Document:

ex10_8.htm

Exhibit 10.8

 

AMENDMENT OF LOAN DOCUMENTS

 

This Amendment to Loan Documents (“Amendment”), dated as of July 31, 2012 (“Execution Date”), is entered into by NutraCea, a California corporation (“NutraCea”), The RiceX Company, a Delaware corporation (“RiceX”), Rice Science, LLC, a Delaware limited liability company (“Rice Science”, and together with RiceX and NutraCea, the “Company”), the Collateral Agent (as defined below) and the individuals and entities listed on Exhibit A hereto (“Investors”).  The parties agree as follows:

	
1.

	
Background and Purpose.

1.1           Purchase Agreement.  NutraCea and the Investors are parties to a Note and Warrant Purchase Agreement, dated as of January 17, 2012 (as amended, “Purchase Agreement”), pursuant to which NutraCea issued to the investors thereunder secured convertible promissory notes (“Notes”) and warrants to purchase shares of NutraCea’s common stock (“Warrants”).

1.2           Security Agreement.  In connection with the Purchase Agreement, the parties hereto entered into a Security Agreement, dated January 17, 2012 (“Security Agreement”), pursuant to which the Company granted a security interest in certain of its assets to the Collateral Agent, for the benefit of itself and the investors.  The current “Collateral Agent” under the Security Agreement is Greg Vislocky and Baruch Halpern.

1.3           Prior Facility.  On or about January 17, 2012, NutraCea and Hillair Capital Investments L.P. (“Hillair”) entered into an $870,000 Original Issue Discount Senior Secured Convertible Debenture facility (“Existing Convertible Debt Facility”).

1.4           Exchange.  Pursuant to a Securities Exchange Agreement, dated on or about the date hereof, between NutraCea and Hillair, NutraCea agreed to issue to Hillair an aggregate of $1,009,200 in principal amount of Original Issue Discount Senior Secured Convertible Debenture Due January 1, 2014 (the “Exchange Debenture”) in exchange for and cancellation of the debenture issued to Hillair pursuant to the Existing Convertible Debt Facility.

1.5.           New Convertible Debt Facility.  Pursuant to the Securities Purchase Agreement, dated on or about the date hereof, between NutraCea and Hillair, NutraCea and Hillair entered into a $290,000 Original Issue Discount Senior Secured Convertible Debenture facility (“New Convertible Debt Facility”), on terms substantially the same as the Existing Convertible Debt Facility, except for the amount of debt, the maturity of the debt, the conversion price of the debt, and the exercise price per share of the warrants issued thereunder.

 

1.6.           Purpose.  As a condition to Hillair loaning funds to NutraCea under the New Convertible Debt Facility, and in order to allow NutraCea to borrow additional funds pursuant to the Purchase Agreement, the parties are entering into this Amendment.

  

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1.7           Ownership.  The Investors own Notes constituting more than 50% of the outstanding principal amount of all Notes.

2.            Amendment of Purchase Agreement.  The Purchase Agreement is hereby amended as follows:

2.1           Conversion and Exercise Prices.  Notwithstanding anything to the contrary in the Purchase Agreement, the initial Conversion Price of any Notes issued in connection with one or more Closings on or within ten (10) days after the Execution Date shall be $0.07, and the initial Exercise Price of any Warrants issued in connection with one or more Closings on or within ten (10) days after the Execution Date shall be $0.08. Notwithstanding anything to the contrary in the Purchase Agreement, the initial Conversion Price of any Notes issued on or after the Execution Date shall not be less than $0.07, and the initial Exercise Price of any Warrants issued on or after the Execution Date shall not be less than $0.08. Capitalized terms used but not defined in this Section 2.1 shall have the meanings given to such terms in the Purchase Agreement.

2.2           Maximum Offering Amount.  So long as Greg Vislocky, Brian Rick Delamarter and Harold Rick Delamarter, together, purchase Notes that collectively have aggregate principal amounts of at least $1,000,000 at Subsequent Closings (as defined in the Purchase Agreement) occurring on or within ten (10) days after the Execution Date, the definition of “Maximum Offering Amount” under the Purchase Agreement shall immediately thereafter be amended to mean “Five Million Eight Hundred Thousand Dollars ($5,800,000),” and NutraCea will have no option to increase the Maximum Offering Amount without the prior written consent of a Majority in Interest, which consent may be given or withheld in the sole discretion of a Majority in Interest.

2.3           Subsequent Closings.  The Purchase Agreement is hereby amended to provide that NutraCea may hold Subsequent Closings (as defined in the Purchase Agreement) at any time on or before December 31, 2012.

2.4           Use of Proceeds.  Any funds received by NutraCea in Subsequent Closings may be used at the discretion of NutraCea.

3.            Amendment to Notes.  The terms of the Notes are hereby amended as follows:

3.1           Maturity Date.  The definition of “Maturity Date” under the Notes that are outstanding as of the Execution Date is hereby amended to be “July 31, 2015”.

