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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(MARK ONE)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE TRANSITION PERIOD FROM__________TO__________
COMMISSION FILE NUMBER: 0-24285
THE RICEX COMPANY
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
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DELAWARE 68-0412200
(State or Other Jurisdiction of Incorporation
or Organization No.) (I.R.S. Employer Identification No.)
1241 HAWK'S FLIGHT COURT, EL DORADO HILLS, CA 95762
(Address of Principal Executive Offices) (Zip Code)
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ISSUER'S TELEPHONE NUMBER (916) 933-3000
SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT: NONE
TITLE OF EACH CLASS: NONE NAME OF EACH EXCHANGE ON WHICH REGISTERED: NONE
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SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE
ACT: COMMON STOCK, $.001 PAR VALUE
(TITLE OF CLASS)
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Check whether the issuer: (1) filed all reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X_ No___
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. / /
State issuer's revenues for its most recent fiscal year: $3,259,418
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold or the average
bid and asked prices of such stock, as of a specified date within the past 60
days. As of March 1, 2000, the aggregate market value of the company's common
stock held by non-affiliates was $15,331,153.
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date. As of March 1, 2000, 36,525,787 shares
of common stock were outstanding.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): Yes___ No X_
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FORM 10-KSB
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INDEX
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PART I
Item 1. Description of Business
Item 2. Description of Property
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Item 6. Management's Discussion and Analysis or Plan of Operation
Item 7. Financial Statements
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and
Management
Item 12. Certain Relationships and Related Transactions
Item 13. Exhibits, List and Reports on Form 8-K
Signatures
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CUSTOMERS
The Company has over 150 active customer accounts. Currently, the Company's
major customers are (1) Wolcott Farms, (2) Pacific Grain, (3) California Natural
Products, and (4) DuCoa L.P. The Company depends on these customers for
approximately 66% of all sales revenue. Loss of any of these companies as a
customer could have a material adverse effect on the Company's business,
financial condition and results of operations.
SUPPLY AND MANUFACTURING
The Company purchases unstabilized rice bran from two major suppliers, Farmers'
Rice Cooperative and California Pacific Rice Growers. Pursuant to agreements
with these companies, the Company's stabilization machinery is physically
attached to the suppliers' rice processing plants and the rice bran by-product
is directly transferred to the Company's machinery for stabilization without the
need for shipping. The relationship with the suppliers is symbiotic, as the rice
manufacturer searches for raw rice bran marketing channels while the Company has
a ready access to unstabilized bran. These suppliers are currently the only
suppliers of unstabilized rice bran to the Company. The Company intends to enter
into additional relationships with rice processors, both in the U.S. and abroad,
as part of its overall business strategy. The Company's production capacity
currently stands at 1,600 tons per month. The Company believes that it will be
readily able to obtain additional suppliers due to the benefits suppliers can
receive from an agreement with the Company. There can be no assurance that the
Company will obtain additional suppliers.
As required, the Company ships Stabilized Rice Bran from its facilities in
California to its plant in Dillon, Montana for further processing into RiceX
Solubles, Dextrinized Rice Bran, and RiceX Fiber Complex. Current monthly
production capacity is approximately 50 tons of RiceX Solubles and 50 tons of
RiceX Fiber Complex. Additional equipment could slightly more than double
production capacity. The Company intends to acquire or construct an additional
processing facility as the demand for RiceX Solubles and Fiber Complex justifies
expansion.
Every food product manufactured by the Company is produced under published FDA
regulations for "Good Manufacturing Practices." Quality control is overseen by
the Vice President of Operations and quality assurance testing is conducted by a
microbiologist and Ph.D. chemist. Product samples for each product code are
analyzed for microbiological adherence to a predetermined set of product
specifications and each lot is released once it demonstrates its compliance with
specifications.
PATENTS AND TRADEMARKS
The RiceX Process is an adaptation and refinement of standard food processing
technology applied to the stabilization of rice bran. The Company has chosen to
treat the RiceX Process as a trade secret and not to pursue process or process
equipment patents on the original processes. However, process improvements will
be reviewed for future patent protection. The Company believes that the unique
products, and their biological effects, resulting from RiceX Company Stabilized
Rice Bran are patentable. In 1998, the Company filed two provisional U.S. patent
applications relating to RiceX Solubles, RiceX Fiber Complex and HVF products
and intends to seek patent protection in selected foreign jurisdictions. The
patent applications include "A Method for Treating Diabetes Mellitus," and "A
Method for Treating Hypercholesterolimia, Hyperlipidermia, and
Atheroscelerosis." The Company may apply for additional patents in the future as
new products are developed.
RiceX-TM- and RiceX Solubles-TM- are registered tradenames of the Company. Satin
Finish-Registered Trademark-, Mirachol-Registered Trademark- and Max
"E"-Registered Trademark- are registered trademarks of the Company. The Company
holds patents to the production of Beta Glucan and a micronutrient enriched rice
bran oil process.
Pursuant to the terms of an agreement between the Company and Wolcott Farms,
Inc., ("Wolcott Farms") a California corporation, dated March 1, 1997, the
Company granted Wolcott Farms an exclusive,
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worldwide license to use the trademark Satin Finish-Registered Trademark-,
agreed to transfer title to the trademark upon full payment of the purchase
price by Wolcott Farms, and granted Wolcott Farms the right to sublicense the
trademark to Natural Glo Investors, L.P. Wolcott Farms has agreed to pay the
Company minimum monthly royalty payments, which are applied towards the purchase
price.
The Company endeavors to protect its intellectual property rights through
patents, trademarks, trade secrets and other measures, however, there can be no
assurance that the Company will be able to protect its technology adequately or
that competitors will not develop similar technology. There can be no assurance
that any patent application the Company may file will be issued or that foreign
intellectual property laws will protect the Company's intellectual property
rights. Other companies and inventors may receive patents that contain claims
applicable to the Company's system and processes. The use of the Company's
systems covered by such patents could require licenses that may not be available
on acceptable terms, if at all. In addition, there can be no assurance that
patent applications will result in issued patents.
Although there currently are no pending claims or lawsuits against the Company
regarding possible infringement claims, there can be no assurance that
infringement claims by third parties, or claims for indemnification resulting
from infringement claims, will not be asserted in the future or that such
assertions, if proven to be true, will not materially adversely affect the
Company's business, financial condition and results of operations. In the
future, litigation may be necessary to enforce patents issued to the Company, to
protect trade secrets or know-how owned by the Company or to defend the Company
against claimed infringement of the rights of others and to determine the scope
and validity of the proprietary rights of others. Any such litigation could
result in substantial cost and diversion of resources by the Company, which
could have a material adverse effect on the Company's financial condition and
results of operations. Adverse determinations in such litigation could result in
the Company's loss of proprietary rights, subject the Company to significant
liabilities to third parties, require the Company to seek licenses from third
parties or prevent the Company from manufacturing or selling its systems, any of
which could have a material adverse effect on the Company's financial condition
and results of operations. In addition, there can be no assurance that a license
under a third party's intellectual property rights will be available on
reasonable terms, if at all. See "Factors Affecting Operating Results--Patents,
Licenses and Intellectual Property Claims."
COMPETITION
Although the Company believes that it is the only company to use non-chemical
methods to stabilize rice bran so that the bran has a shelf life of over
one-year, the Company competes with other companies attempting to stabilize rice
bran, as well as companies producing other food ingredients and nutritional
supplements. The Company's only significant competitor is Producer's Rice Mill.
The competitor may have greater capital resources and experience in the food
industry in total however, the Company believes it has more experience in the
rice bran industry than its competitor. There can be no assurance that the
Company will be able to compete successfully in the rice bran industry. The
Company's major nutritional supplement competitors include producers of wheat
bran and oat bran, particularly in the functional food ingredients market
segment. See "Factors Affecting Operating Results--Competition."
RESEARCH AND DEVELOPMENT
Rice bran contains a wide variety of antioxidants, vitamins, and other nutrients
associated with good health and resistance to disease. The Company has conducted
a preliminary clinical evaluation that indicates RiceX products have efficacy in
the nutritional management of certain conditions and diseases, such as diabetes
mellitus and coronary vascular disease. Data from this study has been analyzed
and the data supports the initiation of clinical trials. The Company intends to
vigorously conduct these trials and, if successful, will develop foods
containing the active nutraceutical components of RiceX Bran to manufacture
products targeted at specific conditions or suitable for the maintenance of
general health and
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well-being. There can be no assurance that the results of additional clinical
trials will prove successful or that the Company will be able to develop
additional new products. See "Government Regulations."
As of December 31, 1999 there were three employees engaged in research and
development, which includes a Director of Research and Development, Director of
Science and Technology, Manager of Analytical Services and Microbiologist. The
Company also uses the services of independent labs and testing facilities.
Expenditures for research and development for the years ended December 31, 1999
and 1998 totaled $712,000 and $1,057,000, respectively. The Company expects to
continue research and development expenditures to establish the scientific basis
for health claims of existing products and to develop new products and
applications.
EMPLOYEES
As of March 1, 2000, the Company has a total of 21 employees, all of which are
full time employees. The Company believes that its relations with its employees
are good.
FORWARD-LOOKING STATEMENTS
When used in this report, the words "believe," "expect," "anticipate" and
similar expressions, together with other discussion of future trends or results,
are intended to identify forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Such statements are subject to certain risks and uncertainties, including
those discussed below that could cause actual results to differ materially from
those projected. These forward-looking statements speak only as of the date
hereof. All of these forward-looking statements are based on estimates and
assumptions made by management of the Company which, although believed to be
reasonable, are inherently uncertain and difficult to predict; therefore, undue
reliance should not be placed upon such statements. The following important
factors, among others, could cause the Company's results of operations to be
adversely affected in future periods: (i) increased competitive pressures from
existing competitors and new entrants; (ii) increases in interest rates or the
Company's cost of borrowing or a default under any material debt agreements;
(iii) deterioration in general or regional economic conditions; (iv) adverse
state or federal legislation or regulation that increases the costs of
compliance, or adverse findings by a regulator with respect to existing
operations; (v) loss of customers or sales weakness; (vi) inability to achieve
future sales levels or other operating results; (vii) the unavailability of
funds for capital expenditures; and (viii) operational inefficiencies in
distribution or other Company systems. Many of such factors are beyond the
control of the Company. There can be no assurance that the Company will not
incur new or additional unforeseen costs in connection with the ongoing conduct
of its business. Accordingly, any forward-looking statements included herein do
not purport to be predictions of future events or circumstances and may not be
realized. In addition, assumptions relating to budgeting, marketing,
advertising, litigation and other management decisions are subjective in many
respects and thus susceptible to interpretations and periodic revisions based on
actual experience and business developments, the impact of which may cause the
Company to alter its marketing, capital expenditure or other budgets, which may
in turn affect the Company's financial positions and results of operations.
LIMITED OPERATING HISTORY AND NEED FOR ADDITIONAL CAPITAL
There is limited historical financial information about the Company upon which
to base an evaluation of the Company's performance or to make a decision
regarding an investment in shares of the Company's common stock. The Company has
shareholders' equity of $67,000, incurred a loss of $3,246,000 and used cash of
$1,655,000 in operating activities for the year ended December 31, 1999. The
Company's cash and cash equivalents aggregated $1,030,000 at December 31, 1999.
The Company commenced manufacturing and marketing activities in June 1996 and
has developed a specific operating plan to meet the ongoing liquidity of the
Company's operations both for the year ended December 31, 2000 and thereafter.
The
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Company's business could be subject to any or all of the problems, expenses,
delays and risks inherent in the establishment of a new business enterprise
including limited capital resources, possible delays in product development,
possible cost overruns due to price and cost increases in raw product and
manufacturing processes, uncertain market acceptance and absence of an operating
history. Therefore, there can be no assurance that the Company's business or
products will be successful or that the Company will be able to achieve or
maintain profitable operations. There can be no assurance that the Company will
not encounter unforeseen difficulties that may deplete its capital resources
more rapidly than anticipated.
During the past year, the Company increased gross margins and reduced costs by
renegotiating supplier contracts and by increasing sales. Management also
implemented spending controls which reduced overhead costs. The Company has
entered into a letter of intent with a venture capital firm to initially provide
up to $6,000,000 in equity financing to pay off the Company's debt and expand
its manufacturing capacity and marketing efforts. Additionally, significant
alliances are in process of development, which are expected to increase sales
volume.
The Company's management believes that its operating plan, which is currently
being implemented, is sufficient to meet the Company's liquidity needs for the
year ended December 31, 2000, and thereafter. The timing and amount of any
capital requirements cannot be predicted at this time. There can be no assurance
that any financing will be available on acceptable terms. If such financing is
not available on satisfactory terms, the Company may be unable to continue,
develop or expand its business, develop new products, or develop new markets at
the rate desired and its operating results may be adversely affected. Equity
financing could result in additional dilution to existing shareholders. See
"Liquidity and Capital Resources."
MARKET RISKS OF A NEW BUSINESS
The Company has formulated its business plans and strategies based on certain
assumptions regarding the size of the rice bran market, the Company's
anticipated share of this market, and the estimated price and acceptance of the
Company's products. These assumptions are based on the best estimates of the
Company's management. There can be no assurance that the Company's assessments
regarding market size, potential market share attainable by the Company, the
price at which the Company will be able to sell its products, market acceptance
of the Company's products or a variety of other factors will prove to be
correct. Any future success of the Company may depend upon factors including
changes in the dietary supplement industry, governmental regulation, increased
levels of competition including the entry of additional competitors and
increased success by existing competitors, changes in general economic
conditions, increases in operating costs including costs of production,
supplies, personnel, equipment, and reduced margins cause by competitive
pressures.
COMPETITION
Competition in the Company's targeted industries, including nutraceuticals,
functional food ingredients, rice bran oils, animal feed supplements and
companion pet food ingredients is vigorous with a large number of businesses
engaged in the various industries. Many of the competitors have established
reputations for successfully developing and marketing their products. Many of
the competitors have greater financial, managerial, and technical resources than
the Company. If the Company is not successful in competing in these markets, it
may not be able to attain its business objectives.
GOVERNMENTAL REGULATION
The processing, formulation, packaging, labeling and advertising of the
Company's products are subject to regulation by one or more federal agencies.
Although Congress has recently recognized the potential impact of dietary
supplements in promoting the health of U.S. citizens by enacting the Dietary
Supplement Health Education Act of 1994 ("DSHEA"), which severely limits the
FDA's jurisdiction in regulating
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dietary supplements, there is no way to predict the potential effect of DSHEA.
It may be difficult for any company manufacturing or marketing dietary
supplements to remain in strict compliance with the technical requirements of
DSHEA. The FDA has recently proposed regulations with the purpose of
implementing DSHEA and proposals have been made to modify or change the
provisions of DSHEA. It is impossible to predict whether those regulations of
proposed changes will become law or the effect that such regulations or proposed
changes, if implemented, will have on the business and operation of the Company.
RELIANCE ON LIMITED NUMBER OF PRODUCTS
All of the Company's products are based on stabilized rice bran. Although the
Company will market rice bran as a dietary supplement, as an active food
ingredient for inclusion in other companies' products, and in other ways, a
decline in the market demand for the Company's products as well as the products
of other companies utilizing the Company's products could have a significant
adverse impact on the Company.
RELIANCE ON ADEQUATE SUPPLY OF RAW RICE BRAN
The Company's proprietary technology is used to stabilize rice bran, which is a
by-product from milling paddy rice to white rice. The Company currently has
supply arrangements with two of the largest rice mills in the United States and
is pursuing other supply sources in the United States and in foreign countries.
There can be no assurance that the Company will continue to secure adequate
sources of raw rice bran to meet its requirements to produce stabilized rice
bran products.
DEPENDENCE ON MARKETING EFFORTS
The Company is dependent on its ability to market products to animal food
producers, food manufacturers, mass merchandise and health food retailers, and
to other companies for use in their products. The Company must increase the
level of awareness of dietary supplements in general and the Company's products
in particular. The Company will be required to devote substantial management and
financial resources to its marketing and advertising efforts and there can be no
assurance that these efforts will be successful.
DEPENDENCE ON KEY EMPLOYEES
The Company believes that its success will depend to a significant extent upon
the efforts and abilities of the current group of executive, scientific and
marketing personnel. The loss of the services of one or more of these key
personnel could have a material adverse affect on the Company's business,
financial condition and results of operations. In addition, the Company's future
success will depend upon its ability to continue to attract and retain qualified
scientific and management personnel. There can be no assurance that the Company
will be successful in attracting and retaining such personnel.
PATENTS, LICENSES AND INTELLECTUAL PROPERTY CLAIMS
The Company's success depends in part on its ability to obtain patents, licenses
and other intellectual property rights for its products and technology. The
Company has two provisional U.S. patent applications pending and the Company may
decide to file corresponding international applications. The process of seeking
patent protection may be long and expensive, and there can be no assurance that
patents will be issued, that the Company will be able to protect its technology
adequately, or that competition will not be able to develop similar technology.
The Company believes the basis on which it has filed its current pending patent
applications is reasonable; however, there can be no assurance that any patent
applications filed will result in issued patents or that the Company will choose
to pursue each patent application to issuance. There currently are no pending
claims or lawsuits against the Company regarding possible infringement claims;
there can be no assurance that infringement claims by third parties, or claims
for
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indemnification resulting from infringement claims, will not be asserted in the
future or that such assertions, if proven to be true, will not materially
adversely affect the Company's business, financial condition and results of
operations. In the future, litigation may be necessary to enforce patents issued
to the Company, to protect trade secrets or know-how owned by the Company or to
defend the Company against claimed infringement of the rights of others and to
determine the scope and validity of the proprietary rights of others. Any
litigation could result in substantial cost and diversion of effort by the
Company, which could have a material adverse affect on the Company's financial
condition and results of operations. Adverse determinations in any litigation
could result in the Company's loss of proprietary rights, subjecting the Company
to significant liabilities to third parties, require the Company to seek
licenses from third parties or prevent the Company from manufacturing or selling
its systems, any of which could have a material adverse affect on the Company's
financial condition and results of operations. There can be no assurance that a
license under a third party's intellectual property rights will be available to
the Company on reasonable terms, if at all.
YEAR 2000
In the past, many computer systems and software products were coded to accept
only two digit entries in the date code field. Beginning in the "Year 2000,"
these date code fields must accept four digit entries in order to distinguish
Year 2000 and beyond dates. As a result, computer systems and/or software used
by many companies had to be upgraded to comply with Year 2000 requirements. The
Company evaluated the impact of the Year 2000 issue as it affected its business
operations and interfaces with customers and vendors. The only two suppliers of
raw rice bran to the Company reported to the Company that they had an active
Year 2000 program in place and that they expected no interruptions in raw rice
bran supply due to Year 2000. The Company also surveyed its other major vendors
and major customers to determine if the Year 2000 would pose a disruption in
service from them. The Company received no notice that the Year 2000 would pose
a problem for its vendors or major customers, and essentially all of the
Company's critical systems include new hardware and packaged software recently
purchased from large vendors who represented that these systems were Year 2000
compliant.
Subsequent to the end of 1999, the Company's operations are fully functioning
and have not experienced any significant issues related to the Year 2000. While
the Company is encouraged by the results of its Year 2000 efforts, monitoring
for any potential problems will continue throughout 2000.
Although the Company does not believe any continued exposure exists, the company
has a contingency plan for possible Year 2000 issues and will continue to update
these plans based on assessments of any subsequent Year 2000 issues as
additional information becomes available.
THIN MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
The Company's Common Stock has been traded on the OTC Bulletin Board since May
1996 under the symbol "RICX." The Company believes that factors such as
announcements of developments related to the Company's business, fluctuations in
the Company's quarterly or annual operating results, failure to meet securities
analysts' expectations, general conditions in the international marketplace and
the worldwide economy, announcements of technological innovations or new systems
or enhancements by the Company or its competitors, developments in patents or
other intellectual property rights and developments in the Company's
relationships with customers and suppliers could cause the price of the
Company's common stock to fluctuate, perhaps substantially. In recent years the
stock market has experienced extreme price fluctuations, which have often been
unrelated to the operating performance of affected companies. Such fluctuations
could adversely affect the market price of the Company's common stock.
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ANTI-TAKEOVER EFFECT OF CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW
Under the Company's Certificate of Incorporation, the Board of Directors of the
Company has the authority, without action by the Company's stockholders, to fix
certain terms of, and to issue, shares of Preferred Stock. The Company is
incorporated under Delaware law. Certain provisions of the Certificate of
Incorporation and certain provisions of Delaware law may have the effect of
delaying, deterring or preventing a change in control of the Company. Other
provisions in the Company's Certificate of Incorporation and Bylaws and Delaware
law impose procedural and other requirements that could make it more difficult
to effect certain corporate actions, including replacing incumbent directors.
Further, the Board is divided into three classes, each of which is to serve for
a staggered three-year term after the initial classification and election, which
may make it more difficult for a third party to gain control of the Board. By
virtue of these provisions, the Board of Directors of the Company may be able to
take or prevent actions affecting unaffiliated stockholders without such
stockholders' approval or consent. In addition, these provisions may adversely
affect the market price of the Company's Common Stock and reduce the possibility
that an investor may receive a premium for his or her shares in a tender offer.
See "Directors, Executive Officers, Promoters and Control Persons."
THE COMPANY
The Company was incorporated under Delaware law in May 1998 and succeeded to the
business of its predecessor corporation, Food Extrusion, Inc., pursuant to a
reincorporation that was effective upon completion of the merger of the Nevada
corporation with the Delaware corporation on August 4, 1998. Food Extrusion,
Inc., ("FoodEx CA"), was incorporated in California in May 1989 and subsequently
merged in a stock-for-stock exchange into Core Iris, a Nevada corporation and
subsequently changed its name to Food Extrusion, Inc. ("Food Extrusion, Inc.").
Food Extrusion, Inc. changed its name to The RiceX Company in May 1998. Food
Extrusion Montana, Inc. ("FoodEx MT"), was incorporated in Montana in
December 1996, as a wholly owned subsidiary of the Company. In January 1997,
FoodEx MT acquired certain assets of Centennial Foods, Inc., an Idaho
corporation ("Centennial") in exchange for 310,000 (adjusted to 1,891,156 in
July 1999) shares of $.001 par value common stock of Food Extrusion, Inc. and
the assumption of certain liabilities totaling approximately $1,320,000. These
obligations were paid in full in January 1999. See "Recent Sales of Unregistered
Securities" and "Liquidity and Capital Resources."
ITEM 2. DESCRIPTION OF PROPERTY
The Company currently leases (i) a 5,600 square foot office facility and
(ii) an 11,400 square foot research and shipping facility at 1241 Hawk's Flight
Court, El Dorado Hills, California pursuant to a lease expiring in
September 2006, with aggregate annual lease payments for both properties
approximating $125,000.
FoodEx MT owns a 15,700 square foot production facility in Dillon, Montana,
which, at December 31, 1998, was pledged as collateral for a $368,999 non
interest bearing loan from the State of Montana, Department of Commerce, that
was repaid in full in January 1999.
The Company believes that its facilities are adequate for its proposed needs
through 2000 and that the property is adequately covered by insurance.
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ITEM 3. LEGAL PROCEEDINGS
The Company is not involved in any material pending legal proceedings, other
than routine litigation incidental to the Company's business, to which the
Company is a party or of which any of its property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual Meeting of Stockholders of the Company was held on July 1, 1999. At
the time of the meeting, proxies representing 16,521,416 votes were cast
approving the election of Kirit S. Kamdar and Steven W. Saunders as directors of
the Company. The final tabulation of votes cast for, against, or withheld, as
well as the number of abstention and broker non-votes for each nominee for the
office as a director were as follows:
<TABLE>
<CAPTION>
VOTES
-------------------------------- BROKER
FOR AGAINST WITHHELD ABSTENTIONS NON-VOTERS
---------- -------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Kirit S. Kamdar.................... 16,521,416 22,712 2,000 -- --
Steven W. Saunders................. 16,521,416 22,712 2,000 -- --
</TABLE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The principal United States market for the Company's common stock is the OTC
Bulletin Board. These quotations reflect inter-dealer prices, without retail
mark-up, mark down or commissions and may not represent actual transactions. The
following is the high and low bid information for such common stock:
<TABLE>
<CAPTION>
COMMON STOCK HIGH LOW
- ------------ ---- ---
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1999
- ------------------------------------------------------------
First Quarter............................................... $1.56 $0.66
Second Quarter.............................................. $1.16 $0.53
Third Quarter............................................... $1.00 $0.53
Fourth Quarter.............................................. $1.44 $0.47
1998
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First Quarter............................................... $5.80 $3.30
Second Quarter.............................................. $6.25 $3.00
Third Quarter............................................... $3.63 $1.22
Fourth Quarter.............................................. $1.75 $0.53
</TABLE>
There are approximately 308 holders of record of the Company's common stock as
of March 1, 2000.
DIVIDENDS
The Company has not paid, nor declared, any dividends since its inception and
does not intend to declare any such dividends in the foreseeable future. The
Company's ability to pay dividends is subject to limitations imposed by Delaware
law and, as a quasi-California corporation, to the more restrictive provision of
California law. Under Delaware law, dividends may be paid to the extent that the
corporation's assets exceed its liabilities and it is able to pay its debts as
they become due in the usual course of business. California law generally
prohibits a corporation from paying dividends unless the retained
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earnings of the corporation immediately prior to the distribution exceed the
amount of the distribution. Alternatively, a corporation may pay dividends if
(i) the assets of the corporation exceed 1 1/4 times its liabilities; and
(ii) the current assets of the corporation equal or exceed its current
liabilities, but if the average pre-tax earnings of the corporation before
interest expense for the two years preceding the distribution was less than the
average interest expense of the corporation for those years, the current assets
of the corporation must exceed 1 1/4 times its current liabilities. See
"Description of Capital Stock-Application of California General Corporate Law."
RECENT SALES OF UNREGISTERED SECURITIES
In 1998, in conjunction with RiceX's reincorporation in Delaware, the Company
increased its authorized number of common shares from 50,000,000 shares to
100,000,000 shares and authorized 10,000,000 shares of preferred stock which may
be issued from time to time, in one or more series, and authorized its Board of
Directors to establish the rights, preferences and privileges of each such
series, when issued. At December 31, 1999, an aggregate of 11,991,651 shares of
the Company's common stock was reserved for future issuance upon the exercise of
stock options and warrants.
During 1999, the Company issued 2,242,152 (2,105,111 to private placement
investors and 137,041 issued as a finders fee in connection with these
transactions) shares of common stock and warrants to purchase 2,105,111 shares
of common stock in conjunction with a $6,000,000 dollar private placement for
$1,455,082. These warrants, which expire three years from issue date, have an
exercise price for the first year of $1.00 per share, for the second year of
$1.25 per share and for the third year of $1.50 per share. At December 31, 1999,
all warrants issued in conjunction with this private placement were outstanding.
The shares were issued without registration under the Securities Act in reliance
on the exemption from registration provided by Section 4(2) of the Securities
Act.
In May 1999, the Company issued 25,000 shares of common stock to a consultant
for services rendered. The value of the common stock was $25,000 and was
included in professional fees for the year ended December 31, 1999. The shares
were issued without registration under the Securities Act in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act.
In January 1997, the Company acquired the assets of FoodEx Montana ("FoodEx MT")
in exchange for 310,000 shares of the Company's common stock and the assumption
of certain liabilities totaling $1,320,000 that were retired in January 1999.
The seller also was given the option to sell the common shares back to the
Company ("Put Option") at a price of $5.00 per share in November 1998 or sooner
upon the occurrence of certain events. The shares were issued without
registration under the Securities Act in reliance on the exemption from
registration provided by Section 3(a)(10) of the Securities Act.
In 1998, the Put Option was amended to permit the holder of the 310,000 shares
to receive additional common stock which, when added to the current value of the
310,000 shares, had an aggregate fair value of $1,550,000. The number of shares
to be issued would be based on an average 30 days market price of the Company's
common stock. At the same time the Put Option was amended, the Company issued
100,000 shares of common stock to the seller for the patent to Beta Glucan
technology and the Mirachol Registered Trademark which were not part of the
FoodEx MT assets acquired in January 1997. The shares were issued without
registration under the Securities Act in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act.
In July 1999, the Company issued 1,581,156 shares of common stock to the seller
to finalize the Put Option, as amended, in connection with the asset purchase
agreement discussed above. Accordingly, the number of additional shares issued
was calculated on the Company's common stock 30 days average market value. The
shares were issued without registration under the Securities Act in reliance on
the exemption from registration provided by Section 4(2) of the Securities Act.
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In July 1999, the Company issued 250,000 shares of common stock to a vendor in
lieu of $234,000 cash to guarantee direct supplies for three years. The shares
were issued without registration under the Securities Act in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act.
In November 1999, the Company entered into a contract with a company to provide
investor relations for a period of one year. The Company issued 1,600,000 shares
of common stock with a fair market value of $1,262,400. Additionally, the
Company issued warrants to purchase 1,000,000 shares of common stock. In
February 2000, the agreement was terminated and the Company expects to receive
at least 50 percent of the stock and warrants back. The shares were issued
without registration under the Securities Act in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act.
In November 1999, the Company issued 1,500,000 shares of common stock to three
executives pursuant to the exercise of some of their stock options. These stock
options were issued in accordance with the Company's Employee Stock Option
program that was ratified by the Board of Directors in 1997. The shares were
issued without registration under the Securities Act in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act.
In December 1999, Monsanto Corporation ("Monsanto") agreed to convert its note
from the Company with an outstanding principal balance of $5,000,000 into
7,167,479 shares of common stock and $54,441 cash. In February 1997, a 1996 loan
agreement ("Loan Agreement") with Monsanto pursuant to which it had advanced
$5,000,000 to the Company, to be converted to common stock was renegotiated. The
renegotiated loan, due in November 1999, was non-interest bearing and
convertible into shares of the Company's common stock at the lower of $5.00 per
share, or the price per share the Company received in a sale of its common stock
in a financing of at least $1,000,000 occurring closest and prior to a notice of
intent to convert. The Company recorded a charge against operations of
$1,325,000 in 1997 for the beneficial conversion feature as a result of the fair
market value of the stock being greater than the conversion rate on the
scheduled dates the Company received the proceeds pursuant to the Loan
Agreement. As a result of this charge, the effective interest rate of the loan
is greater than the interest rate currently available to the Company for similar
debt; therefore no imputed interest has been calculated on this loan. The shares
were issued without registration under the Securities Act in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act.
In 1998, the Company issued 285 shares of common stock and warrants to purchase
40,000 shares of common stock with an exercise price of $1.50 per share to
consultants for services rendered. The warrants were immediately exercisable and
expire in October 2003. The shares were issued without registration under the
Securities Act in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act.
In September 1998, the Company sold 1,000,000 shares of common stock and
warrants to purchase 1,075,000 (1,000,000 to the private placement investor and
75,000 issued as a finders fee in conjunction with this transaction) shares of
common stock in a private placement for $1,500,000. These warrants, which expire
in September 2000, are exercisable at $1.50 per share, if exercised prior to
September 1999 and at $1.81 per share, if exercised between September 1999 and
September 2000. The private offering agreement provides for price protection for
the private placement investor, whereby any issuance of new stock at a price
lower than $1.50 per share requires the Company to issue additional new shares
sufficient to reduce the private placement investor's average purchase price to
the lower per share price of such new issuance. Additionally, the price
protection provision requires that, should the Company issue new shares or
warrants to purchase common stock at less than $1.50 per share, the exercise
price on the warrants issued in the private placement will be reduced to the
lower issuance or exercise price. The shares of stock and warrants issued in the
December 1998 loan agreement described in Note F to the Financial Statements
were less than $1.50 per share. Based on the valuation information provided by
the Company's accounting firm, and contract interpretation from the Company's
counsel, an additional 1,181,818 shares of common stock were issued to the
private placement investor and the exercise price of the warrants was reduced to
19
<PAGE>
$0.69 per share, effective September 10, 1998. However, the investor notified
the Company that it objects to the Company's interpretation of the price
protection provision in the warrant and believes that it should receive
additional shares of common stock underlying the warrant. The Company and its
counsel have reviewed the investors objection and the relevant documents and
believes that the Company's issuance of additional shares of common stock and
adjustment of the warrant exercise price are proper and do not believe that any
additional shares should be required to be issued under the warrants. There can
be no assurance, however, that the Company will not ultimately be required to
issue such additional shares. All warrants issued in conjunction with this
private placement were outstanding at December 31, 1999. The shares were issued
without registration under the Securities Act in reliance on the exemption from
registration provided by Regulation S of the Securities Act.
In December 1998, the employment agreements of four executive officers were
terminated. As part of the severance agreements with three officers, all
previously issued options to purchase the Company's stock held by such officers
were canceled and the remaining officer's options expired. Three officers were
issued warrants, which expire in December 2000 to purchase an aggregate of
1,200,000 shares of common stock at an exercise price of $1.00 per share as part
of their severance agreement. The shares were issued without registration under
the Securities Act in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act.
In December 1998, the Company entered into a loan agreement with a previously
unrelated party (the "Lender") to borrow $1,850,000. The Lender advanced
$1,150,000 to the Company on December 31, 1998 and $700,000 in January 1999. The
Company issued the Lender 940,679 shares of common stock as prepaid interest on
the loan. Additionally, the Company issued the Lender warrants to purchase
3,743,540 shares of common stock at $0.75 per share which expire in December
2003. The shares were issued without registration under the Securities Act in
reliance on the exemption from registration provided by Section 4(2) of the
Securities Act.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following is a discussion of the consolidated financial condition of The
RiceX Company as of December 31, 1999 and the results of operations for the
fiscal years ended December 31, 1999 and 1998, which should be read in
conjunction with, and is qualified in its entirety by, the consolidated
financial statements and notes thereto included elsewhere in this report.
