Document:

ex10_3.htm

EXHIBIT 10.3

 

SECOND AMENDMENT

TO

EMPLOYMENT AGREEMENT

 

This Second Amendment to Employment Agreement (“Amendment”) is entered into by and between NutraCea, a California corporation with principal offices at 5090 N 40th Street, Suite 400, Phoenix, Arizona 85018 (“NutraCea”) and W. John Short (“Employee”) effective as of November 6, 2009 (the “Effective Date”), as follows.

	
1.  

	
Background and Purpose.

1.1. Employment Agreement.  NutraCea and Employee are parties to that certain Employment Agreement dated July 6, 2009 (the “Original Agreement”), as amended pursuant to the First Amendment to the Employment Agreement dated July 7, 2009 (the “First Amendment” and, collectively with the Original Agreement, the “Employment Agreement”).

1.2. Amendment.  NutraCea and Employee wish to modify certain of the provisions of the Employment Agreement as set forth in this Amendment.

1.3. Effective Date.  This Amendment shall become effective as of the Effective Date set forth above.

2. Termination for Good Reason.  Section 3.1.2(a)(iv) shall be deleted in its entirety and Section 3.1.2(a)(iii) shall be replaced with the following provision:

“or (iii) any reduction of Employee’s Base Salary.”

3. Relocation Expenses.  The first sentence of Section 4.2.1 shall be deleted in its entirety and replaced with the following provision:

“NutraCea shall reimburse Employee’s reasonable expenses for (a) travel between the Phoenix, Arizona, area and the Bend, Oregon, area, (b) temporary housing in the Phoenix area, and (c) car rental or leasing in the Phoenix area, in each case from the Effective Date until December 31, 2010, or such earlier date that Employee relocates his family and family residence to Phoenix, Arizona.

 

4. Initial Bonus.  Section 4.2.3 shall be deleted in its entirety and replaced with the following provision:

 

“4.2.3. Initial Bonus.  NutraCea shall pay Employee an initial bonus (“Initial Bonus”) of one hundred thousand dollars ($100,000) to Employee, subject to and expressly contingent upon (i) NutraCea raising a minimum of seven million dollars ($7,000,000) in cash on or before June 30, 2010, from equity or debt financing transaction, a sale of capital assets or equity in subsidiary entities, or any other transaction, but not including any operating revenues arising from operations in the ordinary course of business or any other transactions in the ordinary course of business, and (ii) Section 4.4 In the event Employee does not relocate his family and his family’s residence to the Phoenix, Arizona, area on or before December 31, 2010, the Board may request that Employee (arid if the Board so requests, Employee shall) return the Initial Bonus to NutraCea.”

 

  

  

  

5. Additional Terms of the Options.  New Section 4.3.4 shall be added to the Agreement and shall provide as follows:

“4.3.4 Additional Terms of the Options.  If there is no effective registration statement under the Securities Act of 1933 registering the issuance or resale by Employee of the shares of NutraCea’s common stock underlying the Options, then the Options, once exercisable, may also be exercised (so long as no such registration statement is then in effect) by means of a “net exercise” in which Employee shall be entitled to cancel the exercisable portion of the Options and receive a certificate for the number of shares of NutraCea’s common stock equal to (A-B) x C ÷ A, where:

A = the fair market value of a share of NutraCea’s common stock on the date of exercise, as determined under the terms of the 2005 Plan;

B = the exercise price per shares of NutraCea’s common stock subject to the Options; and

C= the number of shares of NutraCea’s common stock with respect to which Employee is then net-exercising the Options.

Notwithstanding the foregoing, Employee may not net-exercise any portion of an Option unless Employee pays to NutraCea in cash at the time of the net-exercise the amount of any applicable federal, state and local withholding taxes.”

6. Life Insurance.  The final sentence of Section 4.5 (which was added to the Original Agreement by the First Amendment) shall be deleted in its entirety and replaced with the following provision:

“Not later than December 31, 2009, NutraCea shall obtain a life insurance policy on the life of Employee in the amount of five million dollars ($5,000,000).  NutraCea shall maintain such policy for the full term of Employee’s employment with NutraCea.  During the period between the Effective Date and the two (2) year anniversary of the Effective Date, the policy shall be payable two million five hundred thousand dollars ($2,500,000) for the benefit of Employee and Employee’s wife and the balance for the benefit of NutraCea.  Commencing on the two (2) year anniversary of the Effective Date, such policy shall be for the sole benefit of Employee and Employee’s wife as to the full amount of the policy.”

7. Effect of Amendment.  Except as specifically set forth in this Amendment, the Employment Agreement shall remain in full force and effect in accordance with its terms.

8. Modification; Interpretation.  From and after the Effective Date, all references in the Agreement to “the Amendment,” “this Amendment” or any similar reference shall refer to the Agreement as amended by this Amendment.  Capitalized terms not otherwise defined herein shall have the respective meanings ascribed to them in the Agreement.

  

  

  

NutraCea and W. John Short have executed and delivered this Amendment as of the Effective Date set forth above.