3.2.           Conversion Price.  The Conversion Price for all the Notes outstanding as of the Execution Date shall be $0.07 as of the date that Hillair loans funds to NutraCea pursuant to the New Convertible Debt Facility.

3.3           Exempt Issuance.  The definition of Exempt Issuance is hereby amended to include (i) the issuance of securities pursuant to the Existing Convertible Debt Facility, the Exchange Debenture and the New Convertible Debt Facility, including without limitation the issuance of promissory notes, warrants to purchase common stock and the shares of NutraCea’s common stock that may be issued in connection therewith and (ii) shares of NutraCea’s common stock issued as “PIK Shares” under the Notes.

  

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4.            Amendment of Security Agreement.  The Security Agreement is hereby amended as follows:

4.1           Convertible Debt Facility.  The definition of “Convertible Debt Facility” in the Security Agreement is amended in its entirety as follows:

“Convertible Debt Facility” shall mean, collectively, the Existing Convertible Debt Facility, the Exchange Debenture and the New Convertible Debt Facility.”

4.2           Release of Releasable Assets.  Section 4 of the Security Agreement is hereby amended in its entirety as follows:

“Release of Releasable Assets.  If a Majority in Interest of the Investors provide their prior written consent to the sale, which consent may not be withheld unreasonably, the Collateral Agent shall take all actions reasonably required to release and terminate the Collateral Agent’s Lien and Mortgage (as defined in the Purchase Agreement) on any Releasable Assets that have been sold by NutraCea or the SRB Holding Company (as defined below) or for which NutraCea or the SRB Holding Company has entered into an agreement to sell such assets.  Such release and termination shall be effective immediately upon such sale.  So long as no Event of Default is then continuing, if NutraCea establishes an operating facility outside of the United States using the Lake Charles Assets, enters into a joint venture using the Lake Charles Assets, sells all or any portion of the Lake Charles Assets or enters into an agreement to do the same, Collateral Agent’s Lien on such Lake Charles Assets shall immediately and automatically terminate.  NutraCea may take all necessary actions to reflect the foregoing, including without limitation the filing of any termination statements and the recording of any modification to a Mortgage.  The Collateral Agent and the Investors shall cooperate with NutraCea and execute any documents reasonably requested by NutraCea to effect the foregoing.  If any of the Releasable Assets are sold by NutraCea or the SRB Holding Company, the Collateral Agent may require NutraCea to, subject to the Convertible Debt Facility, prepay any portion of the Notes from the net proceeds actually received by NutraCea or the SRB Holding Company in such transaction, but only after application of the portion of such proceeds required to satisfy tax obligations or obligations under mechanics’ liens.

4.3           SRB Holding Company.  Section 11(l) of the Security Agreement is hereby amended in its entirety as follows:

  

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“(l)           SRB Holding Company.  Subject to the terms of the New Convertible Debt Facility, NutraCea shall use commercially reasonable efforts to, within one hundred twenty (120) days following the Execution Date, establish a separate entity and transfer and assign to such entity, the assets of NutraCea comprising NutraCea’s SRB Business (such entity after receipt of such assets, “SRB Holding Company”), which assets include without limitation NutraCea’s stage 1 and stage 2 manufacturing facilities located in the United States, the licenses necessary to use the intellection property to operate the SRB Business and the customer lists associated with such SRB Business.  If NutraCea so establishes an SRB Holding Company, NutraCea shall promptly thereafter (i) grant to the Collateral Agent on behalf of the Investors a security interest in the equity interests of the SRB Holding Company and (ii) take such actions as are required to cause (A) the Collateral that is contributed to the SRB Holding Company to continue to be encumbered by the security interests granted hereunder to the extent that they are required to be encumbered hereunder (including with respect to priority) and (B) the real property assets that will be encumbered pursuant to the Mortgages to continue to be so encumbered.”

5.            Existing Warrants.  The parties agree and acknowledge that after consummation of the transactions contemplated by the New Convertible Debt Facility, (a) the Exercise Price (as defined in the Warrants) of the Warrants outstanding as of the Execution Date will be $0.08, (b) the number of shares of NutraCea common stock issuable upon exercise of each Warrant outstanding as of the Execution Date will be equal to the quotient obtained by dividing (i) the original principal amount of the Note issued to the holder of the Warrant concurrent with the Warrant, by (ii) $0.07, and (c) each reference to January 17, 2017 in each Warrant outstanding as of the Execution Date will be changed to July 31, 2017.  Further, the parties agree that the issuance of securities in connection with the Existing Convertible Debt Facility, the Exchange Debenture and the New Convertible Debt Facility, as currently contemplated, including the issuance of any shares of NutraCea common stock pursuant thereto, shall not reduce the Exercise Price of the Warrants or increase the number of shares of NutraCea common stock issuable upon exercise of the Warrants.

