Designates portions of this document have been omitted pursuant to a request for confidential treatment filed separately with the Commission] AMENDMENT OF LIMITED LIABILITY COMPANY AGREEMENT FOR GRAIN ENHANCEMENT, LLC
EXHIBIT
10.15
[*Designates
portions of this document have been omitted pursuant to a request for
confidential treatment filed separately with the
Commission]
AMENDMENT
OF LIMITED
LIABILITY COMPANY AGREEMENT
FOR
GRAIN
ENHANCEMENT, LLC
This
Amendment of Limited Liability Company Agreement (“Amendment”)
of
Grain Enhancement, LLC, a Delaware limited liability company (“Company”),
is
entered into by and between NutraCea,
a California corporation located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (“NutraCea”),
and
Pacific
Advisors Holdings Limited, a company incorporated under the laws of British
Virgin Islands,
located
at ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ #▇▇-▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (“Pacific
Advisors”),
as
of
January 24, 2008 on the following terms and conditions:
1. Background
and Purpose.
1.1 Agreement.
NutraCea, Pacific Advisors, Theorem
Group, LLC, a California limited liability company, and Ho’okipa Capital
Partners, Inc., a California corporation, entered into the Limited Liability
Company Agreement for the Company effective as of June 22, 2007
(“Agreement”).
The
purpose of this Amendment is to amend certain provisions of the
Agreement.
1.2 Approval
of Amendment.
NutraCea
and Pacific Advisors, constituting all of the Class A Members, have approved
this
Amendment pursuant to, and as permitted by, Section 15.5 of the Agreement and
intend that it shall be binding on all the Members.
1.3 Capitalized
Terms.
All
capitalized terms used in this Amendment shall have the meanings set forth
in
the Agreement, unless otherwise defined herein.
2. Amendment
of Agreement. The
Agreement is hereby amended as follows:
2.1.
Capital
Contributions.
The
Class A Members agreed pursuant
to Section 4.2.1
of the
Agreement to make certain Initial Capital Contributions. The Class A Members
subsequently determined that the amounts required to have been contributed
on
and after October 30, 2007 are not yet necessary for the operations of the
Company as currently contemplated. Accordingly, Sections 4.2.1 and 4.2.2 of
the
Agreement are hereby amended and restated in their entirety to provide as
follows:
“4.2.1. Schedule;
Notice.
The
Class A Members shall make the Initial Capital Contributions as follows:
(a) One
Million Five Hundred Thousand U.S. Dollars ($1,500,000) each (for a total of
Three Million U.S. Dollars ($3,000,000)) on or before June 30, 2007;
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(b) Up
to an
aggregate of Three Million Five Hundred U.S. Dollars ($3,500,000) each (for
a
total of up to Seven Million U.S. Dollars ($7,000,000)) shall be contributed
by
each of the Class A Members at such time, and in such increments, as the Finance
Committee may hereafter determine to be necessary for the successful operation
of the Company’s business, which determination shall be based on actual budgeted
and anticipated costs of proceeding with the Project and acquiring, developing,
and operating the Company’s Facilities. Upon a determination by the Finance
Committee that all or any portion of such additional Initial Capital
Contributions are necessary, a Finance Committee member shall provide written
notice to the Members specifying the amount of the required Capital Contribution
(“Call
Notice”).
Capital Contributions required pursuant to this Section 4.2.1(b) that are not
received by the Company within thirty (30) calendar days of the date of the
Call
Notice shall be deemed delinquent for the purpose of Section
4.2.2.”
“4.2.2. Failure
to make Initial Capital Contributions.
In the
event that (and on each occasion that) (i) a Class A Member (“Defaulting
Member”)
fails
to make, and becomes delinquent in all or any portion of any Initial Capital
Contribution payment as and when required to be made under Section 4.2.1, and
(ii) the other Class A Member timely makes its Initial Capital Contribution
payment, the Defaulting Member’s Percentage Interest shall be reduced as
follows: For each One Million U.S. Dollars ($1,000,000) dollar Initial Capital
Contribution payment that a Class A Member fails to make, as and when due
pursuant to Section 4.2.1, the Percentage Interest of that Defaulting Member
shall be immediately reduced to a Percentage Interest equal to (i) the number
comprising the Defaulting Member’s Percentage Interest immediately prior to such
default, minus (ii) eleven and 875/10,000 (11.875). If the Defaulting Member
fails to contribute only a portion of such amount, the Defaulting Member’s
Percentage Interest will be reduced by a portion of the foregoing amount equal
to the portion of the One Million U.S. Dollar ($1,000,000) Initial Capital
Contribution payment not timely made by the Defaulting Member. A separate and
proportional reduction under this subsection shall apply for each failure of
a
Class A Member to make an Initial Capital Contribution payment pursuant to
Section 4.2.1.