 

	 	NUTRACEA
	 	 
	 	 
	 	__________________________________________
	
 

	
By:          Leo Gingras

	 	Title:      Chief Operating Officer
	 	 
	 	Date: November 6, 2009
	 	 
	 	 
	 	W. JOHN SHORT
	 	 
	 	 
	 	___________________________________________
	 	 
	 	Date: November 6, 2009

 

  

  

  

 

INDEMNIFICATION AGREEMENT

NutraCea, a California corporation (“Company”) and W. John Short (“Indemnitee”) enter into this Indemnification Agreement (“Agreement”) and agree as of November 6, 2009 (“Effective Date”) as follows:

RECITALS

A. Indemnitee is either a member of the Board of Directors or an executive officer of Company and in such capacity is performing a valuable service for Company.

B. Indemnitee is to serve, continue to serve, and take additional service for or on behalf of Company on the condition that he/she is indemnified by Company as herein provided.

C. It is intended that Indemnitee shall be paid promptly by Company all amounts necessary to effectuate in full the indemnity provided herein.

AGREEMENT

1. Services by Indemnitee.    Indemnitee agrees to serve as a director or executive officer of Company so long as he/she is duly appointed or elected and qualified in accordance with the applicable provisions of the Articles of Incorporation and Bylaws of Company or any subsidiary of Company and until such time as he/she resigns or fails to stand for election or is removed from his/her position.  Indemnitee may at any time and for any reason resign or be removed from such position (subject to any other contractual obligation or other obligation imposed by operation of law), in which event Company shall have no obligation under this Agreement to continue Indemnitee in any such position.

2. Indemnification.

2.1 Subject to the limitations set forth herein and in Sections 2.2 and 4 below, Company shall indemnify Indemnitee against Expenses and Liabilities in connection with any Proceeding associated with Indemnitee’s being a director or executive officer of Company to the fullest extent permitted by applicable law, the Articles of Incorporation and Bylaws, as they may from time to time be amended (but, in the case of any such amendment, only to the extent such amendment permits Company to provide broader indemnification rights than the law, the Articles of Incorporation or the Bylaws permitted Company to provide before such amendment).  The right to indemnification provided in Company’s Bylaws shall be presumed to have been relied upon by Indemnitee in serving or continuing to serve Company and shall be enforceable as a contract right.  Without diminishing the scope of the indemnification provided by this Section 2, Company shall indemnify Indemnitee whenever he/she is or was a party or is threatened to be made a party to any proceeding, including without limitation any such proceeding brought by or in the right of Company, because he/she is or was a director or executive officer of Company or because of anything done or not done by him/her in such capacity, against responses and liabilities actually and reasonably incurred by Indemnitee or on his/her behalf in connection with such proceeding, including the costs of any investigation, defense, settlement or appeal.  In addition to, and not as a limitation of, the foregoing, the rights of indemnification of Indemnitee provided under this Agreement shall include those rights set forth in Sections 3, 7, 8 and 12 below.

2.2 Notwithstanding anything in this Agreement to the contrary, Company shall not be obligated under this Agreement to indemnify Indemnitee with respect to:

 

  

  

  

a. Any claim, issue or matter if Indemnitee was finally adjudged to be liable to Company by a court of competent jurisdiction due to his/her gross negligence or willful misconduct unless and to the extent that a California court or the court in which the action was heard determines that Indemnitee is entitled to indemnification for such amounts as the court deems proper; provided, that until such time as a final adjudication is made as to Indemnitee’s gross negligence or willful misconduct, Company shall advance Indemnitee his/her expenses in accordance with Section 3 herein, subject to repayment as described in Section 3 in the event of a final adjudication of gross negligence or willful misconduct;

b. the reporting or accounting of profits made from the purchase or sale by Indemnitee of securities of Company within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, or similar  provisions of any state statutory or common law;

c. any attempt to require, or obtain voting rights with respect to, at least fifty  percent (50%) of the then-outstanding voting stock of Company, whether by tender offer, proxy solicitation or otherwise, if (a) Indemnitee attempted to acquire or obtain voting rights with respect to such stock or was or became a member of a group consisting of two or more persons that has agreed (whether formally or informally and whether or not in writing) to act together for the purpose of acquiring, obtaining voting rights with respect to, holding, voting or disposing of such stock, and (b) such attempt to acquire or obtain voting rights with respect to such stock was not approved by a majority of the directors of Company.  For purposes of determining whether any tender offer, proxy solicitation or other transaction constituted an attempt by Indemnitee, or a group (as described above) of which Indemnitee was or became a member, to acquire or obtain voting rights with respect to at least fifty percent (50%) of the then-outstanding voting stock of Company, there shall be counted toward the requisite number of shares of voting stock any shares which, immediately prior to the commencement of such tender offer, proxy solicitation or other  transaction, (x) were owned by Indemnitee or any member of such group, (y) Indemnitee or any member of any such group had the right to vote, or (z) Indemnitee or any member of any such group had the right to acquire;

d. any solicitation of proxies by Indemnitee, or by a group of which he/she was or became a member consisting of two or more persons that had agreed (whether formally or informally and whether or not in writing) to act together for the purpose of soliciting proxies, in opposition to any solicitation of proxies approved by Company’s Board of Directors; or

e. any act or omission by Indemnitee that constitutes a breach of or default under any agreement between Indemnitee and Company.