6.            Directors. In the event that any member of NutraCea’s Board of Directors (“Board”) that was a member of the Board on January 1, 2009 (such directors, “Designated Directors”) remains on the Board 120 days after any Closing occurring on or after the Execution Date, NutraCea agrees to take, in accordance with applicable law and its articles of incorporation and bylaws, all action necessary to convene as soon as reasonably practicable, but in no event later than 180 days after the Closing, a special meeting of its shareholders to consider and vote upon a proposal (“Proposal”) to remove all members of the Board and to elect a new slate of members of the Board that are recommended by the Board, none of which recommended directors shall be the Designated Directors (including any adjournment or postponement, the “Shareholders Meeting”). Except with the prior approval of the Collateral Agent, no other matters shall be submitted for the approval of the NutraCea shareholders at the Shareholders Meeting. The Board of Directors of NutraCea shall at all times prior to and during such meeting recommend approval of the Proposal and shall take all reasonable lawful action to solicit such approval by its shareholders and shall not (x) withdraw, modify or qualify in any adverse manner such recommendation or (y) take any other action or make any other public statement in connection with the Shareholders Meeting inconsistent with such recommendation. If NutraCea materially breaches its obligations under this Section 6 by failing to call, give notice of, convene and hold the Shareholders Meeting, or the Board of Directors of NutraCea shall have failed to make its recommendation referred to herein, withdrawn such recommendation or modifies or changes such recommendation in an adverse manner, then the interest on the unpaid principal balance under each Note shall thereafter accrue at a rate equal to 18.00% per annum, computed on the basis of the actual number of days elapsed and a year of 365 days.  Neither NutraCea nor the Board shall nominate any of the Designated Directors for election at the next annual meeting of NutraCea’s shareholders.

  

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7.            Consent to Hillair Transaction.  The Investors hereby consent to NutraCea issuing the Exchange Debenture and the Company entering into the New Convertible Debt Facility.

8.            Miscellaneous.

8.1           Full Force and Effect.  As amended by this Amendment, the Purchase Agreement, the Security Agreement, the Notes and the Warrants (collectively, “Loan Documents”) shall remain in full force and effect.

8.2           Conflict.  If the terms of this Amendment conflict with the terms of any of the Loan Documents, the terms of this Amendment shall control.

8.3.           Counterparts.  This Amendment may be executed in one or more counterparts, each of which shall be an original and all of which shall together constitute one and the same document.

8.4.           Governing Law.  This Amendment shall be governed by the laws of the State of California, notwithstanding its conflict of laws provisions.

8.5.           Necessary Action.  The parties agree to take all action necessary or useful to complete and accomplish the intentions of this Amendment.

8.6.           Severability.   If any provision of this Amendment is held to be invalid, void or unenforceable for any reason, the remaining provisions shall nevertheless continue in full force and effect.

[Signature page follows]

 

  

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The parties have entered into this Amendment as of the first date set forth above.

 

	
NUTRACEA

	
INVESTORS:

	 	 
	
By: /s/ J. Dale Belt

Jerry Dale Belt, Chief Financial Officer

	
The Shoshana Shapiro Halpern Revocable

Trust UA June 13, 2006

	 	 
	  	
By:  /s/ Baruch Halpern

Baruch Halpern, Trustee

	 	 
	 	
By:  /s/ Shoshana Halpern

Shoshana Halpern, Trustee

 

	
COLLATERAL AGENT

	  
	  	
/s/ Gregory J. Vislocky

Gregory J. Vislocky

	
/s/ Baruch Halpern

Baruch Halpern

	  
	 	 
	
/s/ Gregory J. Vislocky

Gregory J. Vislocky

	
 

OTHER INVESTORS:

 

	
THE RICEX COMPANY

	  	 
	
a Delaware corporation

	
(Name of Investor)

	 
	 	 	 
	
By:  /s/ W. John Short

	  	 
	
W. John Short , Chief Executive Officer

	
(Signature)

	 

 

	  	  	 
	  	
(Name and title of signatory, if applicable)

	 

	
RICE SCIENCE, LLC,

a Delaware limited liability company

	  
	 	 
	
By: NutraCea, its member

	  
	 	 
	
By:  /s/ J. Dale Belt

Jerry Dale Belt, Chief Financial Officer

	  

 

[SIGNATURE PAGE TO AMENDMENT OF LOAN DOCUMENTS]

 

  

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EXHIBIT A

INVESTORS

The Shoshana Shapiro Halpern Revocable Trust UA June 13, 2006

Gregory J. Vislocky

Walter John Short and Karen A. Wilson

Weintraub Partners

Harold Guy Delamarter

 

7ex10_9.htm

Exhibit 10.9

SUBORDINATION AGREEMENT

 

THIS SUBORDINATION AGREEMENT (this “Agreement”), dated as of July 31, 2012, is made by and among Weintraub Partners, a California general partnership (“Weintraub”), Greg Vislocky, an individual (“Vislocky”), Baruch Halpern and Shoshana Halpern, as trustees of the Shoshana Shapiro Halpern Revocable Trust UA June 13, 2006 (the “Trust”), Harold Guy Delamarter, an individual (“Harold”), and Walter John Short and Karen A. Wilson (“Short”, and collectively with Weintraub, Vislocky, Harold and the Trust, the “Subordinated Creditors”), and Hillair Capital Investments, L.P., a Delaware limited partnership (with its participants, successors and assigns, the “Preferred Lender”, and together with the Subordinated Creditors, the “Parties”). For purposes herein, the “Borrower” means NutraCea, a California corporation.