Upon
a
reduction of the Percentage Interest of a Defaulting Member, the Percentage
Interests of the other Class A Member shall be increased by an amount equal
to
the reduction of the Defaulting Member. The Percentage Interest of each Member
as of the Effective Date is set forth on Exhibit
A
hereto.
The Percentage Interests of the Class A Members set forth on Exhibit
A
shall be
adjusted as set forth in this Section 4.2.2 in the event of each and every
failure by any Class A Member to make any Initial Capital Contribution payments.
Each of the Class A Members agrees that the provisions of this Section 4.2.2
are
fair and reasonable under the circumstances.”
2.2.
Cancellation
of Management Fee.
The
parties agree to amend the Management Fee payable pursuant to Section 5.4.1
of
the Agreement as follows:
A. Concurrently
with the execution of this Amendment, the Company is paying Pacific Advisors
$[*], representing the monthly $[*] Facility Fee that has accrued, but not
been
paid, for the five-month period commencing on August 1, 2007 and ending on
December 31, 2007.
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B. Effective
January 1, 2008, Section 5.4.1 is hereby deleted in its entirety, and all
obligations of the Company under the Agreement to pay Pacific Advisors a
Management Fee are hereby terminated.
2.3.
Company
Right of First Refusal to Purchase Additional Facilities; Option to Acquire
New
Additional Facilities.
New
Sections 3.7, 3.8 and 3.9 of the Agreement are hereby added as additional
Sections of the Agreement as follows:
“3.7.
Company
Right of First Refusal to Purchase Additional Facilities.
NutraCea and Pacific Advisors hereby agree that all Facilities and other aspects
of the Project in the Territory are intended to be conducted by the Company.
If
either NutraCea or Pacific Advisors identifies a site in the Territory that
it
believes is suitable to become a Facility, the proposed Facility and all
material terms with regard thereto shall be provided in writing to each of
the
Class A Members and to the Finance Committee, and the Company shall have the
right to proceed with such proposed Facility. The Company may fail to pursue
a
Facility proposed by one of the Class A Members. Accordingly, the Members hereby
agree that potential Facilities should hereafter be considered and pursued
as
follows:
3.7.1 Facility
Notice.
In the
event that either NutraCea or Pacific Advisors (the “Initiating
Member”)
identifies a site or opportunity that it believes is suitable for a Facility
within the Territory and desires to pursue, the Initiating Member shall provide
written notice to the Company of the opportunity (“Facility
Notice”)
and,
in connection therewith, shall deliver to the Company and the Finance Committee
all information in the possession of such party regarding such proposed Facility
(including without limitation the potential size of the Facility, its expected
output, its costs, its location, the parties involved, the financial commitments
related to the Facility, the expected revenues/profits of such Facility, and
the
proposed purchaser or purchasers (the “Target
Purchasers”)
of the
Product produced by the proposed Facility). The proposed Facility may be a
facility for the production of either SRB or any other Product listed on Exhibit
B. If any member of the Finance Committee believes that the proposed Facility
might be suitable for the Company, the Finance Committee shall meet to consider
the proposed Facility, and the Finance Committee and the Company shall
thereafter evaluate and in good faith consider the proposed Facility as an
investment by the Company. Provided that the Company is, in good faith,
proceeding with its evaluation of the proposed Facility as an investment by
the
Company, the Company shall have the exclusive right to such proposed project
for
a period of 60 days after the date of delivery of the Facility Notice, and
no
Class A Member may, during such time, take any action to develop such proposed
Facility for its own account. If the Finance Committee decides to pursue a
proposed Facility, the Finance Committee shall advise the Initiating Member
that
the Company is proceeding. The Finance Committee shall thereafter establish
a
budget to construct and establish the proposed Facility and, based on that
budget, may thereafter require the Class A Members to make one or more capital
contributions to fund the development of the new Facility, which capital
contribution shall first be requested under Section 4.2.1(b) and thereafter
under Section 4.5. The Company shall be deemed to have rejected a proposed
Facility if (i) any member of the Finance Committee votes against the proposed
Facility, (ii) any member of the Finance Committee fails to vote for or against
the proposed Facility within such 60 day period, or (iii) if after the Finance
Committee approves the proposed Facility and makes a capital call for such
project, any Class A Member fails to make the required additional Capital
Contribution for the new Facility in full and on a timely basis (whether
required pursuant to Section 4.2.1, or pursuant to Section 4.5). In the event
that the Company does not elect to proceed with a proposed Facility within
such
60 day time period (such Facility is herein referred to as the “Excluded