When used in this report, the words "believe," "expect," "anticipate" and
similar expressions, together with other discussion of future trends or results,
are intended to identify forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Such statements are subject to certain risks and uncertainties, including
those discussed below that could cause actual results to differ materially from
those projected. These forward-looking statements speak only as of the date
hereof. All of these forward-looking statements are based on estimates and
assumptions made by management of the Company which, although believed to be
reasonable, are inherently uncertain and difficult to predict; therefore, undue
reliance should not be placed upon such statements. The following important
factors, among others, could cause the Company's results of operations to be
adversely affected in future periods: (i) increased competitive pressures from
existing competitors and new entrants; (ii) increases in interest rates or the
Company's cost of borrowing or a default under any material debt agreements;
(iii) deterioration in general or regional economic conditions; (iv) adverse
state or federal legislation or regulation that increases the costs of
compliance, or adverse findings by a regulator with respect to existing
operations; (v) loss of customers or sales weakness; (vi) inability to achieve
future sales levels or other operating results; (vii) the unavailability of
funds for capital expenditures; and (viii) operational inefficiencies in
distribution or other Company systems. Many of such factors are beyond the
control of the Company. There can be no assurance that the Company will not
incur new or additional unforeseen costs in connection with the ongoing conduct
of its business. Accordingly, any forward-looking statements
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included herein do not purport to be predictions of future events or
circumstances and may not be realized. In addition, assumptions relating to
budgeting, marketing, advertising, litigation and other management decisions are
subjective in many respects and thus susceptible to interpretations and periodic
revisions based on actual experience and business developments, the impact of
which may cause the Company to alter its marketing, capital expenditure or other
budgets, which may in turn affect the Company's financial positions and results
of operations.
OVERVIEW
Since its formation in 1989, the Company has been engaged in extensive research
and development activities that resulted in the development of the RiceX Process
to stabilize rice bran. During 1996, 1997 and 1998, the Company accelerated its
research, including clinical trials; product development; equipment development;
procurement of manufacturing facilities; development of markets and distribution
methods; negotiation of strategic alliances; patent applications; raising
capital; and development of corporate infrastructure, including executive
recruitment activities. The Company commenced commercial operations in 1996 with
revenues for the year aggregating approximately $908,000 and the Company
reporting a net loss of approximately $5,024,000 for the year ended
December 31, 1996. Revenues for year ended December 31, 1999 grew to $3,259,000
with the Company reporting a net loss of $3,246,000.
The following highlights the Company's financial data for December 31, 1999,
1998 and 1997.
SELECTED FINANCIAL SUMMARY
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CONSOLIDATED OPERATING RESULTS 1999 1998 1997
- ------------------------------ ----------- ----------- -----------
<S> <C> <C> <C>
Revenue............................................... $ 3,259 $ 2,950 $ 3,333
Gross margins......................................... 1,043 299 968
32% 10% 29%
Research and development expenses..................... 712 1,057 790
Selling, general and administrative expenses.......... 1,485 2,685 2,423
Stock option and warrant compensation to employees.... 104 980 2,032
Professional fees..................................... 688 358 1,907
Net income (loss)..................................... $ (3,246) $ (5,298) $ (7,768)
Earnings per share.................................... (0.13) (0.26) (0.40)
Weighted average number of shares outstanding......... 24,486,683 20,350,496 19,499,049
=========== =========== ===========
<CAPTION>
CONSOLIDATED BALANCE SHEETS 1999 1998 1997
- --------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Cash and cash equivalents............................. $ 1,030 $ 1,158 $ 863
Total assets.......................................... 4,958 6,455 6,858
Total liabilities and convertible debt................ 4,890 11,210 9,012
Shareholders' equity.................................. $ 67 $ (4,755) $ (3,704)
Number of shares outstanding at December 31,.......... 36,393,784 22,027,997 20,215,215
=========== =========== ===========
</TABLE>
In 1999, the Company's efforts were focused on retiring more than $10,227,000 of
debt obligations that matured in 1999, increasing revenues and gross margins and
reducing fixed overhead costs. New sales contracts improved revenues,
renegotiated supplier contracts lowered variable costs and improved gross
margins, and spending controls reduced overhead costs. For a complete
understanding of these activities, this Management's Discussion and Analysis
should be read in conjunction with Part I. Item 1--Description of Business and
Part II. Item 7--Financial Statements to this Form 10-KSB.
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<PAGE>
YEAR ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998
Although revenues increased overall by 10% to $3,259,000 from $2,950,000, RiceX
Stabilized Rice Bran product sales grew by more than 23%. Revenues from all
product categories increased over last year. The sale of RiceX Regular
Stabilized Rice Bran and RiceX Fine Stabilized Rice Bran increased $355,000 and
$38,000, respectively. Gains in the sales of RiceX Solubles and RiceX Fiber
Complex increased $129,000 and $102,000, respectively. While the sales of RiceX
Stabilized Rice Bran products accounted for approximately 99% and 89% of total
sales in 1999 and 1998, respectively, the mix of such products differed
significantly. In 1999, RiceX Regular Stabilized Rice Bran sales, primarily for
the equine market, accounted for 70% of revenue versus 65% in 1998. RiceX Fine
Stabilized Rice Bran, RiceX Solubles and RiceX Fiber accounted for 30% of sales
in 1999 versus 24% of sales in 1998. Cereal processing for H.J. Heinz's organic
infant cereal accounted for zero sales in 1999 versus $302,000 (11%) of sales in
1998. In 1998, the Company completed its production contract with H.J. Heinz and
no future sales to this customer are anticipated. Management is currently
seeking contracts to replace the infant cereal production.
The gross margin on the sale of products was 32% and 10% in 1999 and 1998,
respectively. Gross margins improvement over last year was due primarily to
production efficiencies, new operating agreements with suppliers, and product
sales mix. The gross margins in 1998 were affected by an inventory valuation
adjustment of $533,000. The adjustment was attributed mostly to the write-off of
dated inventory. The Company expects that gross margins will improve as
production capacity and sales grow.
Research and development expenditures totaled $712,000 in 1999, down 33% from
$1,057,000 in 1998. The decrease resulted from scaled back research and
development efforts and costs associated with the termination of a member of the
prior management team. In 1998 the Company's research and development activities
included the design of the RiceX Process for stabilizing rice bran, product
development and testing and clinical studies to test the efficacy of RiceX in
ameliorating the effect of certain diseases. The Company also successfully
developed rice bran oil for the Nutrilite Division of Amway Corporation. In
1999, the Company successfully completed a joint venture pilot program with
Monsanto to stabilize rice bran in India.
Selling, general and administrative expenses decreased $1,200,000 (45%) to
$1,485,000 in 1999 from $2,685,000 in 1998. Selling, general and administrative
activities in 1998 were directed at raising capital, establishing manufacturing
facilities, developing a direct sales effort, reestablishing executive
management and building corporate infrastructure. Most of these efforts carried
through to 1999. Approximately $1,000,000 (83%) of the decrease in selling,
general and administrative expenses was attributed to the salaries of, and the
severance payments to the three executive officers that left the Company's
employment in December 1998.
The years ended December 31, 1999 and 1998 included non-cash charges totaling
$104,000 and $980,000, respectively, for stock option and warrant compensation
to employees. The non-cash charge of $104,000 in 1999 is for the vested portion
of issued options held by the current executive officers. The 1998 non-cash
charge of $980,000 included $591,576 relating to the vested portion of
previously issued options held by executive officers and $388,900 compensation
expense associated with the fair value of the warrants issued to these officers
as part of their severance agreement.
Professional fees in 1999 were $688,000 compared to $358,000 to 1998. The
increase in the 1999 professional fees was primarily due to increased investor
relations fees paid to JDK and Associates. Other costs in 1999 were due to
annual audit costs, fees connected with patent searches and applications, and
consulting fees. The 1998 professional fees included mostly legal and accounting
fees associated with the reincorporation and merger, SEC registration, private
placement, and debt financing in December 1998. See Part I. Item 1--"The
Company" and Part II. Item 5.--"Recent Sales of Unregistered Securities."
22
<PAGE>
Interest expense in 1999 was $1,325,000 compared to $539,000 in 1998. The
increase was primarily due to debt financing costs in connection with the
December 1998 debt acquisition. In both 1999 and 1998, this primarily represents
the amortization of certain debt issuance costs and accrued interest.
The Company's net loss for 1999 totaled $3,246,000, or $.13 per share, compared
$5,298,000, or $.26 per share for 1998. As discussed above, the decrease in the
Company's net loss reflects improvements in revenues and gross margins and
significant reductions in overhead expenses.
YEAR ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
Revenue in 1998 decreased approximately 11% to $2,950,000 from $3,333,000 in
1997. While revenues from the sale of RiceX Stabilized Rice Bran and RiceX Fiber
Complex increased $165,000 and $140,000, respectively, such gains were offset by
declines in the sales of RiceX Solubles and organic baby cereals of $613,000 and
$70,000, respectively. The decline in RiceX Solubles sales was primarily due to
one customer not achieving its 1998 sales objectives. While the sales of RiceX
Stabilized Rice Bran products accounted for approximately 88% and 89% of total
sales in 1997 and 1998, respectively, the mix of such products differed
significantly. In 1998, sales of RiceX Stabilized Rice Bran, primarily for the
equine market accounted for 67% of revenue versus 53% in 1997 and sales of RiceX
Solubles and RiceX Fiber Complex for use as a functional food ingredient
accounted for 21% of sales in 1998 versus 36% of sales in 1997. Cereal
processing for H.J. Heinz's organic infant cereal accounted for 10% of sales in
1998 versus 11% of sales in 1997. In 1998, the Company completed its production
contract with H.J. Heinz and no future sales to this customer are anticipated.
Management is currently seeking contracts to replace the infant cereal
production.
The gross margin on sale of products was 10% and 29% in 1998 and 1997,
respectively. The decrease was primarily as a result of an inventory valuation
adjustment of $533,000 in 1998. The adjustment was attributed mostly to the
write-off of dated inventory. The Company expects that gross margins will
improve as production capacity and sales grow.
Research and development expenditures totaled $1,057,000 in 1998, up 34% from
$790,000 in 1997, reflecting the Company's continued commitment to research and
development. In 1998 and 1997 the Company's research and development activities
included the design of the RiceX Process for stabilizing rice bran, product
development and testing and clinical studies to test the efficacy of RiceX in
ameliorating the effect of certain diseases. The Company also successfully
developed rice bran oil for the Nutrilite Division of Amway Corporation in 1998.
Approximately $152,000 (19%) of the increase in research and development
expenditures in 1998 were associated with the salary of, and the severance
payment to the executive officer that left the Company's employment in December
1998.
Selling, general and administrative expenses increased $261,000 (11%) to
$2,685,000 in 1998 from $2,423,000 in 1997. Selling, general and administrative
activities in 1997 were directed at raising capital, establishing manufacturing
facilities, developing a direct sales effort, adding executive management and
building corporate infrastructure. Most of these efforts carried through to
1998. Approximately $617,000 (23%) of the increase in selling, general and
administrative expenses were attributed to the salaries of, and the severance
payments to the three executive officers that left the Company's employment in
December 1998. The termination of all four executives had an immediate effect of
reducing overhead expenses by more than $1,000,000 annually.
The year ended December 31, 1998 included a non-cash charge totaling $980,000
which comprised $592,000 relating to the vested portion of previously issued
options held by the executive officers in December 1998 and $389,000
compensation expense associated with the fair value of the warrants issued to
these officers as part of their severance agreement. The year ended December 31,
1997 included a non-cash charge totaling $2,032,000 associated with the one
issuance and subsequent vesting of favorably priced stock options to employees
and directors.
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Professional fees in 1998 were $358,000 compared to $1,907,000 to 1997. In 1997,
legal fees were incurred in connection with patent searches and applications,
consulting fees for capital raising activities and executive searches, and
litigation that was successfully concluded by December 31, 1997. The 1998
professional fees included mostly legal and accounting fees associated with
reincorporating and merger, SEC registration, private placement, debt financing
in December 1998, and severance agreements. See Part I. Item 1--"The Company"
and Part II. Item 5.--"Recent Sales of Unregistered Securities."
Interest expense in 1998 was $539,000 compared to $534,000 in 1997. In both 1998
and 1997, this primarily represents the amortization of certain debt issuance
costs and accrued interest.
1997 earnings were also impacted by a $1,325,000 non-cash charge relating to a
conversion feature granted to a lender in connection with the restructuring of
debt. The charge represents the difference between the fair market value of the
Company's stock and the conversion rate on the date of borrowing. There was no
similar charge in 1998.
The Company's net loss for 1998 totaled $5,298,000, or $.26 per share, compared
$7,768,000, or $.40 per share for 1997. As discussed above, the decrease in the
Company's net loss reflects the significant reduction in professional fees, the
non recurrence of the 1997 charge for the beneficial conversion feature, and
significant reduction in the compensation expense associated with employee stock
options; offset by an increased investment in research and development, a
significant reduction in gross profit on the Company's product sales and a
virtual elimination of interest income as the Company utilized its uninvested
cash at December 31, 1997 to fund 1998 operations.
LIQUIDITY AND CAPITAL RESOURCES
The cash balances at December 31, 1999 decreased $128,000 to $1,030,000 from
$1,158,000 at December 31, 1998. Overall, the Company has yet to generate
cumulative positive cash flows primarily due to debt and other obligation
payments in 1999. However, the cash flows from operations continue to improve on
a comparative basis for the same period last year. For the year ended December
31, 1999, the Company's cash flow from operations improved $817,000 over year
ended December 31, 1998. Net cash used in operations for the twelve months ended
December 31, 1999 totaled $1,655,000 compared to $2,472,000 for the same time
period last year.
In 1999, the Company retired $10,227,000 of both current and long-term
obligations. As of December 31, 1999, the Company has been substantially
dependent on private placements of its equity securities and debt financing to
fund its cash requirements. During the twelve months ended December 31, 1999,
the Company used $3,985,000 of its cash reserves and $6,242,000 of its
securities to retire the obligations that matured during 1999.
During 1999, the Company issued 2,242,152 (2,105,111 to private placement
investors and 137,041 issued as a finders fee in connection with these
transactions) shares of common stock and warrants to purchase 2,105,111 shares
of common stock in conjunction with a $6,000,000 private placement for
$1,455,082. These warrants, which expire three years from issue date, have an
exercise price for the first year of $1.00 per share, for the second year of
$1.25 per share and for the third year of $1.50 per share. At December 31, 1999,
all warrants issued in conjunction with this private placement were outstanding.
In January 1999, The Company paid deferred compensation and severance payments
of $321,000 to four executives that terminated employment with the Company in
December 1998. Then in March 1999, the Company borrowed $250,000 from a
shareholder. This short-term bridge loan was without collateral and non-interest
bearing. In June 1999, the Company retired this loan with proceeds from the
sales of common stock.
In January 1999, the Company paid $1,289,000, its obligation for the liabilities
that were assumed in connection with the 1997 acquisition of certain assets of
the Montana facility. In January 1997, the Company acquired the assets of FoodEx
Montana in exchange for 310,000 shares of the Company's
24
<PAGE>
common stock and the assumption of certain liabilities totaling $1,320,000. The
seller had the option to sell the common shares back to the Company at a price
of $5.00 per share in November 1998 or sooner upon the occurrence of certain
events.
In 1998, the Put Option was amended to permit the holders of the 310,000 shares
to sell the shares back to the Company on July 1, 1999 based on a $5.00 value
and receive common stock with a fair value of $1,550,000. The number of shares
to be issued would be based on the average market price of the Company's common
stock for the preceding 30 days. In consideration for the extension of the Put
Option, the Company issued an additional 100,000 shares of common stock to the
Seller.
In July 1999, the Company issued to the seller an additional 1,581,156 shares of
common stock to equal 1,891,156 shares with a fair market value of $1,550,000 to
satisfy the Put Option that was amended in 1998.
During 1999, the Company entered into negotiations with a company for the
granting of an exclusive license to sell RiceX products in the nutraceutical
market. Those discussions resulted in the execution of an agreement dated as of
November 1, 1999. As part of that transaction, Patricia McPeak, an officer and
director of the Company, intended leaving employment of the Company and become
an officer and shareholder of that new company. However, the constituent members
of the Company's contracting partner could not come to agreement on various
essential terms of their relationship, and as a result, the Company agreed to
terminate that agreement effective as of November 1, 1999, Patricia McPeak
agreed to terminate her relationship with that new company also effective
November 1, 1999. The Company has entered into a new agreement with certain
members of the original contracting party. Negotiations with that new entity
have not been concluded, but the Company may become a shareholder in that new
entity, and Patricia McPeak, an officer and director of the Company, may be
involved as a shareholder and executive officer in that new entity which will
contract with the Company.
In December 1999, the Company entered into a letter of intent with a venture
capital firm to provide up to $6,000,000 in equity financing to pay off the
Company's debt and expand its manufacturing capacity and marketing efforts. The
agreement is structured to provide an initial investment of $2,500,000 as a
convertible note. Within a maximum period of 120 days, subject to the
satisfactory completion of due diligence, the note will be converted into equity
at $.70 per share. The note is secured by property and equipment and
intellectual property of the Company and is non-interest bearing during this
120-day period. If the note is not converted to equity within this period, the
note may be extended for a period of 12 months with an interest rate of Wall
Street Journal prime plus two percent.
In March 1996, the Company borrowed $1,750,000 from a financing company and
issued 578,000 shares of the Company's common stock to the financing company.
The stated interest rate on the note, taking into account the issuance of common
stock, was 13%. During 1999, $321,000 of imputed interest was accreted and added
to principal. The note was paid in full in November 1999.
In February 1997, a 1996 loan agreement ("Loan Agreement") with Monsanto
pursuant to which Monsanto had advanced $5,000,000 to the Company, was
substantially renegotiated. The renegotiated loan was non-interest bearing, due
in November 1999, and convertible into shares of the Company's common stock at
the lower of $5.00 per share or the price per share the Company receives in a
sale of its common stock in a financing of at least $1,000,000 occurring closest
and prior to a notice of intent to convert. The outstanding principal of the
Loan Agreement at December 31, 1998 was $5,000,000 and, on December 1, 1999, was
converted into 7,167,479 shares of the Company's common stock and the remaining
balance of $54,000 was paid in cash.
As of December 31, 1999, the Company's cash reserves totaled $1,030,000 and
other total current assets were $851,000. Management projects the cash
requirement in 2000 to be significantly reduced by management's effort to
improve the Company's gross margins, reduce fixed overheads, and budgeted 2000
sales revenues improving over last year's performance. However, there can be no
assurance that such reduction or such increase in revenue will occur or remain
in effect.
25
<PAGE>
For 2000, the Company expects to expand its sales and marketing efforts, and
professional and legal fees for patent and trademark applications. These efforts
could significantly increase demand for the Company's products beyond the
Company's current production capacity. While the Company believes it can
increase its production capacity to meet sales demand, significant additional
capital could be required to meet such expansion requirements.
The timing and amount of any capital requirements cannot be predicted at this
time. There can be no assurance that any financing will be available on
acceptable terms. If such financing is not available on satisfactory terms, the
Company may be unable to continue, develop or expand its business, develop new
products, or develop new markets at the rate desired and its operating results
may be adversely affected. Equity financing could result in additional dilution
to existing shareholders.
26
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
THE RICEX COMPANY
(FORMERLY FOOD EXTRUSION, INC.)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Certified Public Accountants.......... 28
Report of Former Independent Certified Public Accountants... 29
Consolidated Balance Sheet as of December 31, 1999.......... 30
Consolidated Statements of Operations for the years ended
December 31, 1999 and 1998................................ 31
Consolidated Statements of Shareholders' Equity (Deficit) as
of December 31, 1999 and 1998............................. 32
Consolidated Statements of Cash Flows for the years ended
December 31, 1999 and 1998................................ 33
Notes to Consolidated Financial Statements.................. 34
</TABLE>
27
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
THE BOARD OF DIRECTORS
THE RICEX COMPANY (FORMERLY FOOD EXTRUSION, INC.)
We have audited the accompanying consolidated balance sheet of The RiceX Company
(formerly Food Extrusion, Inc.) and Subsidiary as of December 31, 1999, and the
related consolidated statements of operations, shareholders' equity (deficit)
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The RiceX Company
(formerly Food Extrusion, Inc.) and Subsidiary at December 31, 1999, and the
results of its consolidated operations and its consolidated cash flows for the
year then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note B to the
financial statements, the Company has suffered recurring losses from operations
which raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note B. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Moss Adams LLP
Sacramento, California
February 23, 2000
28
<PAGE>
THE RICEX COMPANY
(FORMERLY FOOD EXTRUSION, INC.)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 1,030,049
Trade accounts receivable................................. 514,699
Inventories............................................... 310,189
Deposits and other current assets......................... 25,825
------------
Total current assets.................................... 1,880,762
PROPERTY AND EQUIPMENT, net................................. 3,008,362
OTHER ASSETS................................................ 68,565
------------
$ 4,957,689
============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Note payable to shareholder............................... $ 1,850,000
Accounts payable and accrued liabilities.................. 540,260
------------
Total current liabilities............................... 2,390,260
CONVERTIBLE NOTE............................................ 2,500,000
------------
Total liabilities....................................... 4,890,260
------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock, par value $.00l per share, 10,000,000
shares authorized, no shares issued and outstanding..... --
Common stock, par value $.001 per share, 100,000,000
shares authorized, 36,393,784 shares issued and
outstanding............................................. 36,394
Additional paid-in capital................................ 27,252,130
Accumulated deficit....................................... (24,013,864)
Deferred expenses relating to equity issuance............. (2,128,731)
Note receivable from shareholder.......................... (1,078,500)
------------
Total shareholders' equity.............................. 67,429
------------
$ 4,957,689
============
</TABLE>
The accompanying notes are an integral part of these statements.
30
<PAGE>
THE RICEX COMPANY
(FORMERLY FOOD EXTRUSION, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Revenues
Sales..................................................... $ 3,230,729 $ 2,913,831
Royalties................................................. 28,689 36,505
----------- -----------
3,259,418 2,950,336
Cost of sales............................................... 2,216,737 2,651,469
----------- -----------
1,042,681 298,867
Research and development expenses........................... 712,234 1,056,702
Selling, general and administrative expenses................ 1,485,490 2,684,542
Stock option and warrant compensation to employees.......... 103,950 980,476
Professional fees........................................... 687,538 358,001
----------- -----------
Loss from operations.................................... (1,946,531) (4,780,854)
Other income (expense):
Interest and other income................................. 25,998 22,261
Interest and other expense................................ (1,325,013) (538,752)
----------- -----------
Loss before provision for income taxes.................. (3,245,546) (5,297,345)
Provision for income taxes.................................. (800) (800)
----------- -----------
Net loss................................................ $(3,246,346) $(5,298,145)
=========== ===========
Basic and diluted earnings per share:
Net loss per share........................................ $ (0.13) $ (0.26)
=========== ===========
Weighted average number of shares outstanding............... 24,486,683 20,350,496
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
31
<PAGE>
THE RICEX COMPANY
(FORMERLY FOOD EXTRUSION, INC.)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
DEFERRED
EXPENSES UNEARNED NOTE
COMMON STOCK ADDITIONAL RELATED TO STOCK RECEIVABLE
---------------------- PAID-IN ACCUMULATED EQUITY OPTION FROM
SHARES AMOUNT CAPITAL DEFICIT ISSUANCE COMPENSATION SHAREHOLDER
----------- -------- ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997....... 20,215,215 $20,215 $17,713,049 $(15,469,373) $ -- $$(1,967,780) $(4,000,000)
Issuance of common stock and
warrants for services.......... 285 -- 43,540 -- -- -- --
Issuance of common stock for put
extension...................... 100,000 100 117,800 -- -- -- --
Reclassification of redeemable
common stock................... 310,000 310 1,549,690 -- -- -- --
Issuance of common stock pursuant
to the exercise of stock
options........................ 280,000 280 279,720 -- -- -- --
Rescission of note receivable and
exercise of option............. (2,000,000) (2,000) (3,998,000) -- -- -- 4,000,000
Issuance of common stock in
private placement, net of
offering costs of $225,000..... 2,181,818 2,182 1,272,818 -- -- -- --
Vesting of stock options to
employees...................... -- -- -- -- -- 591,576 --
Forfeiture of unvested stock
options to employees........... -- -- (1,376,204) -- -- 1,376,204 --
Issuance of warrants as severance
to employees................... -- -- 388,900 -- -- -- --
Issuance of common stock to
prepay interest on debt
financing...................... 940,679 941 646,245 -- (647,186) -- --
Issuance of warrants for debt
issuance costs................. -- -- 1,392,597 -- (1,392,597) -- --
Net loss for the year............ -- -- -- (5,298,145) -- -- --
----------- ------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1998....... 22,027,997 22,028 18,030,155 (20,767,518) (2,039,783) -- --
Issuance of common stock and
warrants for services.......... 25,000 25 24,975 -- -- -- --
Issuance of warrants in
conjunction with bridge loan... -- -- 58,500 -- -- -- --
Amortization of prepaid
interest....................... -- -- -- -- 323,593 -- --
Amortization of debt issuance.... -- -- -- -- 696,299 -- --
Issuance of additional common
stock for put extension........ 1,581,156 1,581 (1,581) -- -- -- --
Issuance of common stock pursuant
to the exercise of stock
options........................ 1,500,000 1,500 1,078,500 -- -- -- (1,078,500)
Issuance of common stock in
private placement, net of
finders fee of $123,743........ 2,242,152 2,242 1,452,840 -- -- -- --
Issuance of stock options to
employees...................... -- -- 103,950 -- -- -- --
Conversion of debt to equity..... 7,167,479 7,168 4,938,394 -- -- -- --
Issuance of common stock for
prepaid processing fees........ 250,000 250 234,125 -- (195,313) -- --
Issuance of common stock for
investor relations fee......... 1,600,000 1,600 1,262,400 -- (913,527) -- --
Issuance of warrants for investor
relations fee.................. -- -- 69,872 -- -- -- --
Net loss for the year............ -- -- -- (3,246,346) -- -- --
----------- ------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1999....... 36,393,784 $36,394 $27,252,130 $(24,013,864) $(2,128,731) $ -- $$(1,078,500)
=========== ======= =========== ============ =========== =========== ===========
<CAPTION>
TOTAL
SHAREHOLDERS'
EQUITY
(DEFICIT)
-------------
<S> <C>
Balance, December 31, 1997....... $(3,703,889)
Issuance of common stock and
warrants for services.......... 43,540
Issuance of common stock for put
extension...................... 117,900
Reclassification of redeemable
common stock................... 1,550,000
Issuance of common stock pursuant
to the exercise of stock
options........................ 280,000
Rescission of note receivable and
exercise of option............. --
Issuance of common stock in
private placement, net of
offering costs of $225,000..... 1,275,000
Vesting of stock options to
employees...................... 591,576
Forfeiture of unvested stock
options to employees........... --
Issuance of warrants as severance
to employees................... 388,900
Issuance of common stock to
prepay interest on debt
financing...................... --
Issuance of warrants for debt
issuance costs................. --
Net loss for the year............ (5,298,145)
-----------
Balance, December 31, 1998....... (4,755,118)
Issuance of common stock and
warrants for services.......... 25,000
Issuance of warrants in
conjunction with bridge loan... 58,500
Amortization of prepaid
interest....................... 323,593
Amortization of debt issuance.... 696,299
Issuance of additional common
stock for put extension........ --
Issuance of common stock pursuant
to the exercise of stock
options........................ 1,500
Issuance of common stock in
private placement, net of
finders fee of $123,743........ 1,455,082
Issuance of stock options to
employees...................... 103,950
Conversion of debt to equity..... 4,945,562
Issuance of common stock for
prepaid processing fees........ 39,062
Issuance of common stock for
investor relations fee......... 350,473
Issuance of warrants for investor
relations fee.................. 69,872
Net loss for the year............ (3,246,346)
-----------
Balance, December 31, 1999....... $ 67,429
===========
</TABLE>
The accompanying notes are an integral part of these statements.
32
<PAGE>
THE RICEX COMPANY
(FORMERLY FOOD EXTRUSION, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash flow from operating activities:
Net loss.................................................. $(3,246,346) $(5,298,145)
Adjustments to reconcile net loss to net cash from
operating activities:
Depreciation and amortization........................... 704,021 720,088
Shares, warrants and options issued for compensation and
services.............................................. 646,861 1,024,016
Issuance of common stock for put extensions............. -- 117,900
Accretion of debt discount.............................. 100,725 215,736
Gain on sale of equipment............................... -- (4,569)
Amortization of prepaid interest and debt issuance
costs................................................. 1,019,892 --
Net changes in operating assets and liabilities:
Trade accounts receivable............................... (122,956) 186,870
Inventories............................................. (97,928) 314,716
Deposits and other current assets....................... 140,177 (17,746)
Deferred debt issuance costs............................ 65,408 70,502
Accounts payable and accrued liabilities................ (864,595) 198,688
----------- -----------
Net cash from operating activities................ (1,654,741) (2,471,944)
----------- -----------
Cash flows from investing activities:
(Purchases) sales of property and equipment, net........ (19,500) 41,412
Payments for trademarks and patents..................... -- (22,900)
Collection on note receivable........................... -- 109,304
----------- -----------
Net cash from investing activities................ (19,500) 127,816
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock.................. 1,456,582 1,555,000
Proceeds from issuance of long-term debt................ 3,200,000 1,150,000
Principal payments on long-term debt.................... (3,056,153) (35,645)
Payment of long-term debt to shareholders............... -- (30,052)
Payment of long-term debt on conversion of debt......... (54,441) --
----------- -----------
Net cash from financing activities................ 1,545,988 2,639,303
----------- -----------
Net (decrease) increase in cash and cash equivalents........ (128,253) 295,175
Cash and cash equivalents, beginning of year................ 1,158,302 863,127
----------- -----------
Cash and cash equivalents, end of year...................... $ 1,030,049 $ 1,158,302
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
33
<PAGE>
THE RICEX COMPANY
(FORMERLY FOOD EXTRUSION, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE A--DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
The RiceX Company ("RiceX"), formerly Food Extrusion, Inc., was incorporated in
California in 1989 and in 1998 was reincorporated in Delaware and changed its
name to The RiceX Company. RiceX has a wholly owned subsidiary, Food Extrusion
Montana, Inc. (FoodEx Montana). The consolidated financial statements include
the accounts of RiceX and FoodEx Montana (collectively "the Company"), after the
elimination of all inter-company balances and transactions.
The Company is an agribusiness food technology company, which has developed a
proprietary process to stabilize rice bran. RiceX is headquartered in El Dorado
Hills, California and has stabilization equipment located at two rice mills in
Northern California. The Company purchases raw rice bran from these two mills
and mill employees, under Company supervision, operates the Company's equipment
to stabilize rice bran. The Company pays a processing fee to the mills for this
service. Under an agreement with one of the mills, that mill may use the
Company's equipment to stabilize rice bran for its customers in exchange for the
payment of a royalty fee to the Company. The Company intends to enter into
additional relationships with rice processors as part of its overall business
strategy.
FoodEx Montana is engaged in the business of custom manufacturing grain-based
products for food ingredient companies at its production facility in Dillon,
Montana. The facility has specialized processing equipment and techniques for
the treatment of grain products to cook, enzyme treat, convert, isolate, dry and
package finished food ingredients. The soluble form of the Company's rice bran
products is produced at the Montana facility.
The processing, formulation, packaging, labeling and advertising of the
Company's products are subject to regulation by one or more federal agencies.
Congress enacted the Dietary Supplement Health Education Act of 1994 ("DSHEA"),
which limits the FDA's jurisdiction in regulating dietary supplements. The FDA
has recently proposed regulations with the purpose of implementing DSHEA and
proposals have been made to modify or change the provisions of DSHEA. The effect
that those regulations or proposed changes will have on the operations of the
Company cannot currently be determined.
A summary of the significant accounting principles and practices used in the
preparation of the consolidated financial statements follows:
1. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of trade accounts receivable for
sales to major customers. The Company performs credit evaluations on its
customers financial condition and generally does not require collateral on
accounts receivable. The Company maintains an allowance for doubtful accounts on
its receivables based upon expected collectibility of all accounts receivable.
Uncollected accounts have not been significant.
34
<PAGE>
Three customers accounted for 63% of sales for the years ended December 31, 1999
and 1998, respectively. No other customer accounted for more than 10% of sales.
3. CASH AND CASH EQUIVALENTS
Cash equivalents consist of highly liquid investments with an original or
remaining maturity at the time of purchase of three months or less.
4. INVENTORIES
Inventories are stated at the lower of cost or market determined on a first-in,
first-out basis.
5. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed on the
straight-line basis over the shorter of the estimated life of the asset or the
lease term, generally ranging from three to ten years. Upon sales or retirement,
the related cost and accumulated depreciation are removed from the accounts and
the resulting gain or loss, if any, is included in results of operations. The
cost of additions, improvements, and interest on construction are capitalized,
while maintenance and repairs are charged to operations when incurred.
