Document:

ex10_19.htm

Exhibit 10.19

 

 

 

BUSINESS LOAN AGREEMENT (ASSET BASED)

	  	  	  	  	  	  	  
	
Principal

$6,000,000.00

	
Loan Date

06-01-2010

	
Maturity

06-30-2011

	
Bank/App

01

	
Loan No

00230296030000000001

	
Account

0023029603

	
Officer

MSJ01

	
References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or Item. 

Any Item above containing “***” has been omitted due to text length limitations.

 

	
Borrower:

	
OCEAN BIO CHEM INC(TIN: 59-1564329)

	
Lender:

	
REGIONS BANK

	  	
4041 SW 47 AVE 

FT LAUDERDALE, FL 333144023

	  	

MONTGOMERY: MIDDLE MARKET COMMERCIAL

201 MONROE STREET

	  	  	  	
ALMG60077B

	  	  	  	
MONTGOMERY, AL 36104

	 	 	 	 

 

THIS BUSINESS LOAN AGREEMENT (ASSET BASED) dated June 1, 2010, is made and executed between OCEAN BIO CHEM INC (“Borrower”) and REGIONS BANK (“Lender”) on the following terms and conditions. Borrower has received prior commercial loans from Lender or has applied to Lender for a commercial loan or loans or other financial accommodations, Including those which may be described on any exhibit or schedule attached to this Agreement. Borrower understands and agrees that: (A) In granting, renewing, or extending any Loan, Lender is relying upon Borrower’s representations, warranties, and agreements as set forth in this Agreement; (B) the granting, renewing, or extending of any Loan by Lender at all times shall be subject to Lender’s sole judgment and discretion; and (C) all such Loans shall be and remain subject to the terms and conditions of this Agreement.

 

TERM. This Agreement shall be effective as of June 1, 2010, and shall continue in full force and effect until such time as all of Borrower’s Loans in favor of Lender have been paid in full, including principal, interest, costs, expenses, attorneys’ fees, and other fees and charges, or until such time as the parties may agree in writing to terminate this Agreement.

 

LINE OF CREDIT. Lender agrees to make Advances to Borrower from time to time from the date or this Agreement to the Expiration Date, provided the aggregate amount of such Advances outstanding at any time does not exceed the Borrowing Base. Within the foregoing limits, Borrower may borrow, partially or wholly prepay, and reborrow under this Agreement as follows:

 

Conditions Precedent to Each Advance. Lender’s obligation to make any Advance to or for the account of Borrower under this Agreement is subject to the following conditions precedent, with all documents, instruments, opinions, reports, and other items required under this Agreement to be in form and substance satisfactory to Lender:

 

(1) Lender shall have received evidence that this Agreement and all Related Documents have been duly authorized, executed, and delivered by Borrower to Lender.

 

(2) Lender shall have received such opinions of councel, supplemental opinions, and documents as Lender may request.

 

(3) The security interests in the Collateral shall have been duly authorized, created, and perfected with first lien priority and shall be in full force and effect.

 

(4) All guaranties required by Lender for the credit facility(ies) shall have been executed by each Guarantor, delivered to Lender, and be in full force and effect.

 

(5) Lender, at its option and for its sole benefit, shall have conducted an audit of Borrower’s Accounts, Inventory, books, records, and operations, and Lender shall be satisfied as to their condition.

 

(6) Borrower shall have paid to Lender all fees, costs, and expenses specified in this Agreement and the Related Documents as are then due and payable.

 

(7) There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement, and Borrower shall have delivered to Lender the compliance certificate called for in the paragraph below titled “Compliance Certificate.”

 

Making Loan Advances. Advances under this credit facility, as well as directions for payment from Borrower’s accounts, may be requested orally or in writing by authorized persons. Lender may, but need not, require that all oral requests be confirmed in writing. Each Advance shall be conclusively deemed to have been made at the request of and for the benefit of Borrower (1) when credited to any deposit account of Borrower maintained with Lender or (2) when advanced in accordance with the instructions of an authorized person. Lender, at its option, may set a cutoff time, after which all requests for Advances will be treated as having been requested on the next succeeding Business Day.

 

Mandatory Loan Repayments. If at any time the aggregate principal amount of the outstanding Advances shall exceed the applicable Borrowing Base, Borrower, Immediately upon written or oral notice from Lender, shall pay to Lender an amount equal to the difference between the outstanding principal balance of the Advances and the Borrowing Base. On the Expiration Date, Borrower shall pay to Lender in full the aggregate unpaid principal amount of all Advances then outstanding and all accrued unpaid interest, together with all other applicable fees, costs and charges, if any, not yet paid.

 

Loan Account. Lender shall maintain on its books a record of account in which Lender shall make entries for each Advance and such other debits and credits as shall be appropriate in connection with the credit facility. Lender shall provide Borrower with periodic statements of Borrower’s account, which statements shall be considered to be correct and conclusively binding an Borrower unless Borrower notifies Lender to the contrary within thirty (30) days after Borrower’s receipt of any such statement which Borrower deems to be incorrect.

 

COLLATERAL. To secure payment of the Primary Credit Facility and performance of all other Loans, obligations and duties owed by Borrower to Lender, Borrower (and others, if required) shall grant to Lender Security Interests in such property and assets as Lender may require. Lender’s Security Interests in the Collateral shall be continuing liens and shall Include the proceeds and products of the Collateral, including without limitation the proceeds of any Insurance. With respect to the Collateral, Borrower agrees and represents and warrants to Lender:

 

Perfection of Security Interests. Borrower agrees to execute all documents perfecting Lender’s Security Interest and to take whatever actions are requested by Lender to perfect and continue Lender’s Security Interests in the Collateral. Upon request of Lender. Borrower will deliver to Lender any and all of the documents evidencing or constituting the Collateral, and Borrower will note Lender’s interest upon any and all chattel paper and instruments if not delivered to Lender for possession by Lender. Contemparaneous with the execution of this Agreement. Borrower will execute one or more UCC financing statements and any similar statements as may be required by applicable law, Borrower hereby Lender. Thereafter supplemental schedules shall be delivered according to the following schedule:

 

  

F-4

  

 

BUSINESS LOAN AGREEMENT (ASSET BASED)

	
Loan No: 0023029603000000001

	
(Continued)

	
Page 2

 

Representations and Warranties Concerning Accounts. With respect to the Accounts, Borrower represents and warrants to Lender: (1) Each Account represented by Borrower to be an Eligible Account for purposes of this Agreement conforms to the requirements of the definition of an Eligible Account; (2) All Account information listed on schedules delivered to Lender will be true and correct, subject to immaterial variance; and (3) Lender, its assigns, or agents shall have the right at any time and at Borrower’s expense to inspect, examine, and audit Borrower’s records and to confirm with Account Debtors the accuracy of such Accounts.

 

Representations and Warranties Concerning Inventory. With respect to the Inventory, Borrower represents and warrants to Lender: (1) All Inventory represented by Borrower to be Eligible Inventory for purposes of this Agreement conforms to the requirements of the definition of Eligible Inventory; (2) All Inventory values listed on schedules delivered to Lender will be true and correct, subject to Immaterial variance; (3) The value of the Inventory will be determined on a consistent accounting basis; (4) Except as agreed to the contrary by Lender in writing, all Eligible Inventory is now and at all times hereafter will be in Borrower’s physical possession and shall not be held by others on consignment, sale on approval, or sale or return; (5) Except as reflected in the Inventory schedules delivered to Lender, all Eligible Inventory is now and at all times hereafter will be of good and merchantable quality, free from defects; (6) Eligible Inventory is not now and will not at any time hereafter be stored with a bailee, warehouseman, or similer party without Lender’s prior written consent, and, in such event, Borrower will concurrently at the time of bailment cause any such bailee, warehouseman, or similar party to issue and deliver to Lender, in form acceptable to Lender, warehouse receipts in Lender name evidencing the storage of Inventory; and (7) Lender, its assigns, or agents shall have the right at any time and at Borrower’s expense to inspect and examine the Inventory and to check and test the same as to quality, quantity, value, and condition.

 

CONDITIONS PRECEDENT TO EACH ADVANCE. Lender’s obligation to make the initial Advance and each subsequent Advance under this Agreement shall be subject to the fulfillment to Lender’s satisfaction of all of the conditions set forth in this Agreement and in the Related Documents.

 

Loan Documents. Borrower shall provide to Lender the following documents for the Loan: (1) the Note; (2) together with all such Related Documents as Lender may require for the Loan; all in form and substance satisfactory to Lender and Lender’s counsel.

 

Borrower’s Authorization. Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly authorizing the execution and delivery of this Agreement, the Note and the Related Documents. In addition, Borrower shall have provided such other resolutions, authorizations, documents and instruments as Lender or its counsel, may require.