Facility”)
for
any reason, then, as set forth below, the Class A Member affiliated with the
Finance Committee member who (a) voted for
Company’s acquisition/development the Excluded Facility and (b) made, or was
willing to make, the required capital contribution, shall have the right to
proceed with the proposed Facility for its own account in accordance with the
provisions of this Section 3.7. (For example, if NutraCea identifies a proposed
Facility and ▇▇▇▇ ▇▇▇▇▇, NutraCea’s member on the Finance Committee, votes for
the proposed Facility, but [*] votes against the proposed Facility, then
NutraCea shall have the right to proceed with the Excluded Facility. However,
NutraCea may not proceed with the development of the Excluded Facility for
its
own account if ▇▇▇▇ ▇▇▇▇▇, as a member of the Finance Committee, voted against
the Company’s acquisition/development of the proposed Facility of if he fails to
vote within the 60-day period.) If the Excluded Facility is developed by a Class
A Member, then the calls for Capital Contributions requested for such Facility
will be withdrawn, and no Class A Member shall have the obligation or right
to
make the requested Capital Contribution.
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3.7.2 Development
of Excluded Facility.
If the
Finance Committee elects not to pursue a proposed Facility and, as a result,
one
Class A Member (the “Electing
Member”)
obtains the right under Section 3.7(a) to develop the Excluded Facility, the
Electing Member may thereafter elect to develop the Excluded Facility for its
own account by delivering
written notice to the Company and to the other Class A Member confirming the
Electing Member’s bona fide desire to proceed with such proposed
Facility.
The
Electing Member proposing the purchase of the Excluded Facility may proceed
to
complete the Excluded Facility described in the notice, provided that the
Excluded Facility that is developed is substantially the same in size, location
and functionality as the proposed Facility considered by the Finance Committee,
and that the Excluded Facility is acquired/developed on substantially the same
terms and conditions as considered by the Finance Committee.
3.8. Operation
of The Excluded Facility.
If the
Company or Finance Committee rejects the opportunity to develop a proposed
Facility and, as a result, the Electing Member obtains the right under Section
3.7 to develop the Excluded Facility, the Electing Member may thereafter
acquire, develop and operate the Excluded Facility for its own account and
benefit (and not for the account or benefit of the Company). The Electing Member
shall bear all of the costs associated with acquiring, developing and operating
the Excluded Facility, and the Electing Member shall have the right receive
and
retain all revenue and profits from the Excluded Facility. All revenues and
profits derived from the Excluded Facility shall be for the Electing Member’s
own account, and the Electing Member shall not be obligated to share any profits
or revenues derived from such sales with the Company.
3.8.1. Excluded
Facility Customers.
The
Excluded Facility shall initially be permitted to sell Products from the
Excluded Facility only to the Target Purchasers. In the event that (i) the
Company does not have excess capacity to produce more Product at all of its
Facilities and there remains additional demand for Product in the Territory
by
other potential customers, and (ii) the Excluded Facility has the capability
of
producing extra Product to satisfy such unmet demand in the Territory, then
the
Excluded Facility shall have the right to sell its Products to such other
customers during the period in which the Company is unable to meet demand for
such Products. Notwithstanding the foregoing, without the Company’s consent, the
Excluded Facility may not sell any Product to existing customers of the
Company.
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3.8.2 Distribution
Fee.
The
parties hereto agree that, as a condition for any Excluded Facility obtaining
the right and license to produce, distribute and sell Product in the Territory,
the Excluded Facility/Electing Member shall pay the Company a fee equal to
5% of
gross sales, F.O.B, of such Excluded Facility.
3.8.3 Amendment
of License Agreement; New Equipment Lease.
In the
event NutraCea establishes and operates an Excluded Facility in accordance
with
the terms of Section 3.7, the Company and Pacific Advisors agree that the
License Agreement, which granted it the exclusive right to operate Facilities
in
the Territory, without any further action required by any party, will be amended
to grant NutraCea the limited right to establish and operate the Excluded
Facility and to sell the Product produced by the Excluded Facility in accordance
with this Section 3.8. In the event Pacific Advisors establishes and operates
an
Excluded Facility in accordance with the terms of Section 3.8, NutraCea agrees
that it shall lease to the Excluded Facility the rice stabilization equipment
required for the operation of the Excluded Facility. The terms under which
the
rice stabilization equipment is leased shall be substantially identical to
the
terms under which NutraCea otherwise leases such equipment to the
Company.