 

BACKGROUND

 

A.         Pursuant to the Securities Exchange Agreement, dated as of the date hereof, between the Borrower and the Preferred Lender (“Exchange Agreement”), the Borrower issued to the Preferred Lender an aggregate of $1,009,200 in principal amount of Original Issue Discount Senior Secured Convertible Debentures Due January 1, 2014 (the “Exchange Debentures”) in exchange for $870,000 in principal amount of the  Original Issue Discount Senior Secured Convertible Debentures Due July 1, 2013 held by the Preferred Lender (the “Prior Debentures”);

 

B.          Pursuant to the Securities Purchase Agreement, dated as of the date hereof, between the Borrower and the Preferred Lender (the “Purchase Agreement”), the Borrower issued to the Preferred Lender an aggregate of $290,000 in principal amount of the Original Issue Discount Senior Secured Convertible Debentures Due January 1, 2014 (the “New Debentures” and, collectively with the Exchange Debentures, the “Debentures”);

 

C.          In connection with the transactions contemplated by the Purchase Agreement, Vislocky and Harold entered into certain agreements pursuant to which the Borrower issued to Vislocky and Harold an aggregate of $750,000 in principal amount of New Subordinated Notes (as defined below);

 

D.          The Subordinated Creditors and the Preferred Lender are parties to a Subordination Agreement, dated as of January 17, 2012 (“Other Subordination Agreement”), pursuant to which the Subordinated Creditors and other creditors of Borrower subordinated the Subordinated Indebtedness to the Preferred Lender Debt (as such terms are defined in the Other Subordination Agreement);

 

E.           It is in the best interest of the Subordinated Creditors to assist the Borrower in obtaining capital from the Preferred Lender and to subordinate their respective security interests under the Security Agreement pursuant to the terms of this Agreement;

 

  

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F.           As a condition to providing capital to the Borrower, the Preferred Lender has required that the Subordinated Creditors enter into this Agreement to subordinate each of their respective security interests granted under the Security Agreement entered into by each of the Subordinated Creditors and the Borrower, dated as of January 17, 2012 (collectively, the “Security Agreement”) to the Preferred Lender Debt (as defined herein); and

 

G.           In consideration of the capital provided or to be provided by the Preferred Lender and other financial accommodations that have been made and may hereafter be made by the Preferred Lender for the benefit of the Borrower, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Subordinated Creditors hereby agree to the terms hereof.

 

AGREEMENT

 

1.             Definitions.  As used herein, the following terms have the meanings set forth below:

 

“Borrower Default” means an Event of Default as defined in the Debentures.

 

“Existing Subordinated Notes” means the (a) Borrower’s Secured Convertible Promissory Note, dated as of January 17, 2012, payable to the order of Weintraub in the original principal amount of Two Hundred Fifty Thousand Dollars ($250,000), (b) Borrower’s Secured Convertible Promissory Note, dated as of January 17, 2012, payable to the order of Vislocky in the original principal amount of Five Hundred Thousand Dollars ($500,000), (c) Borrower’s Secured Convertible Promissory Note, dated as of January 17, 2012, payable to the order of Short in the original principal amount of Twenty Five Thousand Dollars ($25,000), (d) Borrower’s Secured Convertible Promissory Note, dated as of January 17, 2012, payable to the order of the Trust in the original principal amount of Two Million Five Hundred Thousand Dollars ($2,500,000), and (e) Borrower’s Secured Convertible Promissory Note, dated as of January 17, 2012, payable to the order of Harold in the original principal amount of Two Hundred Fifty Thousand Dollars ($250,000),  together with all renewals, extensions and modifications thereof and any note or notes issued in substitution therefor.

 

“Lien” means any security interest, mortgage, deed of trust, pledge, lien, charge, encumbrance, title retention agreement or analogous instrument or device, including the interest of each lessor under any capitalized lease and the interest of any bondsman under any payment or performance bond, in, of or on any assets or properties of a person, whether now owned or hereafter acquired and whether arising by agreement or operation of law.

 

“New Subordinated Notes” means (a) Borrower’s Secured Convertible Promissory Note, dated as of July 31, 2012, payable to the order of Vislocky in the original principal amount of Five Hundred Thousand Dollars ($500,000), and (b) Borrower’s Secured Convertible Promissory Note, dated as of July 31, 2012, payable to the order of Harold in the original principal amount of Two Hundred Fifty Thousand Dollars ($250,000), together with all renewals, extensions and modifications thereof and any note or notes issued in substitution therefor.