6. DEBT ISSUANCE COSTS
Costs incurred in connection with debt financing agreement are deferred and
amortized over the terms of the related obligations using a method, which
approximates the interest method.
7. REVENUE RECOGNITION
Revenue from product sales are recognized as products are shipped.
8. RESEARCH AND DEVELOPMENT
Research and development costs are expensed when incurred.
9. STOCK OPTIONS
The Company accounts for employee stock options in accordance with APB 25, under
which compensation expense is recognized in the financial statements when the
exercise price of option grants are issued at less than fair market value on the
grant date. The Company adopted the disclosure-only provisions of
SFAS No. 123, "Accounting for Stock-Based Compensation", which require the
Company to disclose pro forma net income (loss) assuming compensation expense
related to options granted was determined using the fair value method. As
required by SFAS 123, the Company has valued stock option and warrants granted
to non-employees and made the required pro forma calculations under the fair
value method using the Black-Scholes option pricing model with the following
weighted-average assumptions for 1998 and 1999: risk-free interest rate range of
4.62% to 5.92% in 1999 and 5.26% in 1998; expected option lives of one to five
years; expected volatility of 111% in 1999 and 104% in 1998; and no expected
dividend in either year.
10. NET LOSS PER SHARE
Basic net loss per share is computed on the weighted average number of shares of
common stock outstanding during each period. There were potentially dilutive
instruments including stock options, warrants and convertible debt; however,
they are anti-dilutive as the Company has reported a loss from operations for
each of the two years in the period ended December 31, 1999.
11. INCOME TAXES
The Company accounts for income taxes under the liability method. Deferred
income tax assets and liabilities result from the future tax consequences
associated with temporary differences between the carry amounts and the tax
bases of assets and liabilities. A valuation allowance is established to reduce
deferred
35
<PAGE>
tax assets if it is more likely than not, that all, or some portion, of such
deferred tax assets will not be realized.
12. ACCOUNTING FOR LONG-LIVED ASSETS
Long-lived assets are recorded at the lower of amortized cost or fair value. As
part of an ongoing review of the valuation of long-lived assets, management
assesses the carrying value of such assets if facts and circumstances suggest
they may be impaired. If this review indicates that the carrying value of these
assets may not be recoverable, as determined by a non-discounted cash flow
analysis over the remaining useful life, the carrying value would be reduced to
its estimated fair value. There has been no impairment recognized in these
consolidated financial statements.
13. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." This
Statement standardizes the accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, by requiring that an
entity recognize those items as assets or liabilities in the statement of
financial position and measure them at fair value. In June 1999, the FASB issued
SFAS No. 137, which defers the effective date of SFAS No. 133. The Company will
adopt SFAS No. 133 as of July 1, 2000, and does not believe this pronouncement
will have a material impact on the Company's financial position or results of
operations.
NOTE B--REALIZATION OF ASSETS
The financial statements have been prepared assuming the Company will continue
as a going concern. The Company has incurred operating losses and negative cash
flows from operations since inception. The Company's business could be subject
to cost increases in raw product and manufacturing processes and uncertain
market acceptance. Therefore, there can be no assurance that the Company's
business or products will be successful or that the Company will be able to
achieve or maintain profitable operations.
During the past year, the Company increased gross margins and reduced costs by
renegotiating supplier contracts and by increasing sales. Management also
implemented spending controls which reduced overhead costs. The Company has
entered into a letter of intent with a venture capital firm to provide up to
$6,000,000 in financing to pay off the Company's debt and expand its
manufacturing capacity and marketing efforts (note G). However, there are no
assurances that the additional equity financing will be obtained to meet their
capital resource needs or satisfy their debt obligations. Additionally,
significant alliances are in process of development which are expected to
increase sales volume. Management believes that the combination of these factors
will make the Company self-sustaining.
In view of the matters described in the preceding paragraphs, recoverability of
a major portion of the recorded asset amounts shown in the accompanying balance
sheet is dependent upon continued operations of the Company, which is dependent
upon the Company's ability to meet its financing requirements on a continuing
basis and to succeed in its future operations. The financial statements do not
include any adjustments relating to the recoverability of recorded assets that
might be necessary should the Company be unable to continue in existence.
NOTE C--BUSINESS COMBINATION
Effective January 1997, FoodEx Montana entered into an asset purchase agreement,
shareholders' agreement and security agreement (collectively, the "Asset
Purchase Agreements") with an unrelated company ("Seller") to acquire a
manufacturing facility located in Montana in exchange for 310,000 shares of the
Company's common stock and the assumption of certain obligations. The Seller had
the option to sell the common stock back to the Company at $5.00 per share for a
30-day period beginning November 1, 1998.
36
<PAGE>
In 1998, the Put Option was amended to permit the holders of the 310,000 shares
to sell the shares back to the Company on July 1, 1999 based on a $5.00 value
and receive common stock with a fair value of $1,550,000. The number of shares
to be issued will be based on the average market price of the Company's common
stock for the 30 days preceding July 1, 1999. The Company had the right to
accelerate the Put Option at any time prior to July 1, 1999 on terms similar to
those described above. In consideration for the extension of the Put Option, the
Company issued an additional 100,000 shares of common stock to the Seller.
In July 1999, the Company issued an additional 1,581,156 shares of common stock
to the Seller to finalize the Put Option. The number of additional shares issued
was calculated based on the average price per share of the Company's common
stock for the 30 days preceding July 1, 1999.
NOTE D--PROPERTY AND EQUIPMENT
At December 31, 1999, property and equipment consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Land and buildings.......................................... $ 367,961
Equipment................................................... 4,146,205
Leasehold improvements...................................... 381,642
Furniture and fixtures...................................... 225,417
-----------
5,121,225
Less accumulated depreciation and amortization.............. (2,314,763)
-----------
2,806,462
Equipment not placed in service............................. 201,900
-----------
$ 3,008,362
===========
</TABLE>
NOTE E--ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
At December 31, 1999, accounts payable and accrued liabilities consist of the
following:
<TABLE>
<CAPTION>
<S> <C>
Trade accounts payable...................................... $258,547
Other accrued liabilities................................... 281,713
--------
$540,260
========
</TABLE>
NOTE F--DEBT OBLIGATIONS
At December 31, 1999, debt consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Note payable to shareholder, stated interest rate of 18%,
interest prepaid in common stock, due December 2000,
collateralized by fixed assets, intellectual properties
and inventories........................................... $1,850,000
----------
Current portion............................................. $1,850,000
==========
</TABLE>
In December 1998, the Company entered into a loan agreement with a previously
unrelated party (the "Lender") to borrow $1,850,000. The Lender advanced
$1,150,000 to the Company on December 31, 1998 and $700,000 in January 1999. The
Company issued the Lender 940,679 shares of common stock as prepaid interest on
the loan. Additionally, the Company issued the Lender warrants to purchase
3,743,540 shares of common stock at $0.75 per share which expire in
December 2003. The Company recorded $647,186 of
37
<PAGE>
prepaid interest reflecting the fair market value of the shares on December 31,
1998 and $1,392,597 of debt issuance costs, reflecting the fair value of the
warrants on December 31, 1998. During 1999, the Company amortized $323,593 and
$696,299 of prepaid interest and debt issuance costs, respectively, leaving
$323,593 and $696,299 to be amortized over the next twelve months. The Company
valued the warrants in accordance with SFAS No. 123 using the Black-Scholes
option pricing model. The prepaid interest and debt issuance costs related to
this transaction are recorded as a contra account to shareholders' equity.
In February 1997, a 1996 loan agreement ("Loan Agreement") with Monsanto
Corporation ("Monsanto") pursuant to which Monsanto had advanced $5,000,000 to
the Company, was substantially renegotiated. The renegotiated loan is
non-interest bearing, due in November 1999 and convertible into shares of the
Company's common stock at the lower of $5.00 per share or the price per share
the Company receives in a sale of its common stock in a financing of at least
$1,000,000 occurring closest and prior to a notice of intent to convert. The
Company recorded a charge against operations of $1,325,000 in 1997 for the
beneficial conversion feature as a result of the fair market value of the stock
being greater than the conversion rate on the scheduled dates the Company
received the proceeds pursuant to the Loan Agreement. As a result of this
charge, the effective interest rate of the loan is greater than the interest
rate currently available to the Company for similar debt; therefore no imputed
interest has been calculated on this loan. The outstanding principal of the Loan
Agreement at December 31, 1998 was $5,000,000 and, on December 30, 1999, was
converted into 7,167,479 shares of the Company's common stock and the remaining
balance of $54,441 was paid in cash.
In connection with the acquisition of certain assets of the Montana
manufacturing facility FoodEx, the Company assumed certain existing non-interest
bearing obligations with a face value of $1,320,035. Imputed interest related to
these obligations of $103,140 were accreted and added to principal during the
year ended December 31, 1998. These obligations were paid in full in January
1999.
In March 1996, the Company borrowed $1,750,000 from a financing company and
issued 578,000 shares of the Company's common stock to the financing company.
The Company allocated $1,339,620 of the proceeds to debt and $410,380 to common
stock. The stated interest rate on the note was 5%, while the effective
annualized interest rate on the note, taking into account the issuance of common
stock, was 13%. During 1999, $320,753 of imputed interest was accreted and added
to principal. The note was paid in full in November 1999.
NOTE G--CONVERTIBLE NOTE
On December 1, 1999, the Company entered into a letter of intent with a venture
capital firm to provide up to $6,000,000 in financing to pay off the Company's
debt and expand its manufacturing capacity and marketing efforts. The agreement
is structured to provide an initial investment of $2,500,000 as a convertible
note. Within a maximum period of 120 days, subject to the satisfactory
completion of due diligence, the note will be converted into equity at $.70 per
share. The note is secured by property and equipment and intellectual property
of the Company and is non-interest bearing during this 120-day period. If the
note is not converted to equity within this period, the note may be extended for
a period of 12 months with an interest rate as reported by the Wall Street
Journal of prime plus two percent.
NOTE H--COMMITMENTS
The Company leases office, laboratory and warehouse space and vehicles under
operating leases which expire in 2006 and 2002, respectively. Beginning in
October 2001, the Company has the unilateral right to terminate the operating
leases with six months written notice. Future minimum rental payments required
under these non-cancelable operating lease agreements are $164,480 in 2000,
$134,155 in 2001 and $32,998 in 2002.
Rent expense under operating leases was $128,570 and $122,478 for the years
ended December 31, 1999 and 1998, respectively.
38
<PAGE>
NOTE I - SHAREHOLDERS' EQUITY
1. COMMON AND PREFERRED STOCK
In 1998, in conjunction with RiceX's reincorporation in Delaware, the Company
increased its authorized number of common shares from 50,000,000 shares to
100,000,000 shares and authorized 10,000,000 shares of preferred stock which may
be issued from time to time, in one or more series, and authorized its Board of
Directors to establish the rights, preferences and privileges of each such
series, when issued. At December 31, 1999, an aggregate of 11,991,651 shares of
the Company's common stock was reserved for future issuance upon the conversion
of debt and the exercise of stock options and warrants.
2. STOCK ISSUED FOR SERVICES
In April 1999, the Company issued warrants to purchase 250,000 shares of common
stock in conjunction with a bridge loan. The fair market value of these
warrants, determined in accordance with SFAS No. 123 using the Black-Scholes
option pricing model, are $58,500 which has been recorded as interest expense
for the year ended December 31, 1999.
In May 1999, the Company issued 25,000 shares of stock to a consultant for
services rendered. The value of the common stock was $25,000 and is included in
professional fees for the year ended December 31, 1999.
In July 1999, the Company issued 250,000 shares of common stock to a vendor in
lieu of cash to guarantee direct supplies for three years. The value of the
common stock was $234,000 and is recorded as a contra account to shareholders'
equity and is being amortized to cost of goods sold over the three-year period.
In November 1999, the Company entered into a contract with a company to provide
investor relations for a period of one year. The Company issued 1,600,000 shares
of common stock with a fair value of $1,264,000 as a contra account to
shareholders' equity. During 1999, the Company amortized $350,473 as
professional fees. Additionally, the Company issued warrants to purchase
1,000,000 shares of common stock. The fair market value of these warrants,
determined in accordance with SFAS No. 123 using the Black-Scholes option
pricing model, are $126,000 of which approximately $70,000 has been recorded as
professional fees for the year ended December 31, 1999. In February 2000, the
agreement was terminated and the Company expects to receive at least 50% of the
stock and warrants back.
In 1998, the Company issued 285 shares of common stock and warrants to purchase
40,000 shares of common stock with an exercise price of $1.50 per share to
consultants for services rendered. The warrants were immediately exercisable and
expire in October 2003. The fair value of these shares and warrants, determined
in accordance with SFAS No. 123 using the Black-Scholes option pricing model of
$43,540 is included in professional fees for the year ended December 31, 1998.
3. PRIVATE PLACEMENT
During 1999, the Company issued 2,242,152 shares of common stock and warrants to
purchase shares of common stock in conjunction with a $6,000,000 private
placement for $1,455,082. These warrants, which expire three years from issue
date, have an exercise price for the first year of $1.00 per share, for the
second year of $1.25 per share and for the third year of $1.50 per share. At
December 31, 1999, all warrants issued in conjunction with this private
placement were outstanding.
4. PRIVATE PLACEMENT AND CONTINGENCY
In September 1998, the Company sold 1,000,000 shares of common stock and issued
warrants to purchase 1,075,000 (1,000,000 to the private placement investor and
75,000 issued as a finders fee in conjunction with this transaction) shares of
common stock in a private placement for $1,500,000. These warrants, which expire
in September 2000, are exercisable at $1.50 per share, if exercised prior to
September 1999 and at $1.81 per share, if exercised between September 1999 and
September 2000. The private offering agreement provides for price protection for
the private placement investor, whereby any issuance of new stock at a price
lower than $1.50 per share requires the Company to issue additional new shares
sufficient to reduce
39
<PAGE>
the private placement investor's average purchase price to the lower per share
price of such new issuance. Additionally, the price protection provision
requires that, should the Company issue new shares or warrants to purchase
common stock at less than $1.50 per share, the exercise price on the warrants
issued in the private placement will be reduced to the lower issuance or
exercise price. The shares of stock and warrants issued in the December 1998
loan agreement described in Note F were less than $1.50 per share. Accordingly,
effective September 10, 1998, the Company issued an additional 1,181,818 shares
of common stock to the private placement investor and reduced the exercise price
of the warrants to $0.69 per share. At December 31, 1999, all warrants issued in
conjunction with this private placement were outstanding.
The private placement investor disagrees with the Company's interpretation of
the private placement offering agreement relating to dilutive protection on the
warrants. The private placement investor has asserted that the Company must
issue additional warrants to purchase 1,181,818 shares of common stock at $0.69
per share. The Company, with advice of legal counsel, is contesting this
assertion and the matter has not currently been resolved.
5. WARRANTS AND NON-EMPLOYEE STOCK OPTIONS
At December 31, 1999, the warrants and non-employee stock options outstanding
were as follows:
<TABLE>
<CAPTION>
SHARES ISSUABLE UNDER WARRANTS NUMBER OF EXERCISE PRICE EXERCISE
AND NON-EMPLOYEE OPTIONS SHARES PER SHARE PERIOD
- ------------------------------ ---------- ------------------- -----------------
<S> <C> <C> <C>
Balance, January 1, 1998............... 1,650,000 $ 1.75--$4.00 3--5 years
Issued during the year................. 6,058,540 $ 0.69--$1.81 2--5 years
---------- ------------------- -----------------
Balance, December 31, 1998............. 7,708,540 $ 0.69--$4.00 2--5 years
Issued during the year................. 3,380,111 $ 0.75--$1.50 1--5 years
Cancelled during the year.............. (1,000,000) $ 1.75 1--3 years
---------- ------------------- -----------------
Balance, December 31, 1999............. 10,088,651 $ 0.69--$4.00 1--5 years
========== =================== =================
</TABLE>
6. EMPLOYEE STOCK OPTIONS
The Company has 5,000,000 shares of common stock reserved for grant to its
officers, directors and key employees under its stock option plan. At December
31, 1999, options to purchase 2,969,000 shares of common stock had been granted
under the Plan and 2,031,000 shares were available for future grants. Stock
option information is as follows:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
---------- ---------
<S> <C> <C>
Shares under option at January 1, 1998...................... 1,464,000 $2.78
Granted................................................... 5,270,000 1.88
Exercised................................................. (280,000) 1.00
Cancelled................................................. (5,700,000) 2.25
---------- -----
Shares under option at December 31, 1998.................... 754,000 1.42
Granted................................................... 2,829,000 .71
Exercised................................................. (1,500,000) .72
Cancelled................................................. (180,000) 1.74
---------- -----
Shares under option at December 31, 1999.................... 1,903,000 $ .89
========== =====
Options exercisable at December 31, 1999.................... 477,000 $1.10
========== =====
</TABLE>
40
<PAGE>
Compensation expense, equal to the excess of the fair market value on the date
of grant and the exercise price, is recorded over the vesting period of each
option. Compensation expense related to employee stock options was $103,950 and
$591,576 for the years ended December 31, 1999 and 1998, respectively.
In May 1997, the Company's Chief Executive Officer and a director (the "CEO")
exercised an option to purchase 2,000,000 shares of the Company's common stock
at an exercise price of $2.00 per share in exchange for promissory notes in the
aggregate principal amount of $4,000,000 that bore interest at a rate of 8% per
annum, were secured by the 2,000,000 shares of common stock purchased and were
due at the earlier of May 2002 or upon the sale of all or a portion of the
shares of common stock acquired upon exercise. The Company agreed to reimburse
the CEO the interest payable on the notes plus the related income tax effect of
such reimbursement. The CEO agreed to rescind the exercise of his option
concurrent with the successful closing of the Private Placement described above.
In September 1998, the CEO, as agreed, rescinded the exercise of his options and
the options to purchase 2,000,000 shares of the Company's common stock were
reinstated at the original price of $2.00 per share. As the note receivable from
the CEO was cancelled in connection with the rescission, the accrued interest
income related to the notes receivable and the associated accrued liability for
the associated reimbursements were charged to operations in the year ended
December 31, 1998.
In addition, in September 1998, the Company's Board of Directors cancelled the
outstanding options to purchase an aggregate of 2,950,000 shares of common stock
with exercise prices ranging from $2.00 to $4.88 per share held by the CEO, four
of the Company's executive officers and two directors and replaced them with
options to purchase an aggregate of 2,950,000 shares of common stock at an
exercise price of $1.81 per share, the fair market value of the Company's common
stock on the date of grant.
In December 1998, four officers, including the CEO, were terminated from the
Company. As part of the severance agreements with the officers, all previously
issued options to purchase the Company's stock held by such officers were
cancelled. These options had been compensatory and the Company has recognized
compensation expense relating to the portions of such grants that had vested in
1997 and 1998 prior to the officers' terminations. The officers forfeited the
unvested portion of the accrued compensation relating to the options at the date
of termination of $1,376,204. In conjunction with their severance, three of the
officers were paid an aggregate of $260,417 which has been recognized in 1998 as
compensation expense and were issued warrants, which expire in December 2000, to
purchase an aggregate of 1,200,000 shares of the Company's common stock at an
exercise price of $l.00 per share. The fair value of the warrants, determined in
accordance with SFAS No. 123 using the Black-Scholes option pricing model of
$388,900 was recorded as compensation expense for year ended December 31, 1998.
As required by SFAS No. 123, the Company has determined the pro-forma
information as if the Company had accounted for stock options granted under the
fair value method using the Black-Scholes option pricing model. The model
requires the input of highly subjective assumptions including expected stock
volatility that is subject to change. For this reason, resulting pro-forma
compensation costs are not necessarily indicative of future costs. For purposes
of pro-forma disclosures, the estimated fair value of the options is recognized
as an expense over the options' vesting period.
The Company's pro-forma net loss and net loss per share would be as follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Net loss, as reported............................ $(3,246,346) $(5,298,145)
Net loss, pro-forma.............................. $(4,504,756) $(5,933,033)
Basic net loss per share--as reported............ $ (0.13) $ (0.26)
Basic net loss per share--pro-forma.............. $ (0.18) $ (0.29)
Weighted average fair value of options granted to
employees during the year...................... $ 0.71 $ 0.96
</TABLE>
41
<PAGE>
NOTE J--INCOME TAXES
The provision for income taxes consists of $800 for the years ended
December 31, 1999 and 1998 which represents the state minimum tax.
The difference between the U.S. federal statutory tax rate and the Company's
effective tax rate are as follows:
<TABLE>
<CAPTION>
TAX BENEFIT (EXPENSE)
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Federal statutory tax rate....................... 34.0% 34.0%
State and local income tax, net of federal....... 7.1% 1.4%
Stock options.................................... 1.3% (13.0%)
Other............................................ 0.0% 1.5%
Valuation allowance.............................. (42.4%) (23.9%)
----------- -----------
Effective tax rate............................... 0.0% 0.00%
=========== ===========
</TABLE>
At December 31, 1999, deferred tax assets (liabilities) are comprised of the
following:
<TABLE>
<S> <C>
Net operating loss carryforward...... $ 4,575,000
Options and warrants................. 51,000
Accrued reserves..................... 39,000
Research costs....................... 901,000
Accumulated depreciation (97,000)
Other................................ 16,000
-----------
5,485,000
Less valuation allowance............. (5,485,000)
-----------
$ --
===========
</TABLE>
Deferred taxes arise from temporary differences in the recognition of certain
expenses for tax and financial statement purposes. At December 31, 1999,
management determined that realization of these benefits is not assured and has
provided a valuation allowance for the entire amount of such benefits. At
December 31, 1999, net operating loss carryforwards were approximately
$11,792,000 for federal tax purposes that expire at various dates from 2009
through 2013 and $10,208,000 for state tax purposes that expire in 2003.
Utilization of net operating loss carryforwards may be subject to substantial
annual limitations due to the "change in ownership" provisions of the internal
revenue code and similar state regulations. The annual limitation may result in
expiration of net operating loss carryforwards before utilization.
NOTE K--FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments approximated carrying
value at December 31, 1999. The Company's financial instruments include cash and
accounts receivable for which the carrying amount approximates fair value due to
the short maturity of the instruments. The carrying amount of debt approximates
fair value as the majority of the debt was recently borrowed at rates, or
imputed at rates, currently available to the Company for similar debt.
42
<PAGE>
NOTE L--SUPPLEMENTAL CASH FLOW INFORMATION AND NONCASH FINANCING ACTIVITIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1999 1998
----------- ------------
<S> <C> <C>
Supplemental cash flow information:
Cash paid for income taxes...................... $ 1,600 $ 2,500
Cash paid for interest expense.................. $ 3,600 $ 3,200
Non cash investing and financing activities:
Issuance (rescission) of common stock for note
receivable.................................... $ -- $ (4,000,000)
Conversion of debt into equity.................. $ 4,945,561 $ --
Reclassification of redeemable common stock..... $ -- $ 1,550,000
Amortization/issuance of common stock for
prepaid interest on debt financing............ $ 323,593 $ 647,186
Amortization/issuance of warrants for debt
issuance costs................................ $ 696,299 $ 1,392,597
Issuance of common stock and warrants for
services...................................... $ 1,593,247 $ --
Issuance of warrants in conjunction with bridge
loan.......................................... $ 58,500 $ --
Issuance of stock options to employees.......... $ 103,950 $ --
</TABLE>
43
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On August 17, 1999, the Company dismissed PricewaterhouseCoopers LLP ("PwC") as
its independent accountants. The decision to dismiss PwC was approved by the
Company's Board of Directors. PwC's reports on the Company's financial
statements for each of the past two years did not contain an adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope, or accounting principle except the reports for each of the past two
years expressed substantial doubt about the Company's ability to continue as a
going concern.
On September 17, 1999, Grant Thornton LLP ("Grant Thornton") was engaged by the
Company as its principal accountant to audit the Company's financial statements.
The Company did not consult Grant Thornton regarding the application of
accounting principles to a specific contemplated transaction, or the type of
audit opinion that might be rendered on the Company's financial statements, or
on any matter that was the subject of a disagreement with PwC, the Company's
former accountants, who were dismissed on August 17, 1999.
Effective January 1, 2000, Grant Thornton sold its Stockton and Sacramento,
California offices to Moss Adams, LLP, an accounting and consulting firm ("Moss
Adams"). Since the individuals performing services for the Company at Grant
Thornton are now in the employ of Moss Adams, effective January 1, 2000, the
Company dismissed Grant Thornton as its independent accountants and engaged the
services of Moss Adams to act as the Company's principal accountants to audit
the Company's financial statements. The decision to dismiss Grant Thornton and
retain the services of Moss Adams was approved by the Company's board of
directors. Grant Thornton had not completed the audit of the Company's
December 31, 1999 financial statements and therefore had not issued a report on
the Company's financial statements.
During the Company's two most recent fiscal years and through January 1, 2000,
there have been no disagreements with Grant Thornton or PwC, the Company's
previous accountants, on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which, if not
resolved to the satisfaction of Grant Thornton or PwC, would have caused them to
make reference thereto in their report on the financial statements for such
years. In addition, the Company did not consult Moss Adams regarding the
application of accounting principles to a specific contemplated transaction, or
the type of audit opinion that might be rendered on the Company's financial
statements, or on any matter that was the subject of a disagreement with the
Company's former accountants.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------- -------- --------------------------------------------------------
<S> <C> <C>
Daniel L. McPeak, Sr. 65 Class III Director, CEO, and Chairman of the Board
Patricia McPeak 59 President and Class III Director
Kirit S. Kamdar 58 Class I Director
Steven W. Saunders 44 Class I Director
Joseph R. Bellantoni 38 Class II Director
Milton A. Koffman 76 Class II Director
Todd C. Crow 51 Vice President Finance & Chief Financial Officer
Ike E. Lynch 55 Vice President of Operations
Daniel L. McPeak, Jr. 40 Vice President and General Manager
Dr. Rukmini Cheruvanky 66 Director of Research and Development
Dr. Reddy Sastry V.
Cherukuri 63 Director of Science and Technology
</TABLE>
44
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
DANIEL L. MCPEAK. Mr. McPeak co-founded the Company in February 1989 and has
served as chairman of the Board of the Company since its formation. In November
1998, Mr. McPeak was re-appointed Chief Executive Officer ("CEO") of the
Company. Mr. McPeak previously served as CEO of the Company from May 1989 to
April 1997. Mr. McPeak is the spouse of Ms. McPeak. Mr. McPeak will serve as a
Class III Director until the election of Directors in 2001.
PATRICIA MCPEAK. Ms. McPeak co-founded the Company in February 1989 and has
served as President and Director of the Company since its formation. From
February 1989 to January 1996, Ms. McPeak also served as Secretary of the
Company. Ms. McPeak is the spouse of Mr. McPeak. Ms. McPeak will serve as a
Class III Director until the election of Directors in 2001.
KIRIT S. KAMDAR. Mr. Kamdar has served as a Class I Director of the Company
since August 1998 and will serve until the next election of Directors in 2002.
From January 1990 to September 1992, Mr. Kamdar also served as Director of the
Company, and from January 1990 to April 1994 as the Company's Executive Vice
President. Since July 1974, Mr. Kamdar has been Chairman of the Board and Chief
Executive Officer of Kamflex Corporation, a manufacturing corporation.
Mr. Kamdar received his B.A. degree in Mechanical Engineering from the
University of Bombay and his Master's Degree in Industrial Engineering and
Management from Oklahoma State University.
STEVEN W. SAUNDERS. Mr. Saunders has served as a Class I Director of the Company
since August 1998 and will serve until the next election of Directors in 2002.
Mr. Saunders has been President of Saunders Construction, Inc., a commercial
construction firm since February 7, 1991 and President of Warwick Corporation, a
business-consulting firm.
JOSEPH R. BELLANTONI. Mr. Bellantoni has served as a Class II Director of the
Company since May 1999 and will serve until the election of Directors in 2000.
Mr. Bellantoni has tendered his resignation to be effective upon the Company's
payment of the $1,850,000 promissory note to FoodCeuticals, LLC. From April 1995
to the present, Mr. Bellantoni has served as a Director of Dominion
Resources, Inc., a real estate and resort development company. From April 1995
to December 1998 he served as Treasurer of Dominion and from January 1999 to the
present has served as its Treasurer and President. From February 1989 to
January 1993 Mr. Bellantoni served as a manager of Great American Recreation,
Inc., an operator of ski resorts. From January 1993 to June 1994, he served as
the Vice President of Administration of Great American, from June 1994 to
October 1996 he served as its Chief Financial Officer and from October 1995 to
the present, Mr. Bellantoni has served as a Director. From November 1994 to the
present, Mr. Bellantoni has served as the Chief Financial Officer of Great Gorge
Golf Reserve, an owner, operator and developer of golf courses.
MILTON A. KOFFMAN. Mr. Koffman has served as a Class II Director of the Company
since October 1999 and will serve until the election of Directors in 2000.
Mr. Koffman has tendered his resignation to be effective upon the Company's
payment of the $1,850,000 promissory note to FoodCeuticals, LLC. Mr. Koffman has
been Chairman of the Board of New Value Inc. since 1990. Previously, from 1970
to 1990, he served as Executive Vice President of Great American Industries, a
manufacturer of rubber products. Prior to this, he served as Vice President of
Public Loan Company, Inc., a small loan business company from 1963 to present.
Mr. Koffman was also Managing Partner for a group of Real Estate Partnerships.
Mr. Koffman has served as Vice Chairman of IEC, a manufacturer of electronic
parts from 1985 to 1991. In addition, he was Chairman of Jayark Corporation from
1972 to 1992. Mr. Koffman has been on the Board of Director's for Sattlers
Department Store, Walter Reade Theatres, Scoreboard, Inc. and Chenango
Industries.
TODD C. CROW. Mr. Crow joined the Company in May 1996 and has been the Company's
Vice President of Finance and Chief Financial Officer since November 1998 and
its Secretary since January 1999. From September 1997 to November 1998,
Mr. Crow was the Company's Controller. From May 1996 to
45
<PAGE>
September 1997 he was the Company's Chief Financial Officer. Mr. Crow also
served as a Director of the Company from June 1996 to January 1997. From 1989
until joining The RiceX Company, Mr. Crow held senior financial positions with
the Morning Star Group, an agri-business holding company, and Harter, Inc., a
food-processing manufacturer.
IKE E. LYNCH. Mr. Lynch has served as Vice President of Operations of the
Company since July 1997 and as President and Chief Operations Officer of FoodEx
MT since January 1997. Previously Mr. Lynch was President and Chief Executive
Officer of Centennial Foods, Inc., since its founding in 1989 until its
acquisition by the Company in January 1997.
DANIEL L. MCPEAK, JR. Mr. McPeak joined the Company in July 1996 and has been
the Company's Vice President and General Manager since November 1998. From July
1996 to July 1997, he served as Director of Sales and Marketing, then moved to
the position of Business Manager until November 1998. From 1994 until joining
the Company, Mr. McPeak served as Vice President of Marketing for Fort Knox,
Inc., a security products manufacturer. Daniel L. McPeak, Jr. is the son of
Daniel L. McPeak, Sr.
SIGNIFICANT EMPLOYEES
DR. RUKMINI CHERUVANKY. Dr. Cheruvanky has served as the Company's Director of
Research and Development since April 1996. From January 1996 until joining the
Company, Dr. Cheruvanky was the Laboratory Supervisor for Certified Analytical
Laboratories, a company that specializes in food analysis. From November 1994 to
December 1995, Dr. Cheruvanky was Research Chemist in the Research and
Development Department of DuPont Merck Pharmaceutical Company. From May 1967 to
February 1994, Dr. Cheruvanky was Deputy Director of the National Institute of
Nutrition, the Indian Council of Medical Research. Dr. Cheruvanky has an M.S.
degree in Organic Chemistry and a Ph.D. degree in Organic Chemistry of Natural
Products from Andhra University in India.
DR. REDDY SASTRY V. CHERUKURI. Dr. Cherukuri has served as the Company's
Director of Science and Technology since April 1996. From May 1995 until joining
the Company, Dr. Cherukuri served as Laboratory Supervisor of Customs Coatings,
Inc., a research pharmaceutical company. From December 1994 to January 1995,
Dr. Cherukuri was Chemist for DuPont Merck Pharmaceutical Company. From
May 1992 to November 1994, Dr. Cherukuri was Consultant to the Indian Council of
Medical Research. From January 1967 to May 1992, Dr. Cherukuri served as Senior
Research Manager, Chief of Medicinal Chemistry and Group Leader of New Drug
Development for Indian Drugs and Pharmaceutical, Ltd., a synthetic drugs
research and development company. Dr. Cherukuri has a M.S. degree in Organic
Chemistry and a Ph.D. degree in Organic Chemistry of Synthetic and Natural
Products from Andhra University in India.
BOARD OF DIRECTORS
The Board of Directors is classified into three classes, hereby designated Class
I, Class II and Class III. The term of office of the initial Class I Directors
shall expire at the first regularly scheduled meeting of the stockholders
following the effective date of the Certificate of Incorporation (August 4,
1998); the term of office of the initial Class II Directors shall expire at the
second annual meeting of the stockholders following the Effective Date and the
term of the initial Class III Directors shall expire at the third annual meeting
of the stockholders following the effective date. The classification of the
Board of Directors has the effect of generally requiring at least two annual
stockholder meetings, instead of one, to replace a majority of the members of
the Board of Directors.