 

Fees and Expenses Under This Agreement. Borrower shall have paid to Lender all fees, costs, and expenses specified in this Agreement and the Related Documents as are then due and payable.

 

Representations and Warranties. The representations and warranties set forth in this Agreement, in the Related Documents, and in any document or certificate delivered to Lender under this Agreement are true and correct.

 

No Event of Default. There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement or under any Related Document.

 

REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any indebtedness exists:

 

Organization. Borrower is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of Florida. Borrower is duly authorized to transact business in all other states in which Borrower is doing business, having obtained all necessary fillings, governmental licenses and approvals for each state in which Borrower is doing business. Specifically, Borrower is, and at all times shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. Borrower has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. Borrower maintains an office at 4041 SW 47 AVE, FT LAUDERDALE, FL 333144023. Unless Borrower has designated otherwise in writing, the principal office is the office at which Borrower keeps its books and records including its records concerning the Colleteral. Borrower will notify Lender prior to any change in the location of Borrower’s state of organization or any change in Borrower’s name. Borrower shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to Borrower and Borrower’s business activities.

 

Assumed Business Names. Borrower has filed or recorded all documents or filings required by law relating to all assumed business names used by Borrower. Excluding the name of Borrower, the following is a complete list of all assumed business names under which Borrower does business: None.

 

Authorization. Borrower’s execution, delivery, and performance of this Agreement and all the Related Documents have been duly authorized by all necessary action by Borrower and do not conflict with, result in a violation of, or constitute a default under (1) any provision of (a) Borrower’s articles of incorporation or organization, or bylaws, or (b) any agreement or other instrument binding upon Borrower or (2) any law, governmental regulation, court decree, or order applicable to Borrower or to Borrower’s properties.

 

Financial Information. Each of Borrower’s financial statements supplied to Lender truly and completely disclosed Borrower’s financial condition as of the date of the statement, and there has been no material adverse change in Borrower’s financial condition subsequent to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements.

 

Legal Effect. This Agreement constitutes, and any instrument or agreement Borrower is required to give under this Agreement when delivered will constitute legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms.

 

Properties. Except as contemplated by this Agreement or as previously disclosed in Borrower’s financial statements or in writing to Lender and as accepted by Lender, and except for property tax lians for taxes not presently due and payable, Borrower owns and has good title to all of Borrower’s properties free and clear of all Security interests, and has not executed any security documents or financing statements relating to such properties. All of Borrower’s properties are titled in Borrower’s legal name, and Borrower has not used or filed a financing statement under any other name for at least the last five (5) years.

 

Hazardous Substances. Except as disclosed to and acknowledged by Lender in writing, Borrower represents and warrants that: (1) During the period of Borrower’s ownership of the collateral, there has been no use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance by any person on, under, about or from any of the Collateral. (2) Borrower has no knowledge of, or reason to believe that there has been (a) any breach or violation of any Environmental Laws; (b) any use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance on, under, about or from the Collateral by any prior owners or occupants of any of the Collateral; or (c) any actual or threatened litigation or claims of any kind by any person Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided.

 

  

 

  

 

	
BUSINESS LOAN AGREEMENT (ASSET BASED)

	
Loan No: 00230296030000000001

	
(Continued)

	
Page 3

 

Lien Priority. Unless otherwise previously disclosed to Lender in writing. Borrower has not entered into or granted any Security Agreements, or permitted the filing or attachment of any Security Interests on or [IILEGIBLE] any of the Collateral directly or indirectly securing repayment of Borrower’s Loan and Note, that would be prior or that may in any way be superior to Lender’s Security Interests and rights in and to such Collateral.

 

Binding Effect. This Agreement, the Note, all Security Agreements (if any), and all Related Documents are binding upon the signers thereof, as well as upon their successors, representatives and assigns, and are legally enforceable in accordance with their respective terms.

 

AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long as this Agreement remains in effect, Borrower will:

 

Notices of Claims and Litigation. Promptly inform Lender in writing of (1) all material adverse changes in Borrower’s financial condition, and (2) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor.

 

Financial Records. Maintain its books and records in accordance with GAAP, applied on a consistent basis, and permit Lender to examine and audit Borrower’s books and records at all reasonable times.

 

Financial Statements. Furnish Lender with the following:

 

Annual Statements. As soon as available, but in no event later than one-hundred-twenty (120) days after the end of each fiscal year, Borrower’s balance sheet and income statement for the year ended, audited by a certified public accountant satisfactory to Lender.

 

Interim Statements. As soon as available, but in no event later than sixty (60) days after the end of each fiscal quarter. Borrower’s balance sheet and profit and loss statement for the period ended, prepared by Borrower in form satisfactory to Lender.

 

Additional Requirements.

Borrower agrees to provide a Monthly Borrowing Base Certificate, Accounts Receivable Aging Report & Inventory Listing within 30 days of Month-End.

 

All financial reports required to be provided under this Agreement shall be prepared in accordance with GAAP, applied on a consistent basis, and certified by Borrower as being true and correct.

 

Additional Information. Furnish such additional Information and statements, as Lender may request from time to time.

 

Financial Covenants and Ratios. Comply with the following covenants and ratios:

 

Additional Requirements.

Current Ratio (min): Should be 1.50x and will be tested Quarterly

 

Total Debt/TNW (max): Shall not exceed 2.50x and will be tested Quarterly

 

Fixed Charge Coverage (min): Maintain Fixed Charge Coverage Ratio minimum of 1.20x and will be tested on a Rolling 4 Quarter testing period

 

Defined as: NOI (net operating income) + depreciation + amortization + lease/rent divided by Interest expense + Income tax expense + rent + CMLTDpp (current maturities of long term debt prior period) + Maintenance CAPEX + Non-discretionary dividends.

 

P-Card shall be cross defaulted and cross -collateralized with the working capital line of credit.

 

Except as provided above, all computations made to determine compliance with the requirements contained in this paragraph shall be made in accordance with generally accepted accounting principles, applied on a consistent basis, and certified by Borrower as being true and correct.

 

Insurance. Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect to Borrower’s properties and operations, in form, amounts, coverages and with insurance companies acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least thirty (30) days prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering assets In Which Lender holds or is offered a security interest for the Loans, Borrower will provide Lender with such lender’s loss payable or other endorsements as Lender may require.

 

Insurance Reports. Furnish to Lender, upon request of Lender, reports on each existing Insurance policy showing such information as Lender may reasonably request, including without limitation the following: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties insured; (5) the then current property values on the basis of which insurance has been obtained, and the manner of determining those values; and (6) the expiration date of the policy. In addition, upon request of Lender (however not more often than annually), Borrower will have an Independent appraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower.

 

Other Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party and notify Lender immediately in writing of any default in connection with any other such agreements.

 

Loan Proceeds. Use all Loan proceeds solely for Borrower’s business operations, unless specifically consented to the contrary by Lender in writing.

 

Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments, taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of Borrower’s properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such assessment, tax, charge, levy, lien or claim so long as (1) the legality of the same shall be contested in good faith by appropriate proceedings, and (2) Borrower shall have established on Borrower’s books adequate reserves with respect to such contested assessment, tax, charge, levy, lien, or claim in accordance with GAAP.

 

Performance. Perform and comply, in a timely manner, with all terms, conditions, and provisions set forth in this Agreement, in the Related Documents and in all other instruments and agreements between Borrower and Lender. Borrower shall notify Lender immediately in provide Lender with copies of any records it may request, all at Borrower’s expense.

 

  

 

  

 

	
BUSINESS LOAN AGREEMENT (ASSET BASED)

	
Loan No: 00230296030000000001

	
(Continued)

	
Page 4

 

Compliance Certificate. Unless waived in writing by Lender, provide Lender at least annually, with a certificate executed by Borrower’s chief financial officer, or other officer or person acceptable to Lender, certifying that the representations and warranties set forth in this Agreement are true and correct as of the date of the certificate and further certifying that, as of the date of the certificate, no Event of Default exists under this Agreement.

 

Environmental Compliance and Reports. Borrower shall comply in all respects with any and all Environmental Laws; not cause or permit to exist, as a result of an intentional or unintentional action or omission on Borrower’s part or on the part of any third party, on property owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless such environmental activity is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal, state or local governmental authorities; shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof a copy of any notice, summons, lien, citation, directive, letter or other communication from any governmental agency or instrumentality conceming, any intentional or unintentional action or omission on Borrower’s part in connection with any environmental activity whether or not there is damage to the environment and/or other natural resources.

 

Additional Assurances. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, assignments, financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence and secure the Loans and to perfect all Security interests.