2.3 Indemnitee shall be paid promptly by Company all amounts necessary to effectuate the indemnity described in Section 2.1.

3. Advancement of Expenses.    All reasonable expenses incurred by or on behalf of Indemnitee shall be advanced from time to time by Company to him/her within thirty (30) days after the receipt by Company of a written request for an advance of expenses, whether prior to or after final disposition of a proceeding (except to the extent that there has been a Final Adverse Determination that Indemnitee is not entitled to be indemnified for such expenses), including without limitation any proceeding brought by or in the right of Company; provided, however, that Indemnitee shall not be entitled to the advancement of expenses in connection with any proceeding relating to his/her termination by or resignation from Company or arising out of the circumstances described in Section 2.2, (b), (c) or (d).

  

  

  

  

 

The written request for an advancement of any and all expenses under this paragraph shall contain reasonable detail of the expenses incurred by Indemnitee.  If required by law at the time of such advance, Indemnitee hereby agrees to repay the amounts advanced if it is ultimately determined that Indemnitee is not entitled to be indemnified pursuant to the terms of this Agreement.

4. Additional Limitations.     The foregoing indemnity and advance of expenses shall apply only to the extent that Indemnitee has not been indemnified and reimbursed pursuant to such insurance as Company may obtain; provided, however, that notwithstanding the availability of such other indemnification and reimbursement, Indemnitee may claim indemnification and advancement of expenses pursuant to this Agreement by assigning to Company, at its request, Indemnitee’s claims under such insurance to the extent Indemnitee has been paid by Company.

5. Insurance and Funding.    Company may purchase and maintain insurance to protect itself and/or Indemnitee against any expenses and liabilities in connection with any proceeding to the fullest extent permitted by applicable laws.  Company may create a trust fund, grant an interest or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification or advancement of expenses as provided in this Agreement.

6. Procedure for Determination of Entitlement to Indemnification.

6.1 Whenever Indemnitee believes that he/she is entitled to indemnification pursuant to this Agreement, Indemnitee shall submit a written request for indemnification to Company.  Any request for indemnification shall include sufficient documentation or information reasonably available to Indemnitee to support his/her claim for indemnification.  Indemnitee shall submit his/her claim for indemnification within a reasonable time not to exceed five years after any judgment, order, settlement, dismissal, arbitration award, conviction, acceptance of appeal of “nolo contendere” or its equivalent, final termination or other disposition or partial disposition of any proceeding, whichever is the later date for which Indemnitee requests indemnification.  The President or the Secretary or other appropriate officer of Company shall, promptly upon receipt of Indemnitee’s request for indemnification, advise the Board of Directors of Company in writing that Indemnitee has made such request.  Determination of Indemnitee’s entitlement to indemnification shall be made not later than sixty (60) days after Company’s receipt of his/her written request for such indemnification.  If no determination has been made in such 60-day period, Company shall be deemed to have approved the request.

6.2 The Indemnitee shall be entitled to select the forum in which Indemnitee’s request for indemnification will be heard, which selection shall be included in the written request for indemnification required in Section 6.1.  The forum shall be any one of the following:

a. The stockholders of Company;

b. A quorum of the Board of Directors consisting of Disinterested Directors;

c. Independent Legal Counsel, who shall make the determination in a written opinion; or

 

  

  

  

d. A panel of three arbitrators, one selected by Company, another by Indemnitee and the third by the first two arbitrators selected.  If for any reason three arbitrators are not selected within thirty (30) days after the appointment of the first arbitrator, then selection of additional arbitrators shall be made by the American Arbitration Association.  If any arbitrator resigns or is unable to serve in such capacity for any reason, the American Arbitration Association shall select such arbitrator’s replacement.  The arbitration shall be conducted pursuant to the commercial arbitration rules of the American Arbitration Association now in effect.

e. If Indemnitee fails to make such designation, his/her claim shall be determined by an appropriate court of the State of California.

6.3 Upon making a request for indemnification, Indemnitee shall be presumed to be entitled to indemnification under this Agreement and Company shall have the burden of proof to overcome that presumption in reaching any contrary determination.  The termination of any proceeding by judgment, order, settlement, arbitration award or conviction, or upon a plea of “nolo contendere” or its equivalent shall not affect this presumption or, except as provided in Section 3 or 4 hereof, establish a presumption with regard to any factual matter relevant to determining Indemnitee’s rights to indemnification hereunder.

7. Fees and Expenses of Independent Legal Counsel.    The Company agrees to pay the reasonable fees and expenses of Independent Legal Counsel or a panel of three arbitrators should such counsel or such panel of arbitrators be retained to make a determination of Indemnitee’s entitlement to indemnification pursuant to Section 6 of this Agreement, and to fully indemnify such counsel or arbitrators against any and all expenses and losses incurred by any of them arising out of or relating to this Agreement or their engagement pursuant hereto, except with respect to expenses and losses resulting from the negligence or willful misconduct of such persons.