SECTION 16(A) COMPLIANCE
Based upon a review of the Company's records, the Company is aware that the
following officers or directors of the Company failed to timely file one or more
reports disclosing beneficial ownership of securities of the Company as required
under Section 16(a) of the Securities Exchange Act of 1934, as
46
<PAGE>
amended, during the fiscal year ended December 31, 1999: each of Ike E. Lynch,
Daniel McPeak, Sr. and Patricia McPeak failed to timely file Forms 3 reporting
their initial statement of beneficial ownership of securities upon the Company
registering its Common Stock with the Securities and Exchange Commission under
the Securities Exchange Act of 1934 in July 1998; Todd C. Crow failed to timely
file a Form 3 reporting his initial statement of beneficial ownership of
securities upon Mr. Crow becoming Vice President of Finance and the Company's
Chief Financial Officer in November 1998. Daniel McPeak, Jr. failed to timely
file a Form 3 reporting his initial statement of beneficial ownership of
securities upon Mr. McPeak becoming Executive Vice President and General Manager
in November 1998; Daniel McPeak, Sr. and Patricia McPeak failed to timely file
Forms 4 reporting gifts of stock to Patricia McPeak's mother, The Church of
Jesus Christ of Latter Day Saints and one other individual in 1999; and Ike
Lynch, Todd Crow and Daniel McPeak, Jr. failed to timely file Forms 4 reporting
the acquisition of 500,000 shares of common stock each pursuant to options
granted by the Company, and the issuance of options to each of them to acquire
900,000 shares of common stock pursuant to the Company's 1997 Employee Stock
Option Plan.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the total compensation for the Chief Executive
Officer and each of the Company's current executive officers and two former
officers whose total salary and bonuses for fiscal 1998 and 1999 exceeded
$100,000 or would have exceeded $100,000 on an annualized basis (collectively,
the "Named Executive Officers").
47
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- ----------------------------
AWARDS
SECURITIES
UNDERLYING
OTHER ANNUAL OPTIONS/SARS ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY COMPENSATION (#) COMPENSATION
- ------------------------- -------- -------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Daniel L. McPeak, Sr.(1)............ 1999 $149,126 $16,251(5)
Chairman of the Board, 1998 $148,861 (2)
Chief Executive Officer 1997 $141,798 $26,409(5) 50,000
Patricia McPeak..................... 1999 $129,339 (2)
President 1998 $129,342 $18,282(6)
1997 $127,135 $13,372(6) 50,000
Ike E. Lynch........................ 1999 $124,592 (2) 900,000
V.P. Operations and 1998 $137,500 $25,200(8) 140,000
Chief Operating Officer of 1997 $131,253 $47,700(8) 60,000
Food Extrusion Montana
Todd C. Crow(3)..................... 1999 $ 98,884 (2) 900,000
Chief Financial Officer 1998 $ 79,638 (2)
1997 $ 76,913 (2)
Daniel L. McPeak, Jr.(4)............ 1999 $ 98,940 $ 9,900(13) 900,000
Executive V.P./General Manager 1998 $ 71,892 $ 7,200(13)
1997 $ 71,145 $ 7,200(13)
Allen J. Simon (Terminated)(1)...... 1999 $ 20,833(12)
1998 $221,534 $38,471(7) $236,522(11)
1997 $177,370 $28,760(7) 2,050,000(10)
Karen Berriman (Terminated)(3)...... 1999 $ 12,500(12)
1998 $132,693 (2) $ 31,837(11)
1997 $ 43,189 (2) 200,000(10)
Dennis C. Riddle (Terminated)(4).... 1999 $ 14,583(12)
1998 $154,746 $52,185(9)
1997 $ 30,147 (2) 350,000(10)
</TABLE>
- ------------------------
(1) Mr. McPeak was Chief Executive Officer from January 1996 to April 1997 and
from November 18, 1998 to present. Mr. Simon provided services as CEO from
April 1997 to November 18, 1998 and resigned from the office of CEO
effective December 13, 1998 in accordance with his severance agreement. See
"Certain Relationships and Related Transactions."
(2) Other Annual Compensation is less than 10% of Salary.
(3) Mr. Crow was Chief Financial Officer from May 1996 to September 1997 and
from November 1998 to present. Ms. Berriman served as Chief Financial
Officer from September 1997 to December 1998.
(4) Mr. McPeak, Jr. was Vice President of Sales and Marketing from July 1996 to
October 1997 and from November 1998 to present its Executive Vice President,
General Manager. Mr. Riddle served as Vice President of Sales and Marketing
from October 1997 to December 1998.
48
<PAGE>
(5) In 1999, represents auto expenses, in 1997 represents automobile expenses of
$21,787 and other prerequisites.
(6) Represents automobile allowance of $12,000 in 1998 and automobile expenses
of $9,019 in 1997 and other prerequisites paid on behalf of the executives.
(7) Represents automobile allowance of $12,600, temporary housing allowance of
$24,381 and other prerequisites in 1998; automobile allowance of $10,200,
temporary living allowance of $18,052 and other prerequisites in 1997.
(8) Represents allowances for temporary living of $18,000 and automobile of
$7,200 in 1998; and value realized upon the exercise of stock options of
$30,000, automobile allowance of $7,200 and temporary housing allowance of
$10,500 in 1997.
(9) Represents allowances for relocation $30,000, temporary housing $8,862,
automobile $12,500 and other prerequisites.
(10) Represents options granted that were replaced and re-priced in
September 1998, eventually cancelled in December 1998 and warrants issued in
accordance with severance agreements. See "Certain Relationships and Related
Transactions."
(11) Represents severance payments and accrued vacation pay: A. Simon $210,417
severance, $26,105 accrued vacation; K. Berriman $25,000 severance, $6,837
accrued vacation pay.
(12) Represents one-month payroll for period prior to severance (November 14 to
December 14, 1998) paid in 1999. See "Certain Relationships and Related
Transactions."
(13) Represents automobile allowances and expenses.
OPTION GRANTS IN 1999 TO EXECUTIVES
The following table sets forth for each of the Named Executive Officers certain
information concerning stock options granted during 1999.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE MARKET
OPTIONS/SARS EMPLOYEES IN PRICE PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SH) ($/SH) DATE
- ---- ------------ ---------------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Ike E. Lynch............................. 900,000(1) 3.18% $0.72 $0.79 11/1/09
Daniel L. McPeak, Jr..................... 900,000(1) 3.18% $0.72 $0.79 11/1/09
Todd C. Crow............................. 900,000(1) 3.18% $0.72 $0.79 11/1/09
</TABLE>
- ------------------------
(1) Options were granted on November 1, 1999, 500,000 shares were fully vested
and immediately exercisable at $0.72 per share. The remaining 400,000 shares
will be fully vested and exercisable at $0.72 on May 1, 2000. Market price
of underlying securities on the date of grant, $0.79 per share.
49
<PAGE>
STOCK OPTION EXERCISES AND YEAR-END VALUE TABLE
The table below reflects the number of shares covered by both exercisable and
non-exercisable stock options as of December 31, 1999 for the Named Executive
Officers. Values for "in-the-money" options represent the position spread
between the exercise price of existing options and the market value for the
Company's common stock on December 31, 1999.
<TABLE>
<CAPTION>
VALUE OF
NO. OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE --------------------------- ---------------------------
EXERCISED(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ike E. Lynch............... 500,000 35,000 140,000 400,000 (1) 48,000
Daniel L. McPeak, Jr....... 500,000 35,000 60,000 400,000 (1) 48,000
Todd C. Crow............... 500,000 35,000 110,000 400,000 (1) 48,000
</TABLE>
- ------------------------
(1) The fair market value of the common stock subject to options as of
December 31, 1999 ($.84 per share) was less than the exercise price of such
options.
REPRICED OPTIONS
In September 1998, in conjunction with the private placement of 1,000,000 shares
of the Company's common stock, the Company's Chief Executive Officer ("CEO"), at
the request of the new investor, rescinded his 1997 exercise of a 1997 option to
acquire 2,000,000 shares of the Company's common stock in exchange for a
$4,000,000 note payable to the Company.
Coincidental with the private placement and related rescission, the Company's
Board of Directors cancelled the options granted in 1997 to the CEO, four
executive officers and two directors to acquire an aggregate of 2,950,000 shares
of the Company's common stock at exercise prices ranging from $2.00 to $4.88 per
share and re-granted new options to purchase the same number of shares to these
individuals at an exercise price of $1.81 per share, the fair market value of
the shares at the date the new options were granted (See Note I of Notes to
Consolidated Financial Statements and Item 12. Certain Relationships and Related
Transactions).
DIRECTOR COMPENSATION
On July 9, 1997, the Board of Directors adopted a non-employee director
compensation plan pursuant to which non-employee directors are compensated as
follows: (i) $15,000 annual retainer payable in quarterly installments for
participation at up to six meetings of the Board of Directors; (ii) an
immediately exercisable, nonqualified stock option to purchase 50,000 shares of
common stock to be granted upon appointment to the Board of Directors, and (iii)
an immediately exercisable, nonqualified stock option to purchase 15,000 shares
of common stock to be granted on the day of each annual shareholders' meeting
during the non-employee director's service on the Board of Directors. Such
options are to be granted as free-standing options and not under the 1997 Stock
Option Plan. The exercise price shall be the fair market value of a share of
common stock on the date of grant. On April 27, 1999, the Board voted to
temporarily suspend the grant of options with payment of retainer to the Board
of Directors. Directors are also reimbursed for reasonable expenses incurred in
attending meetings of the Board of Directors and committees thereof.
EMPLOYMENT AGREEMENTS
MCPEAK EMPLOYMENT AGREEMENT. The Company entered into an Employment Agreement
with Mr. McPeak in April 1997 (the "McPeak Employment Agreement"), pursuant to
which Mr. McPeak agreed to serve as Chairman of the Board of Directors of the
Company and previously served as Chief
50
<PAGE>
Executive Officer. The McPeak Employment Agreement provides that Mr. McPeak will
receive an annual base salary of $150,000 which will be increased to $200,000
upon the Company's realization of positive cash flow on a month-to-month basis.
The McPeak Employment Agreement terminates on December 31, 2001, unless his
employment is terminated earlier. Thereafter, the term will be automatically
extended for additional one-year periods unless either party delivers notice of
election not to extend the employment at least 60 days prior to the end of the
then current term. Mr. McPeak's employment may be terminated prior to the
expiration of this agreement under the following circumstances: (i) death;
(ii) termination by the Company for Cause (as defined in the McPeak Employment
Agreement); (iii) termination by the Company without Cause (as defined in the
McPeak Employment Agreement). If Mr. McPeak is terminated without Cause, he is
entitled to the base salary in effect at such time for the remainder of the term
of the McPeak Employment Agreement. Within three months of first receiving
notice of a Change in Control (as defined in the McPeak Employment Agreement)
Mr. McPeak may elect to retire from service and render, on a non-exclusive
basis, only such consulting and advisory services to the Company as he may
reasonably accept and he is entitled to continue receiving his benefits and
salary until the later of (i) six months after the date of such election,
(ii) subsequent full-time employment with another enterprise, or (iii) the
expiration of the term of the McPeak Employment Agreement.
MS. MCPEAK EMPLOYMENT AGREEMENT. The Company entered into an Employment
Agreement with Ms. McPeak in April 1997 (the "Ms. McPeak Employment Agreement"),
pursuant to which Ms. McPeak agreed to serve as President of the Company. The
Ms. McPeak Employment Agreement provides that Ms. McPeak will receive an annual
base salary of $130,000 which will be increased to $150,000 upon the Company's
realization of positive cash flow on a month-to-month basis. The Ms. McPeak
Employment Agreement terminates on December 31, 2001, unless her employment is
terminated earlier. Thereafter, the term will be automatically extended for
additional one-year periods unless either party delivers notice of election not
to extend the employment at least 60 days prior to the end of the then current
term. Ms. McPeak's employment may be terminated prior to the expiration of the
agreement under the following circumstances: (i) death; (ii) termination by the
Company for Cause (as defined in the Ms. McPeak Employment Agreement); (iii)
termination by the Company without Cause (as defined in the Ms. McPeak
Employment Agreement). If Ms. McPeak is terminated without Cause, she is
entitled to the base salary in effect at such time for the remainder of the term
of the Ms. McPeak Employment Agreement. Within three months of first receiving
notice of a Change in Control (as defined in the Ms. McPeak Employment
Agreement) Ms. McPeak may elect to retire from service and render, on a
non-exclusive basis, only such consulting and advisory services to the Company
as she may reasonably accept and she is entitled to continue receiving her
benefits and salary until the later of (i) six months after the date of such
election, (ii) subsequent full-time employment with another enterprise, or (iii)
the expiration of the term of the Ms. McPeak Employment Agreement.
LYNCH EMPLOYMENT AGREEMENT. In May 1999, the Company entered into an Employment
Agreement with Mr. Ike E. Lynch (the "Lynch Employment Agreement"), pursuant to
which Mr. Lynch agreed to serve as Vice President of Operations for the Company
and Chief Operating Officer for the Company's subsidiary, Food Extrusion
Montana. The Lynch Employment Agreement provides that Mr. Lynch will receive an
annual base salary of $125,000, which will be increased to $135,000 on May 1,
2000, then reviewed annually. The Lynch Employment Agreement terminates on May
1, 2004, unless his employment is terminated earlier. Thereafter, the term will
be automatically extended for an additional five year term unless either party
delivers notice of election not to extend the employment at least 90 days prior
to the expiration of the initial term. Mr. Lynch's employment may be terminated
prior to the expiration of the agreement under the following circumstances: (i)
the mutual written agreement of the Company and Mr. Lynch; (ii) Mr. Lynch's
disability, which shall, for the purposes of the Lynch Employment Agreement,
mean Mr. Lynch's inability due to physical or mental impairment, to perform
Mr. Lynch's duties and obligations under the Lynch Employment Agreement, despite
reasonable accommodation by the Company, for a period exceeding three months;
(iii) Mr. Lynch's death; (iv) notice of termination by the Company for cause (as
defined in the Lynch Employment Agreement); or (v) written
51
<PAGE>
notice of termination by the Company without cause upon fourteen (14) days
notice, subject to the compensation for early termination. If Mr. Lynch is
terminated without cause, the Company shall pay to Mr. Lynch as liquidated
damages and in lieu of any and all other claims which Mr. Lynch may have against
the Company the amount equal to Mr. Lynch's monthly base salary multiplied by
the number of months remaining in the term of this Agreement, or payment amount
equal to two years of Mr. Lynch's base salary, whichever is greater.
CROW EMPLOYMENT AGREEMENT. In May 1999, the Company entered into an Employment
Agreement with Mr. Todd Crow (the "Crow Employment Agreement"), pursuant to
which Mr. Crow agreed to serve as Chief Financial Officer of the Company. The
Crow Employment Agreement provides that Mr. Crow will receive an annual base
salary of $125,000, which will be increased to $135,000 on May 1, 2000, then
reviewed annually. The Crow Employment Agreement terminates on May 1, 2004,
unless his employment is terminated earlier. Thereafter, the term will be
automatically extended for an additional five year term unless either party
delivers notice of election not to extend the employment at least 90 days prior
to the expiration of the initial term. Mr. Crow's employment may be terminated
prior to the expiration of the agreement under the following circumstances: (i)
the mutual written agreement of the Company and Mr. Crow; (ii) Mr. Crow's
disability, which shall, for the purposes of the Crow Employment Agreement, mean
Mr. Crow's inability due to physical or mental impairment, to perform
Mr. Crow's duties and obligations under the Crow Employment Agreement, despite
reasonable accommodation by the Company, for a period exceeding three months;
(iii) Mr. Crow's death; (iv) notice of termination by the Company for cause (as
defined in the Crow Employment Agreement); or (v) written notice of termination
by the Company without cause upon fourteen (14) days notice, subject to the
compensation for early termination. If Mr. Crow is terminated without cause, the
Company shall pay to Mr. Crow as liquidated damages and in lieu of any and all
other claims which Mr. Crow may have against the Company the amount equal to
Mr. Crow's monthly base salary multiplied by the number of months remaining in
the term of this Agreement, or payment amount equal to two years of Mr. Crow's
base salary, whichever is greater.
MCPEAK, JR. EMPLOYMENT AGREEMENT. In May 1999, the Company entered into an
Employment Agreement with Mr. McPeak (the "McPeak, Jr. Employment Agreement"),
pursuant to which Mr. McPeak agreed to serve as Executive Vice President and
General Manager for the Company. The McPeak, Jr. Employment Agreement provides
that Mr. McPeak will receive an annual base salary of $125,000 which will be
increased to $135,000 on May 1, 2000, then reviewed annually. The McPeak, Jr.
Employment Agreement terminates on May 1, 2004, unless his employment is
terminated earlier. Thereafter, the term will be automatically extended for an
additional five year term unless either party delivers notice of election not to
extend the employment at least 90 days prior to the expiration of the initial
term. Mr. McPeak's employment may be terminated prior to the expiration of the
agreement under the following circumstances: (i) the mutual written agreement of
the Company and Mr. McPeak; (ii) Mr. McPeak's disability, which shall, for the
purposes of the McPeak, Jr. Employment Agreement, mean Mr. McPeak's inability
due to physical or mental impairment, to perform Mr. McPeak's duties and
obligations under the McPeak Jr. Employment Agreement, despite reasonable
accommodation by the Company, for a period exceeding three months;
(iii) Mr. McPeak's death; (iv) notice of termination by the Company for cause
(as defined in the McPeak, Jr. Employment Agreement); or (v) written notice of
termination by the Company without cause upon fourteen (14) days notice, subject
to the compensation for early termination. If Mr. McPeak is terminated without
cause, the Company shall pay to Mr. McPeak as liquidated damages and in lieu of
any and all other claims which Mr. McPeak may have against the Company the
amount equal to Mr. McPeak's monthly base salary multiplied by the number of
months remaining in the term of this Agreement, or payment amount equal to two
years of Mr. McPeak's base salary, whichever is greater.
52
<PAGE>
1997 STOCK OPTION PLAN
The Board of Directors adopted the 1997 Stock Option Plan (the "1997 Plan") in
November 1997 and the shareholders approved the 1997 Plan in May 1998. A total
of 5,000,000 shares have been authorized for issuance under the 1997 Plan, of
which 2,031,000 shares are available for future grant as of December 31, 1999.
The 1997 Plan provides for the grant of "incentive stock options" as defined in
Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"), to
employees of the Company. The 1997 Plan also provides for the grant of options
that are not intended to qualify as incentive stock options under Section 422A
of the Code to employees, non-employee directors and consultants of the Company.
The exercise price of any incentive stock option granted under the 1997 Plan may
not be less than 100% of the fair market value of the Company's common stock on
the date of grant and of any nonqualified stock option 85% of fair market value
and 110% of fair market value in the case of a participant owning stock
possessing more than 10% of the voting rights of the Company's outstanding
capital stock. Shares subject to an option granted under the 1997 Plan may be
purchased for cash, in exchange for shares of common stock owned by the
optionee, or other consideration as set forth in the 1997 Plan. The 1997 Plan is
administered by the Board of Directors. Under the 1997 Plan, options vest not
less than 20% per year and have ten year terms (except with respect to 10%
stockholders which have five-year terms). If the Company sells substantially all
of its assets, is a party to a merger or consolidation in which it is not the
surviving corporation (a "Change of Control"), then the Company has the right to
accelerate unvested options and shall give the option holder written notice of
the exercisability and specify a time period in which the option may be
exercised. All options shall terminate in their entirety to the extent not
exercised on or prior to the date specified in the written notice unless the
agreement governing the Change of Control shall provide otherwise.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 1, 2000 (the
"Reference Date") with respect to the beneficial ownership of common stock of
the Company, by each person known by the Company to own beneficially more than
five percent of the Company's common stock, by each executive officer and
director, and by all officers and directors as a group. Unless otherwise
indicated, all persons have sole voting and investment powers over such shares,
subject to community property laws. As of the Reference Date, there were
36,525,787 shares of common stock outstanding.
<TABLE>
<CAPTION>
AMOUNT & NATURE PERCENT
NAME(1) OF BENEFICIAL OWNER(2) OF CLASS
- ------- ---------------------- --------
<S> <C> <C>
Monsanto
800 N. Lindbergh, St. Louis, MO 63167.................... 7,167,479 15.34%
Daniel L. McPeak, Sr., Chairman of the Board and Patricia
McPeak, President and Director......................... 3,574,095(3) 7.65%
Heldomo, A.G.
12, Baarer Strasse, 6300 Zug, Switzerland................ 3,181,818 6.81%
Kirit Kamdar, Director................................... 1,801,250(4)
Steven W. Saunders, Director............................. 857,000(4)
Joseph R. Bellantoni, Director........................... 250,000(5)
Milton A. Koffman, Director.............................. --
Todd C. Crow, Chief Financial Officer.................... 1,010,000(4)
Ike E. Lynch, V.P. Operations............................ 1,296,054(4)
Daniel L. McPeak, Jr., V.P. General Manager.............. 971,500(4)
All directors and executive officers, as a group (9
persons)............................................... 9,761,099 20.89%
</TABLE>
53
<PAGE>
- ------------------------
(1) Except as otherwise noted, the address for each person is c/o The RiceX
Company, 1241 Hawk's Flight Court, El Dorado Hills, California 95762.
(2) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
common stock listed as beneficially owned by them. A person is deemed to be
the beneficial holder of securities that can be acquired by such person
within 60 days from the Reference Date upon the exercise of warrants or
options. Each beneficial owner's percentage ownership is determined by
including shares, underlying options or warrants which are exercisable by
such person currently, or within 60 days following the Reference Date, and
excluding shares underlying options and warrants held by any other person.
(3) Ownership shown jointly because Mr. McPeak and Ms. McPeak are married.
Includes 1,708,225 shares in Mr. McPeak's name and 1,665,870 shares in
Ms. McPeak's name and 200,000 held in a joint trust.
(4) Includes warrants and options for the purchase of common stock as follows:
Kirit S. Kamdar, 50,000; Steven W. Saunders, 50,000; Todd C. Crow, 510,000;
Ike E. Lynch, 540,000, also includes 14,409 shares of common stock held by
Mr. Lynch's wife to which Mr. Lynch disclaims beneficial ownership; Daniel
L. McPeak, Jr., 460,000.
(5) Includes shares held by Mr. Bellantoni's wife in the amount of 26,000 shares
of common stock to which Mr. Bellantoni disclaims beneficial ownership and a
warrant to purchase 200,000 shares of common stock of the Company that
FoodCeuticals, LLC transferred to Mr. Bellantoni in consideration of his
services performed in connection with the loan from FoodCeuticals to the
Company. The warrant is currently exercisable.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Kirit Kamdar has been a Director of the Company since August 5, 1998 and was
a Director of the Company from January 1990 to September 1992. From January 1990
to April 1994, Mr. Kamdar served as the Company's Executive Vice President.
Mr. Kamdar currently owns 1,801,250 shares of the Company's common stock or
5.95% Since July 1974, Mr. Kamdar has been Chairman of the Board and Chief
Executive Officer of Kamflex Corporation ("Kamflex"), a manufacturer of
extrusion and conveyor equipment. In 1997, Kamflex sold $83,990 worth of such
equipment to the Company pursuant to its standard commercial terms and prices.
Kamflex's sales volume to customers other than the Company is approximately $3.5
to $4 million per year. The Company did not purchase any equipment from Kamflex
in 1998 and 1999.
In July 1999, the Company issued 250,000 shares of common stock to a vendor in
lieu of $234,000 cash to guarantee direct supplies for three years.
In November 1999, the Company entered into a contract with a company to provide
investor relations for a period of one year. The Company issued
1,600,000 shares of common stock with a fair market value of $1,262,400.
Additionally, the Company issued warrants to purchase 1,000,000 shares of common
stock. In February 2000, the agreement was terminated and the Company expects to
receive at least 50 percent of the stock and warrants back.
In November 1999, the Company issued 1,500,000 shares of common stock to three
executives pursuant to the exercise of some of their stock options. These stock
options were issued in accordance with the Company's Employee Stock Option
program that was ratified by the Board of Directors in 1997.
In December 1999, Monsanto Corporation ("Monsanto") agreed to convert its note
from the Company with an outstanding principal balance of $5,000,000 into
7,167,479 shares of common stock and $54,441 cash. In February 1997, a 1996 loan
agreement ("Loan Agreement") with Monsanto pursuant to which it
54
<PAGE>
had advanced $5,000,000 to the Company, to be converted to common stock was
renegotiated. The renegotiated loan, due in November 1999, was non-interest
bearing and convertible into shares of the Company's common stock at the lower
of $5.00 per share, or the price per share the Company received in a sale of its
common stock in a financing of at least $1,000,000 occurring closest and prior
to a notice of intent to convert. The Company recorded a charge against
operations of $1,325,000 in 1997 for the beneficial conversion feature as a
result of the fair market value of the stock being greater than the conversion
rate on the scheduled dates the Company received the proceeds pursuant to the
Loan Agreement. As a result of this charge, the effective interest rate of the
loan is greater than the interest rate currently available to the Company for
similar debt; therefore no imputed interest has been calculated on this loan.
During 1999, the Company entered into negotiations with a company for the
granting of an exclusive license to sell RiceX products in the nutraceutical
market. Those discussions resulted in the execution of an agreement dated as of
November 1, 1999. As part of that transaction, Patricia McPeak, an officer and
director of the Company, intended leaving employment of the Company and become
an officer and shareholder of that new company. However, the constituent members
of the Company's contracting partner could not come to agreement on various
essential terms of their relationship, and as a result, the Company agreed to
terminate that agreement effective as of November 1, 1999, Patricia McPeak
agreed to terminate her relationship with that new company also effective
November 1, 1999. The Company has entered into a new agreement with certain
members of the original contracting party. Negotiations with that new entity
have not been concluded, but the Company may become a shareholder in that new
entity, and Patricia McPeak, an officer and director of the Company, may be
involved as a shareholder and executive officer in that new entity which will
contract with the Company.
In May 1997, the Company's Chief Executive Officer and a director (the "CEO")
exercised an option to purchase 2,000,000 shares of the Company's common stock
at an exercise price of $2.00 per share in exchange for promissory notes in the
aggregate principal amount of $4,000,000 that bore interest at a rate of 8% per
annum, were secured by the 2,000,000 shares of common stock purchased and were
due at the earlier of May 2002 or upon the sale of all or a portion of the
shares of common stock acquired upon exercise. The Company agreed to reimburse
the CEO the interest payable on the notes plus the related income tax effect of
such reimbursement. The CEO agreed to rescind the exercise of his option
concurrent with the successful closing of the Private Placement described above.
In September 1998, the CEO, as agreed, rescinded the exercise of his option in
exchange for the cancellation of his indebtedness to the Company related to the
exercise and the reinstitution of the options to purchase 2,000,000 shares of
the Company's common stock at an exercise price of $1.81 per share the fair
market value of the shares on the date of grant. The accrued interest income
related to the notes receivable and the associated accrued liability for the
associated reimbursements were written off to operations in the year ended
December 31, 1998 in connection with the rescission.
In addition, in September 1998, the Company's Board of Directors cancelled the
outstanding options to purchase an aggregate of 2,950,000 shares of common stock
with exercise prices ranging from $2.00 to $4.88 per share held by the CEO, four
of the Company's executive officers and two directors and replaced them with
options to purchase an aggregate of 2,950,000 shares of common stock at an
exercise price of $1.81 per share, the fair market value of the Company's common
stock on the date of grant.
In December 1998, the employment agreements of four officers were terminated. As
part of the severance agreements with three officers, all previously issued
options to purchase the Company's stock held by such officers were canceled and
the remaining officer's options expired. The unvested portion of the accrued
compensation relating to the options at the date of termination of $1,376,204
was forfeited by the officers. In conjunction with their terminations, three of
the officers were paid an aggregate of $260,417 and were issued warrants, which
expire in December 2000, to purchase an aggregate of 1,200,000 shares of the
Company's common stock at an exercise price of $1.00 per share as part of their
severance agreements.
The Company believes that the transactions set forth above were made on terms no
less favorable to the Company than could have been obtained from unaffiliated
third parties. The Company intends that all future transactions, including
loans, between the Company and its officers, directors, principal stockholders
and their affiliates be approved by a majority of the Board of Directors,
including a majority of the independent and disinterested outside directors on
the Board of Directors, and be on terms no less favorable to the Company than
could be obtained from unaffiliated third parties.
55
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
INDEX TO EXHIBITS
(A) EXHIBIT NO DESCRIPTION OF EXHIBIT
2.1 Certificate of Incorporation of the Company. (1)
2.2 Form of Bylaws of the Company. (2)
3.1 Certificate of Incorporation of the Company. (1)
3.2 Form of Incorporation of the Company. (1)
4.1 Option Agreement between the Company and David B. Lockton dated August 1,
1996. (1)
4.2 Restricted Stock Purchase Agreement between the Company and Allen J. Simon
dated April 18, 1997 and amended on May 29, 1997. (1)(3)
4.3 Amendment No. 1 to Restricted Stock Purchase Agreement between the Company
and Allen J. Simon dated May 29, 1997. (1)(3)
4.4 Security Agreement between Allen J. Simon and the Company dated May 29,
1997. (1)(3)
4.5 Promissory Note Secured by Pledge of Stock for Allen J. Simon in favor of
the Company in the amount of $1,333,333.34 dated May 29, 1997. (1)(3)
4.6 Security Agreement between Allen J. Simon and the Company dated May 29,
1997. (1)(3)
4.7 Promissory Note Secured by Pledge of Stock for Allen J. Simon in favor of
the Company in the amount of $1,333,333.33 dated May 29, 1997. (1)(3)
4.8 Security Agreement between Allen J. Simon and the Company dated May 29,
1997. (1)(3)
4.9 Promissory Note Secured by Pledge of Stock for Allen J. Simon in favor of
the Company in the amount of $1,333,333.33 dated May 29, 1997. (1)(3)
4.10 Form of Rescission of Loan Agreement between the Company and Allen J.
Simon dated August 27, 1998. (2)(3)
4.11 Security Agreement between Food Extrusion, Inc. and Monsanto Company dated
November 1, 1996. (1)
4.12 Promissory Note of the Company in favor of Monsanto Company in the amount
of $5,000,000 dated November 1, 1996. (1)
4.13 Subscription Agreement between the Company and the Dorchester Group dated
January 1, 1996. (1)
4.14 Stock Option Agreement between the Company and Allen J. Simon dated
April 18, 1997. (1)(3)
4.15 Amendment No. 1 to Stock Option Agreement by and among the Company and
Allen J. Simon dated May 29, 1997. (1)(3)
4.16 Registration Rights Agreement by and between the Company and Allen J.
Simon dated April 18, 1997. (1)(3)
4.17 Registration Rights Agreement by and among the Company and Monsanto
Company dated February 5, 1997. (1)
4.18 Form of Registration Rights Agreement between the Company and certain
officers and directors. (1)
4.19 Form of Warrant Agreement between the Company and certain investors dated
February 9, 1996. (1)
56
<PAGE>
4.20 Letter Agreement between the Company and certain investors dated
January 15, 1999. (5)
4.21 Stock Purchase Agreement between the Company and Marilyn Roosevelt dated
July 16, 1997. (1)
4.22 Shareholders Agreement between CF Corporation (formerly Centennial
Foods, Inc.) and the Company dated March 19, 1997. (1)
4.23 Amendment No. 1 to the Shareholders Agreement between CF Corporation and
the Company dated January 15, 1999. (5)
4.24 Registration Rights Agreement between the Company and CF Corporation dated
January 22, 1999. (5)
4.25 1997 Stock Option Plan with (i) Form of Incentive Stock Option Agreement
and (ii) Form of Nonstatutory Stock Option Agreement. (1)(3)
4.26 Form of Directors Stock Option Agreement. (1)(3)
4.27 Directors Stock Option Agreement between the Company and Allen J. Simon
dated July 9, 1997. (1)(3)
4.28 Form of Nonstatutory Stock Option Agreement not issued under the 1997
Stock Option Plan, governing options granted to employees by the Company.
(1)(3)
4.29 Note Agreement between Monsanto Company and the Company dated October 31,
1996. (1)
4.30 Addendum No. 1 to Note Agreement dated October 31, 1996 between Monsanto
Company and the Company dated February 6, 1997. (1)
4.31 Creditor Agreement between Centennial Foods, Inc., the Company and Ike
Lynch dated October 14, 1996. (1)
4.32 Creditor Agreement between Centennial Foods, Inc., the Company and Montana
Department of Environmental Quality dated October 18, 1996. (1)
4.33 Assignment of Commercial Security Agreement and Business Loan and Credit
Agreement dated March 4, 1996 between Seattle-First National Bank and
Company 19 General Partnership. (1)
4.34 Assignment of Subordination Agreements and Negotiable Collateral between
Seattle-First National Bank and Company 19 General Partnership dated
March 4, 1996. (1)
4.35 Creditor Agreement between Centennial Foods, Inc. and Company 19 General
partnership dated October 14, 1996. (1)
4.36 Form of Subordination Agreement between certain creditors of Centennial
Foods, Inc. in favor of Seafirst. (1)
4.37 Creditor's Agreement between Centennial Foods and Montana Department of
Commerce dated October 11, 1996. (1)
4.38 Form of Creditor's Agreement between Centennial Foods, Inc. and certain
convertible note holders. (1)
4.39 Amended and Restated Loan Agreement between the Company and FoodCeuticals
dated as of December 31, 1998. (5)
4.40 Promissory Note in the amount of $1,850,000 payable to FoodCeuticals dated
December 31, 1998. (5)
4.41 Registration Rights Agreement between the Company and FoodCeuticals dated
December 31, 1998. (5)
57
<PAGE>
4.42 Warrant Agreement number 98-1 between the Company and FoodCeuticals dated
December 31, 1998. (5)
4.43 Warrant Agreement number 99-1 between the Company and FoodCeuticals dated
January 15, 1999. (5)
4.44 Security Agreement between the Company and FoodCeuticals dated
December 31, 1998. (5)
4.45 Form of Warrant Agreement between the Company and certain former officers
of the Company dated as of December 1998. (5)
4.46 Subscription Agreement between the Company and Heldomo, A.G. dated
September 10, 1998. (5)
4.47 Warrant Agreement between the Company and Heldomo, A.G. dated
September 10, 1998. (5)
4.48 Stockholder Agreement by and among The RiceX Company, Inc. and BioCeutics,
Inc. dated November 1, 1999.