 

LENDER’S EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender’s interest in the Collateral or if Borrower fails to comply with any provision of this Agreement or any Related Documents, including but not limited to Borrower’s failure to discharge or pay when due any amounts Borrower is required to discharge or pay under this Agreement or any Related Documents, Lender on Borrower’s behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on any Collateral and paying all costs for insuring, maintaining and preserving any Collateral. All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note, or the maximum rate permitted by law, whichever is less, from the date incurred or paid by Lender to the date of repayment by Borrower. All such expenses will become a part of the Indebtedness and, at Lender’s option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note’s maturity.

 

NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the prior written consent of Lender:

 

Indebtedness and Liens. (1) Except for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by this Agreement, creat, incur or assume indebtedness for borrowed money, including capital leases, (2) sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of Borrower’s assets (except as allowed as Permitted Liens), or (3) sell with recourse any of Borrower’s accounts, except to Lender.

 

Continuity of Operations. (1) Engage in any business activities substantially different than those in which Borrower is presently engaged, (2) cease operations, liquidate, merge, transfer, acquire or consolidate with any other entity, change its name, dissolve or transfer or sell Collateral out of the ordinary course of business, or (3) pay any dividends on Borrower’s stock (other than dividends payable in its stock), provided, however that notwithstanding the foregoing, but only so long as no Event of Default has occurred and is continuing or would result from the payment of dividends, if Borrower is a “Subchapter S Corporation” (as defined in the internal Revenue Code of 1986, as amended). Borrower may pay cash dividends on its stock to its shareholders from time to time in amounts necessary to enable the shareholders to pay income taxes and make estimated income tax payments to satisfy their liabilities under federal and state law which arise solely from their status as Shareholders of a Subchapter S Corporation because of their ownership of shares of Borrower’s stock, or purchase or retire any of Borrower’s outstanding shares or alter or amend Borrower’s capital structure.

 

Loans, Acquisitions and Guaranties. (1) Loan, invest in or advance money or assets to any other person, enterprise or entity, (2) purchase, create or acquire any interest in any other enterprise or entity, or (3) incur any obligation as surely or guarantor other than in the ordinary course of business.

 

Agreements. Borrower will not enter into any agreement containing any provisions which would be violated or breached by the performance of Borrower’s obligations under this Agreement or in connection herewith.

 

CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse change in Borrower’s financial condition, in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; or (D) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor’s guaranty of the Loan or any other loan with Lender; or (E) Lender in good faith deems itself insecure, even though no Event of Default shall have occurred.

 

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower’s accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the debt against any and all such accounts, and, at Lender’s option, to administratively freeze all such accounts to allow Lender to protect Lender’s charge and setoff rights provided in this paragraph.

 

DEFAULT. Each of the following shall constitute an Event of Default under this Agreement:

 

Payment Default. Borrower falls to make any payment when due under the Loan.

 

Other Defaults. Borrower falls to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.

 

Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower’s or any Grantor’s property or Borrower’s or any Grantor’s ability to repay the Loans or perform their respective obligations under this Agreement or any of the Related Documents.

 

False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this Agreement or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.

 

  

 

  

 

	
BUSINESS LOAN AGREEMENT (ASSET BASED)

	
Loan No: 00230296030000000001

	
(Continued)

	
Page 5

 

[ILLEGIBLE] EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including any obligation to make further Loan Advances or disbursements), and, at Lender’s option, all indebtedness immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default of the type described in the “Insolvency” subsection above, such acceleration shall be automatic and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lender’s rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower or of any Grantor shall not effect Lender’s right to declare a default and to exercise its rights and remedies.

 

ADDITIONAL DEFINITIONS. Certain Defined Terms. For purposes of the foregoing financial covenants, the following terms are defined as follows:

 

Capital Expenditures means any expenditure for fixed assets or that is properly chargeable to capital account in accordance with generally accepted accounting principles.

 

Current Assets means assets that, in accordance with generally accepted accounting principles, are current assets; provided, however, that (a) inventories shall be taken into account on the basis of cost or current market value, whichever is lower, or, to the extent that such inventories are required for delivery under then existing contracts, the applicable contract price, (b) current assets shall not include any intangible assets or any securities that are not readily marketable, (c) securities included as current assets shall be taken into account at the current market price thereof, and (d) current assets shall not include any amounts due from or owed by any shareholder/partner/member or Affiliate of the Borrower or any of its Subsidiaries.

 

Current Liabilities means short-term obligations due within one year, including current maturities of long- term debts.

 

Debt means (a) all indebtedness, whether or not represented by bonds, debentures, notes or other securities, for the repayment of borrowed money, (b) all deferred indebtedness for the payment of the purchase price of property or assets purchased, (c) all capitalized lease obligations, (d) all indebtedness secured by any Lien on any property of such person, whether or not indebtedness secured thereby has been assumed, (e) all obligations with respect to any conditional sale contract or title retention agreement, (f) all indebtedness and obligations arising under acceptance facilities or in connection with surety or similar bonds, and the outstanding amount of all letters of credit issued for the account of such person, and (g) all obligations with respect to interest rate swap agreements.

 

Funded Debt means all Debt maturing by its terms more than one year after, or which is renewable or extendible at the option of the obligor to a date more than one year after, the date as of which Funded Debt is being determined.

 

Guaranteed Obligations means all guaranties, endorsements, assumptions and other contingent obligations in respect of, or to purchase or to otherwise acquire, any indebtedness, obligation or liability of another person.

 

Interest Expense means interest payable on Debt during the period in question.

 

Liabilities means all Debt and all other items (including taxes accrued as estimated) which, in accordance with generally accepted accounting principles, would be included in determining total liabilities as shown on the liabilities side of a balance sheet.

 

Lien means any mortgage, pledge, assignment, charge, encumbrance, lien, security title, security interest or other preferential arrangement.

 

Net Cash Flow for any period means net income (or the net deficit, if expenses and charges exceed revenues and other proper income credits) for such period, plus amounts that have been deducted for (a) depreciation and (b) amortization in determining net income for such period.

 

Net income means, for any period and with repect to any person or entity, the net earnings (after income taxes) of such period, determined on a FIFO basis and in accordance with GAAP, but excluding (a) any gain or loss arising from the sale of capital assets, (b) any gain arising from any write-up of assets, (c) earnings from any person or entity, substantially all of the assets of which have been acquired in any manner by the person or entity whose net income is measured, to the extent that such earnings were realized by such other person or entity prior to the date of such acquisition, (d) net earnings of any other person or entity in which the person or entity whose net income is measured has an ownership interest, unless such earnings have actually been received in the form of cash distributions, (e) the earnigs of any other person or entity to which assets of the person or entity whose net income is measured shall have been sold, transfered to, disposed of, or into which the person or entity whose net income is measured shall have merged, to the extent that such earnings arise prior to the date of such transaction, (f) any gain arising from the acquisition of any securities of the person or entity whose net income is measured, and (g) any other extraordinary or nonrecurring gains.

 

Net Income Available for interest Payments for any period means net income (or the net deficit, if expenses and charges exceed revenues and other proper income credits) for such period plus amounts that have been deducted for (a) Interest Expense, (b) Income and profit taxes, and (c) amortization of debt discount in determining net income for such period.

 

Permitted Contest means any appropriate proceeding conducted in good faith by the Borrower to contest any tax, assessment, charge, Lien or similar claim, during the pendency of which proceeding the enforcement of such tax, assessment, charge, Lien or claim is stayed; provided that the Borrower has set aside on its books or, if required by the Lender, deposited as cash collateral with the Lender, adequate cash reserves to assure the payment or any such tax, assessment, charge, Lien or claim.

 

Principal Maturities means principal maturing or coming due on Debt during the period in question.

 

Short-Term Debt means all Debt which by its terms matures within one year from, and which is not renewable at the option of the obligor to a date later than one year after, the date such Debt was incurred. Any Debt that is extended or renewed (other than pursuant to the option of the obligor) shall be deemed to have been incurred at the date of such extension or renewal.

 

Solvent means, as to any person or entity, such person or entity (i) owns property whose fair salable value is greater than the amount required to pay all of such person’s or entity’s debts (including contingent, subordinated, unmatured and unliquidated liabilities), (ii) owns property whose present fair salable value is greater than the probable total liabilities (including contingent, subordinated, unmatured and unliquidated liabilities) of such person or entity, (iii) is able to pay all of its debts as such debts mature, (iv) has capital that is not unreasonably small for its business and is sufficient to carry on its business and transactions and all business and transactions in which it is about to engage, (v) is not “insolvent” within the meaning of Section 101(32) of the United States Bankruptcy Code, and (vi) has not incurred (by way of assumption or otherwise) any obligations or liabilities (contingent or otherwise) under any of the Loan documents, or made any conveyance pursuant to or in connection therewith, with actual intent to hinder, delay or defraud either present or future creditors of such person or entity or any of its Subsidiaries. As used herein, the term “fair salable value” of a person’s or entity’s assets means the amount that may be realized within a reasonable time, either through collection or sale of such assets at the regular market value, based upon the amount that could be obtained for such assets within such period by a capable and diligent seller from an interested buyer who is willing (but is under no compulsion) to purchase under ordinary selling conditions.