 

  

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“Preferred Lender Debt”, used herein in its most comprehensive sense, means the Debentures and any and all advances, debts, obligations and liabilities of the Borrower to the Preferred Lender, heretofore, now or hereafter made, incurred or created, whether voluntary or involuntary and however arising, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, including under any swap, derivative, foreign exchange, hedge, deposit, treasury management or other similar transaction or arrangement at any time entered into by the Borrower with the Preferred Lender, and whether the Borrower may be liable individually or jointly with others, or whether recovery upon such amounts may be or hereafter become unenforceable.

 

 “Subordinated Indebtedness” means all obligations arising under the Existing Subordinated Notes and the New Subordinated Notes and each and every other debt, liability and obligation of every type and description which the Borrower may now or at any time hereafter owe to the Subordinated Creditors, whether such debt, liability or obligation now exists or is hereafter created or incurred, and whether it is or may be direct or indirect, due or to become due, absolute or contingent, primary or secondary, liquidated or unliquidated, or joint, several or joint and several.

 

2.           Subordination.  The payment of all of the Subordinated Indebtedness is hereby expressly subordinated to the extent and in the manner hereinafter set forth to the payment in full of the Preferred Lender Debt; and regardless of any priority otherwise available to the Subordinated Creditors by law or by agreement, and any Lien claimed therein by the Subordinated Creditors shall be and remain fully subordinate for all purposes to the rights of the Preferred Lender therein for all purposes whatsoever. The Subordinated Indebtedness shall continue to be subordinated to the Preferred Lender Debt even if the Preferred Lender Debt is deemed subordinated, avoided or disallowed under the United States Bankruptcy Code or other applicable law.

 

3.           Principal Payments.  Except as set forth in Section 6, until all of the Preferred Lender Debt has been paid in full, the Subordinated Creditors shall not, without the Preferred Lender’s prior written consent, demand, receive or accept any principal payment from the Borrower in respect of the Subordinated Indebtedness, or exercise any right of or permit any setoff in respect of the Subordinated Indebtedness.

 

4.           Interest Payments.  A Subordinated Creditor may demand, receive and accept regularly scheduled payments of interest in respect of the Subordinated Indebtedness; provided, that without the Preferred Lender’s prior written consent, the Subordinated Creditors shall not demand, receive or accept any interest payment from the Borrower in respect of the Subordinated Indebtedness so long as any Borrower Default exists or if a Borrower Default will occur as a result of or immediately following such interest payment.

 

  

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5.           Receipt of Prohibited Payments.  Each Subordinated Creditor agrees that if the Subordinated Creditor receives any payment on the Subordinated Indebtedness that the Subordinated Creditor is not entitled to receive under the provisions of this Agreement, the Subordinated Creditor will hold the amount so received in trust for the Preferred Lender and will forthwith turn over such payment to the Preferred Lender in the form received (except for the endorsement of the Subordinated Creditor where necessary) for application to then-existing Preferred Lender Debt (whether or not due), in such manner of application as the Preferred Lender may deem appropriate.  If a Subordinated Creditor exercises any right of setoff that the Subordinated Creditor is not permitted to exercise under the provisions of this Agreement, the Subordinated Creditor will promptly pay over to the Preferred Lender, in immediately available funds, an amount equal to the amount of the claims or obligations offset.  If a Subordinated Creditor fails to make any endorsement required under this Agreement, the Preferred Lender, or any of its officers or employees or agents on behalf of the Preferred Lender, is hereby irrevocably appointed as the attorney-in-fact (which appointment is coupled with an interest) for such Subordinated Creditor to make such endorsement in the Subordinated Creditor’s name.

 

6.           Action on Subordinated Indebtedness.  Each of the Subordinated Creditors agrees not to commence any action or proceeding against the Borrower to recover all or any part of the Subordinated Indebtedness, or join with any creditor (unless the Preferred Lender shall so join) in bringing any proceeding against the Borrower under any bankruptcy, reorganization, readjustment of debt, arrangement of debt receivership, liquidation or insolvency law or statute of the federal or any state government, or take possession of, sell, or dispose of any Collateral (as defined in the Security Agreement), or exercise or enforce any right or remedy available to a Subordinated Creditor with respect to any such Collateral, unless and until the Preferred Lender Debt has been paid in full. Notwithstanding anything to the contrary set forth in this Section 6, if Borrower’s obligations to Preferred Lender are not fully paid and satisfied, and Preferred Lender has not initiated a foreclosure or other action against Borrower, upon five (5) business days’ prior written notice to Preferred Lender after expiration of the Standstill Period, Subordinated Creditors may exercise any rights or remedies they may have against Borrower whether by judicial or non-judicial foreclosure or otherwise provided that the receipt of any payments by Subordinated Creditors shall be paid over to the Preferred Lender, in immediately available funds, until payment in full of the obligations to the Preferred Lender. “Standstill Period” means the period beginning on the occurrence of an event of default under the agreements between the Subordinated Creditors and Borrower and ending on the date that is six (6) months following the date after the Subordinated Creditors shall have given notice to Preferred Lender and Borrower that such event of default shall have occurred and be continuing and of the intent of the Subordinated Creditors to exercise their rights and remedies.