4.49 Warrant Agreement between the Company and Dorchester Group dated
April 26, 1999.
4.50 Form of nonstatutory Stock Option Agreement between the Company and
employee dated October 1, 1999. (3)
4.51 Warrant Agreement between the Company and JDK & Associates dated
November 1, 1999.
4.52 Addendum No. 2 to the October 31, 1996 Monsanto Security Agreement dated
November 30, 1999.
4.53 Form of nonstatutory Stock Option Agreement between the Company and Vice
President, Operations, Ike Lynch dated November 1, 1999. (3)
4.54 Form of Subscription Agreement to the Private Placement Offering 1999.
4.55 Form of Warrant Agreement to the Private Placement Offering 1999.
10.1 Employment Agreement between Allen J. Simon and the Company dated
April 18, 1997. (1)(3)
10.2 Amendment to Employment Agreement between Allen J. Simon and the Company
dated May 29, 1997. (1)(3)
10.3 Employment Agreement between the Company and Karen D. Berriman dated
September 15, 1997. (1)(3)
10.4 Employment Agreement between the Company and Gary A. Miller dated
October 6, 1997. (1)(3)
10.5 Employment Agreement between the Company and Cherukuri Venkata Reddy
Sastry dated April 14, 1996. (1)(3)
10.6 Employment Agreement between the Company and Rukmini Cheruvanky dated
April 14, 1996. (1)(3)
10.7 Employment Agreement between the Company and Dennis Riddle dated
September 19, 1997. (1)(3)
10.8 Employment Agreement between the Company and Daniel McPeak dated April 1,
1997. (1)(3)
10.9 Employment Agreement between the Company and Patricia Mayhew dated
April 1, 1997. (1)(3)
10.10 Employment Agreement between the Food Extrusion Montana, Inc. and Ike E.
Lynch dated March 19, 1997. (1)(3)
10.11 Consulting Agreement between the Company and Robert H. Hesse dated
September 30, 1997. (1)(3)
58
<PAGE>
10.12 Form of Indemnification Agreement by and among the Company and certain
officers and directors. (1)(3)
10.13 Agreement between the Company and Wolcott Farms, Inc. dated March 1, 1997.
(1)*
10.14 Stabilized Rice Bran Processing, Sales and Marketing Agreement between
Farmers' Rice and the Company dated June 28, 1994. (1)*
10.15 Amendment dated April 16, 1996 to Stabilized Rice Bran Processing, Sales
and Marketing Agreement between Farmers' Rice Cooperative and the Company
dated June 28, 1994. (1)
10.16 Stabilized Rice Bran Processing, Sales and Marketing Agreement between
California Pacific Rice Milling, Ltd. and the Company dated August 1995.
(1)*
10.17 Agreement between the Company and Dry Creek Trading, Inc. dated
February 1, 1997. (1)
10.18 International Distribution Agreement between the Company and SunJoy
Cereal-Tech Development Ltd. dated June 16, 1997. (1)*
10.19 Agreement between the Company and SunJoy Enterprises Corporation dated
June 16, 1997. (1)
10.20 Non-binding Letter of Intent between Nutrilite Division of Amway
Corporation and the Company dated April 8, 1998. (1)
10.21 Letter Agreement between DuCoa, L.P. and the Company dated February 25,
1998. (1)*
10.22 Letter of Intent between Monsanto Company and Company dated March 16,
1998. (1)*
10.23 First Amendment to Letter Agreement between Monsanto Company and Company
dated July 27, 1998. (2)
10.24 Security Agreement between CF Corporation, Food Extrusion Montana, Inc.
and the Company dated March 19, 1997. (1)
10.25 Joint Development Agreement between Kellogg Company and the Company dated
May 15, 1998. (1)*
10.26 Promissory Note in favor of Dominion Resources, Inc. in the amount of
$1,750,000 dated July 30, 1996. (1)
10.27 Commercial Lease and Deposit Receipt between Roebbelen Land Company and
the Company dated December 23, 1991. (1)
10.28 First Amendment of Lease between Roebbelen Land Company and the Company
dated January 19, 1994. (1)
10.29 Second Amendment of Lease between Roebbelen Land Company and the Company
dated July 11, 1996. (1)
10.30 Third Amendment of Lease Agreement between Roebbelen Land Company and the
Company dated February 1, 1998. (1)
10.31 Lease Agreement between Roebbelen Land Company and the Company dated
July 11, 1996. (1)
10.32 First Amendment of Lease between Roebbelen Land Company and the Company
dated September 1996. (1)
10.33 Second Amendment of Lease Agreement between Roebbelen Land Company and the
Company dated February 1, 1998. (1)
10.34 Rental Agreement, Month to Month, between James W. Cameron, Jr. and the
Company dated December 22, 1997. (1)
59
<PAGE>
10.35 Plan and Agreement of Reorganization between Core Iris, Inc. and the
Company dated December 5, 1996. (1)
10.36 Asset Purchase Agreement between Centennial Foods, Inc., Food Extrusion
Montana, Inc. and the Company dated January 2, 1997. (1)
10.37 Form of Severance Agreement and Mutual Release of Claims dated as of
December 1998 between the Company and certain former officers of the
Company. (5)
10.38 BioCeutics License Agreement dated November 1, 1999. (3)
10.39 Form Employment Agreement between the Company and Daniel L. McPeak Jr.
date May 1, 1999. (3)
10.40 Intermark Partners, LLC Addendum to Letter of Intent to Invest, Agreement
in Principal dated November 16, 1999.
10.41 Intermark Partners, LLC Supplemental Agreement dated March 10, 2000.
10.42 Consulting Agreement between The RiceX Company, Inc. and JDK & Associates,
Inc. dated October 20, 1999. (3)
10.43 Termination of Consulting Agreement between The RiceX Company, Inc. and
JDK & Associates, Inc. dated February 17, 2000.
10.44 Stabilized Rice Bran Processing, Sales, and Marketing Agreement between
Farmers' Rice Cooperative and the Company dated May 1, 1999. * (3)
16.1 Letter from PricewaterhouseCoopers, LLP (formerly Coopers & Lybrand LLP)
dated July 28, 1998. (2)
16.2 On August 17, 1999, The RiceX Company dismissed PricewaterhouseCoopers,
LLP (formerly Coopers and Lybrand, LLP) dated July 28, 1998. (4)
16.3 On September 17, 1999, Grant Thornton, LLP was engaged by the Company as
its principal accountant to audit the Company's financial statements. (4)
16.4 Effective January 1, 2000, Grant Thornton, LLP, the independent
accountants for The RiceX Company, sold its Stockton and Sacramento,
California offices to Moss Adams, LLP, an accounting and consulting form.
Since the individuals performing services for the Company at Grant
Thornton are now in the employ of Moss Adams, effective January 01, 2000,
the Company dismissed Grant Thornton as its independent accountants and
engaged the services of Moss Adams to act as the Company's principal
accountants to audit the Company's financial statements. (4)
21 List of Subsidiaries
27 Financial Data Schedule
- ------------------------
(1) Previously filed as an exhibit to the Company's Registration Statement No.
000-24285 filed with the Commission on May 18, 1998.
(2) Previously filed as an exhibit to the Company's Amendment No. 2 to the
Registration Statement No. 000-24285 filed with the Commission on August 26,
1998.
(3) Represents a management contract or compensatory plan or arrangement.
(4) Previously filed as item (4) on Form 8-K dated August 26, 1999,
September 22, 1999, or January 7, 2000.
60
<PAGE>
(5) Previously filed as an exhibit to the Company's Form 10-KSB filed with the
Commission on April 15, 1999.
* Confidential treatment granted as to certain portions.
(B) REPORTS ON FORM 8-K
As reported on August 26, 1999, Change in Registrant's Certifying Accountant,
the Company dismissing its independent accountants.
As reported on September 22, 1999, Change in Registrant's Certifying Accountant,
the Company engaging new independent accountants.
As reported on January 7, 2000, Change in Registrant's Certifying Accountant,
the Company Dismissing and engaging new independent accountants. See Part II.
Item 8. -- "Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure."
61
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized:
<TABLE>
<S> <C> <C>
THE RICEX COMPANY
Date: March 30, 2000 By: /s/ Daniel L. McPeak
-----------------------------------------
Daniel L. McPeak
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Date: March 30, 2000 By: /s/ Todd C. Crow
-----------------------------------------
Todd C. Crow
VICE PRESIDENT, FINANCE AND
CHIEF FINANCIAL OFFICER
</TABLE>
In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
Date: March 30, 2000 By: /s/ Patricia McPeak
-----------------------------------------
Patricia McPeak
PRESIDENT AND DIRECTOR
Date: March 30, 2000 By: /s/ Kirit S. Kamdar
-----------------------------------------
Kirit S. Kamdar
DIRECTOR
Date: March 30, 2000 By: /s/ Steven W. Saunders
-----------------------------------------
Steven W. Saunders
DIRECTOR
</TABLE>
62
<PAGE>
EXHIBIT 4.48
STOCKHOLDER AGREEMENT
by and among
PATRICIA McPEAK,
THE RICEX COMPANY,
JOSEPH PAGANO,
EUGENE MULVIHILL
and
BIOCEUTICS, INC.
Dated as of
November 1, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. Restrictions on Transfers of Shares..............................................1
2. Pre-emptive Rights...............................................................3
3. Control Transfer ................................................................4
4. Tag Along Rights ................................................................5
5. Representation and Warranty of Stockholders......................................7
6. Noncompetition...................................................................7
8. Personal Guaranty ...............................................................8
9. RiceX Claims ....................................................................8
10. Definition of Shares.............................................................8
11. Specific Performance ............................................................8
12. Successors and Assigns ..........................................................8
13. Governing Law; Disputes .........................................................9
14. Counterparts and Facsimile Signatures ...........................................9
15. Titles and Subtitles ............................................................9
16. Notices .........................................................................9
17. Entire Agreement; Amendments and Waivers........................................11
18. Severability....................................................................11
19. Termination.....................................................................11
20. Rights of Third Parties.........................................................11
</TABLE>
<PAGE>
STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT is made as of the 1st day of November, 1999 by and
among PATRICIA McPEAK ("Patricia"), THE RICEX COMPANY ("RiceX" and, together
with Patricia, the "Mc/X Stockholders"), JOSEPH PAGANO ("Joe"), EUGENE
MULVIHILL ("Gene" and, together with Joe, the "P/M Stockholders") and
BIOCEUTICS, INC., a Delaware corporation ("Company").
WHEREAS, the Company was formed on August 6,1999 and thereafter issued an
aggregate of 1,000 shares of its common stock, $.01 par value ("Common
Stock"), to Patricia, RiceX, Joe and Gene (collectively, the "Stockholders")
for $1.00 per share, as follows:
<TABLE>
<CAPTION>
Stockholder Number of Share
<S> <C>
Joe 325
Gene 325
Patricia 250
RiceX 100
</TABLE>
WHEREAS, the Company and RiceX are simultaneously herewith entering into an
agreement pursuant to which the Company is being granted certain exclusive
purchase and distribution rights for RiceX's products ("License Agreement");
and
WHEREAS, the Company and Patricia are simultaneously herewith entering into
an employment agreement pursuant to which Patricia will be engaged as
President of the Company for a two-year term ("Employment Agreement") and an
Employee Confidentiality, Non-Competition and Assignment of Inventions
Agreement; and
WHEREAS, the Stockholders and the Company desire to set forth certain
agreements among them with respect to the transfer and control of the Common
Stock owned by them ("Shares");
NOW THEREFORE, in consideration of the premises and mutual agreements herein
and for other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto agree as follows:
1. RESTRICTIONS ON TRANSFERS OF SHARES.
(a) TRANSFER OF SHARES. The Mc/X Stockholders may not sell, transfer, assign,
pledge, donate, or otherwise encumber or dispose (a "Transfer") of any
interest in the Shares unless (i) it has first complied with the Offer Right
(described below) and (ii) all Shares owned by it or her are the subject of
such Transfer. Notwithstanding anything to the contrary, neither RiceX nor
Patricia shall make any Transfer prior to November 1, 2001, except in
compliance with the terms of Section 4 of this Agreement; PROVIDED, HOWEVER,
that if a P/M Stockholder sells any of his Shares to any unaffiliated third
party, then the Mc/X Stockholder shall have the right, but not the
obligation, to sell a proportionate number of Mc/X Stockholder's Shares,
subject to the Offer Right (as defined below).
(b) FIRST OFFER RIGHT.
(i) If a Mc/X Stockholder wishes to make a Transfer of its Shares ("Offered
Shares"), then, at least ten (10) days before making any such Transfer, the
Mc/X Stockholder shall deliver to the Company and the P/M Stockholders a
written notice (the "Sale Notice") notifying them of the proposed Transfer.
The Sale Notice shall disclose in reasonable detail the proposed terms and
conditions of the Transfer, including, without limitation, the price per
share to be paid by the transferee, the identity of the transferee, evidence
of its financial ability to effectuate the purchase, and confirmation of
1
<PAGE>
the transferee's agreement to be bound by the terms of this Agreement. Unless
otherwise agreed by the P/M Stockholders, the purchase price for any Transfer
must be payable in cash.
(ii) The P/M Stockholders shall have the right to purchase all (but not less
than all) of the Offered Shares, at the price and on the terms specified in
the Sale Notice (the "Offer Right"). The P/M Stockholders may decide, as
between themselves, who shall purchase the Offered Shares. The P/M
Stockholders shall deliver written notice of their election to exercise the
Offer Right (the "Purchase Election Notice") to the Mc/X Stockholders within
5 days after the Sale Notice is given. Failure by the P/M Stockholders to
give a timely Purchase Election Notice to the Mc/X Stockholders shall be
deemed an election by them not to exercise the Offer Right.
(iii) If the P/M Stockholders elect to purchase all of the Offered Shares
pursuant to the Offer Right, then such purchase shall, unless the parties
thereto otherwise agree, be completed
2
<PAGE>
at a closing to be held at the principal office of the Company at 10:00 a.m.
local time on the 10th day following the exercise of the Offer Right.
(iv) The purchase price for the Shares sold pursuant to the Offer Right shall
be the purchase price contained in the Sale Notice, and shall be on the
applicable terms and conditions contained in the Sale Notice and this
Agreement.
(v) In the event that the P/M Stockholders fail to exercise the Offer Right,
then the Mc/X Stockholder shall be permitted to transfer the Offered Shares
solely to the proposed transferee and solely on the terms and conditions set
forth in the Sale Notice.
(c) RIGHTS AND OBLIGATIONS ATTACHED TO COMMON STOCK, SECURITIES LAWS. Upon a
Transfer by a Mc/X Stockholder, the recipient of the Shares shall be entitled
to all of the rights and benefits, and subject to all the obligations, of the
transferring Mc/X Stockholder arising under this Agreement. Prior to any
Transfer, the Mc/X Stockholders shall cause (i) the prospective transferee to
execute and deliver documents evidencing same to the Company and the P/M
Stockholders, in type and form reasonably satisfactory to the Company and the
P/M Stockholder and (ii) its counsel to deliver an opinion to the. Company,
in form reasonably satisfactory to the Company and the P/M Stockholder, to
the effect that such Transfer may be made without registration under federal
securities laws.
(d) IMPROPER TRANSFER. Any attempt to transfer any Shares which is not in
accordance with this Agreement or is in violation of law shall be null and
void, and the Company shall not give any effect to such attempted transfer in
the share records of the Company.
2. PRE-EMPTIVE RIGHTS.
(a) Except with respect to (i) the grant of options; (and the issuance of
shares of Common Stock upon exercise thereof) to employees, consultants,
directors and officers of the Company other than the Stockholders, and (ii)
the issuance of securities by the Company in an underwritten public offering,
if the Company proposes to offer or sell, in consideration for cash, shares
of Common Stock or any other class of capital stock or securities convertible
or exercisable into or exchangeable for shares of Common Stock or any other
class of the Company's capital stock ("New Offer"), the Company shall offer
to each Stockholder the right ("Pre-emptive Right"), on the same terms
specified below, to purchase up to that number of securities sufficient to
permit the Stockholder to maintain its proportionate equity interest in the
Company
3
<PAGE>
(as determined by dividing all of the Shares then owned by such Stockholder
by the shares of Common Stock then outstanding.
(b) The Company shall send a written notice of the New Offer to each
Stockholder at least ten (10) days prior to the consummation of any New Offer
specifying in reasonable detail the material terms of the New Offer
including, without limitation, the material terms of the proposed security,
the material terms of any proposed agreement to be executed by the purchaser,
the consideration per share to be paid by the purchaser, and the identity (if
known) of each proposed purchaser. Each Stockholder shall notify the Company
within five (5) days of the receipt of such notice whether it intends to
exercise its Pre-emptive Right. The closing of any purchase of securities by
a Stockholder under this Section shall take place on the same day as the
closing of the New Offer or, at the Stockholders' discretion, at anytime
within ten (10) days ("Stockholder Closing Period") thereafter; PROVIDED
HOWEVER, that the Stockholder Closing Period shall be six (6) months for any
New Offer made prior to November 1, 2000.
(c) The Pre-emptive Right afforded under this Section 2 shall terminate with
respect to a Stockholder at such time as it owns less than 5% of the
outstanding Common Stock.
3. CONTROL TRANSFER.
(a) If the P/M Stockholders propose to make a Control Transfer (as
hereinafter defined) of any of their Shares, then they shall have the right,
but not the obligation, to require the Mc/X Stockholders to participate
("Bring Along Right") in any such sale on the same terms as the P/M
Stockholders by requiring the purchaser to purchase from the Mc/X Stockholder
the "Mc/X Stockholders Proportionate Share" (as hereinafter defined) of the
Shares to be sold, on the same terms and conditions as pertain to the Shares
to be sold by the P/M Stockholders in the Control Transfer.
(b) "Mc/X Stockholders Proportionate Share" means the percentage determined
by dividing (x) the number of Shares then owned by the Mc/X Stockholders, by
(y) the sum of (i) the number of Shares then owned by the P/M Stockholders
plus (ii) the number of Shares then owned by the Mc/X Stockholders.
4
<PAGE>
(c) PROCEDURE.
(i) If the P/M Stockholders desire to make a Control Transfer, then at least
ten (10) days before making any such Control Transfer, the P/M Stockholders
may deliver to the Mc/X Stockholders a written notice (the "Change of Control
Notice") notifying it of the proposed Control Transfer. The Change of Control
Notice shall specify the proposed number of Shares to be the subject of the
Control Transfer (the "Subject Shares") and disclose in detail the proposed
terms and conditions of the Control Transfer, including, without limitation,
the price per share to be paid by the transferee, the identity of the
transferee, evidence of its financial ability to effectuate the purchase and,
if applicable, notice that the Mc/X Stockholders are obligated to include and
sell all of their Shares or the Mc/X Stockholders Proportionate Share, as the
case may be, as part of such Control Transfer pursuant to the Bring Along
Right.
(ii) If the P/M Stockholders exercise the Bring Along Right, the Mc/X
Stockholders shall cooperate in consummating the Control Transfer, including,
without limitation, by becoming parties to the sale agreement and all other
appropriate related agreements, delivery of certificates and other
instruments for its Shares duly endorsed for transfer, free and clear of all
liens and encumbrances, and voting or consenting in favor of such transaction
(to the extent a vote or consent is required) and taking any other necessary
or appropriate action in furtherance thereof, including the execution and
delivery of any other appropriate agreements, certificates, instruments and
other documents, including becoming a party to standard representations,
warranties and indemnities in such agreements.
(d) "Control Transfer" means the first transaction or series of related
transactions as a result of which any third party, or group of third parties
acting in concert, who are not affiliates of the P/M Stockholders, acquires,
directly or indirectly, from the P/M Stockholders for cash or other
consideration, a majority of the Common Stock owned by the P/M Stockholders
prior to such transaction or series of related transactions or the power or
ability to exercise voting rights in respect of a majority of such shares of
Common Stock.
4. TAG ALONG RIGHTS.
(a) If the P/M Stockholders propose to make a Control Transfer of any of
their Shares, then the Mc/X Stockholders shall have the right ("Tag-Along
Right"), but not the obligation, to participate
5
<PAGE>
in any such sale on the same terms as the P/M Stockholders by requiring the
purchaser to purchase from the Mc/X Stockholder the Mc/X Stockholders
Proportionate Share of the Shares to be sold, on the same terms and
conditions as pertain to the Shares to be sold by the P/M Stockholders in the
Control Transfer.
(b) If the P/M Stockholders desire to make a Control Transfer, then at least
10 days before making any such Control Transfer, the P/M Stockholders shall
deliver to the Mc/X Stockholders a Change of Control Notice notifying of the
proposed Control Transfer. The Change of Control Notice shall specify the
subject Shares and disclose in detail the proposed terms and conditions of
the Control Transfer, including without limitation, the price per share to be
paid by the transferee, the identity of the transferee, evidence of its
financial ability to effectuate the purchase and, if applicable, notice that
the Minority Shareholder may include and sell the Mc/X Stockholders
Proportionate Share as part of such Control Transfer pursuant to the
Tag-Along Right.
(c) If the Mc/X Stockholder wishes to participate in the Control Transfer, it
shall provide written notice thereof ("Tag-Along Notice") to the P/M
Stockholders no less than 5 days prior to the proposed date of the Control
Transfer. The Tag-Along Notice shall constitute the Mc/X Stockholder's
binding agreement to sell the Mc/X Stockholders Proportionate Share on the
terms and conditions applicable. to the Control Transfer. If the proposed
transferee or purchaser does not consummate the purchase of all of the Shares
on the terms and conditions applicable to the P/M Stockholders, then neither
the P/M Stockholders nor the Mc/X Stockholders shall consummate the sale of
any of its Shares to such transferee or purchaser.
(d) If the Mc/X Stockholders exercise the Tag-Along Right, the Mc/X
Stockholder shall cooperate in consummating the Control Transfer, including,
without limitation, by becoming a party to the sale agreement and all other
appropriate related agreements, delivery of certificates and other
instruments for their Shares duly endorsed for transfer, free and clear of
all liens and encumbrances, and voting or consenting in favor of such
transaction (to the extent a voter consent is required) and taking any other
necessary or appropriate action in furtherance thereof, and including the
execution and delivery of any other appropriate agreements, certificates,
instruments and other documents, including becoming a party to standard
representations, warranties and indemnities in such agreements.
(e) If a Tag-Along Notice is not received by the P/M Stockholders from the
Mc/X Stockholders prior to the 5 day period specified above, the P/M
Stockholders shall have the right to sell or otherwise transfer the number of
Shares specified in the Change of Control Notice to the proposed purchaser
6
<PAGE>
or transferee without any participation by the Mc/X Stockholder, but only on
the terms and conditions set forth in the Change of Control Notice.
5. REPRESENTATION AND WARRANTY OF STOCKHOLDERS. Each of the Stockholders
hereby represents and warrants that, except for this Agreement, it is not a
party to any contract or agreement respecting the Shares, including any
voting trust or other voting arrangement, option or transfer agreement.
6. NONCOMPETITION. If Patricia breaches any provisions of the Employee
Confidentiality, NonCompetition and Assignment of Inventions Agreement, being
signed simultaneously herewith (even if such Agreement, or any section of
such Agreement is held to be unenforceable by a court of law or other
tribunal), then from and after such date, (i) all rights provided to Patricia
in this Agreement shall terminate and (ii) the Company shall have the right
to purchase Patricia's shares for a price of $.01 per share.
7. LOAN OBLIGATION. Each of Joe, Gene and Patricia agree that, if the Company
needs working capital to operate its business at any time during the period
commencing on the date hereof and ending on the "Due Date," as defined below,
each of them will lend to the Company the Company's working capital
requirements, up to a maximum outstanding at any one point in time of
$400,000 in the following ratio:
Joe and Gene - 36.11% each
Patricia - 27.78%.
All amounts loaned will bear interest at the minimum rate to avoid imputation
of interest under the Internal Revenue Code and will be due and payable,
together with interest, on the earlier of November 1, 2001 or the date the
Company closes an equity debt financing from unaffiliated parties (such date
referenced to herein as the "Due Date"). All such loans will be secured by a
first priority perfected security interest in favor of Joe, Gene and Patricia
(on a pro rata basis) on all the Company's assets. Prior to making such
loans, the Company will execute, for the benefit of Joe, Gene and Patricia,
appropriate promissory notes and security agreements.
If Patricia determines to borrow funds to fulfill her loan obligation under
this Paragraph 7, each of Joe and Gene will lend 50% of the amount to be
borrowed by Patricia. All amounts loaned to Patricia will bear interest at
the minimum rate to avoid imputation of interest under the Internal Revenue
Code and will be due and payable, together with interest, on the earlier of.
(1) three (3) years from the date of the loan or (2) the date Patricia is
repaid by the Company. All of the shares of Common Stock held by Patricia as
of the date of this Agreement, plus any additional shares acquired by
Patricia, in the future, shall
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be pledged to the Joe and Gene as security. Prior to making such loans to
Patricia, Patricia will execute, for the benefit of Joe and Gene, appropriate
promissory notes, and pledge and escrow agreements.
8. PERSONAL GUARANTY. Joe and Gene each agree to guaranty 50% (for an
aggregate of 100%) of the salary owed to Patricia under the Employment
Agreement through November 1, 2001. Any funds advanced by Joe or Gene
pursuant to this guarantee shall be deemed to be loans to the Company with
the same terms (and subject to the same security) as those described in
Section 6, above. Prior to making any such loans, the Company will execute,
for the benefit of Joe and Gene, appropriate promissory notes and security
agreements.
9. RICEX CLAIMS. Each of Patricia and RiceX agree to jointly and severally
indemnify the Company, Joe and Gene ("Indemnified Parties") for, and hold
them harmless from and against, any and all costs, expenses and damages
(including reasonable attorneys' fees and expenses) incurred in connection
with any suit, action and claim brought by or on behalf of RiceX or its
stockholders against any Indemnified Party based on RiceX's failure to
capitalize on a corporate opportunity (or any related claim) arising out of,
or as a result of, RiceX entering into the License Agreement, Patricia
entering into the Employment Agreement or either RiceX or Patricia becoming a
Stockholder or entering into this Agreement.
10. DEFINITION OF "SHARES". The term "Shares" shall mean any and all shares
of Common Stock outstanding as of the date here of and any additional shares
of Common Stock hereafter acquired by the owner thereof.
11. SPECIFIC PERFORMANCE. If any Stockholder commits a breach, or threatens
to commit a breach, of any of the provisions of this Agreement, the other
parties shall have the right and remedy to have the provisions of this
Agreement specifically enforced by any court having equity jurisdiction, it
being acknowledged and agreed by the parties that the transactions
contemplated hereunder are of a special, unique and extraordinary character
and that any such breach or threatened breach by a party will cause
irreparable injury to the other parties and that money damages will not
provide an adequate remedy to such other parties.
12. SUCCESSORS AND ASSIGNS. None of the rights or obligations of the parties
hereto may be assigned without the written consent of each of the parties,
and any attempt to do so shall be null and void. Subject to the preceding
sentence, the rights and obligations of each party hereto shall be binding on
and inure to the benefit of its successors and permitted assigns.
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13. GOVERNING LAW; DISPUTES. This Agreement shall be governed by and
construed under the law of the State of Delaware, disregarding any principles
of conflicts of law that would otherwise provide for the application of the
substantive law of another jurisdiction. Each of the undersigned (i) agrees
that any legal suit, action or proceeding arising out of or relating to this
Agreement shall be instituted exclusively in the Superior Court of the State
of Delaware, (ii) waives any objection to the venue of any such suit, action
or proceeding and the right to assert that such forum is not a convenient
forum, and (iii) irrevocably consents to the jurisdiction of the Superior
Court of the State of Delaware in any such suit, action or proceeding. Each
of the undersigned further agrees to accept and acknowledge service of any
and all process which may be served in any such suit, action or proceeding in
the Superior Court of the State of Delaware and agrees that service of
process upon it mailed by certified mail to its address shall be deemed in
every respect effective service of process upon it in any such suit, action
or proceeding.
14. COUNTERPARTS AND FACSIMILE SIGNATURES. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. A signature
received via facsimile shall be deemed an original for all purposes.
15. TITLES AND SUBTITLES. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
16. NOTICES. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or
made as of the date delivered if delivered personally or by nationally
recognized overnight courier, or four business days after deposit with the
United States Post Office by certified mail, postage prepaid, to the parties
at the following addresses and numbers (or at such other address or number
for a party as shall be specified by like notice, except that notices of
changes of address or number shall be effective upon receipt):
If to Patricia:
Patricia McPeak
100 Rock Lane
El Dorado Hills California 95762
Telephone No.: (916)933-1000
Facsimile No.: (916) 933-9300
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If to RiceX:
The RiceX Company 1241 Hawk's Flight Court El Dorado Hills, California 95762
Attn: Daniel L. McPeak, Sr. Telephone No.: (916) 933-3000 Facsimile No.:
(916) 933-3333
If to Joe or the Company:
Graubard Mollen & Miller 600 Third Avenue New York, New York 100 16 Attn:
David Alan Miller, Esq. Telephone No.: (212) 818-8800 Facsimile No: (212)
818-8881
If to Gene:
Eugene Mulvihill 355 Madison Avenue Morristown, New Jersey 07960 Telephone
No.: (973) 984-2276 Facsimile No.: (973) 984-5062
with a copy in any case to:
Crosby, Heafey, Roach & May 700 South Flower Street - Suite 2200 Los Angeles,
California 90017 Attn: Richard W, Lasater II Telephone No.: (213) 896-8025
Facsimile No.: (213) 896-8000
Graubard Mollen & Miller 600 Third Avenue New York, New York 100 16 Attn:
David Alan Miller, Esq. Telephone No.: (212) 818-8800 Facsimile No: (212)
818-8881)
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and
Sheppard, Mullin, Richter & Hampton LLP 4 Embarcadero Center - 17th Floor San
Francisco, California 94111-9100 Attn: William T. Manierre, Esq. Telephone
No.: (415) 434-9100 Facsimile No.: (415) 434-3947
17. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement constitutes the
full and entire understanding and agreement between the parties with regard
to the subjects hereof. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and each Stockholder.
18. SEVERABILITY. If one or more provisions of this Agreement is or are held
to be unenforceable under applicable law, such provision(s) shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as
if such provision(s) were so excluded and shall be enforceable in accordance
with its remaining terms.
19. TERMINATION. The provisions of this Agreement will terminate
automatically and be of no further force and effect upon the earliest of (i)
consummation of a Control Transfer, and (ii) consummation of the initial
public offering of the Company's equity securities.
20. RIGHTS OF THIRD PARTIES. Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective permitted successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
NEXT PAGE IS THE SIGNATURE PAGE
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IN WITNESS WHEREOF, the parties here to have executed this Stockholder
Agreement on the day and year first above written.
PATRICIA McPEAK
By:/s/Patricia McPeak
THE RICEX COMPANY
By:/s/Daniel L. McPeak
Name: Daniel L. McPeak
Title: Chief Executive Officer and
Chairman of the Board
JOSEPH PAGANO
By:/s/Joseph Pagano
EUGENE MULVIHILL
By:/s/Eugene Mulvihill
BIOCEUTICS, INC.
By:/s/Samuel Rozzi
Name: SAMUEL ROZZI
Title: VICE PRESIDENT
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EXHIBIT 4.49
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS WARRANT HAS NOT BEEN
QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA
AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF
THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS
THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102
OR 25106 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO
THIS WARRANT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING
OBTAINED, UNLESS THE SALE IS SO EXEMPT.
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE
SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF ANY EFFECTIVE REGISTRATION STATEMENT AS TO
SUCH SECURITIES FILED UNDER THE ACT AND COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER HEREOF
THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE CAPITAL STOCK
OF
THE RICEX COMPANY
This Warrant is entered into pursuant to the terms of the Loan
Agreement between Dorchester Group and The RiceX Company (the "Company"). The
Company hereby grants to Dorchester Group, or its permitted registered
assigns ("Registered Holder"), subject to the terms and conditions of this
Warrant, the right to purchase from the Company at any time after the date of
this Warrant and prior to the Expiration Date (as defined below) up to the
number of shares (subject to adjustment as set forth herein and rounded to
whole shares) of Warrant Stock (as defined below) at a purchase price per
share equal to the Purchase Price (as defined below) subject to adjustment as
provided herein, upon surrender of this Warrant at the principal office of
the Company together with a duly executed Subscription Form in the form
attached hereto as Exhibit 1 and simultaneous payment of the full Purchase
Price, as adjusted to the extent provided herein, in lawful money of the
United States of America.