 

Subsidiary or Subsidiaries means with respect to any person or entity, (a) any corporation more than fifty percent (50%) of whose outstanding Income Tax Expense, (c) depreciation, (d) amortization, and (e) lease and rent expense.

 

  

 

  

 

	
BUSINESS LOAN AGREEMENT (ASSET BASED)

	
Loan No: 00230296030000000001

	
(Continued)

	
Page 6

 

Maintenance Capital Expenditures means the minimum amount of capital expenditures, not financed with Debt, needed to keep the company operating at its current level. The amount of Maintenance Capital Expenditures will be provided by the Borrower to the Lender in an acceptable form. If such information is not supplied or is not acceptable, Maintenance Capital Expenditures will be deemed to be 50% of depreciation expense.

 

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement:

 

Amendments. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.

 

Attorneys’ Fees; Expenses. Borrower agrees to pay upon demand all of Lender’s costs and expenses, including Lender’s attorneys’ fees and Lender’s legal expenses, incurred in connection with the enforcement of this Agreement. Lender may hire or pay someone else to help enforce this Agreement, and Borrower shall pay the costs and expenses of such enforcement. Costs and expenses include Lender’s attorneys’ fees and legal expenses whether or not there is a lawsuit, including attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Borrower also shall pay all court costs and such additional fees as may be directed by the court.

 

Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement.

 

Consent to Loan Participation. Borrower agrees and consents to Lender’s sale or transfer, whether now or later, of one or more participation interests in the Loan to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy Borrower may have with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interests will be considered as the absolute owners of such interests in the Loan and will have all the rights granted under the participation agreement or agreements governing the sale of such participation interest. Borrower further waives all rights of offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or such purchaser may enforce Borrower’s obligation under the Loan irrespective of the failure or insolvency of any holder of any interest in the Loan. Borrower further agrees that the purchaser of any such participation interests may enforce its interests irrespective of any personal claims or defenses that Borrower may have against Lender.

 

Governing Law. This Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Alabama without regard to its conflicts of law provisions. This Agreement has been accepted by Lender in the State of Alabama.

 

No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender’s right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute a waiver of any of Lender’s rights or of any of Borrower’s or any Grantor’s obligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.

 

Notices. Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Agreement. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party’s address. For notice purposes, Borrower agrees to keep Lender informed at all times of Borrower’s current address. Unless otherwise provided or required by law, if there is more than one Borrower, any notice given by Lender to any Borrower is deemed to be notice given to all Borrowers.

 

Severability. If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability of any other provision of this Agreement.

 

Subsidiaries and Affiliates of Borrower. To the extent the context of any provisions of this Agreement makes it appropriate, including without limitation any representation, warrenty or covenant, the word “Borrower” as used in this Agreement shall include all of Borrower’s subsidiaries and affiliates. Notwithstanding the foregoing however, under no circumstances shall this Agreement be construed to require Lender to make any Loan or other financial accommodation to any of Borrower’s subsidiaries or affiliates.

 

Successors and Assigns. All covenants and agreements by or on behalf of Borrower contained in this Agreement or any Related Documents shall bind Borrower’s successors and assigns and shall inure to the benefit of Lender and its successors and assigns. Borrower shall not, however, have the right to assign Borrower’s rights under this Agreement or any interest therein, without the prior written consent of Lender.

 

Survival of Representations and Warranties. Borrower understands and agrees that in extending Loan Advances, Lender is relying on all representations, warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Agreement or the Related Documents. Borrower further agrees that regardless of any investigation made by Lender, all such representations, warranties and covenants will survive the extension of Loan Advances and delivery to Lender of the Related Documents, shall be continuing in nature, shall be deemed made and redated by Borrower at the time each Loan Advance is made, and shall remain in full force and effect until such time as Borrower’s indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur.

 

Time is of the Essence. Time is of the essence in the performance of this Agreement.

 

  

 

  

 

	 	
BUSINESS LOAN AGREEMENT (ASSET BASED)

	 
	
Loan No: 00230296030000000001

	
(Continued)

	
Page 7

 

Waive Jury.  All parties to this agreement hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by any Accounts $6,000,000,00), plus (b) 50.000% of the aggregate amount of Eligible Inventory (not to exceed in corresponding Loan amount based on Eligible inventory $6,000,000.00).

 

Business Day. The words “Business Day” mean a day on which commercial banks are open in the State of Alabama.

 

Collateral. The word “Collateral” means all properly and assets granted as collateral security for a Loan, whether real or personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment Intended as a security device. or any other security or lien interest whatsoever, whether created by law, contract, or otherwise. The word Collateral also includes without limitation all collateral described in the Collateral section of this Agreement.

 

Eligible Accounts. The words “Eligible Accounts” mean at any time, all of Borrower’s Accounts which contain selling terms and conditions acceptable to Lender. The net amount of any Eligible Account against which Borrower may borrow shall exclude all returns, discounts, credits, and offsets of any nature. Unless otherwise agreed to by Lender in writing, Eligible Accounts do not include:

 

          (1) Accounts with respect to which the Account Debtor is employee or agent of Borrower.

 

          (2) Accounts with respect to which the Account Debtor is a subsidiary of, or affiliated with Borrower or its shareholders, officers, or directors.

 

          (3) Accounts with respect to which goods are placed on consignment, guaranteed sale, or other terms by reason of which the payment by the Account Debtor may be conditional.

 

          (4) Accounts with respect to which Borrower is or may become liable to the Account Debtor for goods sold or services rendered by the Account Debtor to Borrower.

 

          (5) Accounts which are subject to dispute, counterclaim, or setoff.

 

          (6) Accounts with respect to which the goods have not been shipped or delivered, or the services have not been rendered, to the Account Debtor.

 

          (7) Accounts with respect to which Lender, in its sole discretion, deems the creditworthiness or financial condition of the Account Debtor to be unsatisfactory.

 

          (8) Accounts of any Account Debtor who has filed or has had filed against it a petition in bankruptcy or an application for relief under any provision of any state or federal bankruptcy, insolvency, or debtor-in-relief acts; or who has had appointed a trustee, custodian, or receiver for the assets of such Account Debtor; or who has made an assignment for the benefit of creditors or has become insolvent or falls generally to pay its debts (including its payrolls) as such debts become due.

 

          (9) Accounts which have not been paid in full within 90 Days from the invoice date.

 

 Eligible Inventory. The words “Eligible Inventory” mean, at any time, all of Borrower’s Inventory as defined below, except:

 

          (1) Inventory which is not owned by Borrower free and clear of all security interests, liens, encumbrances, and claims of third parties.

 

          (2) Inventory which Lender, in its sole discretion, deems to be obsolete, unsalable, damaged, defective, or unfit for further processing.

 

Environmental Laws. The words “Environmental Laws” mean any and all state, federal and local statutes, regulations and ordinances relating to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 (“SARA”), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state or federal laws, rules, or regulations adopted pursuant thereto.

 

Event of Default. The words “Event of Default” mean any of the events of default set forth in this Agreement in the default section of this Agreement.

 

Expiration Date. The words “Expiration Date” mean the date of termination of Lender’s commitment to lend under this Agreement.

 

GAAP. The word “GAAP” means generally accepted accounting principles.

 

Grantor. The word “Grantor” means each and all of the persons or entities granting a Security interest in any Collateral for the Loan, Including without limitation all Borrowers granting such a Security interest.

 

Guarantor. The word “Guarantor” means any guarantor, surety, or accommodation party of any or all of the Loan.

 

Guaranty. The word “Guaranty” means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note.

 

Hazardous Substances. The words “Hazardous Substances” mean materials that, because of their quantity, concentration or physical, chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The Words “Hazardous Substances” are used in their very broadest sense and include without limitation any and all hazardous or toxic substances, materials or waste as defined by or listed under the Environmental Laws. The term “Hazardous Substances” also includes, without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos.

 

Indebtedness. The word “Indebtedness” means the Indebtedness evidenced by the Note or Related Documents, including all principal and interest together with all other Indebtedness and costs and expenses for which Borrower is responsible under this Agreement or under any of the Related Documents.