 

7.             Action Concerning Collateral.

 

(a)           Notwithstanding any Lien now held or hereafter acquired by the Subordinated Creditors, the Preferred Lender may take possession of, sell, dispose of, and otherwise deal with all or any part of any collateral of the Subordinated Creditor, and may enforce any right or remedy available to it with respect to the Borrower or such collateral, all without notice to or consent of the Subordinated Creditors except as specifically required by applicable law.

 

  

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(b)           In addition, and without limiting the generality of the foregoing, if (i) a Borrower Default has occurred and is continuing, (ii) the Borrower or the Preferred Lender intends to sell or otherwise dispose of any collateral of the Secured Creditors to an unrelated third party outside the ordinary course of business, (iii) Preferred Lender has given written notice thereof to the Subordinated Creditors, and (iv) the Subordinated Creditors have failed, within ten (10) days after receipt of such notice, to purchase for cash the Preferred Lender Debt for the full amount thereof, the Subordinated Creditors shall be deemed to have consented to such sale or disposition, to have released any Lien it may have in such collateral and to have authorized the Preferred Lender or its agents to file partial releases (and any related financing statements such as “in lieu” financing statements under Part 7 of Article 9 of the Uniform Commercial Code) with respect to such Collateral.

 

(c)           The Preferred Lender shall have no duty to preserve, protect, care for, insure, take possession of, collect, dispose of, or otherwise realize upon any of the assets of Borrower, whether or not they comprise collateral for a Secured Creditor, and in no event shall the Preferred Lender be deemed a Subordinated Creditor’s agent with respect to any assets of Borrower.  All proceeds received by the Preferred Lender with respect to any of Borrower’s assets may be applied, first, to pay or reimburse the Preferred Lender for all costs and expenses (including reasonable attorneys’ fees) incurred by the Preferred Lender in connection with the collection of such proceeds, and, second, to any Preferred Lender Debt in any order that it may choose.

 

8.           Bankruptcy and Insolvency.  In the event of any receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization or arrangement with creditors, whether or not pursuant to bankruptcy law, the sale of all or substantially all of the assets of the Borrower, dissolution, liquidation or any other marshalling of the assets or liabilities of the Borrower, the Subordinated Creditors will file all claims, proofs of claim or other instruments of similar character necessary to enforce the obligations of the Borrower in respect of the Subordinated Indebtedness and will hold in trust for the Preferred Lender and promptly pay over to the Preferred Lender in the form received (except for the endorsement of the Subordinated Creditors where necessary) for application to the then-existing Preferred Lender Debt, any and all moneys, dividends or other assets received in any such proceedings on account of the Subordinated Indebtedness, unless and until the Preferred Lender Debt has been paid in full. If any Subordinated Creditors shall fail to take any such action, the Preferred Lender, as attorney-in-fact for the Subordinated Creditors, may take such action on the Subordinated Creditor’s behalf.  The Subordinated Creditors each hereby irrevocably appoint the Preferred Lender, or any of its officers or employees on behalf of the Preferred Lender, as the attorney-in-fact for the Subordinated Creditor (which appointment is coupled with an interest) with the power but not the duty to demand, sue for, collect and receive any and all such moneys, dividends or other assets and give acquittance therefor and to file any claim, proof of claim or other instrument of similar character, to vote claims comprising Subordinated Indebtedness to accept or reject any plan of partial or complete liquidation, reorganization, arrangement, composition or extension and to take such other action in the Preferred Lender’s own name or in the name of the Subordinated Creditor as the Preferred Lender may deem necessary or advisable for the enforcement of the agreements contained herein; and each of the Subordinated Creditors will execute and deliver to the Preferred Lender such other and further powers-of-attorney or instruments as the Preferred Lender may request in order to accomplish the foregoing. If the Preferred Lender desires to permit the use of cash collateral or to provide post-petition financing to the Borrower, the Subordinated Creditors shall not object to the same or assert that its interests are not being adequately protected.

 

  

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9.           Restrictive Legend; Transfer of Subordinated Indebtedness.  The Subordinated Creditors will cause the Subordinated Notes and all other notes, bonds, debentures or other instruments evidencing the Subordinated Indebtedness or any part thereof to contain a specific statement (in the form attached hereto as Exhibit A) thereon to the effect that the indebtedness thereby evidenced is subject to the provisions of this Agreement, and the Subordinated Creditors will mark their books conspicuously to evidence the subordination effected hereby.  The Subordinated Creditors represent and warrant to the Preferred Lender that each is the lawful holder of each such Subordinated Creditor’s Existing Subordinated Note and/or New Subordinated Note and has not transferred any interest therein to any other person or entity.  In the event of the transfer in any manner of the Subordinated Indebtedness by any Subordinated Creditor to any person who is not a party to this Agreement, the transferring party shall obtain, as a condition to and upon such transfer, the written consent of the transferee to become a party to and be bound by the terms of this Agreement and to the placing of the legend as required by this Section 9 upon the notes, bonds, debentures or other instruments evidencing the Subordinated Indebtedness.