8. Remedies of Indemnitee.

8.1 In the event that (i) a determination pursuant to Section 6 hereof is made that Indemnitee is not entitled to indemnification, (ii) advances of expenses are not made pursuant to this Agreement, (iii) payment has not been timely made following a determination of entitlement to indemnification pursuant to this Agreement, or (iv) Indemnitee otherwise seeks enforcement of this Agreement, Indemnitee shall be entitled to a final adjudication in any court of competent jurisdiction of his/her rights.  Company shall not oppose Indemnitee’s right to seek any such adjudication.  In any such proceeding Indemnitee shall be presumed to be entitled to indemnification under this Agreement and Company shall have the burden of proof to overcome that presumption.

8.2 In the event that a determination that Indemnitee is not entitled to indemnification, in whole or in part, has been made pursuant to Section 6 hereof, the decision in the judicial proceeding provided in Section 8.1 shall be made de novo and Indemnitee shall not be prejudiced by reason of a determination that he/she is not entitled to indemnification.

8.3 If a determination that Indemnitee is entitled to indemnification has been made pursuant to Section 6 hereof or otherwise pursuant to the terms of this Agreement, Company shall be bound by such determination in the absence of (i) a misrepresentation of a material fact by Indemnitee or (ii) a specific finding (which has become final) by a court of competent jurisdiction that all or any part of such indemnification is expressly prohibited by California law.

 

  

  

  

8.4 In any court proceeding pursuant to this Section 8, Company shall be precluded from asserting that the procedures and presumptions of this Agreement are not valid, binding and enforceable.  The Company shall stipulate in any such court that Company is bound pursuant to the terms hereof.

9. Modification, Waiver, Termination and Cancellation.   No supplement, modification, termination, cancellation or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver.

10. Notice by Indemnitee and Defense of Claim. Indemnitee shall promptly notify Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any matter, whether civil, criminal, administrative or investigative, but the omission so to notify Company shall not relieve them from any liability which they may have to Indemnitee if such omission does not prejudice Company’s rights.  If such omission does prejudice Company’s rights, Company will be relieved from liability only to the extent of such prejudice, or will such omission relieve Company from any liability which it may have to Indemnitee otherwise than under this Agreement.  With respect to any proceeding as to which Indemnitee notifies Company of the commencement thereof:

a. Company will be entitled to participate therein at its own expense;

b. Company jointly with any other indemnifying party similarly notified shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to Indemnitee; provided, however, that Company shall not be entitled to assume the defense of any proceeding if there has been a Change of Control or if Indemnitee shall have reasonably concluded that there may be a conflict of interest between Company and Indemnitee with respect to such proceeding.  After notice from Company to Indemnitee of its election to assume the defense thereof, Company shall not be liable to Indemnitee under this Agreement for any expenses subsequently incurred by the Indemnitee in connection with the defense thereof, other than reasonable costs of investigation or as otherwise provided below.  Indemnitee shall have the right to employ its own counsel in such proceeding but the fees and expenses of such counsel incurred after notice from Company of its assumption of the defense thereof shall be at the expense of Indemnitee unless: (i) the employment of counsel by Indemnitee has been authorized by Company;  (ii) Indemnitee shall have reasonably concluded that counsel engaged by Company may not adequately represent Indemnitee; or (iii) Company shall not in fact have employed counsel to assume the defense in such proceeding or shall not in fact have assumed such defense and be acting in connection therewith with reasonable diligence; in each of which cases the fees and expenses of such counsel shall be at the expense of Company; and

c. Company shall not settle any proceeding in any manner that would subject Indemnitee to a penalty or cost without Indemnitee’s written consent; provided, however, that Indemnitee shall not unreasonably withhold his/her consent to any proposed settlement.

 

11. Notices.   All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered personally or by overnight courier such as Federal Express, or sent by certified or registered mail with postage prepaid, addressed as follows:

 

  

  

  

a. If to Indemnitee, to:                       W. John Short

  61508 Cultus Lake Court

  Bend, OR  97702

b. If to Company, to:                          NutraCea

  5090 N 40th Street, Suite 400

  Phoenix, AZ  85018 

  Attn: Leo Gingras, Chief Operating Officer

c. or to such other address as may have been furnished to Indemnitee by Company or to Company by Indemnitee, as the case may be.  Notices given as set forth herein shall be conclusively deemed to have been received by the party to whom addressed upon receipt, if delivered personally or by overnight courier, and three business days after the same is deposited in the United States mail if sent by certified or registered mail.

12. Non-exclusivity.    The rights of Indemnitee hereunder shall not be deemed exclusive of any other rights to which Indemnitee may now or in the future be entitled under the California General Corporation Law, Company’s Articles of Incorporation or Bylaws, or any agreements, vote of stockholders, resolution of the Board of Directors or otherwise.

 

13. Certain Definitions.

13.1 “Change in Control” shall be deemed to have occurred if:

a. Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of Company or a corporation owned directly or indirectly by the stockholders of Company in substantially the same proportions as their ownership of stock of Company, hereafter becomes the “beneficial owner” (as defined in rule 13d-3 under such Act), directly or indirectly, of securities of Company representing fifteen percent (15%) or more of the total voting power represented by Company’s then outstanding voting securities; or

b. The stockholders of Company approve a merger or consolidation of Company with any other corporation, other than a merger or consolidation which would result in the voting securities of Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least eighty percent (80%) of the total vesting power represented by the voting securities of Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of Company approve a plan of complete liquidation of Company or an agreement for the sale or disposition by Company of all or substantially all of Company’s assets.