1. CERTAIN DEFINITIONS. The following terms shall have the meaning set
forth below:
1.1 BOARD. The "Board" means the Board of Directors of the Company.
1.2 COMPANY. The "Company" means The RiceX Company, a Delaware
corporation.
1.3 EXPIRATION DATE. "Expiration Date" means 5:00 p.m. Pacific
Time on April 26, 2001, or, if earlier, the date and time determined under
Section 5.4 of this Warrant.
1.4 ISSUE DATE. "Issue Date" means the date of this Warrant.
1.5 PURCHASE PRICE. "Purchase Price" means one dollar ($1.00) per
share of Warrant Stock. The Purchase Price is subject to adjustment, as
provided herein.
1.6 REGISTERED HOLDER. "Registered Holder" means Dorchester Group
or its permitted registered assigns.
<PAGE>
1.7 SEC. "SEC" means the Securities Exchange Commission of the
United States of America.
1.8 WARRANT. "Warrant" means this Warrant and Warrant(s) delivered
in substitution or exchange therefor, as provided herein.
1.9 WARRANT STOCK. "Warrant Stock" means up to 250,000 shares of
the Common Stock of the Company and any other consideration issuable under
this Agreement upon exercise of this Warrant or any portion thereof. The
number and character of shares of Warrant Stock are subject to adjustment as
provided herein and the term "Warrant Stock" shall include stock and other
securities and property at any time receivable or issuable upon exercise of
this Warrant.
2. EXERCISE. Subject to the terms of this Warrant and compliance with
all applicable securities laws, Registered Holder may exercise this Warrant
at any time, on any business day before the Expiration Date, for up to the
number of shares of Warrant Stock that is set forth in Section 1.9 above, by
surrendering this Warrant at the principal office of the Company at 1241
Hawks Flight Court, El Dorado Hills, California 95762, with a Subscription
Form in the form attached as Exhibit 1 hereto duly executed by the Registered
Holder, together with full payment in cash or check of the sum obtained by
multiplying (a) the number of shares of Warrant Stock the Registered Holder
desires to purchase by (b) the Purchase Price or adjusted Purchase Price
therefor, if applicable, as determined in accordance with the terms hereof.
Registered Holder may exercise this Warrant for less than the full number of
shares of Warrant Stock purchasable hereunder but must exercise this Warrant
in increments of at least ten percent (10%) of the initial shares of Warrant
Stock, as adjusted pursuant hereto, if the exercise is for less than all
remaining Warrant Stock then exercisable hereunder. Upon Registered Holder's
partial exercise, Registered Holder must surrender this Warrant, and the
Company shall issue to the Registered Holder a new Warrant of the same tenor
for purchase of the number of remaining shares of Warrant Stock not
purchased. Registered Holder shall be deemed to have exercised this Warrant
immediately prior to the close of business on the date of its surrender for
exercise as provided above, and shall be treated for all purposes as the
holder of record of such shares as of the close of business on such date. As
soon as practicable on or after such date, the Company shall issue and
deliver to the Registered Holder or Holders a certificate or certificates for
the number of whole shares of Warrant Stock issuable upon such exercise,
together with cash in lieu of any fraction of a share equal to such fraction
of the current fair market value of one whole share of Warrant Stock as of
the date of exercise, as determined in good faith by the Company's Board. No
fractional shares may be issued upon any exercise of this Warrant.
3. FULLY PAID SHARES. All shares of Warrant Stock the Company issues
upon exercise of this Warrant shall be validly issued, fully paid and
non-assessable.
4. TRANSFER AND EXCHANGE. Subject to the terms of this Warrant and
compliance with all applicable securities laws, this Warrant and all rights
hereunder are transferable, in whole or in part, on the books of the Company
maintained for such purpose at the principal office of the Company referred
to above, by the Registered Holder hereof in person, or by duly authorized
attorney, upon Registered Holder's surrender of this Warrant properly
endorsed and upon payment of any necessary transfer tax or other governmental
charge imposed upon such transfer. Upon any partial transfer, the Company
shall issue and deliver to the Registered Holder a new Warrant or Warrants
with respect to the shares of Warrant Stock not so transferred. Until a
transfer of this Warrant is registered on the books of the Company, the
Company may treat the Registered Holder hereof as the owner for all purposes.
Notwithstanding the foregoing, this Warrant and the rights hereunder may not
be transferred unless such transfer (a) complies with all applicable
securities laws and the provisions of Section 11 hereof, and (b) effects the
transfer of the right to purchase at least five percent (5%) of the initial
shares of Warrant Stock, as adjusted, or the right to purchase all remaining
shares of Warrant Stock purchasable under this Warrant if the right to
purchase less than five percent (5%) of the initial shares of Warrant Stock
remains untransferred.
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The number or
character of shares of Warrant Stock issuable upon exercise of this Warrant
and the Purchase Price therefor shall be adjusted to the extent provided
below upon occurrence of the following events:
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<PAGE>
5.1 ADJUSTMENT FOR STOCK SPLITS, STOCK DIVIDENDS, RECAPITALIZATION
AND SIMILAR EVENTS. The Purchase Price of this Warrant and the number of
shares of Warrant Stock issuable upon exercise of this Warrant shall each be
proportionally adjusted to reflect any stock split, reverse stock split,
combination of shares, reclassification, recapitalization or other similar
event affecting the number of outstanding shares of the Company's Stock. For
example, if there should be a 2-for-1 stock split of the Company's Stock, the
Purchase Price of this Warrant shall be divided by two (2) and the number of
shares of Warrant Stock purchasable under this Warrant shall be doubled. An
adjustment under this Section 5.1 shall be effective at the close of business
on the date such event becomes effective.
5.2 ADJUSTMENT FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If the
Company shall make or issue, or shall fix a record date for the determination
of eligible holders entitled to receive, a dividend or other distribution
with respect to the Warrant Stock payable in securities of the Company, then,
and in each such case, the Registered Holder of this Warrant on exercise of
this Warrant at any time after the consummation, effective date or record
date of such event, shall receive, in addition to the shares of Warrant Stock
issuable on such exercise prior to such date, the securities or such other
securities of the Company to which such Registered Holder would have been
entitled upon such date if such Registered Holder had exercised this Warrant
immediately prior thereto (all subject to further adjustment as provided in
this Warrant).
5.3 ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER. In case
of any reorganization of the Company (or any successor corporation, the stock
or other securities of which are at the time receivable on the exercise of
this Warrant), after the Issue Date, or in case, after such date, the Company
(or any other such successor corporation) shall consolidate all of its assets
to another corporation, then, and in each such case, the Registered Holder of
this Warrant, upon the exercise hereof (as provided in Section 2) at any time
after the consummation of such reorganization, consolidation, merger, or
conveyance, shall be entitled to receive, in lieu of the stock or other
securities and property receivable upon the exercise of this Warrant prior to
such consummation, the stock or other securities or property to which such
Registered Holder would have been entitled had Registered Holder exercised
this Warrant immediately prior thereto, all subject to further adjustment as
provided in this Section 5, and the successor or purchasing corporation in
such reorganization, consolidation, merger or conveyance (if other than the
Company) shall duly execute and deliver to the Registered Holder a supplement
hereto acknowledging such corporation's obligations under this Warrant; and
in each such case, the terms of this Warrant shall be applicable to the
shares of stock or other securities or property receivable upon the exercise
of this Warrant after such consummation.
5.4 CONVERSION OF WARRANT STOCK. In case all the authorized
Warrant Stock of the Company is converted, pursuant to the Company's
Certificate of Incorporation, into other securities or property, or the
Warrant Stock otherwise ceases to exist, then, in such case, the Registered
Holder of this Warrant, on exercise hereof at any time after the date on
which the Warrant Stock is so converted or ceases to exist (the "Termination
Date") shall receive, in lieu of the number of Shares of Warrant Stock that
would have been issuable upon such exercise immediately prior to the
Termination Date (the "Former Issuable Number of Shares of Warrant Stock"),
the stock and other securities and property to which such Registered Holder
would have been entitled to receive upon the Termination Date if such
Registered Holder had exercised this Warrant with respect to the Former
Issuable Number of Shares of Warrant Stock immediately prior to the
Termination Date (all subject to further adjustment as provided in this
Warrant).
5.5 ADJUSTMENTS TO PURCHASE PRICE. Although an adjustment to the
Purchase Price may occur pursuant to this Section 5, the aggregate purchase
price for the total number of shares of Warrant Stock purchasable hereunder
(as adjusted) shall remain the same.
6. NO IMPAIRMENT. The Company may not, by amendment of its Certificate
of Incorporation or Bylaws, or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other
voluntary action, willfully avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but shall at all times in
good faith assist in the carrying out of all such terms and in the taking of
all such action as may be necessary or appropriate in order to protect the
rights of the Registered Holder against impairment. Without limiting the
generality of the foregoing, the Company (a) will not set nor increase the
par value (if any par value exists) of any shares of stock issuable upon the
exercise of this Warrant above the amount payable therefor
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upon such exercise, and (b) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully
paid and non-assessable shares of Warrant Stock upon the exercise of this
Warrant.
7. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in
either the Purchase Price or in the number of share of Warrant Stock, or
other stock, securities or property receivable on the exercise of this
Warrant, the Treasurer of the Company shall, upon request from Registered
Holder, compute such adjustment in accordance with the terms of this Warrant
and prepare a certificate setting forth such adjustment and showing in detail
the facts upon which such adjustment is based, including a statement of the
adjusted Purchase Price. Thereafter, the Company shall cause copies of such
certificate to be mailed (by first class mail, postage prepaid) to the
Registered Holder.
8. NOTICES OF RECORD DATE. In case:
(a) The Company shall take a record of the holders of its
Warrant Stock for the purpose of entitling them to receive any dividend or
other distribution; or
(b) Of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation, or any conveyance of
all or substantially all of the assets of the Company to another corporation
in which holders of the Company's stock are to receive stock, securities,
cash or property of another corporation; or
(c) Of any voluntary dissolution, liquidation or winding-up of
the Company; or
(d) Any redemption or conversion into Common Stock of all
outstanding Warrant Stock.
then, and in each such case, the Company shall mail or cause to be mailed to
the Registered Holder of this Warrant a notice specifying, as the case may
be, (a) the date on which a record is to be taken for the purpose of such
dividend or distribution, and stating the amount and character of such
dividend or distribution, or (b) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution,
liquidation, winding-up, redemption or conversion is to take place, and the
time, if any is to be fixed, as of which the holders of record of Warrant
Stock shall be entitled to exchange their shares of Warrant Stock or Common
Stock (or such other stock or securities) for securities or other property
deliverable upon such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding-up. Such notice shall
be mailed at least ten (10) days prior to the effective or record date
therein specified, as applicable. Failure to provide notice under this
Section 8 or any defect therein shall not affect the validity of any action
taken in connection with such dividend, distribution, reorganization,
reclassification, consolidation, merger, conveyance, dissolution,
liquidation, winding-up, redemption or conversion.
9. LOSS OR MUTILATION. Upon Registered Holders delivery to the Company
of evidence reasonably satisfactory to the Company of the ownership, and the
loss, theft, destruction or mutilation, of this Warrant, and of indemnity
reasonably satisfactory to the Company, and (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company shall execute and
deliver to the Registered Holder in lieu thereof a new Warrant of like tenor.
10. RESERVATION OF WARRANT STOCK. If at any time the number of
authorized but unissued shares the Company's Common Stock or other securities
shall not be sufficient to effect the exercise of this Warrant, the Company
shall take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock or
other securities to such number of shares of Common Stock or other securities
as shall be sufficient for such purpose.
11. RESTRICTIONS ON TRANSFER.
11.1 ACKNOWLEDGMENT, REPRESENTATION AND WARRANTIES OF REGISTERED
HOLDER. The Registered Holder understands and acknowledge that neither this
Warrant nor the shares of Warrant Stock have been registered
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under the Securities Act of 1933, as amended (the "Act"), or any state
securities laws. As a condition to the issuance of this Warrant and to its
exercise the Registered Holder hereby represents and warrants to the Company
that:
(a) The Warrant and, if applicable, the shares of Warrant
Stock (collectively, the "Securities") have been acquired by the Registered
Holder for investment and not with a view to the sale or other distribution
thereof within the meaning of the Act and the Registered Holder has no
present intention of selling or otherwise disposing of all or any portion of
the Securities.
(b) The Registered Holder has acquired the Securities for the
Registered Holder's own account only and no one else has any beneficial
ownership in the Securities.
(c) The Registered Holder is capable of evaluating the merits
and risks of any investment in the Securities, is financially capable of
bearing a total loss of this investment and has either (i) a preexisting
personal or business relationship with the Company or its principals or (ii)
by reason of the Registered Holder's business or financial experience, has
the capacity to protect his or its own interest in connection with this
investment.
(d) The Registered Holder has had access to all information
regarding the Company, its present and prospective business, assets,
liabilities and financial condition that the Registered Holder considers
important to making the decision to acquire the Securities and has had ample
opportunity to ask questions of and receive answers from the Company's
representatives concerning an investment in the Securities and to obtain any
and all documents requested in order to supplement or verify any of the
information supplied.
(e) The Registered Holder understands that the Securities
shall be deemed restricted securities under the Act and may not be resold
unless they are registered under the Act and any applicable state securities
law, or in the opinion of counsel in form and substance satisfactory to the
Company, an exemption from such registration is available.
(f) The Registered Holder is aware of Rule 144 promulgated
under the Act, which rule provides, in substance, that (i) after one year
from the date restricted securities have been purchased and fully paid for, a
holder may transfer restricted securities provided certain conditions are
met, e.g., certain public information is available about the Company, and
specific limitations on the amount of shares which can be sold within certain
periods and the manner in which such shares must be sold are complied with,
and (ii) after two years from the date the Securities have been purchased and
fully paid for, holders who are not "affiliates" of the Company may sell
restricted securities without satisfying such conditions.
(g) The Registered Holder further understands that if the
requirements of Rule 144 are not met, registration under the Act, compliance
with Regulation A, or some other registration exemption will be required for
any disposition of the Securities; and that, although Rule 144 is not
exclusive, the SEC has expressed its opinion that persons proposing to sell
restricted securities other than in a registered offering or other than
pursuant to Rule 144 will have a substantial burden of proof in establishing
that an exemption from registration is available for such offers or sales and
such persons and the brokers who participate in the transactions do so at
their own risk.
11.2 SALE OR TRANSFER OF WARRANT STOCK. The Registered Holder of
this Warrant, by acceptance hereof, agrees that, absent an effective
registration statement filed with the SEC under the Act, covering the
disposition or sale of this Warrant or the Warrant Stock issued or issuable
upon exercise hereof, such Registered Holder will not sell or transfer any or
all of this Warrant or such Warrant Stock, as the case may be, without first
providing the Company with an opinion of counsel satisfactory to the Company
to the effect that such sale or transfer will be exempt from the registration
and prospectus delivery requirements of the Act, and such Registered Holder
consents to the Company making a notation on its records, or giving
instructions to any transfer agent of this Warrant, or such Warrant Stock, in
order to implement this restriction on transfer. The share certificates
issued upon exercise of this Warrant shall bear legends referring to the
restrictions on transfer set forth in this Section 11. As a condition to the
transfer of this Warrant or transfer of the shares issuable on exercise
hereof, any permitted transferee must execute and deliver to the Company
representations and warranties similar to those set forth in this Section 11.
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12. REGISTRATION RIGHTS.
12.1 DEFINITIONS. For purposes of this Section 12:
(a) ACT. The term "Act" means the Securities Act of 1933, as
amended;
(b) REGISTRABLE SECURITIES. The term "Registrable Securities"
means the Warrant Stock and any shares of Common Stock of the Company issued
as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with
respect to, or in exchange for or in replacement of, such Warrant Stock,
excluding in all cases, any Registrable Securities sold by a person in a
transaction in which his rights under this Section 12 are not assigned.
(c) 1934 ACT. The term "1934 Act" means the Securities
Exchange Act of 1934, as amended;
(d) REGISTRATION; REGISTER OR REGISTERED. The terms
"Register," "Registered," and "Registration" refer to a registration effected
by preparing and filing a registration statement in compliance with the Act
and the declaration or ordering of the effectiveness of such registration
statement;
(e) REQUIRED INFORMATION. The term "Required Information"
means (i) facts or events representing a material or fundamental change in
the information included in the Registration Statement or (ii) prospectus
required by Section 19(a)(3) of the Act;
(f) RULE 144. The term "Rule 144" means Rule 144 as
promulgated by the SEC under the Act, as amended from time to time, or any
similar or successor rule that may be promulgated by the SEC;
(g) RULE 145. The term "Rule 145" shall mean Rule 145 as
promulgated by the SEC under the Act, as amended from time to time, or any
similar or successor rule that may be promulgated by the SEC; and
(h) SEC. The term "SEC" means the Securities and Exchange
Commission.
12.2 COMPANY REGISTRATION. Subject to Section 12.6, if at any time
(but without obligation to do so), the Company proposes to Register any of
its common stock under the Act (i) in connection with an underwritten public
offering of such securities (other than a registration relating solely to the
sale of securities to employees of the Company pursuant to a stock option,
stock purchase or similar plan, or a registration relating to a Rule 145
transaction or a registration on any form which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Company's common stock) on a
form that would also permit the Registration of the Registrable Securities or
(ii) for the account of a shareholder or shareholders exercising their
respective registration rights, the Company shall, each such time, promptly
give Registered Holder written notice of such determination. Upon the written
request of Registered Holder given within twenty (20) days after the mailing
of any such notice by the Company in accordance with Section 13.3, the
Company shall, subject to the provisions of Section 12.6, use its best
efforts to include in such Registration and cause to be Registered all of the
Registrable Securities that Registered Holder requested be Registered.
12.3 REGISTRATION PROCEDURES. Whenever required under Section 12.2
to use its best efforts to effect the Registration of any Registrable
Securities, the Company shall accomplish the following as expeditiously as
reasonably possible:
(a) REGISTRATION STATEMENT. Prepare and file with the SEC a
registration statement with respect to such Registrable Securities
("Registration Statement") and use its best efforts to cause such
Registration Statement to become and remain effective. In connection with any
proposed Registration intended to permit an offering of any securities from
time to time, the Company shall not be obligated to cause any such
Registration to remain effective (i) for more than one hundred and twenty
(120) days nor (ii) until the Registered
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Holder has completed the distribution; provided, that such one hundred twenty
(120) day period shall be extended for such period of time as the Registered
Holder refrains from selling any securities included in such Registration at
the request of an underwriter of common stock or other securities of the
Company;
(b) AMENDMENTS. Prepare and file with the SEC such amendments
and supplements to such Registration Statement as may be necessary to comply
with the provisions of the Act for the disposition of securities covered by
such Registration Statement;
(c) COPIES. Furnish to Registered Holder copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act and all applicable SEC rules and regulations, and
such other documents as the Registered Holder may reasonably request in order
to facilitate the disposition of Registrable Securities owned by Registered
Holder, including without limitation an earnings statement which satisfies
the provisions of Section 11(a) of the Act; and
(d) BLUE SKY. Use its best efforts to Register and qualify the
securities covered by such Registration Statement under such other securities
or blue sky laws of such jurisdictions as shall reasonably be appropriate for
the distribution of the securities covered by the Registration Statement;
provided, that the Company shall not be required in connection therewith or
as a condition thereto to qualify to do business or to file a general consent
to service of process in any such jurisdictions. If any jurisdiction in which
the securities shall be qualified shall require that expenses incurred in
connection with the qualification of the securities in the jurisdiction be
borne by the selling shareholders, then expenses shall be payable by the
selling shareholders pro rata, to the extent required by such jurisdiction.
12.4 REGISTERED HOLDER INFORMATION. As a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement, the
Registered Holder shall furnish to the Company such information regarding
Registered Holder, the Registrable Securities held by Registered Holder, and
the intended method of disposition of such securities as the Company shall
reasonably request and as shall be required in connection with the action to
be taken by the Company.
12.5 REGISTRATION EXPENSES. The Company shall bear all expenses of
Registration (excluding underwriting discounts and the legal fees of counsel
separately retained by the selling Registered Holder and expenses directly
incurred by the selling Registered Holder). Such expenses of Registration
shall include without limitation, Registration, qualification and filing fees
and legal fees of the Company. All underwriting discounts with respect to
such shares shall be borne by the Registered Holder requesting registration.
12.6 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 12.2 to include any of the Registered
Holder's Registrable Securities in such underwriting unless the Registered
Holder accepts the terms of the underwriting as agreed upon between the
Company and the underwriters selected by it and then only in such quantity as
will not, in the written opinion of the underwriters or the Company,
jeopardize the success of the offering by the Company. If the total amount of
securities that the Registered Holder requests to be included in such
offering exceeds the amount of securities that the underwriters or the
Company reasonably believe to be compatible with the success of the offering,
the Company shall only be required to include in the offering so many of the
securities of the selling Registered Holder as the underwriters or the
Company believe will not jeopardize the success of the offering determined as
provided in Section 12.7 below.
12.7 ALLOCATION OF RIGHTS. Except as may otherwise be required
under any other agreement to which the Company is a party on the date of this
Warrant, if the total number of shares of Registrable Securities and other
common stock with registration rights (including common stock to be received
upon conversion of convertible securities) ("Other Shares") exceeds the
number of shares to be included in a Registration, then the number of shares
of Registrable Securities and Other Shares to be included in the Registration
shall be allocated among the Registered Holder of the Registrable Securities
and shareholders of the Other Shares who hold similar or greater registration
rights on the basis of the proportionate number of shares held by such
Registered Holder (assuming full conversion). If any Registered Holder or
other selling shareholder does not request inclusion of the maximum number of
shares of Registrable Securities and Other Shares allocated to Registered
Holder, then the remaining portion of Registered
7
<PAGE>
Holders allocation shall be reallocated among those requesting Registered
Holders and other selling shareholders whose allocations did not satisfy
their requests on the basis of the number of shares of Registrable Securities
and Other Shares held by such Registered Holders and other selling
shareholders (assuming full conversion). This procedure shall be repeated
until all Registrable Securities and Other Shares which may be included in
the Registration have been so allocated.
12.8 NO DELAY OF REGISTRATION. No Registered Holder shall have any
right to take any action to restrain, enjoin, or otherwise delay any
Registration as the result of any controversy that might arise with respect
to the interpretation or implementation of this Agreement.
12.9 INDEMNIFICATION. In the event any Registrable Securities is
included in a Registration Statement pursuant to this Agreement:
(a) INDEMNIFICATION BY THE COMPANY. To the extent permitted by
law, the Company shall indemnify and hold harmless Registered Holder
requesting or joining in a Registration, any underwriter (as defined in the
Act) for it, and each person, if any, who controls such Registered Holder or
underwriter within the meaning of the Act, against any losses, claims,
damages or liabilities, joint or several, to which they may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) (i) arise out of or are based on
any untrue or alleged untrue statement of any material fact contained in such
Registration Statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii)
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or (iii) arise out of any violation by
the Company of any rule or regulation promulgated under the Act applicable to
the Company and relating to action or inaction required of the Company in
connection with any such Registration. In such event the Company shall
reimburse each such Registered Holder, such underwriter or controlling person
for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
Section 12.9(a) shall not apply to (i) amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld) nor (ii) any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in connection with such
Registration Statement, preliminary prospectus, final prospectus or
amendments or supplements thereto, in reliance upon and in conformity with
written information furnished expressly for use in connection with such
Registration by any such Registered Holder;
(b) INDEMNIFICATION BY REGISTERED HOLDER. To the extent
permitted by law, each Registered Holder requesting or joining in a
Registration will indemnify and hold harmless the Company, each of its
officers, legal counsel and directors, and each person, if any, who controls
the Company within the meaning of the Act and each agent, any underwriter
(within the meaning of the Act) for the Company or such other holders, any
person who controls such underwriter and any other holder of selling
securities in such Registration Statement or any of its officers or directors
or any person who controls such holder against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director,
officer, legal counsel, controlling person, agent or underwriter may become
subject, under the Act, the 1934 Act or other federal or state law, or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereto) arise out of or are based upon (i) any untrue or alleged
untrue statement of any material fact contained in such Registration
Statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or (iii)
arise out of any violation by the Registered Holder of any rule or regulation
promulgated under the Act applicable to the Registered Holder and relating to
action or inaction required of the Registered Holder in connection with any
such Registration, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in such Registration Statement, preliminary or final
prospectus, or amendments or supplements thereto, in reliance upon and in
conformity with written information furnished by such Registered Holder
expressly for use in connection with such registration. Such Registered
Holder will reimburse any legal or other expenses reasonably incurred by the
8
<PAGE>
Company or any such director, officer, legal counsel, controlling person,
agent or underwriter in connection with investigating or defending any such
loss, claim, damage, liability or action;
(c) NOTICE. Promptly after receipt by an indemnified party
under this Section 12.9 of notice of the commencement of any action
(including any government action), such indemnified party shall, if a claim
in respect thereof is to be made against any indemnifying party under this
Section, notify the indemnifying party in writing of the commencement thereof
and the indemnifying party shall have the right to participate in and,
jointly with any other indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually satisfactory to the parties; provided,
however, if representation jointly would be inappropriate due to potential
differing interests between such parties in such proceeding, either party may
retain counsel of its own. The failure to notify an indemnifying party
promptly of the commencement of any such action, if prejudicial to his or its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section, but the failure to
notify the indemnifying party shall not relieve him of any liability that the
indemnifying party may have to any indemnified party otherwise than under
this Section 12.9; and
(d) CONTRIBUTION. If the indemnification provided for in this
Section 12.9 is held by a court of competent jurisdiction to be unavailable
to an indemnified party hereunder with respect to any loss, liability, claim,
damage or expense, then the indemnifying party, in lieu of indemnifying such
indemnified party shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and of the indemnified party in connection with the
statement or omissions that resulted in such loss, liability, claim, damage
or expense as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or
the indemnified party, and the opportunity to correct or prevent such
statement or omission. Such allocation shall be consistent with the
principles of indemnification provisions under Sections 12.9 (a) and (b)
above.
12.10 TERMINATION OF THE COMPANY'S OBLIGATIONS. The right of any
Registered Holder to request Registration pursuant to this Agreement shall
terminate on, or on the first date after, the closing of the first Registered
public offering of the Company's common stock initiated by the Company if all
shares of Registrable Securities held or entitled to be held upon conversion
by such Registered Holder may immediately be sold under Rule 144 of the Act
during any ninety (90)-day period.
12.11 REPORTS UNDER 1934 ACT. In order to allow the Registered
Holders the benefits of Rule 144 promulgated under the Act and any other rule
or regulations of the SEC that may at any time permit the Registered Holder
to sell securities of the Company to the public without Registration, the
Company agrees to use its best efforts to:
(a) PUBLIC INFORMATION. Make and keep public information
available, as those terms are understood and defined in Rule 144;
(b) FILING. File with the SEC in a timely manner all reports
and other documents required of the Company under the Act and the 1934 Act;
and
(c) COPIES OF REPORTS. Furnish upon request to any Registered
Holder, so long as such Registered Holder owns any Registrable Securities:
(i) a written statement by the Company that the Company has complied with the
reporting requirements of Rule 144, the Act and the 1934 Act (at any time
after it has become subject to such reporting requirements); (ii) a copy of
the most recent annual or quarterly report of the Company; and (iii) such
other reports and documents so filed by the Company as may be reasonably
requested in availing any Registered Holder of any rule or regulation of the
SEC permitting the selling of any such securities without Registration.
12.12 LOCKUP AGREEMENT. Upon the request of the Company or the
underwriters managing any firm commitment underwritten offering of the
Company's securities, in connection with any Registration, each
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<PAGE>
Registered Holder agrees that it shall not, sell or otherwise dispose of any
Registrable Securities during a period of up to one-hundred and eighty days
(or more if requested by the underwriter or the Company) following the
effective date of a registration statement; provided that such agreement
shall only apply to the first such Registration including securities sold on
behalf of the Company to the public in an underwritten offering. The
obligations of the Registered Holders under this paragraph 12.12 shall not
apply to a registration relating solely to employee benefit plans on Form S-1
or Form S-8 or similar forms that may be promulgated in the future. The
Company may impose stop-transfer instructions with respect to all shares (or
securities) subject to the foregoing restriction until the end of such one
hundred eighty (180)-day period (or such longer period). Registered Holder
will not be required to lockup Registrable Securities on terms less favorable
than the terms of lockup agreements with the Company's officers and/or
directors.
12.13 NO LIMITATION ON FUTURE REGISTRATION RIGHTS. Other than the
obligations imposed hereunder on the Company to allocate registration rights,
the Company shall not be restricted from granting any form of registration
rights to any person.
12.14 TRANSFER OF REGISTRATION RIGHTS. The registration rights of
Registered Holder under this Agreement may be transferred to any transferee
who acquires from Registered Holder shares representing at least one percent
(1%) of the issued and outstanding Shares of the Company; provided, that the
Company is given written notice by the Registered Holder at the time of such
transfer stating the name and address of the transferee and identifying the
securities with respect to which the rights under this Agreement are being
assigned.
13. GENERAL PROVISIONS.
13.1 NO RIGHTS OR LIABILITIES AS SHAREHOLDER. This Warrant does not
by itself entitle the Registered Holder to any voting rights or other rights
as a shareholder of the Company. In the absence of affirmative action by
Registered Holder to purchase Warrant Stock by exercise of this Warrant, no
provisions of this Warrant, and no enumeration herein of the rights or
privileges of the Registered Holder shall cause such Registered Holder to be
a shareholder of the Company for any purpose by virtue hereof.
13.2 AMENDMENT. The provisions of this Agreement may be modified at
any time by agreement of the parties. Any such agreement hereafter made shall
be ineffective to modify this Agreement in any respect unless in writing and
signed by the parties against whom enforcement of the modification or
discharge is sought.
13.3 NOTICES. Any notice under this Agreement shall be in writing,
and any written notice or other document shall be deemed to have been duly
given (i) on the date of personal service on the parties, (ii) on the third
business day after mailing, if the document is mailed by registered or
certified mail, (iii) one day after being sent by professional or overnight
courier or messenger service guaranteeing one-day delivery, with receipt
confirmed by the courier, or (iv) on the date of transmission if sent by
telegram, telex, telecopy or other means of electronic transmission resulting
in written copies, with receipt confirmed. Any such notice shall be delivered
or addressed to the parties at the addresses set forth below or at the most
recent address specified by the addressee through written notice under this
provision:
If to the Company:
Daniel McPeak
Chief Executive Officer
The RiceX Company
1241 Hawk's Flight Court
El Dorado Hills, CA 95762
Fax: (916) 933-3232
With a copy to:
Crosby, Heafey, Roach & May
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<PAGE>
700 S. Flower St., Suite 2200
Los Angeles, CA 90017
Attn: Richard Lasater
If to the Registered Holder:
Dorchester Group
67 Forest Road
Tenafly, NJ 07670
Attn: Robert Hesse
With a copy to:
- -------------------------------
- -------------------------------
- -------------------------------
- -------------------------------
Attn:
--------------------------
Failure to conform to the requirement that mailings be done by registered or
certified mail shall not defeat the effectiveness of notice actually received
by the addressee.
13.4 CHANGE; WAIVER. Any of the terms or conditions of this
Agreement may be waived at any time by the party entitled to the benefit
thereof, but no such waiver shall affect or impair the right of the waiving
party to require observance, performance or satisfaction either of that term
or condition as it applies on a subsequent occasion or of any other term or
condition.
13.5 HEADINGS. The headings in this Warrant are for purposes of
convenience and reference only, and shall not be deemed to constitute a part
hereof.
13.6 LAW GOVERNING. The rights and obligations of the parties and
the interpretation and performance of this Agreement shall be governed by the
law of California, excluding its conflict of laws rules
13.7 INTEGRATION. This Agreement constitutes the entire agreement
between the Company and the Registered Holder with respect to the subject
matter hereof. Any previous agreement between the Company and the Registered
Holder is superseded by this Agreement. Subject to the exceptions
specifically set forth in this Agreement, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
heirs, successors, administrators, executors and assigns of the parties
hereto.
13.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.9 SEVERABILITY. If any provision of this Agreement is
adjudicated by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of the Agreement which can be given full force
and effect without the invalid provision shall continue in full force and
effect and shall in no way be impaired or invalidated.
Dated: As of April 26, 1999
COMPANY
The RiceX Company, a Delaware corporation
11
<PAGE>
By:
------------------------------------
Its:
-----------------------------------
REGISTERED HOLDER
Dorchester Group
By:
------------------------------------
Its:
-----------------------------------
12
<PAGE>
EXHIBIT 1
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
The undersigned Registered Holder of this Warrant irrevocably
exercises this Warrant for the purchase of shares of Stock of , purchasable
with this Warrant, and herewith makes payment therefor, all at the price and
on the terms and conditions specified in this Warrant. The representations
and warranties of the undersigned contained in Section 11 of this Warrant
continue to be true and complete on the date hereof.