 

10.           Continuing Effect.  This Agreement shall constitute a continuing agreement of subordination, and the Preferred Lender may, without notice to or consent by the Subordinated Creditors, and except as set forth in Section 2, modify any term of the Preferred Lender Debt in reliance upon this Agreement.  Without limiting the generality of the foregoing, the Preferred Lender may, at any time and from time to time, without the consent of or notice to the Subordinated Creditors and without incurring responsibility to the Subordinated Creditors or impairing or releasing any of the Preferred Lender’s rights or any of the Subordinated Creditor’s obligations hereunder:

 

(a)           change the amount of payment or extend the time for payment or renew or otherwise alter the terms of any Preferred Lender Debt or any instrument evidencing the same in any manner;

 

(b)           if applicable, sell, exchange, release or otherwise deal with any property at any time securing payment of all or any portion of the Preferred Lender Debt or any part thereof;

 

(c)           release anyone liable in any manner for the payment or collection of the Preferred Lender Debt or any part thereof;

 

(d)           exercise or refrain from exercising any right against the Borrower or any other person (including the Subordinated Creditors); and

 

(e)           apply any sums received by the Preferred Lender, by whomsoever paid and however realized, to the Preferred Lender Debt in such manner as the Preferred Lender shall deem appropriate.

 

  

6

  

 

11.           No Commitment.  None of the provisions of this Agreement shall be deemed or construed to constitute or imply any commitment or obligation on the part of the Preferred Lender to make any future loans or other extensions of credit or financial accommodations to the Borrower.

 

The Subordinated Creditors hereby waive any and all right to require the marshalling of assets in connection with the exercise of any of the Preferred Lender’s remedies permitted by applicable law or agreement.

 

12.           Notice.

 

(i)           Any notice or other communication required or permitted to be given or made under this Agreement (i) shall be in writing, (ii) may be delivered by hand delivery, First Class U.S. Mail (regular, certified, registered or expedited delivery), FedEx, UPS Overnight, Airborne or other nationally recognized delivery service, fax, or electronic transmission, and (iii) shall be delivered or transmitted to the appropriate address as set forth below.

 

(ii)          Each notice or other communication shall be delivered or addressed to a party at its address set forth below.  A party’s address for notice may be changed from time to time by notice given to the other party.

 

If to the Subordinated Creditors:

 

	  	
Walter John Short and Karen A. Wilson

	  	
__________________

	  	
__________________

	  	
Attention:

	  	
Telephone:

	  	
Facsimile:

	 	 
	  	
Greg Vislocky

	  	
7700 NE Parkway Drive, Suite 300

	  	
Vancouver, WA  98662

	  	
Telephone:  (360) 735-7155 x257

	  	
Facsimile:

	 	 
	  	
Weintraub Partners

	  	
400 Capitol Mall, Suite 1100

	  	
Sacramento, CA 95814

	  	
Attention:  Chris Chediak

	  	
Telephone: (916) 558-6000

	  	
Facsimile:  (916) 446-1611

	 	 
	  	
The Shoshana Shapiro Halpern Revocable Trust UA June 13, 2006

	  	
__________________

	  	
__________________

 

	  	
Attention:  Baruch Halpern and Shoshana Halpern, Trustees

	  	
Telephone:

	  	
Facsimile:

	 	 
	  	
Harold Guy Delamarter

	  	
24411 NE 128th Street

	  	
Brush Prairie, WA 98606

	  	
Telephone:  (360) 606-6163

 

  

7

  

 

If to the Preferred Lender:

 

	  	
Hillair Capital Investments L.P.

	  	
___________________

	  	
___________________

	  	
Attention:

	  	
Telephone:

	  	
Facsimile:

 

(iii)         Absent fraud or manifest error, a receipt signed by the addressee or its authorized representative, a certified or registered mail receipt, a signed delivery service confirmation or a fax or e-mail confirmation of transmission shall constitute proof of delivery.  Any notice actually received by the addressee shall constitute delivery notwithstanding the failure to comply with any provisions of this subsection.

 

(iv)         A notice delivered by regular First Class U.S. Mail shall be deemed to have been delivered on the third (3rd) business day after its post-mark.  Any other notice shall be deemed to have been received on the date and time of the signed receipt or confirmation of delivery or transmission thereof, unless that receipt or confirmation date and time is not a business day or is after 5:00 p.m. local time on a business day, in which case such notice shall be deemed to have been received on the next succeeding business day.