 

Inventory. The word “Inventory” means all of Borrower’s raw materials, work in process, finished goods, merchandise, parts and supplies, of every kind and description, and goods held for sale or lease or furnished under contracts of service in which Borrower now has or hereafter acquires any right, whether held by Borrower or others, and all documents of title, warehouse receipts, bills of lading, and all other documents of every type covering all or any part of the foregoing. Inventory includes Inventory temporarily out of Borrower’s custody or possession and all returns on Accounts.

 

Lender. The word “Lender” means REGIONS BANK, its successors and assigns.

 

Loan. The word “Loan” means any and all loans and financial accommodations from Lender to Borrower whether now or hereafter existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement from time to time.

 

  

 

  

 

	
BUSINESS LOAN AGREEMENT (ASSET BASED)

	
Loan No: 00230296030000000001

	
(Continued)

	
Page 8

	  	
whether in the form of a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever whether created by law, contract, or otherwise.

 

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT (ASSET BASED) AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT (ASSET BASED) IS DATED JUNE 1, 2010. 

 

THIS AGREEMENT IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS AGREEMENT IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.

 

BORROWER:

	  	 	  
	
OCEAN BIO CHEM INC

	  	  	  
	
By:

	

	
(Seal)

	  	
PETER G. DORNAU, CEO of OCEAN BIO CHEM INC

	  

 

LENDER:

	  	  
	
REGIONS BANK

	  	  
	
By:

	

	
(Seal)

	  	
Authorized Signer

	  

	
[ILLEGIBLE]ex10_2.htm

Exhibit 10.2

 

EMPLOYMENT AGREEMENT

This Employment Agreement (“Agreement”) is entered into by and between NutraCea, a California corporation with principal offices at 6720 North Scottsdale Road, Suite 390, Scottsdale, Arizona 85253 (“NutraCea”, the “Company” or the “Employer”) and Kody Newland an individual with a mailing address at 1928 East Highland F-104 PMB 611, Phoenix, Arizona 85016 (“Employee”) effective as of March 3, 2010 (“Effective Date”), as follows:

AGREEMENT

1.           Employment. NutraCea wishes to employ Employee and Employee agrees to provide services for NutraCea on the terms and conditions set forth below.

2.           Employment; Scope of Employment. Employee shall be employed as Senior Vice President of Sales and Marketing of NutraCea.  NutraCea reserves the exclusive right to designate and modify Employee’s specific duties from time to time in any manner consistent with Employee’s status as Senior Vice President of Sales and Marketing of NutraCea.  No modification or change of Employee’s responsibilities and/or duties shall modify, change or revoke any provision of this Agreement.

2.1           Best Efforts; Full Working Time.  Employee agrees to devote his/her best efforts, attention, skill and experience to the performance of Employee’s duties all in accordance with the provisions of this Agreement.  Employee shall apply his/her entire full working time to performing these services.

2.2           Supervision and Direction of Services.  All of Employee’s services shall be under the supervision and direction of the Chief Executive Officer of NutraCea.

2.3           Rules.  Employee shall be bound by all the policies, rules and regulations of NutraCea now in force and by all such other policies, rules and regulations as may be hereafter implemented and shall faithfully observe and abide by the same.  No such policy, rule or regulation shall alter, modify or revoke Employee’s status as an at-will employee or any other provision of this Agreement.

2.4           Exclusive Services.  During the Term of this Agreement and any extension of this Agreement, Employee shall not, directly or indirectly, whether as a partner, employee, creditor, shareholder, independent contractor or otherwise, promote, participate or engage in any activity or other business which NutraCea deems in its sole discretion to be competitive in any way with NutraCea’s current or future business operations.  Employee agrees that Employee shall not enter into any agreement to establish, form, contract with or become employed by a competing business of NutraCea while Employee is employed with NutraCea.

2.5           Non-Solicitation. To the fullest extent permissible under applicable law, Employee agrees that both during the term of this Agreement and for a period of two (2) years following termination of this Agreement, Employee shall not take any action to induce employees or independent contractors of NutraCea to sever their relationship with NutraCea and to accept an employment or an independent contractor relationship with any other business.

 

  

  

  

3.           Term and Termination; Payments upon Termination.

3.1           Term and Termination. Unless earlier terminated for Cause (as defined below), NutraCea hereby employs the Employee for a period commencing on the Effective Date and ending on March 3, 2012 (the “Term”).  The Term may be extended by mutual agreement of the parties on a month-to-month basis unless either party notifies the other party in writing at least ninety (90) days prior to the expiration of the then-effective Term of such party’s intention not to renew this Agreement.

3.1.1           Termination for Cause.  “Cause” for termination of Employee’s employment shall mean the occurrence of any of the following:

(a)           Employee has materially breached the terms here of;

(b)           Employee, in the reasonable determination of the Board of Directors of NutraCea has been grossly negligent or engaged in material willful or gross misconduct in the performance of his/her duties;

(c)           Has failed to meet written standards established by NutraCea for the performance of duties hereunder;

(d)           Employee has committed, as determined by the Board of Directors of NutraCea, or has been convicted of fraud, moral turpitude, embezzlement, theft, or dishonesty or other criminal conduct;

(e)           Employee has taken other actions or omitted to take any actions such that such action or omissions constitute legal cause for termination under Arizona law, as then in effect; or

(f)           Habitual misuse of alcohol or any non-prescribed drug.

3.2           Payments upon Termination.

 

3.2.1           For Cause.  Following any termination by the Company for Cause, Employee shall be entitled to receive in cash payment an amount equal to all previously accrued but unpaid or unused compensation, including but not limited to, salary, vacation pay and Employee may retain the vested portion of any stock and stock  options properly and duly granted to Employee as of such date, subject and pursuant to the terms of the stock option agreements or stock purchase agreements entered into between NutraCea and Employee, which grant NutraCea certain repurchase rights.

3.2.2           Without Cause.  Following any termination by the Company without Cause, Employee (or Employee’s estate) shall be entitled to receive in cash payment an amount equal to all previously accrued but unpaid or unused compensation, including but not limited to , salary, vacation pay and Employee may retain the vested portion of any stock and stock options properly and duly granted to Employee as of such date, subject and pursuant to the terms of the stock option agreements or stock purchase agreements entered into between NutraCea and Employee, which grant NutraCea certain repurchase rights.  Employee will also receive ninety (90) days of pay and receive continuing insurance coverage for ninety (90) days.  Any stock options due to vest in the ninety (90) days immediately after termination will vest upon termination.

4.           Compensation; Benefits.

4.1           Base Salary.  Employee shall be paid at a rate which, on an annualized basis, equals one hundred seventy five thousand dollars ($175,000) per year subject to normal payroll withholdings and NutraCea’s standard payroll practices.  As a named Executive Officer of NutraCea, Employee’s salary shall be subject to increase as determined by the Board of Directors.

  

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4.2           Expenses.  Employee shall be reimbursed for reasonable business expenses which he/she incurs in the performance of his/her duties hereunder, in accordance with NutraCea’s standard reimbursement policies.

4.3           Annual Bonus Program.  Employee shall participate in any NutraCea annual bonus program that is adopted by NutraCea (subject to the terms and conditions of any such program).  Any such annual bonus program shall be approved by the NutraCea Compensation Committee and the Board of Directors and shall set forth objective criteria for bonus payments based on the financial performance of NutraCea and specific sales related goals and objectives set for the Employee. Such annual bonus program also shall set forth a target bonus objective for Employee, which target amount initially shall be thirty percent (30%) of his Base Salary.  The actual annual bonus amount, if any, shall be paid in accordance with the terms of such program.

4.4           Stock Options.   In connection with Employee’s employment, NutraCea shall grant to Employee, as of the Effective Date, a qualified stock option to purchase seven hundred fifty thousand (750,000) shares of NutraCea’s common stock pursuant to the terms and conditions of NutraCea’s 2010 Equity Incentive Plan and as outlined in EXHIBIT A.  Employee may, from time to time and at NutraCea’s sole discretion, be granted additional stock options.  All option grants shall be subject to Board of Director (and/or its Compensation Committee) approval and to the terms and conditions of the corresponding Equity Incentive Plan and Option Agreements.

4.5           Vacation and other Standard Benefits. Employee shall be entitled to three (3) weeks of paid vacation time per year.  Accrual of vacation time shall be subject to the terms and conditions of NutraCea’s vacation policy. Employee shall be entitled to health benefits in accordance with NutraCea’s standard policies. In addition, Employee is entitled to paid holidays, sick leave and other benefits in accordance with NutraCea’s standard policies.  Employee shall be reimbursed for reasonable business expenses, subject to prior approval by NutraCea in accordance with NutraCea’s accounting department of appropriate receipts or such other verification of expenses as NutraCea may require from time to time.