13.2 “Disinterested Director” shall mean a director of Company who is not or was not a party to the proceeding in respect of which indemnification is being sought by Indemnitee.

13.3 “Expenses” shall include all direct and indirect costs (including, without limitation, attorneys’ fees, retainers, court costs, transcripts, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, all other disbursements or out-of-pocket expenses and reasonable compensation for time spent by Indemnitee for which he/she is otherwise not compensated by Company) actually and reasonably incurred in connection with a proceeding or establishing or enforcing a right to indemnification under this Agreement, applicable law or otherwise; provided, however, that “Expenses” shall not include any Liabilities.

 

  

  

  

13.4 “Final Adverse Determination” shall mean that a determination that Indemnitee is not entitled to indemnification shall have been made pursuant to Section 6 hereof and either (i) a final adjudication in a court of competent jurisdiction pursuant to Section 8.1 hereof shall have denied Indemnitee’s right to indemnification hereunder, or (ii) Indemnitee shall have failed to file a complaint in a court of competent jurisdiction pursuant to Section 8.1 for a period of one hundred twenty (120) days after the determination made pursuant to Section 6 hereof.

13.5 “Indemnification Period” shall mean the period of time during which Indemnitee shall continue to serve as a director or executive officer of Company, and  thereafter so long as Indemnitee shall be subject to any possible proceeding arising out of acts or omissions of Indemnitee as a director or executive officer of Company.

13.6 “Independent Legal Counsel” shall mean a law firm selected by Company and approved by Indemnitee (which approval shall not be unreasonably withheld) or, if there has been a change in control, selected by Indemnitee and approved by Company (which approval shall not be unreasonably withheld) and that neither is presently nor in the past five years has been retained to represent, (i) Company or any of its subsidiaries or affiliates, or Indemnitee or any corporation as to which Indemnitee was or is a director, officer, employee or agent, or any subsidiary or affiliate of such a corporation, in any material matter, or (ii) any other party to the proceeding giving rise to a  claim for indemnification hereunder.  Notwithstanding the foregoing, the term, “Independent Legal Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing Company or Indemnitee in an action to determine Indemnitee’s right to indemnification under this Agreement.

13.7 “Liabilities” shall mean liabilities of any type whatsoever including, but not limited to, any judgments, finds, excise taxes and penalties, penalties and amounts paid in settlement (including all interest assessments and other charges paid or payable in connection with or in respect of such  judgments, fines, penalties or amounts paid in settlement) of any proceeding.

13.8 “Proceeding” shall mean any threatened, pending or completed action, claim, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other proceeding whether civil, criminal, administrative or investigative, including any appeal there from.

14. Binding Effect, Duration and Scope of Agreement.    This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of Company), spouses, heirs and personal and legal representatives.  This Agreement shall continue in effect during the Indemnification Period, regardless of whether Indemnitee continues to serve as a director or executive officer.

15. Severability.   If any provision or provisions of this Agreement (or any portion thereof) shall be held to be invalid, illegal or unenforceable for any reason whatsoever:

 

  

  

  

a. the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby; and

b. to the fullest extent legally possible, the provisions of this Agreement shall not in any way be affected or impaired thereby.

16. Governing Law and Interpretation of Agreement.    This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of California, as applied to contracts between California residents entered into and to be performed entirely within California.  If the laws of the State of California are hereafter amended to permit Company to provide broader indemnification rights than such laws permitted Company to provide prior to such amendment, the rights of indemnification and advancement of expenses conferred by this Agreement shall automatically be broadened to the fullest extent permitted by the laws of the State of California, as so amended.

17. Consent to Jurisdiction.   The Company and Indemnitee irrevocably consent to the jurisdiction of the courts of the State of California for all purposes in connection with an action or proceeding which arises out of or relates to this Agreement.

18. Attorneys’ Fees.    In any proceeding brought to enforce any provision of this Agreement, or to seek damages for a breach of any provision hereof, or when any prevailing party is validly asserted as a defense, the prevailing party shall be entitled to receive from the other party all reasonable attorneys’ fees and costs in connection therewith.

19. Entire Agreement.    This Agreement represents the entire agreement between the parties hereto, and there are no other agreements, contracts or understandings between the parties hereto with respect to the subject matter of this Agreement, except as specifically referred to herein or as provided in Section 12 hereof.

20. Counterparts.    This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement.

 

 

	 	NutraCea
	 	 
	 	 
	 	__________________________________________
	
 

	
By:          Leo Gingras

	 	Title:      Chief Operating Officer
	 	 
	 	Date: November 6, 2009
	 	 
	 	 
	 	“Indemnitee”
	 	 
	 	 
	 	___________________________________________
	 	W. John Short
	 	 
	 	Date: November 6, 2009ex10_1.htm

Exhibit 10.1

 

 

CONFIDENTIAL TREATMENT REQUESTED

 

[***] – CONFIDENTIAL PORTIONS OF THIS AGREEMENT WHICH HAVE BEEN REDACTED ARE MARKED WITH BRACKETS (“[***]”).  THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION.