Dated:
------------ -------------------------------------
(Signature of Registered Holder)
-------------------------------------
(Street Address)
-------------------------------------
(City) (State) (Zip)
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned Registered Holder of this Warrant
hereby sells, assigns and transfers unto the Assignee named below in
accordance with the terms and conditions of the Warrant, all of the rights of
the undersigned under the within Warrant, with respect to the number of
shares of Warrant Stock set forth below:
<TABLE>
<CAPTION>
NAME OF ASSIGNEE ADDRESS NO. OF SHARES
<S> <C> <C>
</TABLE>
and does hereby irrevocably constitute and appoint ________________________
Attorney to make such transfer on the books of ________________________
maintained for the purpose, with full power of substitution in the premises.
Dated: BY:
------------ ----------------------------------
(Registered Holder)
Name:
Title:
<PAGE>
EXHIBIT 4.50
THIS OPTION HAS BEEN ISSUED PRUSUANT TO EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND THE
QUALIFICATION REQUIREMENTS OF APPLICABLE STATE SECURITIES LAWS (THE "LAWS").
IT IS UNLAWFUL TO EXERCISE, SELL, PLEDGE OR OTHERWISE DISPOSE OF THIS OPTION,
OR ANY INTEREST THEREIN, OR RECEIVE ANY CONSIDERATION THEREFORE, IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND
QUALIFICATION UNDER THE LAWS, UNLESS EXEMPTIONS FROM SUCH REGISTRATION AND
QUALIFICATION REQUIREMENTS ARE AVAILABLE.
THIS OPTION MAY BE EXERCISED ONLY IN ACCORDANCE WITH THE TERMS OF THIS STOCK
OPTION AGREEMENT.
----------------------
THE RiceX-TM- COMPANY
NON-STATUTORY STOCK OPTION AGREEMENT
The RiceX-TM- Company, a Delaware corporation (the "Company"),
hereby grants TO Maria Gutierrez (the "Optionee"), an option (the "Option")
to purchase up to 3,000 shares ("Shares") of Common Stock, per value $.001,
of the Company (the "Common Stock") at an exercise price (the "Exercise
Price") equal to $.55 per share, which is equal to the fair market value of
the Company's Common Stock on the date of grant, in all respects subject to
the terms, definitions and provisions of this Non-Statutory Stock Option
Agreement (the "Agreement").
1. NATURE OF THE OPTION. The Option is intended to be a nonstatutory
option and NOT an incentive stock option within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code").
2. PAYMENT OF EXERCISE PRICE.
(a) METHOD OF PAYMENT. Payment of the Exercise Price for shares
purchased upon exercise of the Option shall be made (i) by delivery to the
Company of cash or a check to the order of the Company in an amount equal to
the purchase price of such shares; (ii) subject to the consent of the
Company, by delivery to the Company of shares of Common Stock of the Company
then owned by the Optionee having a fair market value equal in amount to the
purchase price of such shares in accordance with Section 2(b); (iii) by any
other means approved by the Board of Directors and which is consistent with
applicable laws and regulations
(including, without limitation, the provisions of Rule 16b-3 under the
Securities Exchange Act of 1934 and Regulation T promulgated by the Federal
Reserve Board); or (iv) by any combination of such methods of payment.
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(b) METHOD OF PAYMENT-PUBLIC MARKET. In the event there exists a
public market for the Company's Common Stock on the date of
exercise, payment of the exercise price may be made by surrender
of shares of the Company's Common Stock. In this case payment
shall be made as follows:
(i) Optionee shall deliver to the Secretary of the Company
a written notice which shall set forth the portion of the purchase price the
Optionee wishes to pay with Common Stock, and the number of shares of such
Common Stock the Optionee intends to surrender pursuant to exercise of this
Option, which shall be determined by dividing the aforementioned portion of
the purchase price by the average of the last reported bid and asked prices
per share of Common Stock of the Company, as reported in THE WALL STREET
JOURNAL, (or, if not so reported, as otherwise reported by the National
Association of Securities Dealers Automated Quotation (NASDAQ) System or, in
the event the Common Stock is listed on a national securities exchange, or on
the NASDAQ National Market System, NASDAQ Small-Cap Market or any successor
national market system, the closing price of Common Stock of the Company on
such exchange as reported in the WALL STREET JOURNAL), for the day on which
the notice of exercise is sent or delivered;
(ii) Fractional shares shall be disregarded and the
Optionee shall pay in cash an amount equal to such fraction multiplied by the
price determined under subparagraph (i) above;
(iii) The written notice shall be accompanied by a duly
endorsed blank stock power with respect to the number of Shares set forth in
the notice, and the certificate(s) representing said Shares shall be
delivered to the Company at its principal offices within three (3) working
days from the date of the notice of exercise;
(iv) The Optionee hereby authorizes and directs the
Secretary of the Company to transfer so many of the Shares represented by
such certificate(s) as are necessary to pay the purchase price in accordance
with the provisions herein;
(v) If any such transfer of Shares requires the consent of
the California Commissioner of Corporations or of some other agency under the
securities laws of any other state, or an opinion of counsel for the Company
or Optionee that such transfer may be effected under applicable Federal and
state securities laws, the time periods specified herein shall be extended
for such periods as the necessary request for consent to transfer is pending
before said Commissioner or other agency, or until counsel renders such an
opinion, as the case may be. All parties agree to cooperate in making such
request for transfer, or in obtaining such opinion of counsel, and no
transfer shall be effected without such consent or opinion if required by
law; and
(vi) Nothwithstanding any other provision herein, the
Optionee shall only be permitted to pay the purchase price with shares of the
Company's Common Stock owned by him as of the exercise date in the manner and
within the time periods allowed under Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 as such regulation is presently constituted,
as it is amended from time to time, and as it is interpreted now or hereafter
by the
2
<PAGE>
Securities and Exchange Commission and any such shares shall have been held
by the Optionee for not less than six (6) months.
3. EXERCISE OF OPTION. The Option shall vest and become exercisable
during its term, subject to the provisions of Section 5 below, as
follows:
(a) VESTING AND RIGHT TO EXERCISE.
(i) The Option hereby granted shall vest and become
exercisable as to 1/3 of the Shares subject to this Option annually,
commencing one year from the date of grant of the Option, until fully vested.
If there should occur a "change of control" of the Company, as defined below,
then the Option shall immediately vest and become exercisable in full. For
purposes of the foregoing provision, a "change in control" means the
occurrence of any of the following:
(A) any "person", as such term is used in Sections
13(d) and 14(d) of the Exchange Act of 1934, as amended (the "Exchange Act")
(other than the Company or its existing shareholders) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company (or a successor to the
Company) representing 50% or more of the combined voting power of the then
outstanding securities of the Company or such successor;
(B) the dissolution of the Company or liquidation
of more than 50% or more in value of the assets of the Company, (ii) any
merger or reorganization of the Company whether or not another entity is the
survivor, (iii) a transaction (other than the initial public offering of
Company's shares) pursuant to which holders, as a group, of all of the shares
of the Company outstanding before the transaction, hold, as a group, less
than 50% of the combined voting power of the Company or any successor company
outstanding after the transaction, or (iv) any other event or series of
events which the board determines, in its discretion, would materially alter
the structure of the Company or its ownership.
(ii) In the event of the Optionee's death, disability or
other termination of employment prior to exercise, the exercisability of the
Option shall be governed by Section 5, below.
(iii) The Option may be exercised in whole or in part but
may not be exercised as to fractional shares.
(b) METHOD OF EXERCISE. In order to exercise any portion of
the Option, the Optionee shall execute and deliver to the Chief Financial
Officer of the Company, the Notice of Exercise of Stock Option in the form
attached hereto as Exhibit A, together with the Consent of Spouse. The Notice
of Exercise must be accompanied by payment in full of the aggregate purchase
price for the Shares to be purchased in the type of consideration set forth
in Section 2. The Notice of Exercise may be delivered to the Company at any
time. The certificate(s) for the Shares as to which the Option has been
exercised shall be registered in the name of Optionee or his designee.
3
<PAGE>
(c) RESTRICTIONS ON EXERCISE. The Option may not be exercised
if the issuance of the Shares upon such exercise or the method of payment of
consideration for such Shares would constitute a violation of any applicable
Federal or state securities law or any other law or regulation. As a
condition to the exercise of the Option, the Company may require the Optionee
to make any representation or warranty to the company at the time of exercise
of the Option as in the opinion of legal counsel for the Company may be
required by any applicable law or regulation, including the execution and
delivery of an appropriate representation statement. The stock certificate
(s) for the Shares issued upon exercise of the Option may bear appropriate
legends restricting transfer.
(d) DELIVERY OF CERTIFICATES. The Company shall deliver the
certificate(s) for the Shares issued upon exercise of the Option to the
Director as soon as is practicable; PROVIDED, HOWEVER, that if any law or
regulation requires the Company to take any action with respect to such
shares before the issuance thereof, including, without limitation, actions
taken pursuant to Section 6 below, then the date of delivery of such Shares
shall be extended for a period necessary to take such action.
4. NON-TRANSFERABILITY OF OPTION. The Option may be exercised during
the lifetime of the Optionee only by the Optionee any may not be transferred
in any manner other than by will or by the laws of descent and distribution.
The terms of the Option shall be binding upon the executors, administrators,
heirs and successors of the Optionee.
5. TERM OF THE OPTION. Except as otherwise provided in this
Agreement, to the extent not previously exercised, the right to exercise the
Option shall terminate on the tenth (10th) anniversary of the Date of Grant.
Notwithstanding the foregoing, if an Optionee ceases to be an employee of the
Company for any reason, except death and disability, he or she may, but only
within ninety (90) days after the date he or she ceases to be an employee of
the Company, exercise his or her Option to the extent that he or she was
entitled to exercise it at the date of such termination, and in the case of
the Optionee's death or disability, the Optionee (or the Administrator or
Executor or other Representative of the Optionee's Estate) may, but only
within one (1) year after the date he or she ceases to be an employee of the
Company due to death or disability, exercise his or her Option to the extent
that he or she was entitled to exercise it at the date of such termination;
PROVIDED, HOWEVER, that in no event may the Option be exercised after its ten
(10) year term has expired. To the extent that the Optionee was not entitled
to exercise an Option at the date of such termination, or if he or she does
not exercise such Option (which he or she was entitled to exercise) within
the time specified herein, the Option shall terminate.
6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION: OTHER ADJUSTMENTS.
Subject to any required action by the shareholders of the Company, the number
of Shares and the Exercise Price shall be proportionately adjusted for any
increase or decrease in the number of issued shares of common stock resulting
from a stock split, reverse stock split, combination, reclassification, the
payment of a stock dividend on the common stock or any other increase or
decrease in the number of shares of Common Stock of the Company effected
without the receipt of consideration by the Company; PROVIDED, HOWEVER, that
conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment
shall be made by the Board, whose determination in that respect shall be
final, binding and conclusive. Except as expressly provided herein, no issue
by the Company of
4
<PAGE>
shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and not adjustment by reason thereof shall be
made with respect to, the number of Shares subject to, or the Exercise Price
of, this Option.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the number of Shares, we well as the
Exercise Price, in the event that the Company effects one or more
reorganizations, recapitalizations, rights offerings, or other increases or
reductions of shares of its outstanding common stock, and in the event of the
Company being consolidated with or merged into any other corporation;
PROVIDED, however, that in no event shall the Optionee be adversely affected
by such adjustment.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for changing, modifying, amending or adjusting any of the
terms of this Option solely in order for the Company to perfect a significant
financing; provided, however, that in no event shall the Optionee be
adversely affected by such adjustment.
7. RIGHTS OF SHAREHOLDER. Optionee shall have no rights as a
shareholder with respect to the Shares until the date of the issuance or the
transfer to the Optionee of the certificate(s) for such Shares and only after
the Exercise Price for such Shares has been paid in full.
8. AMENDMENT. Except as set forth in Section 6, this Agreement may
not be amended without the written consent of the Optionee.
9. INCOME TAX WITHHOLDING. The Optionee authorizes the Company to
withhold, in accordance with applicable law from any compensation payable to
him or her, any taxes required to be withheld by Federal, state or local laws
as a result of the exercise of this Option. Furthermore, in the event of any
determination that the Company has failed to withhold a sum sufficient to pay
all withholding taxes due in connection with the exercise of this Option, the
Optionee agrees to pay the Company the amount of such deficiency in cash
within five (5) days after receiving a written demand from the Company to do
so, whether or not Optionee is an employee or director of the Company at that
time.
10. INVESTMENT REPRESENTATIONS; LEGENDS.
(a) REPRESENTATIONS. The Optionee represents, warrants and
covenants that:
(i) Any shares purchased upon exercise of this Option
shall be acquired for the Optionee's account for investment only, and not
with a view to, or for sale in connection with, any distribution of the
shares in violation of the Securities Act of 1933 (the "Securities Act"), or
any rule or regulation under the Securities Act.
(ii) The Optionee has had such opportunity as he or she
has deemed adequate to obtain from representatives of the Company such
information as is necessary to permit the Optionee to evaluate the merits and
risks of his or her investment in the Company.
(iii) The Optionee is able to bear the economic risk of
holding such shares acquired pursuant to the exercise of this option for an
indefinite period.
5
<PAGE>
(iv) The Optionee understands that the Shares acquired
pursuant to the exercise of this option are not registered under the
Securities Act and are "restricted securities" within the meaning of Rule 144
under the Securities Act and may not be transferred, sold or otherwise
disposed of in the absence of an effective registration statement with
respect to the Shares filed and made effective under the Securities Act of
1933, or an opinion of counsel satisfactory to the Company to the effect that
registration under such Act is not required.
By making payment upon exercise of this option, the Optionee shall be deemed
to have reaffirmed, as of the date of such payment, the representations made
in this Section 10.
(b) LEGEND OF STOCK CERTIFICATE. All stock certificates
representing shares of Common Stock issued to the Optionee upon exercise of
this option shall have affixed thereto legend(s) substantially in the
following forms, in addition to any other legends required by applicable
state law:
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT
BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THE
SHARES EVIDENCED BY THIS CERTIFICATE, FILED AND MADE
EFFECTIVE UNDER THE SECURITIES ACT OF 1933, OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY TO THE EFFECT THAT
REGISTRATION UNDER SUCH ACT IS NOT REQUIRED."
DATE OF GRANT:
--------------
THE RiceX-TM- COMPANY
By:
-------------------------------------
Daniel L. McPeak,
Sr., Chief Executive Officer
By:
-------------------------------------
Todd C. Crow, Chief Financial Officer
6
<PAGE>
The Optionee acknowledges receipt of the Non-Statutory
Stock Option Agreement attached hereto and represents that he or she is
familiar with the terms and provisions thereof, and hereby accepts the Option
subject to all of the terms and provisions thereof. The Optionee hereby
agrees to accept as binding, conclusive and final all decisions or
interpretations of the Board of Directors of The RiceX-TM- Company upon any
questions arising under such Agreement.
Dated:
--------------------
OPTIONEE:
------------------------------------
CONSENT OF SPOUSE
I, _________________________, spouse of the Optionee who executed
the Non-Statutory Stock Option Agreement attached hereto, hereby agree that
my spouse's interest in the shares of Common Stock of The RiceX-TM- Company
subject to said Agreement shall be irrevocably bound by the Agreement's
terms. I agree to accept as binding, conclusive and final all decisions or
interpretations of the Board of Directors of The RiceX-TM- Company upon any
questions arising under such Agreement. I further agree that my community
property interest in such Shares, if any, shall similarly be bound by said
Agreement and that such consent is binding upon my executors, administrators,
heirs and assigns. I agree to execute and deliver such documents as may be
necessary to carry out the intent of said Agreement and this consent.
Dated:
--------------------
Signature:
------------------------------
Print Name:
-----------------------------
7
<PAGE>
EXHIBIT A
To: THE RiceX-TM- Company
1241 Hawk's Flight Court
El Dorado Hills, CA 95762
Subject: NOTICE OF EXERCISE OF STOCK OPTION
With respect to the stock option granted to the undersigned
by The RiceX-TM- Company, (the "Company") on ________________________, to
purchase an aggregate of _______________ shares of the Company's Common
Stock, this is official notice that the undersigned hereby elects to exercise
such option to purchase shares as follows:
NUMBER OF SHARES:
-------------------
DATE OF PURCHASE:
-------------------
MODE OF PAYMENT: (certified check or cash)
--------------------
The shares should be issued as follows:
NAME:
--------------------------------
ADDRESS:
-----------------------------
-----------------------------
Signed:
-----------------------------
Dated:
-------------------------------
Please send this notice of exercise to:
The RiceX-TM- Company
1241 Hawk's Flight Court.
El Dorado Hills, CA 95762
8
<PAGE>
Exhibit 4.50
SCHEDULE TO IDENTICAL DOCUMENTS FILED
<TABLE>
<CAPTION>
NAME SHARES
<S> <C>
Rukmini Cheruvanky 12,000
Reddy Sastry Cherukuri 12,000
Steven Holloman 30,000
Terry Miller 12,000
Edward Newton 12,000
Tim Maerz 6,000
Mohammad Mazhar 12,000
Charmaine Lynch 12,000
Tom McCarthy 6,000
David Maki 6,000
Ryan Minges 6,000
</TABLE>
9
<PAGE>
EXHIBIT 4.51
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS WARRANT HAS NOT BEEN
QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA
AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF
THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS
THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102
OR 25106 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO
THIS WARRANT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING
OBTAINED, UNLESS THE SALE IS SO EXEMPT.
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE
SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF ANY EFFECTIVE REGISTRATION STATEMENT AS TO
SUCH SECURITIES FILED UNDER THE ACT AND COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER HEREOF
THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE CAPITAL STOCK
OF
THE RICEX COMPANY
This Warrant is entered into pursuant to the terms of the Agreement
between JDK & Associates, Inc. and The RiceX Company (the "Company"). The
Company hereby grants to JDK & Associates, Inc., or its permitted registered
assigns ("Registered Holder"), subject to the terms and conditions of this
Warrant, the right to purchase from the Company at any time after the date of
this Warrant and prior to the Expiration Date (as defined below) up to the
number of shares (subject to adjustment as set forth herein and rounded to
whole shares) of Warrant Stock (as defined below) at a purchase price per
share equal to the Purchase Price (as defined below) subject to adjustment as
provided herein, upon surrender of this Warrant at the principal office of
the Company together with a duly executed Subscription Form in the form
attached hereto as Exhibit 1 and simultaneous payment of the full Purchase
Price, as adjusted to the extent provided herein, in lawful money of the
United States of America.
1. CERTAIN DEFINITIONS. The following terms shall have the meaning
set forth below:
<PAGE>
1.1 BOARD. The "Board" means the Board of Directors of the
Company.
1.2 COMPANY. The "Company" means The RiceX Company, a
Delaware corporation.
1.3 EXPIRATION DATE. "Expiration Date" means 5:00 p.m.
Pacific Time on October 31, 2002, or, if earlier, the date and time
determined under Section 5.4 of this Warrant.
1.4 ISSUE DATE. "Issue Date" means the date of this Warrant.
1.5 PURCHASE PRICE. "Purchase Price" means seventy-five cents
($0.75) per share of Warrant Stock. The Purchase Price is subject to
adjustment, as provided herein.
1.6 REGISTERED HOLDER. "Registered Holder" means JDK &
Associates, Inc. or its permitted registered assigns.
1.7 SEC. "SEC" means the Securities Exchange Commission of
the United States of America.
1.8 WARRANT. "Warrant" means this Warrant and Warrant(s)
delivered in substitution or exchange therefor, as provided herein.
1.9 WARRANT STOCK. "Warrant Stock" means up to 50,000 shares
of the Common Stock of the Company and any other consideration issuable under
this Agreement upon exercise of this Warrant or any portion thereof. The
number and character of shares of Warrant Stock are subject to adjustment as
provided herein and the term "Warrant Stock" shall include stock and other
securities and property at any time receivable or issuable upon exercise of
this Warrant.
2. EXERCISE. Subject to the terms of this Warrant and compliance with
all applicable securities laws, Registered Holder may exercise this Warrant
at any time, on any business day before the Expiration Date, for up to the
number of shares of Warrant Stock that is set forth in Section 1.9 above, by
surrendering this Warrant at the principal office of the Company at 1241
Hawks Flight Court, El Dorado Hills, California 95762, with a Subscription
Form in the form attached as Exhibit 1 hereto duly executed by the Registered
Holder, together with full payment in cash or check of the sum obtained by
multiplying (a) the number of shares of Warrant Stock the Registered Holder
desires to purchase by (b) the Purchase Price or adjusted Purchase Price
therefor, if applicable, as determined in accordance with the terms hereof.
Registered Holder may exercise this Warrant for less than the full number of
shares of Warrant Stock purchasable hereunder but must exercise this Warrant
in increments of at least ten percent (10%) of the initial shares of Warrant
Stock, as adjusted pursuant hereto, if the exercise is for less than all
remaining Warrant Stock then exercisable hereunder. Upon Registered Holder's
partial exercise, Registered Holder must surrender this Warrant, and the
Company shall issue to the Registered Holder a new Warrant of the same tenor
for
2
<PAGE>
purchase of the number of remaining shares of Warrant Stock not purchased.
Registered Holder shall be deemed to have exercised this Warrant immediately
prior to the close of business on the date of its surrender for exercise as
provided above, and shall be treated for all purposes as the holder of record
of such shares as of the close of business on such date. As soon as
practicable on or after such date, the Company shall issue and deliver to the
Registered Holder or Holders a certificate or certificates for the number of
whole shares of Warrant Stock issuable upon such exercise, together with cash
in lieu of any fraction of a share equal to such fraction of the current fair
market value of one whole share of Warrant Stock as of the date of exercise,
as determined in good faith by the Company's Board. No fractional shares may
be issued upon any exercise of this Warrant.
Upon exercise, in part or in whole, of this Warrant, certificates
representing the Warrant Shares shall bear a legend substantially similar to
the following:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (I) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (II) TO THE
EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER THE ACT (OR ANY
SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF
SECURITIES), OR (III) UPON THE DELIVERY BY THE HOLDER TO THE
COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO
THE ISSUER, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER
SUCH ACT IS AVAILABLE.
3. FULLY PAID SHARES. All shares of Warrant Stock the Company issues
upon exercise of this Warrant shall be validly issued, fully paid and
non-assessable.
4. TRANSFER AND EXCHANGE. Subject to the terms of this Warrant and
compliance with all applicable securities laws, this Warrant and all rights
hereunder are transferable, in whole or in part, on the books of the Company
maintained for such purpose at the principal office of the Company referred
to above, by the Registered Holder hereof in person, or by duly authorized
attorney, upon Registered Holder's surrender of this Warrant properly
endorsed and upon payment of any necessary transfer tax or other governmental
charge imposed upon such transfer. Upon any partial transfer, the Company
shall issue and deliver to the Registered Holder a new Warrant or Warrants
with respect to the shares of Warrant Stock not so transferred. Until a
transfer of this Warrant is registered on the books of the Company, the
Company may treat the Registered Holder hereof as the owner for all purposes.
Notwithstanding the foregoing, this Warrant and the rights hereunder may not
be transferred unless such transfer (a) complies with all applicable
securities laws and the provisions of Section 11 hereof, and (b) effects the
transfer of the right to purchase at least five percent (5%) of the initial
shares of Warrant Stock, as adjusted, or the right to purchase all remaining
3
<PAGE>
shares of Warrant Stock purchasable under this Warrant if the right to
purchase less than five percent (5%) of the initial shares of Warrant Stock
remains untransferred.
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The number or
character of shares of Warrant Stock issuable upon exercise of this Warrant
and the Purchase Price therefor shall be adjusted to the extent provided
below upon occurrence of the following events:
5.1 ADJUSTMENT FOR STOCK SPLITS, STOCK DIVIDENDS,
RECAPITALIZATION AND SIMILAR EVENTS. The Purchase Price of this Warrant and
the number of shares of Warrant Stock issuable upon exercise of this Warrant
shall each be proportionally adjusted to reflect any stock split, reverse
stock split, combination of shares, reclassification, recapitalization or
other similar event affecting the number of outstanding shares of the
Company's Stock. For example, if there should be a 2-for-1 stock split of the
Company's Stock, the Purchase Price of this Warrant shall be divided by two
(2) and the number of shares of Warrant Stock purchasable under this Warrant
shall be doubled. An adjustment under this Section 5.1 shall be effective at
the close of business on the date such event becomes effective.
5.2 ADJUSTMENT FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If the
Company shall make or issue, or shall fix a record date for the determination
of eligible holders entitled to receive, a dividend or other distribution
with respect to the Warrant Stock payable in securities of the Company, then,
and in each such case, the Registered Holder of this Warrant on exercise of
this Warrant at any time after the consummation, effective date or record
date of such event, shall receive, in addition to the shares of Warrant Stock
issuable on such exercise prior to such date, the securities or such other
securities of the Company to which such Registered Holder would have been
entitled upon such date if such Registered Holder had exercised this Warrant
immediately prior thereto (all subject to further adjustment as provided in
this Warrant).
5.3 ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER. In
case of any reorganization of the Company (or any successor corporation, the
stock or other securities of which are at the time receivable on the exercise
of this Warrant), after the Issue Date, or in case, after such date, the
Company (or any other such successor corporation) shall consolidate all of
its assets to another corporation, then, and in each such case, the
Registered Holder of this Warrant, upon the exercise hereof (as provided in
Section 2) at any time after the consummation of such reorganization,
consolidation, merger, or conveyance, shall be entitled to receive, in lieu
of the stock or other securities and property receivable upon the exercise of
this Warrant prior to such consummation, the stock or other securities or
property to which such Registered Holder would have been entitled had
Registered Holder exercised this Warrant immediately prior thereto, all
subject to further adjustment as provided in this Section 5, and the
successor or purchasing corporation in such reorganization, consolidation,
merger or conveyance (if other than the Company) shall duly execute and
deliver to the Registered Holder a supplement hereto acknowledging such
corporation's obligations under this Warrant; and in each such case, the
terms of this Warrant shall be applicable
4
<PAGE>
to the shares of stock or other securities or property receivable upon the
exercise of this Warrant after such consummation.
5.4 CONVERSION OF WARRANT STOCK. In case all the authorized
Warrant Stock of the Company is converted, pursuant to the Company's
Certificate of Incorporation, into other securities or property, or the
Warrant Stock otherwise ceases to exist, then, in such case, the Registered
Holder of this Warrant, on exercise hereof at any time after the date on
which the Warrant Stock is so converted or ceases to exist (the "Termination
Date") shall receive, in lieu of the number of Shares of Warrant Stock that
would have been issuable upon such exercise immediately prior to the
Termination Date (the "Former Issuable Number of Shares of Warrant Stock"),
the stock and other securities and property to which such Registered Holder
would have been entitled to receive upon the Termination Date if such
Registered Holder had exercised this Warrant with respect to the Former
Issuable Number of Shares of Warrant Stock immediately prior to the
Termination Date (all subject to further adjustment as provided in this
Warrant).
5.5 ADJUSTMENTS TO PURCHASE PRICE. Although an adjustment to
the Purchase Price may occur pursuant to this Section 5, the aggregate
purchase price for the total number of shares of Warrant Stock purchasable
hereunder (as adjusted) shall remain the same.
6. NO IMPAIRMENT. The Company may not, by amendment of its
Certificate of Incorporation or Bylaws, or through reorganization,
consolidation, merger, dissolution, issue or sale of securities, sale of
assets or any other voluntary action, willfully avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but shall at
all times in good faith assist in the carrying out of all such terms and in
the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Registered Holder against impairment. Without
limiting the generality of the foregoing, the Company (a) will not set nor
increase the par value (if any par value exists) of any shares of stock
issuable upon the exercise of this Warrant above the amount payable therefor
upon such exercise, and (b) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully
paid and non-assessable shares of Warrant Stock upon the exercise of this
Warrant.
7. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in
either the Purchase Price or in the number of share of Warrant Stock, or
other stock, securities or property receivable on the exercise of this
Warrant, the Treasurer of the Company shall, upon request from Registered
Holder, compute such adjustment in accordance with the terms of this Warrant
and prepare a certificate setting forth such adjustment and showing in detail
the facts upon which such adjustment is based, including a statement of the
adjusted Purchase Price. Thereafter, the Company shall cause copies of such
certificate to be mailed (by first class mail, postage prepaid) to the
Registered Holder.
8. NOTICES OF RECORD DATE. In case:
5
<PAGE>
(a) The Company shall take a record of the holders of
its Warrant Stock for the purpose of entitling them to receive any dividend
or other distribution; or
(b) Of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation, or any conveyance of
all or substantially all of the assets of the Company to another corporation
in which holders of the Company's stock are to receive stock, securities,
cash or property of another corporation; or
(c) Of any voluntary dissolution, liquidation or
winding-up of the Company; or
(d) Any redemption or conversion into Common Stock of
all outstanding Warrant Stock.
then, and in each such case, the Company shall mail or cause to be mailed to
the Registered Holder of this Warrant a notice specifying, as the case may
be, (a) the date on which a record is to be taken for the purpose of such
dividend or distribution, and stating the amount and character of such
dividend or distribution, or (b) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution,
liquidation, winding-up, redemption or conversion is to take place, and the
time, if any is to be fixed, as of which the holders of record of Warrant
Stock shall be entitled to exchange their shares of Warrant Stock or Common
Stock (or such other stock or securities) for securities or other property
deliverable upon such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding-up. Such notice shall
be mailed at least ten (10) days prior to the effective or record date
therein specified, as applicable. Failure to provide notice under this
Section 8 or any defect therein shall not affect the validity of any action
taken in connection with such dividend, distribution, reorganization,
reclassification, consolidation, merger, conveyance, dissolution,
liquidation, winding-up, redemption or conversion.
9. LOSS OR MUTILATION. Upon Registered Holder's delivery to the
Company of evidence reasonably satisfactory to the Company of the ownership,
and the loss, theft, destruction or mutilation, of this Warrant, and of
indemnity reasonably satisfactory to the Company, and (in the case of
mutilation) upon surrender and cancellation of this Warrant, the Company
shall execute and deliver to the Registered Holder in lieu thereof a new
Warrant of like tenor.
10. RESERVATION OF WARRANT STOCK. If at any time the number of
authorized but unissued shares the Company's Common Stock or other securities
shall not be sufficient to effect the exercise of this Warrant, the Company
shall take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock or
other securities to such number of shares of Common Stock or other securities
as shall be sufficient for such purpose.
11. RESTRICTIONS ON TRANSFER.
6
<PAGE>
11.1 ACKNOWLEDGMENT, REPRESENTATION AND WARRANTIES OF
REGISTERED HOLDER. The Registered Holder understands and acknowledge that
neither this Warrant nor the shares of Warrant Stock have been registered
under the Securities Act of 1933, as amended (the "Act"), or any state
securities laws. As a condition to the issuance of this Warrant and to its
exercise the Registered Holder hereby represents and warrants to the Company
that:
(a) The Warrant and, if applicable, the shares of
Warrant Stock (collectively, the "Securities") have been acquired by the
Registered Holder for investment and not with a view to the sale or other
distribution thereof within the meaning of the Act and the Registered Holder
has no present intention of selling or otherwise disposing of all or any
portion of the Securities.
(b) The Registered Holder has acquired the Securities
for the Registered Holder's own account only and no one else has any
beneficial ownership in the Securities.
(c) The Registered Holder is capable of evaluating the
merits and risks of any investment in the Securities, is financially capable
of bearing a total loss of this investment and has either (i) a preexisting
personal or business relationship with the Company or its principals or (ii)
by reason of the Registered Holder's business or financial experience, has
the capacity to protect his or its own interest in connection with this
investment.
(d) The Registered Holder has had access to all
information regarding the Company, its present and prospective business,
assets, liabilities and financial condition that the Registered Holder
considers important to making the decision to acquire the Securities and has
had ample opportunity to ask questions of and receive answers from the
Company's representatives concerning an investment in the Securities and to
obtain any and all documents requested in order to supplement or verify any
of the information supplied.
(e) The Registered Holder understands that the
Securities shall be deemed restricted securities under the Act and may not be
resold unless they are registered under the Act and any applicable state
securities law, or in the opinion of counsel in form and substance
satisfactory to the Company, an exemption from such registration is available.
(f) The Registered Holder is aware of Rule 144
promulgated under the Act, which rule provides, in substance, that (i) after
one year from the date restricted securities have been purchased and fully
paid for, a holder may transfer restricted securities provided certain
conditions are met, e.g., certain public information is available about the
Company, and specific limitations on the amount of shares which can be sold
within certain periods and the manner in which such shares must be sold are
complied with, and (ii) after two years from the date the Securities have
been purchased and fully paid for, holders who are not "affiliates" of the
Company may sell restricted securities without satisfying such conditions.
7
<PAGE>
(g) The Registered Holder further understands that if
the requirements of Rule 144 are not met, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required for any disposition of the Securities; and that, although Rule 144
is not exclusive, the SEC has expressed its opinion that persons proposing to
sell restricted securities other than in a registered offering or other than
pursuant to Rule 144 will have a substantial burden of proof in establishing
that an exemption from registration is available for such offers or sales and
such persons and the brokers who participate in the transactions do so at
their own risk.