5.           Employee’s Representations.  Employee represents and warrants to NutraCea that information provided by Employee in connection with Employee’s employment and any supplemental information provided to NutraCea is complete, true and materially correct in all respects. Employee has not omitted any information that is or may reasonably be considered necessary or useful to evaluate the information provided by Employee to NutraCea.  Employee shall immediately notify NutraCea in writing of any change in the accuracy or completeness of all such information.

6.           Trade Secrets.  Employee acknowledges that NutraCea has gone to great time and expense to develop customers and to develop procedures and processes for development of products and services and the sales of products and services.  Such procedures and processes in addition to various other types of proprietary information are included as part of the “confidential information” described in the “Proprietary Information Agreement” attached hereto as EXHIBIT B.  Employee has previously executed the Proprietary Information Agreement or agrees to execute NutraCea’s Proprietary Information Agreement contemporaneously with the execution of this Agreement and employment.

7.           Remedies for Breach of Covenant Regarding Confidentiality. The parties agree that the breach by Employee of any covenants contained in Sections 2.4, 2.5, 5 and 6 will result in immediate and irreparable injury to NutraCea. In the event of any breach by Employee of the covenants contained in Sections 2.4, 2.5, 5 or 6, NutraCea shall be entitled to seek recourse through all available legal and equitable remedies necessary or useful to prevent any likelihood of immediate or irreparable injury to NutraCea. The parties agree that, in the case of such a breach or threat of breach by Employee of any of the provisions of such Sections, NutraCea may take any appropriate legal action, including without limitation an action for injunctive relief, consisting of orders temporarily restraining and preliminarily and permanently enjoining such actual or threatened breach.

  

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8.           Miscellaneous.

8.1           Choice of Law, Jurisdiction, Venue. The rights and obligations of the parties and the interpretation and performance of this Agreement shall be governed by the laws of Arizona, excluding its conflict of laws rules.  The exclusive jurisdiction and venue of any legal action brought by either party under this Agreement shall be in the County of Maricopa, State of Arizona.

8.2.           Entire Agreement.   This Agreement, the Proprietary Information Agreement dated March 3, 2010, described in Section 6 and the Option Agreement referenced in Section 4.4 contain the entire Agreement among the parties and supersede the Letter Agreement and all prior and contemporaneous oral and written agreements, understandings and representations among the parties, including without limitation any offer letter.  There are no representations, agreements, arrangements, or understandings, whether oral or written, between or among the parties relating to the subject matter of this Agreement that are not fully expressed herein and therein.

8.3           Notices. Any notice under this Agreement shall be in writing, and any written notice or other document shall be deemed to have been duly given (i) on the date of personal service on the parties, (ii) on the third business day after mailing, if the document is mailed by registered or certified mail, (iii) one day after being sent by professional or overnight courier or messenger service guaranteeing one-day delivery, with receipt confirmed by the courier, or (iv) on the date of transmission if sent by telegram, telex, telecopy or other means of electronic transmission resulting in written copies, with receipt confirmed. Any such notice shall be delivered or addressed to the parties at the addresses set forth above or at the most recent address specified by the addressee through written notice under this provision.   Failure to conform to the requirement that mailings be done by registered or certified mail shall not defeat the effectiveness of notice actually received by the addressee.

8.4           Severability. NutraCea and Employee agree that should any provision of this Agreement be declared or be determined by any court of competent jurisdiction to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining parts, terms and provisions shall not be affected thereby, and said illegal, unenforceable or invalid part, term or provision shall be deemed not to be part of this Agreement.

8.5           Attorney’s Fees.  If the services of an attorney are used by any party to secure the performance of this Agreement or otherwise upon the breach or default of another party to this Agreement, or if any judicial remedy or arbitration is sought to enforce or interpret any provision of this Agreement or the rights and duties of any person in relation thereto, the prevailing party shall be entitled to reasonable attorney’s fees, cost and other expenses, in addition to any other relief to which such party may be entitled.  Any award of damages by any court or arbitration as a result of the breach of this Agreement of any of its provisions shall include an award of prejudgment interest from the date of the breach at the maximum amount of interest allowed by law.

8.6           Amendment. The provisions of this Agreement may be modified at any time by agreement of the parties.  Any such agreement hereafter made shall be ineffective to modify this Agreement in any respect unless in writing and signed by the party against whom enforcement of the modification or discharge is sought.

8.7           No Transfer or Assignment; No Third-Party Beneficiaries. The rights of Employee hereunder have been granted by NutraCea with the understanding that this Agreement is personal to, and shall be performed by Employee individually. This Agreement is not transferable or assignable by Employee in any manner. No person or entity other than NutraCea and Employee shall have any rights whatsoever under this Agreement.  No person or entity other than NutraCea or Employee shall have any right to enforce any provision of this Agreement, or to recover damages on account of the breach of this Agreement. No heir, successor or assign of Employee, whether voluntarily or by operation of law, shall have or succeed to any rights of NutraCea or Employee hereunder.

  

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8.8           Waiver. Any of the terms or conditions of this Agreement may be waived at any time by the party entitled to the benefit thereof, but no such waiver shall affect or impair the right of the waiving party to require observance, performance or satisfaction of that term or condition as it applies on a subsequent occasion or of any other term or condition.

8.9           Resolution of Disputes.

8.9.1           Resolution of Disputes. NutraCea and Employee agree that any claim or controversy arising out of or pertaining to this Agreement or the termination of Employee's employment, including but not limited to, claims of wrongful treatment or termination allegedly resulting from discrimination, harassment or retaliation on the basis of race, sex, age, national origin, ancestry, color, religion, marital status, status as a veteran of the Vietnam era, physical or mental disability, medical condition, or any other basis prohibited by law ("Dispute"),  shall be resolved through binding arbitration, as provided in this paragraph.  The parties agree that no party shall have the right to sue any other party regarding a Dispute except as provided in this paragraph.

8.9.2           Binding Arbitration.  Any Dispute between the parties shall be submitted to, and conclusively determined by, binding arbitration in accordance with this paragraph. The provisions of this paragraph shall not preclude any party from seeking injunctive or other provisional or equitable relief in order to preserve the status quo of the parties pending resolution of a Dispute, and the filing of an action seeking injunctive or other provisional relief shall not be construed as a waiver of that party's arbitration rights. The arbitration of any Dispute between the parties to this Agreement shall be governed by the provisions of the Arizona Arbitration Act.

8.9.3           Appointment of Arbitrator.  The arbitration shall be a neutral arbitrator selected by NutraCea and Employee.  Within thirty (30) days of services of a demand for arbitration by either party to this Agreement, the parties shall endeavor in good faith to select a single arbitrator.  If they fail to do so within that time period, each party shall have an additional period of fifteen (15) days in which to appoint an arbitrator and those arbitrators within fifteen (15) days shall select an additional arbitrator.  If any party fails to appoint an arbitrator or if the arbitrators initially selected by the parties fail to appoint an additional arbitrator within the time specified herein, any party may apply to have an arbitrator appointed for the party who has failed to appoint, or to have the additional arbitrator appointed by the presiding judge for the Superior Court, Maricopa County, Arizona.

8.9.4           Initiation of Arbitration. In the case of any Dispute between the parties to this Agreement, either party shall have the right to initiate the binding arbitration process provided for in this paragraph by serving upon the other party a demand for arbitration within the statutory time period from the date the Dispute first arose.

8.9.5           Location of Arbitration. Any arbitration hearing shall be conducted in Maricopa County, Arizona.

8.9.6           Applicable Law. The law applicable to the arbitration of any Dispute shall be the law of the State of Arizona, excluding its conflicts of law rules.

8.9.7           Arbitration Procedures. The parties shall be entitled to conduct discovery sufficient to adequately arbitrate their claims or defenses, including access to essential documents and witnesses, as determined by the arbitrator and subject to limited judicial review. In addition, either party may choose, at that party’s discretion, to request that the arbitrators resolve any dispositive motions prior to the taking of evidence on the merits of the Dispute.  By way of example, such dispositive motions would include, but are not limited to, those which would entitle a party to summary judgment or summary adjudication.  In the event a party to the arbitration requests that the arbitrators resolve a dispositive motion, the arbitrators shall receive and consider any written or oral arguments regarding the dispositive motion, and shall receive and consider any evidence specifically relating thereto, and shall render a decision thereon, before hearing any evidence on the merits of the Dispute.

  

5

  

8.9.8           Scope of Arbitrators' Award or Decision. NutraCea and Employee agree that if the arbitrators find any Disputed claim to be meritorious, the arbitrators shall have the authority to order all forms of legal and/or equitable relief that would otherwise be available in court and that is appropriate to the claim. Any decision or award by the arbitrators shall be in writing and shall be specific enough to permit limited judicial review if necessary.