 

 

SETTLEMENT AGREEMENT AND MUTUAL RELEASE

 

THIS IS AN AGREEMENT between Medtronic, Inc. (“Medtronic”), a Minnesota corporation with its principal place of business at 710 Medtronic Parkway, Minneapolis, Minnesota  55432, Salient Surgical Technologies, Inc. (“Salient”), a Delaware corporation with its principal place of business at 180 International Drive, Portsmouth, New Hampshire 03801, and Bovie Medical Corporation (“Bovie”), a Delaware corporation with its principal place of business at 734 Walt Whitman Road, Melville, New York  11747 (the “Agreement”).  Medtronic and Salient are collectively referred to hereinafter as “Plaintiffs”, and Medtronic, Salient, and Bovie are collectively referred to hereinafter as the “Parties”.

 

WHEREAS Medtronic is the owner of United States Patent No. 7,364,579 titled “Fluid-Assisted Electrosurgical Device” (“the ‘579 Patent”);

 

WHEREAS Salient is an exclusive, world-wide licensee of the ‘579 Patent, pursuant to agreement between Medtronic and Salient;

 

WHEREAS the Parties have been involved in a litigation concerning Bovie’s alleged infringement of the ‘579 patent in a case styled as Medtronic, Inc. & Salient Surgical Technologies, Inc. v. Bovie Medical Corporation, Case No. 10-494 (SLR), pending before the United States District Court for the District of Delaware (the “Delaware Action”).

 

WHEREAS Bovie filed Counterclaims against Plaintiffs in the Delaware Action;

 

WHEREAS the Parties desire to settle and resolve all claims pending in the Delaware Action between and among each other;

 

WHEREAS concurrently with the execution of this Settlement Agreement, the parties are entering into a stipulation of dismissal in the form attached hereto; and

 

NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties, and other terms and conditions contained herein, the sufficiency of which is hereby acknowledged, the Parties agree as follows:

 

1.           PAYMENT.  In consideration of the promises, covenants and releases granted under this Agreement, Medtronic agrees to pay Bovie the total sum of Seven Hundred Fifty Thousand Dollars (U.S. $750,000) on signing and execution of this Agreement by all Parties (“Effective Date”).

  

  

  

[***] = Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Securities and Exchange Commission.

 

1.1           [***]

 

2.             BOVIE’S WITHDRAWAL FROM MARKET.  In consideration of the promises, covenants and releases granted in this Agreement, Bovie, its future licensees of its saline-enhanced RF handpiece technology (hereinafter “Future Licensees”), and any current and future divisions, departments, subsidiaries, parents, affiliates, successors, and predecessors of Bovie, agree to cease and refrain from the importation, use, sale, purchase for resale, offer for sale, advertisement, or possession for resale, both within the United States and worldwide of any monopolar and bipolar saline-enhanced RF handpiece technology (including SEER and BOSS) (hereinafter “Saline-Enhanced RF Device Business”) from and including the Effective Date through and including February 22, 2015 (hereinafter “Withdrawal Period”).

 

2.1           Bovie agrees, on behalf of itself, its Future Licensees, and its current and future divisions, departments, subsidiaries, parents, affiliates, successors, and predecessors that it will not seek to directly or indirectly enter into the Saline-Enhanced RF Device Business within the United States and worldwide through and including February 22, 2015.

 

2.2           Bovie further agrees that commencing promptly after the Effective Date and during the Withdrawal Period, Bovie shall store its entire finished goods inventory of products related to the Saline-Enhanced RF Device Business in a secure, offsite storage facility.  Such finished goods inventory, whether in the U.S. or abroad, shall be placed into the secure, offsite storage upon its receipt from Bovie’s suppliers.  Bovie shall provide Salient with annual written reports during the Withdrawal Period certifying that the stored goods have remained intact within the storage facility.  Furthermore, Salient may request and Bovie shall provide a copy of the records from the storage facility as substantiation of Bovie’s certifications.  Bovie may elect to destroy and dispose of the stored goods and, if so, Bovie shall provide Salient advance written notice at least thirty (30) days prior to such action, and shall also provide prompt written notice to Salient certifying said destruction and disposal.

 

2.3           Bovie further agrees on behalf of itself, its Future Licensees, and its current and future divisions, departments, subsidiaries, parents, affiliates, successors, and predecessors that it will not knowingly and voluntarily provide assistance to a third party that would allow that third party to enter into the Saline-Enhanced RF Device Business within the United States and worldwide through and including February 22, 2015.

 

3.             [***]

 

4.             DISMISSAL OF PENDING LITIGATION.  The parties agree that this Settlement Agreement is expressly contingent upon the payment of $750,000.00 as provided and specified in Section 1 above, the execution of the mutual releases set forth herein and the stipulation of dismissal of the Delaware Action.  Concurrently with the execution of this Agreement, the Parties shall execute the documents in the form attached as Exhibit 1 pursuant to which the Parties agree to dismiss the Delaware Action with prejudice including all claims and counterclaims, and any claim which could have been had or brought by and between the Parties arising from or connected with the Delaware Action, and the parties acknowledge the release and discharge of each other from any and all such claims.

  

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[***] = Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Securities and Exchange Commission.