3.9 Option
to Acquire Excluded Facility.
Following the establishment and the commencement of operations of an Excluded
Facility, the Electing Member who elects to develop an Excluded Facility shall
grant the Company the right to acquire the Excluded Facility as
follows:
3.9.1 Election
Period; Option Acquire.
At any
time during the period commencing on the date that the Electing Member delivers
written notice pursuant to Section 3.7.2 to the Company and to the other Class
A
Member confirming the Electing Member’s bona fide desire to proceed with the
Excluded Facility, and ending 90 calendar days after an Excluded Facility has
been constructed and has commenced commercial production of Products (during
the
“Election
Period”),
the
Company shall have the right to acquire the Excluded Facility. The Electing
Member hereby grants the Company the right to acquire the Exclude Facility,
and
agrees to transfer the Excluded Facility to the Company, on the terms and
conditions set forth below. During the Election Period, the Electing Member
shall provide both the Company and the other Class A Member with access to
all
of the books and records related to the Excluded Facility, and shall provide
all
information reasonably requested regarding the development of the Excluded
Facility, its marketing plans, its target customers, and such other information
as they may reasonably request, all for the purposes of evaluating the possible
acquisition by the Company of the Excluded Facility.
3.9.2 Exercise.
The
option to acquire the Excluded Facility may be exercised on behalf of the
Company at any time during the Election Period by the member who is not the
Electing Member (the other Class A Member is herein referred to as the
“Non-Electing
Member”).
The
Non-Electing Member may exercise the Company’s option to purchase the Excluded
Facility (i) by providing written notice to the Electing Member of the election
to acquire the Facility and (ii) by making a capital contribution to the Company
in an amount equal to [*]% of the actual out-of-pocket expenses incurred by
the
Electing Member in the development and establishment of the Excluded Facility
(the dollar amount contributed by the Non-Electing Member is referred to as
the
“Option
Payment”).
Notwithstanding anything in this Agreement to the contrary, a capital
contribution made by a Non-Electing Member for the purposes of acquiring an
Excluded Facility shall not require the Electing Member to match the capital
contribution, and the provisions of Section 4.2.2, to the extent applicable,
shall not apply to such capital contribution. Upon the funding of the Option
Payment, the Company will purchase the entire Excluded Facility from the
Electing Member in consideration for a cash payment equal to Option Payment
and
a deemed capital contribution to the Company. Accordingly, upon the transfer
of
title of the entire Excluded Facility to the Company, the Electing Member shall
(i) be credited with making a capital contribution equal to Option Payment,
and
(ii) shall receive a cash payment from the Company equal to the Option Payment.
Following the acquisition of the Excluded Facility, that Facility shall
thereafter become a Company owned Facility and shall cease being an Excluded
Facility. Accordingly after the acquisition of the Excluded Facility by the
Company, all profits, losses and other attributes of the transferred Facility
shall accrue to the benefit of the Company.
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3.9.3 The
option granted under this Section 3.9 shall expire and no longer apply to any
further Excluded Facilities developed by a Electing Member if that Electing
Member owns two Excluded Facilities that are not acquired by the Company under
this Section 3.9 during their Election Periods.
3. Amendment
Controlling.
In the
event of any inconsistency between the terms of this Amendment and the terms
of
the Agreement, the terms of this Amendment shall control. Except to the extent
expressly amended pursuant to this Amendment, the terms and provisions of the
Agreement shall remain in full force and effect without
modification.
4. Counterparts.
This
Amendment may be executed in one or more counterparts, each of which shall
be an
original and all of which shall together constitute one and the same document.
The execution by a Member of a written consent approving this Amendment shall
constitute such Member’s execution of this Agreement.
5. Authorization.
By his
or her signature, each person executing this Amendment on behalf of a party
hereto represents and warrants to the other party hereto that he or she is
duly
authorized.
6. Governing
Law.
This
Amendment shall be governed by the laws of the State of Delaware,
notwithstanding its conflict of law provisions.
| NutraCea, a California corporation | |||
| By: | |||
|
▇▇▇▇
▇▇▇▇▇
|
|||
|
Pacific
Advisors Holdings Limited,
a
British Virgin Islands company
|
|||
| By: | |||
|
(___________________________) |
|||
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