 

13.           Conflict in Agreements.  If the subordination provisions of any instrument evidencing Subordinated Indebtedness conflict with the terms of this Agreement, the terms of this Agreement shall govern the relationship between the Preferred Lender and the Subordinated Creditors.

 

14.           No Waiver.  No waiver shall be deemed to be made by any Party of any of its rights hereunder unless the same shall be in writing signed on behalf of the Party, and each such waiver, if any, shall be a waiver only with respect to the specific matter or matters to which the waiver relates and shall in no way impair the rights of the Party or the obligations of the other Parties in any other respect at any time.

 

15.           Binding Effect; Acceptance.  This Agreement shall be binding upon the Parties and their respective heirs, legal representatives, successors and assigns and shall inure to the benefit of the Parties and their respective participants, successors and assigns irrespective of whether this or any similar agreement is executed by any other creditor of the Borrower.  Notice of acceptance of this Agreement or of reliance upon this Agreement is hereby waived by each of the Parties.

 

  

8

  

 

16.           Miscellaneous.  The paragraph headings herein are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.  This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

 

17.           Governing Law; Consent to Jurisdiction and Venue.  This Agreement shall be governed by and construed in accordance with the substantive laws (other than conflict laws) of the State of California.  Each party consents to the personal jurisdiction of the state and federal courts located in the State of California in connection with any controversy related to this Agreement, waives any argument that venue in any such forum is not convenient, and agrees that any litigation initiated by any of them in connection with this Agreement may be venued in either the state or federal courts located in Sacramento County, California.

 

18.           Waiver of Jury Trial.  To the extent permissible under law, the parties hereto, each after consulting or having had the opportunity to consult with legal counsel, knowingly, voluntarily and intentionally waive any right they may have to a trial by jury in any litigation.  No party shall seek to consolidate, by counterclaim or otherwise, any litigation in which a jury trial has been waived with any other litigation in which a jury trial cannot be or has not been waived.  This provision shall be deemed to be enforceable to the fullest extent of the law as it may exist at the time any litigation is commenced.

 

 [Remainder of Page Intentionally Left Blank; Signature Pages Follow]

 

  

9

  

 

The Subordinated Creditors have executed this Agreement as of the date and year first above-written.

 

	  	/s/ Greg Vislocky	
 

	  	
(Greg Vislocky)

	  	  	  
	  	/s/ Harold Guy Delamarter	 
	  	
(Harold Guy Delamarter)

	  	
  

 

	  
	  	
Walter John Short and Karen A. Wilson

	  	  	  
	  	/s/ Walter John Short	 
	  	
(Walter John Short)

	  	  	  
	  	/s/ Karen A. Wilson	  
	  	
(Karen A. Wilson)

 

	  	
The Shoshana Shapiro Halpern Revocable Trust UA June 13, 2006

	  	  	  	 
	  	
By:

	/s/ Baruch Halpern	 
	  	
Name:

	
Baruch Halpern

	 
	  	
Its:

	
Trustee

	 
	  	
  

 

	  	 
	  	
By:

	/s/ Shoshana Halpern	 
	  	
Name:

	
Shoshana Halpern

	 
	  	
Its:

	
Trustee

	 
	  	
  

 

	  	 
	  	
Weintraub Partners

	 
	  	  	  	 
	  	
By:

	/s/ Chris Chediak	 
	  	  	  	 
	  	
Name:

	Chris Chediak	 
	  	  	  	 
	  	
Title:

	Partner	 

  

 

  

 

The Preferred Lender has executed this Agreement as of the date and year first above-written.

 

	  	
Hillair Capital Investments, L.P.

	  	  	 	 
	  	By:	/s/ Hillair Capital Investments, L.P.	 
	  	  	 	 
	  	
Name:

	 	 
	  	  	 	 
	  	
Title:

	 	 

 

  

 

  

 

ACKNOWLEDGMENT BY BORROWER

 

The undersigned, being the Borrower referred to in the foregoing Agreement, hereby (i) acknowledges receipt of a copy thereof, (ii) agrees to all of the terms and provisions thereof, (iii) agrees to and with the Preferred Lender that it shall make no payment on the Subordinated Indebtedness that the Subordinated Creditors would not be entitled to receive under the provisions of the Agreement, (iv) agrees that any such payment will constitute a default under the Preferred Lender Debt, and (v) agrees to mark its books conspicuously to evidence the subordination of the Subordinated Indebtedness effected hereby.

 

	  	
NutraCea

	  	  	 	 
	  	By:	/s/ W. John Short	 
	  	  	 	 
	  	
Name:

	W. John Short	 
	  	  	 	 
	  	
Title:

	Chief Executive Officer	 

 

  

 

  

 

EXHIBIT A

 

Legend

 

“THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT BY _____________ IN FAVOR OF THE HILLAIR CAPITAL INVESTMENTS, L.P., DATED JULY 31, 2012.”

 

 

 Exhibit A - 1

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