 

4.1           Notwithstanding the foregoing, each Party intends and agrees that the United States District Court for the District of Delaware shall be the exclusive jurisdiction for the purpose of resolving any claim or controversy arising out of or relating to the terms and conditions of this Agreement, a Party’s performance or failure to perform hereunder, or any other claim or dispute arising out of the Agreement.

 

4.2           Each Party further agrees to waive any objections it may have now or hereafter to the venue of any proceeding filed in the United States District Court for the District of Delaware for the purposes referenced in this Section.  In any such proceeding to enforce the terms of this Agreement, the Court shall award to the prevailing party its reasonable attorneys’ fees and costs incurred.

 

5.             NO ADMISSION OF INFRINGEMENT OR LIABILITY.  This Agreement is entered into in order to compromise and settle disputed claims, without any acquiescence on the part of any Party as to the merit of any patent-infringement claim, defense, affirmative defense, counterclaim, or of liabilities or damages related to any patent rights or otherwise.  Neither this Agreement nor any part thereof, shall be, or used as, an admission of infringement or liability by anyone, at any time, for any purpose.

 

6.             VALIDITY AND ENFORCEABILITY OF PATENTS.

 

6.1           Bovie acknowledges, on behalf of itself, its Future Licensees, and its current and future divisions, departments, subsidiaries, parents, affiliates, successors, and predecessors, the validity and enforceability of U.S. Patent No. 7,364,579 (the “ ‘579 Patent”), and application No. 08/393,082, filed February 22, 1995, now Patent No. 6,063,081; application No. 08/556,784, filed November 2, 1995, now Patent No. 5,897,553; application No. 09/580,228, filed on May 26, 2000, now Patent No. 6,358,248; application No. 09/955,496, filed on September 18, 2001, now Patent No. 6,585,732; application No. 10/411,921, filed on April 11, 2003, now Patent No. 6,764,487; application No. 10/883,178, filed on July 1, 2004, now Patent No. 6,949,098; application No. 11/230,839, filed on September 20, 2005, now Patent No. 7,166,105 (collectively, “the ‘579 Patent’s Related Patents and Patent Applications”), through and including February 22, 2015.  Bovie further agrees, on behalf of itself, its Future Licensees, and its current and future divisions, departments, subsidiaries, parents, affiliates, successors, and predecessors that it will not knowingly and voluntarily participate, or knowingly and voluntarily assist any third party, in any U.S. Patent Office proceeding or District Court litigation to invalidate and/or declare unpatentable any claim of the ‘579 Patent or any of the ‘579 Patent’s Related Patents and Patent Applications, through and including February 22, 2015.

 

6.2           Bovie further acknowledges, on behalf of itself, its Future Licensees, and its current and future divisions, departments, subsidiaries, parents, affiliates, successors, and predecessors, the validity and enforceability of European Patent, EP 0 863726, and divisional application No. 02015008.2, now European Patent No. 1 245 196 (“the EP Related Patent and Patent Application”), through and including February 22, 2015.  Bovie further agrees, on behalf of itself, its Future Licensees, and its current and future divisions, departments, subsidiaries, parents, affiliates, successors, and predecessors that it will not knowingly and voluntarily participate, or knowingly and voluntarily assist any third party, in any Patent Office proceeding or litigation to invalidate and/or declare unpatentable any claim of European Patent, EP 0 863726, or any EP Related Patent and Patent Application, through and including February 22, 2015.

  

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[***] = Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Securities and Exchange Commission.

7.             RELEASES.

 

7.1           In exchange for Bovie’s above agreements, Medtronic and Salient, together with their respective agents, servants, employees, attorneys, predecessors, successors, assigns, parent and parents, subsidiaries and affiliates, and including the owners, shareholders, directors and officers of each of the foregoing (collectively, the “Salient Parties”) forever irrevocably release and discharge Bovie, its agents, servants, employees, attorneys, predecessors, successors, assigns, parent and parents, subsidiaries and affiliates, and including the owners, shareholders, directors and officers of each of the foregoing (collectively, the “Bovie Parties”) from any and all claims, demands, threats, suits or proceedings that the Salient Parties have or claim to have or may hereafter have or claim to have against any of the Bovie Parties for infringement of either the ‘579 Patent or any of the ‘579 Patent’s Related Patents and Patent Applications, or the European Patent, EP 0 863726, and the EP Related Patent and Patent Application.  The Salient Parties further forever irrevocably release and discharge the Bovie Parties from any and all claims, demands, threats, suits or proceedings that the Salient Parties have or claim to have directly or indirectly related to or arising from the Delaware Action.

 

7.2           In exchange for Medtronic’s and Salient’s above agreements, the Bovie Parties forever irrevocably release and discharge the Salient Parties from any and all claims, demands, threats, suits or proceedings that the Bovie Parties have or claim to have directly or indirectly related to or arising from the Delaware Action.

 

8.             ATTORNEYS’ FEES AND COSTS.  Except as expressly provided in this Agreement, each Party shall bear its own fees, costs, and expenses incurred in the Delaware Action.