8.9.9           Costs of Arbitration; Attorneys’ Fees.  NutraCea shall bear any costs of arbitration that are over and above costs that would be incurred by Employee had he/she not been required to arbitrate the Dispute, but instead had been free to bring the action in court.  Each party shall bear its own attorneys’ fees.  However, NutraCea and Employee agree that the arbitrators, in their discretion and consistent with applicable law, may award to the prevailing party the costs and attorneys’ fees incurred by that party in participating in the arbitration process as long as they do not exceed those that would be incurred by Employee in a court action.

8.9.10         Acknowledgment of Consent to Arbitration.  NOTICE:  BY EXECUTING THIS AGREEMENT EMPLOYEE AGREES TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "RESOLUTION OF DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY ARIZONA LAW AND EMPLOYEE WAIVES ANY RIGHTS EMPLOYEE MIGHT POSSES TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRAIL.  BY EXECUTING THIS AGREEMENT, THE EMPLOYEE WAIVES EMPLOYEE’S JUDICIAL RIGHTS TO APPEAL.  IF EMPLOYEE REFUSES TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, EMPLOYEE MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE ARIZONA CODE OF CIVIL PROCEDURE.  EMPLOYEE’S AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY. BY EXECUTING THIS AGREEMENT EMPLOYEE IS INDICATING THAT EMPLOYEE HAS READ AND UNDERSTOOD THE FOREGOING AND AGREES TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THIS ARBITRATION OF DISPUTES PROVISION TO NEUTRAL ARBITRATION.

8.10           Exhibits. All exhibits to which reference is made are deemed incorporated in this Agreement whether or not actually attached.

[SIGNATURE PAGE TO FOLLOW]

  

6

  

SIGNATURE PAGE

Signature page for the Employment Agreement (“Agreement”) between NutraCea, a California corporation with principal offices at 6720 N Scottsdale Road, Suite 390, Scottsdale, Arizona 85253 and Kody Newland an individual with a mailing address at 1928 E Highland F-104 PMB 611, Phoenix, Arizona 85016 (“Employee”) effective as of March 3, 2010 (“Effective Date”).

 

	  	NutraCea	 
	  	  	  	 
	  	  	  	 
	  	  	  	 
	  	  	  	 
	  	
By:

	
W. John Short

	 
	  	
Title:

	
Chief Executive Officer

	 
	  	  	  	 
	  	  	  	 
	  	  	  	 
	  	Employee	 
	  	  	  	 
	  	  	  	 
	  	  	  	 
	  	  	  	 
	  	Kody Newland	 
	  	  	  	 
	  	  	  	 
	  	March 3, 2010	 

  

7

  

EXHIBIT A

OPTION AGREEMENT for Kody Newland

	
  

	
§

	
750,000 shares

	
  

	
§

	
250,000 vesting at signing

	
  

	
§

	
500,000 vesting in equal monthly portions over the twenty-four (24) month contact period

	
  

	
§

	
Strike price = 0.20¢

	
  

	
§

	
Cashless provision

	
  

	
§

	
Accelerated vesting if change of control occurs

Cashless Option

Surrender of options.  At the time of exercise, Employee has the right to exercise with a cashless method of payment.  If the common stock is publicly traded, by surrendering the right to purchase a certain number of option shares under the Option and using the appreciated value of the shares surrendered, defined as the Fair Market Value less the exercise price of the shares surrendered.  By way of example, if the optionee surrenders the right to purchase 40 shares on a date when the Fair Market Value is $8.125 per share and the Exercise Price is $3.25 per share, then the optionee could purchase ($8.125 - $3.25 = $4.875 x 40 shares = $195.00 divided by $3.25 = 60 shares), and the number of shares purchasable under the Option would be reduced by 100 shares.

Change of Control

Acceleration of Vesting.  If a “change of control” of the Company should occur, as defined below, then the option shall immediately vest and become exercisable in full and any performance criteria of this option will be waived.  For purposes of this Agreement, “change of control” shall mean:

	
  

	
1.

	
The consummation of a merger or consolidation of the Company with any other corporation which results in the voting securities of the Company outstanding immediately prior thereto failing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the total voting power represented by the voting securities of the company or such surviving entity outstanding immediately after such merger or consolidation or,

	
  

	
2.

	
The consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets.

  

8

  

EXHIBIT B

PROPRIETARY INFORMATION AGREEMENT

NutraCea, a California corporation ("Company"), and Kody Newland, an individual ("Employee"), agree as follows:

1.           Employment.  Employee acknowledges that the obligations of Employee set forth in this Agreement are a condition of Employee's employment with Company and are agreed to by Employee in consideration of such employment.  The parties agree that this Agreement shall not in any way affect the employer/employee relationship of the parties other than as specifically set forth in this Agreement, including without limitation the ability of Company to terminate Employee’s employment at will (unless otherwise provided in a written agreement, properly signed by Company).

2.           Term.  The term of this Agreement shall commence on the date hereof and shall continue for the duration of Employees employment with Company.

3.           Confidential Information.  Employee agrees not to disclose to any others, or take or use for Employee's own purposes or purposes of any others, during the term of this Agreement or at any time thereafter, any of Company's Confidential Information (as defined below).  Employee agrees that these restrictions shall also apply to (1) Confidential Information belonging to third parties in Company's possession, (2) Confidential Information belonging to any parent or subsidiary of the Company and (3) Confidential Information conceived, originated, discovered or developed by Employee during the term of this Agreement.  "Confidential Information" means any Company proprietary information, technical data, trade secrets or know-how, including, but not limited to, research, product plans, products, services, customer lists and customers, markets, software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, marketing, finances or other business information disclosed to Employee by Company, either directly or indirectly, in writing, orally or by drawings, or by observation of products.  Confidential Information does not include any of the foregoing items which has become publicly known and made generally available through no wrongful act of Employee.  Employee further agrees not to improperly use or disclose or bring onto the premises of Company any trade secrets of another person or entity during the term of this Agreement.  Employee recognizes that the Company has received and in the future will receive from third parties their confidential or proprietary information subject to a duty to the Company, to maintain the confidentiality of such information and to use it only for certain limited purposes.  Employee agrees to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person, firm or corporation, or to use it, except as necessary, in carrying out Employee’s work for the Company consistent with the Company's agreement with such third party.

4.           Inventions.  For purposes of this Agreement, "Invention" shall mean any new inventions, improvements, machines, manufactures, methods, processes, uses, apparatuses, compositions of matter, designs, original works of authorship, formulas, databases, computer programs or software, or configurations of any kind, discovered, conceived, developed, made, or produced or any improvements to them, and shall not be limited to the definition of an invention contained in the United States Patent Laws.

4.1.           Assignment of Inventions.  Employee assigns to Company all of Employee's interest in all ideas and Inventions, whether or not patentable, copyrightable or protectible as trade secrets, made or conceived by Employee, solely or jointly with any others, during the term of Employee's employment with Company, except for any idea or Invention for which no equipment, supplies, time, facilities or trade secret information of Company was used and that was developed entirely upon Employee's own time, and does not relate either to the business of Company or Company's actual or demonstrably anticipated research or development.  All ideas and Inventions hereby assigned are referred to as “Assigned Inventions”.  Employee agrees to promptly disclose all Assigned Inventions in writing to Company, to assist Company in preparing patent applications and assignments for those Inventions and to vest title to those Inventions in Company, all at Company's expense, but for no consideration to Employee in addition to Employee's salary or wages.  If Company requires Employee's assistance under this Section after termination of Employee's employment, Employee shall be compensated for Employee's time actually spent in providing that assistance at any hourly rate equivalent to Employee's salary or wages during Employee's last period of employment by Company.

  

9

  

4.2.           Prior Inventions.  Employee has attached as Exhibit A, a list of any Inventions belonging to Employee prior to employment with Company ("Prior Inventions"), that relate to the business of Company or Company's actual or demonstrably anticipated research or development and that are not assigned to Company hereunder.  If no such list is attached, Employee represents that there are no such Prior Inventions.  If in the course of employment with Company, Employee incorporates into a Company product, process or machine a Prior Invention owned by Employee or in which Employee has an interest, Company is hereby granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide and assignable license to make, have made, modify, sublicense, use and sell such Prior Invention as part of or in connection with such product, process or machine.

4.3.           Records of Inventions.  Employee agrees to keep and maintain adequate and current written records of all Inventions of Employee during the term of employment with Company.  Such records shall be in the form of notes, sketches, drawings, and any other format that may be specified by Company, and shall be available to and remain the sole property of Company at all times.

4.4           Works for Hire.  Employee acknowledges and agrees that any copyrightable works prepared by Employee within the scope of Employee’s employment are “works for hire” under the Copyright Act and that the Company will be considered the author and owner or such copyrightable works.  Employee agrees that all Inventions that (a) are developed using equipment, supplies, facilities or trade secrets of the Company, (b) result from work performed by Employee for the Company, or (c) relate to the Company’s business or current or anticipated research and development will be the sole and exclusive property of the Company and are hereby irrevocably assigned by Employee to the Company.

