in,

(ii) serving as officer, director, supervisor, or consultant to, and

(iii) the hiring of any employee of

 

any entity that engages in the business of producing, marketing, distributing and selling products derived from rice bran, including rice oil, extracted defatted rice bran, and meat and poultry additives (and, in the case of a future venture, the business of that future venture, if different from the foregoing), but the mere production, marketing, distribution or sale of products not derived from rice bran, such as corn oil, that may compete with the Company’s products shall not be deemed to be a business in competition with the Company’s business.

Section 2.8   Costs and Expenses . All costs and expenses relating to obtaining the Approval Certificate and Business License of the Operating Company, as well as those relating to the preparatory meetings for the commencement of operations, as well as all the costs and expenses relating to the formation and operation of the Company, shall be borne by the Company. Notwithstanding the foregoing, each Party shall be responsible for its own costs in connection with the drafting, negotiation and conclusion of this Agreement, including attorneys’ fees, consulting fees, transportation and other expenses.

 

Section 3.1   Parent Contribution . In exchange for receiving 51,200,000 Shares of Class A Common Stock, Parent shall contribute to the equity capital of the Operating Company USD $51.2 million in the installments set forth in Schedule 3 .

Section 3.2   Bright Contribution . In exchange for receiving 12,800,000 Shares of Class A Common Stock, Bright shall contribute to the Operating Company USD $12.8 million in the installments set forth in Schedule 3 .

Section 3.3   Conditions Precedent . The obligations of Parent and Bright to make the contributions set forth in Section 3.1 and Section 3.2 , respectively, shall be subject to the prior satisfaction of the following conditions:

The obligations of Parent to make the contributions set forth in Section 3.1 shall also be subject to the prior receipt by Parent of the following information from Bright:

Section 3.4   Failure to Fulfill Conditions Precedent . If any of the conditions precedent set forth in Section 3.3 above are not fulfilled [*] and Parent and Bright have not agreed in writing to waive such conditions precedent or to extend the time for the fulfillment of the conditions precedent within thirty days after said date, either Parent or Bright shall have the right to terminate this Agreement, provided the terminating party’s act or failure to act was not the principal cause of the non-fulfillment of any condition precedent. In the case of a termination of this Agreement pursuant to this Section 3.4 , neither Parent nor Bright shall have any right whatsoever to:

Section 3.5   Minority Shareholder Contribution . The Minority Shareholders shall receive their respective Shares of Class B Common Stock [*] . Such shares shall be issued concurrently with the issuance of shares to Parent and Bright upon the making of the first installment of their capital contributions. The Minority Shareholders shall not be required or permitted to [*] to the Company in exchange for additional equity in the Company but shall be permitted to [*] terms and conditions as the Minority Shareholders and the Company may agree, with the approval of the Board of Directors.