 

9.             PRESS RELEASE  Bovie has drafted and will release a press release that is mutually agreeable to the Parties, which announces the settlement and discloses the material terms of the settlement to the extent required by applicable law, in the opinion of Bovie’s securities counsel.  Notwithstanding, Bovie may include language in the press release regarding a future OEM relationship between Bovie and Salient.  A copy of the press release is attached hereto as Exhibit 2.

 

10.           CONFIDENTIAL.  Subject to the public disclosures permitted under paragraph 9, above, each Party shall keep the terms of this Agreement confidential.  Notwithstanding the foregoing, a Party may disclose such information (a) to the extent it is required to do so by applicable law; (b) to its legal counsel; (c) to accountants, banks, financing sources, prospective purchasers, and their advisors; (d) to officers or employees as needed to perform the Agreement; and, (e) in connection with the enforcement of this Agreement or any rights hereunder.

  

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[***] = Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Securities and Exchange Commission.

 

11.           NOTICES.  Any notice, request, demand, or other communication required or permitted hereunder shall be in writing, shall reference this Agreement, and shall be deemed to be properly given: (a) when delivered personally; (b) when sent by facsimile, with written confirmation of receipt; (c) when sent by electronic mail (email) with confirmation of delivery; or, (d) one (1) business day after deposit with a nationally recognized overnight courier with written confirmation of receipt.  All notices shall be sent to the addresses set forth below (or to such other address or person as may be designated by a Party by giving written notice to the other Party pursuant to this Section):

 

If to Medtronic:

 

Medtronic, Inc.

710 Medtronic Parkway

Minneapolis, Minnesota  55432

Attention:                                

[insert email]

If to Salient:

 

Salient Surgical Technologies, Inc.

180 International Drive

Portsmouth, New Hampshire 03801

Attention: Denise C. Lane, Esq., Director of Legal Affairs & I.P.

denise.lane@salientsurgical.com

If to Bovie:

 

Bovie Medical Corporation

5115 Ulmerton Road

Clearwater, Florida 33760

Attention: Leonard Keen, Esq., VP & General Counsel

Leonard.Keen@boviemed.com 

12.           NONASSIGNABILITY.  This Agreement may not be assigned by either Party without the prior written consent of all other Parties.  Notwithstanding the foregoing, such other Party’s consent shall not be required for any assignment to an entity that succeeds to all or substantially all of the assigning Party’s business or assets relating to this Agreement, whether by sale, merger, operation of law or otherwise.  This Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective permitted successors and assigns.

 

13.           FURTHER ASSURANCES.  Each Party agrees to take or cause to be taken such further actions and to execute, deliver, and file or cause to be executed, delivered, and filed such further documents and instruments, and to obtain such consents as may be reasonably required or requested in order to effectuate fully the purposes, terms and conditions of this Agreement.

 

14.           APPLICABLE LAW.  This Agreement shall be governed by the laws of the State of Delaware, and all rights and obligations of the Parties to this Agreement, and the interpretation, construction, and enforceability hereof shall also be governed by the laws of the State of Delaware.

  

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[***] = Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Securities and Exchange Commission.

 

15.           SEVERABILITY.  If any term or other provision of this Agreement is determined by a court, administrative agency or arbitrator to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to either Party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the fullest extent possible.

 

16.           FAILURE OR INDULGENCE NOT WAIVER.  No failure or delay on the part of either Party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or agreement herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right.

 

17.           AMENDMENT.  No change or amendment will be made to this Agreement except by an instrument in writing signed on behalf of each of the Parties to such agreement.

 

18.           CUMULATIVE REMEDIES.  The rights and remedies of the Parties as set forth in this Agreement are not exclusive and are in addition to any other rights and remedies now or hereafter provided by law or at equity.

 

19.           CONSTRUCTION.  This Agreement has been negotiated by the Parties and shall be interpreted fairly in accordance with its terms and without any construction in favor of or against any Party.

 

20.           COUNTERPARTS.  This Agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which shall constitute one and the same agreement.

 

21.           REPRESENTED BY COUNSEL.  Each Party acknowledges that it has been represented by independent counsel of its choice throughout all negotiations which preceded the execution of this Agreement and all other documents to be executed referred to herein (the “Subject Documents”), and that the Subject Documents have been executed after consultation with such independent legal counsel.

 

22.           REPRESENTATION AND WARRANTY OF AUTHORITY.  The Parties hereto, and the individuals executing this document, personally represent and warrant that each has the capacity and authority to execute this Agreement and bind the respective Parties hereto, together with their affiliates, subsidiaries, parents, assignees, and licensees, all of whom are expressly bound by the terms of this Agreement.

  

6

  

[***] = Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Securities and Exchange Commission.

 

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed on the date written below.

Medtronic, Inc.

	
By:

	
/s/ Gary Ellis

	
Name:

	
Gary Ellis

	
Title:

	
Senior VP and CFO

	
Date:

	
2/28/2011

Salient Surgical Technologies, Inc.

	
By:

	
/s/ Joseph Army

	
Name:

	
Joseph Army

	
Title:

	
CEO

	
Date:

	
2/24/2011

Bovie Medical Corporation

	
By:

	
/s/ Andrew Makrides

	
Name:

	
Andrew Makrides

	
Title:

	
President and CEO

	
Date:

	
2/16/2011

 

 

7

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