4.5           Assignment of Other Rights.  In addition to the foregoing assignment of Inventions to the Company, Employee hereby irrevocably transfers and assigns to the Company: (a) all worldwide patents, patent applications, copyrights, mask works, trade secrets and other intellectual property rights in any Invention: and (b) any and all “Moral Rights” (as defined below) that Employee may have in or with respect to any Invention.  Employee also hereby forever waives and agrees never to assert any and all Moral Rights Employee may have in or with respect to any Inventions, even after termination of Employee’s work on behalf of the Company.  “Moral Rights” mean any rights to claim authorship of an Invention, to object to or prevent the modification of any Invention, or to withdraw from circulation or control the publication or distribution of any Invention, and any similar right, existing under judicial or statutory law of any country in the world, or under any treaty, regardless or whether or not such right is denominated or generally referred to as a “moral right”.

5.           Return of Property.  Employee agrees that upon termination of employment with Company, Employee will deliver to Company all devices, records, data, disks, computer files, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, other documents or property, or reproductions of any aforementioned items developed by Employee pursuant to employment with Company or otherwise belonging to Company, its successors or assigns.  In the event of the termination of Employee’s employment, Employee agrees to sign and deliver the "Termination Certification" attached hereto as Exhibit B.

  

10

  

6.           Notification of New Employer.  Company shall have the right to notify any future employers of Employee of Employee's rights and obligations under this Agreement.

7.           Other Agreements.  Employee represents that the performance of all the terms of this Agreement will not breach any agreement to keep in confidence proprietary information acquired by Employee in confidence or in trust prior to employment with Company.  Employee has not and shall not enter into any oral or written agreement in conflict with this Agreement.

8.           Equitable Remedies.  Employee agrees that it would be impossible or inadequate to measure and calculate Company's damages from any breach of the covenants set forth in this Agreement.  Accordingly, Company shall have available, in addition to any other right or remedy available under law or equity, the right to obtain any injunction from a court of competent jurisdiction restraining such breach or threatened breach and to specific performance of any such provision of this Agreement.  Employee further agrees that no bond or other security shall be required in obtaining such equitable relief and consents to the issuance of such injunction and to the ordering of specific performance.

9.           Miscellaneous.

9.1           Attorneys' Fees; Prejudgment Interest; Governing Laws.  If the services of an attorney are required by any party to secure the performance hereof or otherwise upon the breach or default of another party to this Agreement, or if any judicial remedy or arbitration is necessary to enforce or interpret any provision of this Agreement or the rights and duties of any person in relation thereto, the prevailing party shall be entitled to reasonable attorneys' fees, costs and other expenses, in addition to any other relief to which such party may be entitled.  Any award of damages following judicial remedy or arbitration as a result of the breach of this Agreement or any of its provisions shall include an award of prejudgment interest from the date of the breach at the maximum amount of interest allowed by law.  The rights and obligations of the parties and the interpretation and performance of this Agreement shall be governed by the law of Arizona, excluding its conflict of laws rules.

9.2.           Amendment; Waiver.  The provisions of this Agreement may be modified at any time by agreement of the parties.  Any such agreement hereafter made shall be ineffective to modify this Agreement in any respect unless in writing and signed by the parties against whom enforcement of the modification or discharge is sought.  Any of the terms or conditions of this Agreement may be waived at any time by the party entitled to the benefit thereof, but no such waiver shall affect or impair the right of the waiving party to require observance, performance or satisfaction either of that term or condition as it applies on a subsequent occasion or of any other term or condition.

9.3.           Entire Agreement.  This document and any written employment agreement between Employee and Company constitute the entire agreement between the parties regarding the subject matter, all oral agreements being merged herein, and supersedes all prior representations.  There are no representations, agreements, arrangements, or understandings, oral or written, between or among the parties relating to the subject matter of this Agreement that are not fully expressed herein.

9.4.           Succession.  Subject to the provisions otherwise contained in this Agreement, this Agreement shall inure to the benefit of and be binding on the heirs, successors and assigns of the respective parties hereto.

9.5.           Severability.  If any provision of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, the remainder of the Agreement which can be given effect without the invalid provision shall continue in full force and effect and shall in no way be impaired or invalidated.

  

11

  

9.6           Notices.  Any notice under this Agreement shall be in writing, and any written notice or other document shall be deemed to have been duly given (i) on the date of personal service on the parties, (ii) on the third business day after mailing, if the document is mailed by registered or certified mail, (iii) one day after being sent by professional or overnight courier or messenger service guaranteeing one-day delivery, with receipt confirmed by the courier, or (iv) on the date of transmission if sent by telegram, telex, telecopy or other means of electronic transmission resulting in written copies, with receipt confirmed.   Any such notice shall be delivered or addressed to the parties at the addresses set forth below or at the most recent address specified by the addressee through written notice under this provision.   Failure to conform to the requirement that mailings be done by registered or certified mail shall not defeat the effectiveness of notice actually received by the addressee.

9.7           No Duty to Employ.  Employee understands that this Agreement does not constitute a contract of employment or obligate the Company to employ Employee for any stated period of time.  This Agreement shall be effective as of the first day of Employee’s employment by the Company.

9.8           Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall constitute an original but all of which taken together shall constitute one and the same instrument.

In witness whereof, the parties have executed this Proprietary Information Agreement as of the date set forth below.

	
EMPLOYEE:

	  	
COMPANY:

	 
	  	  	
NUTRACEA

	 
	  	  	
a California corporation

	 
	  	  	  	 
	  	  	  	 
	
Kody Newland

	  	
By:     W. John Short

	 
	  	  	
Title:   Chairman & Chief Executive Officer

	 
	
Address:

	  	  	 
	
1928 E Highland

	  	
Address:

	 
	
F-104, PMB 61

	  	
6720 N Scottsdale Rd, Suite 390

	 
	
Phoenix, AZ  85016

	  	
Scottsdale, AZ  85253

	 
	  	  	  	 
	
Date:  March 3, 2010

	  	
Date:  March 3, 2010

	 

 

  

12

  

EXHIBIT A of PROPRIETARY INFORMATION AGREEMENT

PRIOR INVENTIONS

Title Date Identifying Number or Brief Description

 

	
 

	 	
No inventions or improvements

	  	 	  
	
 

	 	
Additional Sheets Attached

 

	
Signature of Employee:

	  	
 

	 
	  	  	
Kody Newland

	 
	  	  	  	 
	
Date:

	  	
March 3, 2010

	 

  

  

  

EXHIBIT B of PROPRIETARY INFORMATION AGREEMENT

TERMINATION CERTIFICATION

This is to certify that I do not have in my possession, nor have I failed to return, any devices, records, data, disks, computer files, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, other documents or property, or reproductions of any aforementioned items developed by me pursuant to employment with NutraCea or otherwise belonging to NutraCea, its successors or assigns or any parent or subsidiary of NutraCea.

I further certify that I have complied with all the terms of NutraCea's Proprietary Information Agreement signed by me, including the reporting of any inventions and original works of authorship (as defined therein), conceived or made by me (solely or jointly with others) covered by that agreement.

I further agree that, in compliance with the Proprietary Information Agreement, I will preserve as confidential all trade secrets, confidential knowledge, data or other proprietary information relating to products, processes, know-how, designs, formulas, developmental or experimental work, computer programs, data bases, other original works of authorship, customer lists, business plans, financial information or other subject matter pertaining to any business of NutraCea, any parent or subsidiary of NutraCea, or any of its respective employees, clients, consultants or licensees.

I further agree that for twenty four (24) months from this date, I will not:

	
  

	
a.

	
Hire any employees of NutraCea, or

	
  

	
b.

	
Directly or indirectly, solicit, induce, recruit or encourage any NutraCea employee, consultant, vendor, supplier, customer or client to sever its relationship with NutraCea or accept an employment, consultant or other business relationship with any other business.

	
EMPLOYEE:

	 	
COMPANY:

	 
	  	 	
NUTRACEA

	 
	  	 	
a California corporation

	 
	  	 	  	 
	 	 	 	 
	
Kody Newland

	 	
By:

	 
	  	 	
Title:

	 
	  	 	  	 
	
Address:

	 	  	 
	
1928 E Highland

	 	
Address:

	 
	
F-104, PMB 61

	 	
6720 N Scottsdale Rd, Suite 390

	 
	
Phoenix, AZ  85016

	 	
Scottsdale, AZ  85253

	 
	  	 	  	 
	
Date:  ______________________________

	 	
Date:  ______________________________

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