11.2 SALE OR TRANSFER OF WARRANT STOCK. The Registered Holder
of this Warrant, by acceptance hereof, agrees that, absent an effective
registration statement filed with the SEC under the Act, covering the
disposition or sale of this Warrant or the Warrant Stock issued or issuable
upon exercise hereof, such Registered Holder will not sell or transfer any or
all of this Warrant or such Warrant Stock, as the case may be, without first
providing the Company with an opinion of counsel satisfactory to the Company
to the effect that such sale or transfer will be exempt from the registration
and prospectus delivery requirements of the Act, and such Registered Holder
consents to the Company making a notation on its records, or giving
instructions to any transfer agent of this Warrant, or such Warrant Stock, in
order to implement this restriction on transfer. The share certificates
issued upon exercise of this Warrant shall bear legends referring to the
restrictions on transfer set forth in this Section 11. As a condition to the
transfer of this Warrant or transfer of the shares issuable on exercise
hereof, any permitted transferee must execute and deliver to the Company
representations and warranties similar to those set forth in this Section 11.
12. GENERAL PROVISIONS.
12.1 NO RIGHTS OR LIABILITIES AS SHAREHOLDER. This Warrant
does not by itself entitle the Registered Holder to any voting rights or
other rights as a shareholder of the Company. In the absence of affirmative
action by Registered Holder to purchase Warrant Stock by exercise of this
Warrant, no provisions of this Warrant, and no enumeration herein of the
rights or privileges of the Registered Holder shall cause such Registered
Holder to be a shareholder of the Company for any purpose by virtue hereof.
12.2 AMENDMENT. The provisions of this Agreement may be
modified at any time by agreement of the parties. Any such agreement
hereafter made shall be ineffective to modify this Agreement in any respect
unless in writing and signed by the parties against whom enforcement of the
modification or discharge is sought.
12.3 NOTICES. Any notice under this Agreement shall be in
writing, and any written notice or other document shall be deemed to have
been duly given (i) on the date of personal service on the parties, (ii) on
the third business day after mailing, if the document is mailed by registered
or certified mail, (iii) one day after being sent by professional or
overnight courier or messenger service guaranteeing one-day delivery, with
receipt confirmed by the courier, or (iv) on the date of transmission if sent
by telegram, telex, telecopy or other means of electronic transmission
resulting in written
8
<PAGE>
copies, with receipt confirmed. Any such notice shall be delivered or
addressed to the parties at the addresses set forth below or at the most
recent address specified by the addressee through written notice under this
provision:
If to the Company:
Daniel McPeak, Chief Executive Officer
The RiceX Company
1241 Hawk's Flight Court, Suite 103
El Dorado Hills, CA 95762
Fax: (916) 933-3232
With a copy to:
Crosby, Heafey, Roach & May
700 S. Flower St., Suite 2200
Los Angeles, CA 90017
Attn: Mr. Richard Lasater
If to the Registered Holder:
JDK & Associates, Inc.
19800 MacArthur Blvd., Suite 880
Irvine, CA 92612
Attn: Joseph Kowal
With a copy to:
- ------------------------------
- ------------------------------
- ------------------------------
- ------------------------------
Attn:
-------------------------
Failure to conform to the requirement that mailings be done by registered or
certified mail shall not defeat the effectiveness of notice actually received
by the addressee.
12.4 CHANGE; WAIVER. Any of the terms or conditions of this
Agreement may be waived at any time by the party entitled to the benefit
thereof, but no such waiver shall affect or impair the right of the waiving
party to require observance, performance or satisfaction either of that term
or condition as it applies on a subsequent occasion or of any other term or
condition.
12.5 HEADINGS. The headings in this Warrant are for purposes
of convenience and reference only, and shall not be deemed to constitute a
part hereof.
9
<PAGE>
12.6 LAW GOVERNING. The rights and obligations of the parties
and the interpretation and performance of this Agreement shall be governed by
the law of California, excluding its conflict of laws rules
12.7 INTEGRATION. This Agreement constitutes the entire
agreement between the Company and the Registered Holder with respect to the
subject matter hereof. Any previous agreement between the Company and the
Registered Holder is superseded by this Agreement. Subject to the exceptions
specifically set forth in this Agreement, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
heirs, successors, administrators, executors and assigns of the parties
hereto.
12.8 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
12.9 SEVERABILITY. If any provision of this Agreement is
adjudicated by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of the Agreement which can be given full force
and effect without the invalid provision shall continue in full force and
effect and shall in no way be impaired or invalidated.
Dated: As of November 1, 1999
COMPANY
The RiceX Company, a Delaware corporation
By:
--------------------------------------
Its:
--------------------------------------
REGISTERED HOLDER
JDK & Associates, Inc.
By:
--------------------------------------
Its:
--------------------------------------
10
<PAGE>
EXHIBIT 1
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
Theundersigned Registered Holder of this Warrant irrevocably
exercises this Warrant for the purchase of ___________ shares of ___________
Stock of ___________, purchasable with this Warrant, and herewith makes
payment therefor, all at the price and on the terms and conditions specified
in this Warrant. The representations and warranties of the undersigned
contained in Section 11 of this Warrant continue to be true and complete on
the date hereof.
Dated:
---------- --------------------------------------
(Signature of Registered Holder)
--------------------------------------
(Street Address)
--------------------------------------
(City) (State) (Zip)
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned Registered Holder of this Warrant
hereby sells, assigns and transfers unto the Assignee named below in
accordance with the terms and conditions of the Warrant, all of the rights of
the undersigned under the within Warrant, with respect to the number of
shares of Warrant Stock set forth below:
<TABLE>
<CAPTION>
NAME OF ASSIGNEE ADDRESS NO. OF SHARES
<S> <C> <C>
</TABLE>
and does hereby irrevocably constitute and appoint ______________________
Attorney to make such transfer on the books of ___________ maintained for the
purpose, with full power of substitution in the premises.
Dated: BY:
---------- --------------------------------------
(Registered Holder)
Name:
Title:
<PAGE>
EXHIBIT 4.52
ADDENDUM NO. 2 TO AGREEMENT DATED OCTOBER 31,1996
REFERENCE is made to that certain letter agreement dated October 31, 1996, as
amended by Addendum No. 1 thereto (together, the "Agreement") by and between
Monsanto Company ("Monsanto") and The Ricex Company, fka Food Extrusion, Inc.
(the "Company"). In consideration of the covenants set forth below, Monsanto
and the Company agree that, pursuant to Section 8.04 of the Agreement, the
Agreement shall be amended as of October 31, 1999 as follows:
1. Section 1.02 of the Agreement is deleted in its entirety and replaced
with the following:
"Section 1.02.
(a) Monsanto shall convert the Note into the number of shares of common stock
of the Company determined by dividing $5,000,000 by the lesser of (i) the
average of the closing bid prices for the common stock in the
over-the-counter market during the period of 30 trading days preceding
October 31, 1999 or (ii) $.75; provided, however, if such average of the
closing bid prices is less than $.69, the denominator shall be $.69. The
conversion shall occur on November 30, 1999. Immediately prior to the
conversion, the Company shall deliver to Monsanto an Officer's Certificate
setting forth the total number of shares of common stock of the Company then
outstanding. Notwithstanding the foregoing, the number of shares of common
stock of the Company to be purchased by, Monsanto shall not exceed 19.9% of
the shares of the common stock. of the Company outstanding on the conversion
date, after giving effect to such conversion. If Monsanto is not able to
acquire all of the shares of common stock into which the Note would be
convertible under the foregoing formula, the Company shall issue to Monsanto
a promissory note, in the form attached hereto as Annex A, in the principal
amount equal to the value of the shares which Monsanto did not acquire.
(b) Monsanto shall have registration rights with respect to the shares of
Common Stock into which the Note is converted as set forth in the form of
registration rights agreement attached hereto as Exhibit E."
IN WITNESS WHEREOF, the parties hereto have executed this Addendum No. 2 to
the Agreement dated October 31, 1996 as of the 30th day of November, 1999.
Monsanto Company The RiceX Company
By: Jacob Licht By Daniel L. McPeak
Its: Director, Business Development Its: Chairman and Chief Executive Officer
<PAGE>
EXHIBIT 4.53
THIS OPTION HAS BEEN ISSUED PURSUANT TO EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND THE
QUALIFICATION REQUIREMENTS OF APPLICABLE STATE SECURITIES LAWS (THE "LAWS").
IT IS UNLAWFUL TO EXERCISE, SELL, PLEDGE OR OTHERWISE DISPOSE OF THIS OPTION,
OR ANY INTEREST THEREIN, OR RECEIVE ANY CONSIDERATION THEREFOR, IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND
QUALIFICATION UNDER THE LAWS, UNLESS EXEMPTIONS FROM SUCH REGISTRATION AND
QUALIFICATION REQUIREMENTS ARE AVAILABLE.
THIS OPTION MAY BE EXERCISED ONLY IN ACCORDANCE WITH THE TERMS OF THIS STOCK
OPTION AGREEMENT.
THE RICEX COMPANY
NONSTATUTORY STOCK OPTION AGREEMENT
The RiceX Company, a Delaware corporation (the "Company"),
hereby grants to Ike Lynch (the "Optionee"), an option (the "Option") to
purchase a total of 900,000 shares of Common Stock, par value $.001, of the
Company (the "Common Stock") at an exercise price (the "Exercise Price")
equal to $.72 per share, which is equal to the fair market value of the
Company's Common Stock on the date of the grant, in all respects subject to
the terms, definitions and provisions of this Non-Statutory Stock Option
Agreement (the "Agreement").
1. NATURE OF THE OPTION. The Option is intended to be a
nonstatutory option and NOT an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
2. PAYMENT OF EXERCISE PRICE.
(a) METHOD OF PAYMENT. Payment of the Exercise
Price for shares purchased upon exercise of the Option shall be made (i) by
delivery to the Company of cash or a check to the order of the Company in an
amount equal to the purchase price of such shares; (ii) subject to the
consent of the Company, by delivery to the Company of shares of Common Stock
of the Company then owned by the Optionee having a fair market value equal in
amount to the purchase price of such shares in accordance with Section 2(b);
(iii) a note to the Company evidenced by proper form and security, or by any
other means approved by the Board of Directors and which is consistent with
applicable laws and regulations (including, without limitation, the
provisions of Rule 16b-3 under the Securities Exchange Act of 1934 and
Regulation T promulgated by the Federal Reserve Board); or (iv) by any
combination of such methods of payment.
<PAGE>
(b) METHOD OF PAYMENT-PUBLIC MARKET. In the event
there exists a public market for the Company's Common Stock on the date of
exercise, payment of the exercise price may be made by surrender of shares of
the Company's Common Stock. In this case payment shall be made as follows:
(i) Optionee shall deliver to the
Secretary of the Company a written notice which shall set forth the portion
of the purchase price the Optionee wishes to pay with Common Stock, and the
number of shares of such Common Stock the Optionee intends to surrender
pursuant to the exercise of this Option, which shall be determined by
dividing the aforementioned portion of the purchase price by the average of
the last reported bid and asked prices per share of Common Stock of the
Company, as reported in THE WALL STREET JOURNAL (or, if not so reported, as
otherwise reported by the National Association of Securities Dealers
automated Quotation (NASDAQ) System or, in the event the Common Stock is
listed on a national securities exchange, or on the NASDAQ Small-Cap Market
of any successor national market system, the closing price of Common Stock of
the Company on such exchange as reported in THE WALL STREET JOURNAL) for the
day on which the notice of exercise is sent or delivered.
(ii) Fractional shares shall be
disregarded and the Optionee shall pay in cash an amount equal to such
fraction multiplied by the price determined under subparagraph (I) above;
(iii) The written notice shall be
accompanied by a duly endorsed blank stock power with respect to the number
of Shares set forth in the notice, and the certificate(s) representing said
Shares shall be delivered to the Company at its principal offices within
three (3) working days from the date of the notice of exercise;
(iv) The Optionee hereby authorizes and
directs the Secretary of the Company to transfer so many of the Shares
represented by such Certificate(s) as are necessary to pay the purchase price
in accordance with the provisions herein;
(v) If any such transfer of Shares
requires the consent of the California Commissioner of Corporations or of
some other agency under the securities laws of any other state, or an opinion
of counsel for the Company or Optionee that such transfer may be effected
under applicable Federal and state securities laws, the time periods
specified herein shall be extended for such periods as the necessary request
for consent to transfer is pending before said Commissioner or other agency,
or until counsel renders such an opinion, as the case may be. All parties
agree to cooperate in making such request for transfer, or in obtaining such
opinion of counsel, and no transfer shall be effected without such consent or
opinion if required by law; and
(vi) Notwithstanding and other provisions
herein, the Optionee shall only be permitted to pay the purchase price with
shares of the Company's Common Stock owned by him as of the exercise date in
the manner and within the time periods allowed under Rule 16b-3 promulgated
under the Securities Exchange Act of 1934 as such regulation is presently
constituted, as it is amended from time to time, and as it is interpreted now
or hereafter by the Securities and Exchange Commission and any such shares
have been held by the Optionee for not less than six (6) months.
2
<PAGE>
3. EXERCISE OF OPTION. The Option shall vest and become
exercisable during its term, subject to the provisions of Section 5 below, as
follows:
(a) VESTING AND RIGHT TO EXERCISE.
(i) The Option hereby granted shall vest
and become exercisable with respect to 500,000 Shares of the Option on
November 1, 1999, and shall vest and become exercisable with respect to the
remaining 400,000 of the Shares subject to the Option on May 1, 2000. Subject
to the provisions of subparagraph (ii) and (iii) below, the Optionee can
exercise any portion of the Option, which has vested until the expiration of
the Option term.
If there should occur a "change of control" of the Company, as defined below,
then the Option shall immediately vest and become exercisable in full. For
purposes of the foregoing provision, a "change in control" means the
occurrence of any of the following:
(A) any "person", as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than the Company or its existing
shareholders) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
(or a successor to the Company) representing 50% or more of the combined
voting power of the then outstanding securities of the Company or such
successor;
(B) the dissolution of the
Company or liquidation of more than 50% or more in value of the assets of the
Company, (ii) or any merger or reorganization of the company whether or not
another entity is the survivor, (iii) a transaction (other than the initial
public offering of Company's shares) pursuant to which holders, as a group,
of all of the shares of the Company outstanding before the transaction, hold,
as a group, less than 50% of the combined voting power of the Company or any
successor company outstanding after the transaction, or (iv) any other event
or series of events which the Committee determines, in its discretion, would
materially alter the structure of the Company or its ownership.
(ii) In the event of the Optionee's
death, disability or other termination of employment prior to exercise, the
exercisability of the Option shall be governed by Section 5 below.
(iii) The Option may be exercised in
whole or in part but may not be exercised as to fractional shares.
(b) METHOD OF EXERCISE. In order to exercise any
portion of the Option, the Optionee shall execute and deliver to the Chief
Financial Officer of the Company, the Notice of Exercise of Stock Option in
the form attached hereto as Exhibit A, together with the Consent of Spouse.
The Notice of Exercise must be accompanied by payment in full of the
aggregate purchase price for the Shares to be purchased in the type of
consideration set forth in Section 2. The Notice of Exercise may be delivered
to the Company at any time. The
3
<PAGE>
certificate(s) for the Shares as to which the Option has been exercised shall
be registered in the name of Optionee or his designee.
(c) RESTRICTIONS ON EXERCISE. This Option may not
be exercised if the issuance of the shares upon such exercise or the method
of payment of consideration for such shares would constitute a violation of
any applicable Federal or state securities law or any other law or
regulation. As a condition to the exercise of the Option, the Company may
require the Optionee to make any representation or warranty to the Company at
the time of exercise of the Option as in the opinion of legal counsel for the
Company may be required by any applicable law or regulation, including the
execution and delivery of an appropriate representation statement. The stock
certificate(s) for the Shares issued upon exercise of the Option may bear
appropriate legends restricting transfer.
(d) DELIVERY OF CERTIFICATES. The Company shall
deliver the certificate(s) for the Shares issued upon exercise of the Option
to the Director as soon as is practicable; Provided, however, that if any law
or regulation requires the Company to take action with respect to such shares
before the issuance thereof, including, without limitation, actions taken
pursuant to Section 6 below, then the date of delivery of such Shares shall
be extended for a period necessary to take such action.
4. NON-TRANSFERABILITY OF OPTION. This Option may be
exercised during the lifetime of the Optionee only by the Optionee and may
not be transferred in any manner other than by will or by the laws of descent
and distribution. The terms of this Option shall be binding upon the
executors, administrators, heirs and successors of the Optionee.
5. TERM OF THE OPTION. Except as otherwise provided in this
agreement, to the extent not previously exercised, the right to exercise the
Option shall terminate on the tenth (10th) anniversary of the Date of Grant.
Notwithstanding the foregoing, if an Optionee ceases to be an employee of the
Company for any reason, except death and disability, he or she may, but only
within ninety (90) days after the date he or she ceases to be an employee of
the Company, exercise his or her Option to the extent that he or she was
entitled to exercise it at the date of such termination, and in the case of
the Optionee's death or disability, the Optionee (or the Administrator or
Executor or other Representative of the Optionee's Estate) may, but only
within one (1) year after the date he or she ceases to be an employee of the
Company due to death or disability, exercise his or her Option to the extent
that he or she was entitled to exercise it at the date of such termination;
provided, however that in no event may the Option be exercised after its ten
(10) year term has expired. To the extent that the Optionee was not entitled
to exercise an Option at the date of such termination, or if he or she does
not exercise such Option (which he or she was entitled to exercise) within
the time specified herein, the Option shall terminate.
6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; OTHER
ADJUSTMENTS. Subject to any required action by the shareholders of the
Company, the number of Shares and the Exercise Price shall be proportionately
adjusted for any increase or decrease in the number of issued shares of
common stock resulting from a stock split, reverse stock split, combination,
reclassification, the payment of a stock dividend on the common stock or any
other increase or decrease in the number of shares of Common Stock of the
Company effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities
4
<PAGE>
of the Company shall not be deemed to have been "effected without receipt of
consideration". Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issue by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to,
the number of Shares subject to, or the Exercise Price of, this Option.
The Board may, if it so determines in the exercise of
its sole discretion, also make provision for adjusting the number of
Shares, as well as the Exercise Price, in the event that the Company
effects on or more reorganization, recapitalizations, rights offerings,
or other increases or reductions of shares of its outstanding common
stock, and in the event of the Company being consolidated with or
merged into any other corporation; provided, however, that in no event
shall the Optionee be adversely affected by such adjustment.
The Board may, if it so determines in the exercise of
its sole discretion, also make provision for changing, modifying,
amending or adjusting any of the terms of this Option solely in order
for the Company to perfect a significant financing; provided, however,
that in no event shall the Optionee be adversely affected by such
adjustment.
7. RIGHTS OF SHAREHOLDER. Optionee shall have no rights as
a shareholder with respect to the shares until the date of the issuance or
the transfer to the Optionee of the certificate(s) for such Shares and only
after the Exercise Price for such Shares has been paid in full.
8. AMENDMENT. Except as set forth in Section 6, this
Agreement may not be amended without the written consent of the Optionee.
9. INCOME TAX WITHHOLDING. The Optionee authorizes the
Company to withhold, in accordance with applicable law from any compensation
payable to him or her, any taxes required to be withheld by Federal, state or
local laws as a result of the exercise of this Option. Furthermore, in the
event of any determination that the Company has failed to withhold a sum
sufficient to pay all withholding taxes due in connection with the exercise
of this Option, the Optionee agrees to pay the Company the amount of such
deficiency in cash within five (5) days after receiving a written demand from
the Company to do so, whether or not Optionee is an employee or director of
the Company at that time.
10. INVESTMENT REPRESENTATIONS; LEGENDS.
(a) REPRESENTATIONS. The Optionee represents,
warrants and covenants that:
(i) Any shares purchased upon exercise of
this Option shall be acquired for the Optionee's account for investment only,
and not with a view to, or for sale in connection with, any distribution of
the shares in violation of the Securities Act of 1933 (the "Securities Act"),
or any rule or regulation under the Securities Act.
5
<PAGE>
(ii) The Optionee has had such
opportunity as he or she has deemed adequate to obtain from representatives
of the Company such information as is necessary to permit the Optionee to
evaluate the merits and risks of his or her investment in the Company.
(iii) The Optionee is able to bear the
economic risk of the holding such shares acquired pursuant to the exercise of
this option for an indefinite period.
(iv) The Optionee understands that the
Shares acquired pursuant to the exercise of this option are not registered
under the Securities Act and are "restricted securities" within the meaning
of Rule 144 under the Securities Act and may not be transferred, sold or
otherwise disposed of in the absence of an effective registration statement
with respect to the Shares filed and made effective under the Securities Act
of 1933, or an opinion of counsel satisfactory to the Company to the effect
that registration under such Act is not required.
By making payment upon exercise of this option, the Optionee shall be deemed
to have reaffirmed, as of the date of such payment, the representations made
in this Section10.
(b) LEGENDS OF STOCK CERTIFICATE. All stock
certificates representing shares of Common Stock issued to the Optionee upon
exercise of this option shall have affixed thereto legend(s) substantially in
the following forms, in addition to any other legends required by applicable
state law:
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT
BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THE
SHARES EVIDENCED BY THIS CERTIFICATE, FILED AND MADE EFFECTIVE
UNDER THE SECURITIES ACT OF 1933, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION
UNDER SUCH ACT IS NOT REQUIRED".
In witness whereof, the parties have executed this agreement as of November 1,
1999.
THE RICEX COMPANY
By:
-----------------------------------
Daniel McPeak, Chairman and CEO
By:
-----------------------------------
6
<PAGE>
Todd Crow, Vice President and CFO
7
<PAGE>
The Optionee acknowledges receipt of a copy of the Plan,
and represents that he or she is familiar with the terms and provisions
thereof, and hereby accepts this Option subject to all of the terms and
provisions thereof. The Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board of
Directors of The RiceX Company upon any questions arising under such
Agreement.
Dated:
----------------
OPTIONEE:
---------------------------------
CONSENT OF SPOUSE
I, ___________________________, spouse of the Optionee who
executed the foregoing Agreement attached hereto, hereby agree that my
spouse's interest in the shares of Common Stock of The RiceX Company, subject
to said Agreement shall be irrevocably bound by the Agreement's terms. I
agree to accept as binding, conclusive and final all decisions or
interpretations of the Board of Directors of The RiceX Company upon any
questions arising under such Agreement. I further agree that my community
property interest in such Shares, if any, shall similarly be bound by said
Agreement and that such consent is binding upon my executors, administrators,
heirs and assigns. I agree to execute and deliver such documents as may be
necessary to carry out the intent of said Agreement and this consent.
Dated:
----------------
---------------------------------
Signature
8
<PAGE>
EXHIBIT 4.53
SCHEDULE OF IDENTICAL DOCUMENTS FILED
Todd C. Crow
Daniel L. McPeak, Jr.
9
<PAGE>
EXHIBIT 4.54
CONFIDENTIAL Offeree No.:
Name:
SUBSCRIPTION BOOKLET
THE RICEX COMPANY
$6,000,000 worth of Units, each Unit consisting of
one share of Common Stock and a warrant to purchase
one share of Common Stock
Offering Price
$.75 per Unit
<PAGE>
SUBSCRIPTION INSTRUCTIONS
This booklet of subscription documents relates to the private
offering (the "Offering") of up to $6,000,000 worth of units (the "Units"),
each Unit consisting of (i) one share (a "Share") of the Common Stock of The
RiceX Company, a Delaware corporation (the "Company"), and (ii) a warrant (a
"Warrant") to purchase one share (a "Warrant Share") of the Company's Common
Stock at an exercise price for the first year of $1.00, for the second year
of $1.25 and for the third year of $1.50. Delivery of this booklet to anyone
other than the person named on the front cover is unauthorized, and any
reproduction or circulation of this booklet, in whole or in part, is
prohibited.
In order to subscribe for the Units, a subscriber must
complete and execute the subscription documents contained in this
booklet in accordance with the instructions set forth herein. This
entire booklet, together with the appropriate payment, should then be
returned to:
The RiceX Company
1241 Hawk's Flight Court
El Dorado Hills, CA 95762
Attention: Todd C. Crow
Checks must be made payable to:
"The RiceX Company"
Please be sure that your name appears in exactly the same way in
each place where it is inserted in each of the documents attached hereto and
in each place where your signature is required on such documents.
NO SUBSCRIPTIONS WILL BE ACCEPTED THAT DO NOT INCLUDE (a) A
COMPLETED AND EXECUTED SUBSCRIPTION AGREEMENT (INCLUDED IN THIS BOOKLET), (b)
A COMPLETED AND EXECUTED INVESTOR STATUS QUESTIONNAIRE (INCLUDED IN THIS
BOOKLET), (c) A COMPLETED AND EXECUTED REGISTRATION RIGHTS AGREEMENT
(INCLUDED IN THIS BOOKLET), AND (d) PAYMENT FOR THE UNITS TO BE PURCHASED.
THE COMPANY RESERVES THE RIGHT, IN ITS SOLE DISCRETION, TO REJECT ANY
SUBSCRIPTION IF IT BELIEVES THE SUBSCRIBER DOES NOT MEET THE QUALIFICATIONS
TO INVEST IN THE UNITS OR FOR ANY OTHER REASON.
Stock certificates and a copy of the Subscription Agreement executed
by the Company will be delivered to subscribers as soon as practicable after
acceptance of such subscriber's investment.
All proceeds received by the Company from the subscribers for the
Units offered hereby will be deposited in a special non-interest bearing bank
account. The Company, in its sole discretion, will hold closings from time to
time ("Closing Date") and all the funds (regardless of the amount) held in
the special account as of the Closing Date will be turned over to the Company
on such Closing Date. In such event, the Company may continue to seek
additional funds by offering up to a maximum of $6,000,000 worth of Units.
THERE IS NO MINIMUM NUMBER OF SUBSCRIPTIONS REQUIRED BEFORE CLOSING.
<PAGE>
INSTRUCTIONS FOR COMPLETING THE SUBSCRIPTION DOCUMENTS
YOU must complete and sip the Subscription Agreement, the Investor Status
Questionnaire and the Registration Rights Agreement.
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<S> <C>
Investor Status Questionnaire Read carefully and complete each section of the
questionnaire.
Each co-subscriber (other than a spouse) must complete a
separate questionnaire.
Corporations, partnerships and trusts must also furnish
recent financial statements, and must attach complete and
unabridged appropriate authorizing instruments (corporate
resolutions, certificate of incorporation and by-laws,
partnership agreement or trust instrument).
Complete and sign the last page of the Investor Status
Questionnaire. (The name and the signature on the Investor
Status Questionnaire must match exactly.)
Subscription Agreement Be sure to read the entire agreement carefully.
If you desire to subscribe, complete and sign the appropriate page of the
Subscription Agreement. (Your name must appear exactly the same throughout
the Subscription Agreement and the Investor Status Questionnaire.)
Registration Rights Agreement Upon the request of the holders thereof, the Company has
agreed to include the Shares and the Warrant Shares
offered hereby in each registration statement filed by the
Company until a registration statement covering such
shares is declared effective by the SEC ("Registration
Statement"); provided, however, that in the event of an
underwritten public offering the number of Shares and
Warrant Shares included in the Registration Statement may
be reduced or eliminated in the discretion of the managing
underwriter in such offering. In addition, the Company has
agreed to use its best efforts to cause any effective
registration statement to remain in effect until the earlier of
(i) the date that all of the Shares and Warrant Shares
offered hereby included in the Registration Statement have
been sold pursuant thereto and (ii) the date the holders
thereof receive an opinion of counsel that all of the Shares
and Warrant Shares may be freely traded without
registration under the Act.
ii
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The Company shall bear all fees and expenses incurred in the preparation and
filing of the Registration Statement, except fees and expenses of holders'
individual advisors and underwriting discounts attributable to such holders'
Shares and Warrant Shares, if any.
In the event of a registered public offering of the shares of Common Stock of
the Company, the holders of the Shares and the Warrant Shares will not be
able to sell or otherwise transfer such shares within the 180-day period
following the effective date of the Registration Statement relating to such
offering.
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<S> <C>
Payment by Check Payment of the purchase
price for the Units subscribed for
may be made by check payable to
"The RiceX Company" and submitted
to the address set forth below.
Submission of Documents This entire booklet should be returned to:
The RiceX Company.
1241 Hawk's Flight Court
El Dorado Hills, CA 95762
Attention: Todd C. Crow
</TABLE>
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<PAGE>
SUBSCRIPTION AGREEMENT
THE RICEX COMPANY
THIS AGREEMENT IS BEING ENTERED INTO IN RELIANCE ON CERTAIN EXEMPTIONS FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), INCLUDING BUT NOT LIMITED TO THOSE SET FORTH IN REGULATION D
PROMULGATED THEREUNDER, AND APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES LAW ADMINISTRATOR, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES LAW ADMINISTRATOR
PASSED ON THE ACCURACY OR ADEQUACY OF THE INFORMATION PROVIDED. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
A PURCHASER OF THE UNITS, EACH UNIT CONSISTING OF ONE SHARE OF COMMON STOCK
(A "SHARE") OF THE COMPANY AND A WARRANT (A "WARRANT") TO PURCHASE ONE SHARE
OF COMMON STOCK (A "WARRANT SHARE") OF THE COMPANY, OFFERED HEREBY (THE
"UNITS") MUST BE PREPARED TO BEAR THE ECONOMIC RISK OF THE INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME BECAUSE THE UNITS, THE SHARES, THE WARRANT SHARES
AND THE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND,
THEREFORE, CANNOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS THEY ARE' SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS
AVAILABLE. THE ISSUER IS UNDER NO OBLIGATION TO REGISTER THE UNITS, THE
SHARES, THE WARRANT SHARES OR THE WARRANTS OFFERED HEREBY UNDER THE
SECURITIES ACT, EXCEPT AS EXPRESSLY SET FORTH HEREIN.
THE UNITS OFFERED HEREBY HAVE NOT BEEN QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS AND CANNOT BE OFFERED, SOLD, TRANSFERRED OR HYPOTHECATED IN
THE ABSENCE OF QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS UNLESS AN
EXEMPTION FROM QUALIFICATION IS AVAILABLE.
EACH PROSPECTIVE PURCHASER MUST COMPLY WITH ALL APPLICABLE LAWS AND
REGULATIONS IN FORCE IN ANY JURISDICTION IN WHICH IT PURCHASES, OFFERS OR
SELLS THE SECURITIES AND MUST OBTAIN ANY CONSENT, APPROVAL OR PERMISSION
REQUIRED BY IT FOR THE PURCHASE, OFFER OR SALE BY IT OF THE SECURITIES UNDER
THE LAWS AND REGULATIONS IN FORCE IN ANY JURISDICTION TO WHICH IT IS SUBJECT
OR IN WHICH IT MAKES SUCH PURCHASES, OFFERS OR RESALES, AND THE COMPANY SHALL
NOT HAVE ANY RESPONSIBILITY THEREFOR.
<PAGE>
THIS SUBSCRIPTION AGREEMENT (this "Agreement") is made and entered into as of
the date the subscription evidenced hereby is accepted by and between The
RiceX Company, a Delaware corporation (the "Company"), and the undersigned
(the "Purchaser," who together with such other persons who enter into an
agreement in the form hereof shall be referred collectively herein as the
"Purchasers").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE OF UNITS.
1.1 PURCHASE OF UNITS. The Subscriber hereby offers to purchase and
subscribe for the number of Units determined by dividing the Subscription
Amount set forth on the signature page of this Agreement (the "Subscription
Amount") by $.75 (the "Offering Price"). Payment shall be made by delivering
the Subscription Amount in cash, check, money order or cashier's check made
payable to "The RiceX Company" in United States dollars, along with this
Agreement and all other documents referenced herein, to the Company.
2. CLOSING.
2.1 CLOSING DATE. The Closing shall occur within 5 business days of the
receipt by the Company of a fully executed Subscription Booklet (including
the Subscription Agreement, Investor Status Questionnaire and Registration
Rights Agreement) from the Subscriber and payment for the Units has been
received (the "Closing Date").
2.2 ISSUANCE OF UNITS. Subject to the terms and conditions hereof, on
the Closing Date applicable to the Purchaser, against the Purchaser's payment
to the Company of the Subscription Amount, the Company shall issue to the
Purchaser (i) the number of shares of the Company's Common Stock as
determined by dividing the Subscription Amount by the Offering Price (the
"Shares") and (ii) a warrant to purchase the number of shares of Common Stock
equal to the number of Shares determined under Section 2.2(i) above at an
exercise price for the first year at $ 1.00 per share, for the second year at
$1.25 per share and for the third year at $1.50 per share (the "Warrant"). No
fractional shares will be issued.
2.3 DELIVERY. As soon as practicable after the Closing Date applicable
to the Units acquired by the Purchaser, the Company will deliver to the
Purchaser certificates representing such Shares and the Warrant, which
certificates shall be issued in the Purchaser's name as set forth on the
signature page of this Agreement.
3. MECHANICS OF INVESTMENT.
3.1 SUBSCRIPTION. The Purchaser shall subscribe for the Units by (i)
indicating on the signature page hereof the amount Purchaser desires to
invest, which amount must be at least $25,000 (unless waived by the Company),
(ii) executing this Agreement and fully completing and executing the Investor
Status Questionnaire attached hereto as EXHIBIT A (the "Questionnaire"),
(iii) executing the Registration Rights Agreement attached hereto as EXHIBIT B
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<PAGE>
(the "Registration Rights Agreement") and (iv) sending such documents along
with a check in an amount equal to the Subscription Amount payable to "The
RiceX Company" to:
The RiceX Company
1241 Hawk's Flight Court
El Dorado Hills, CA 95762
Attention: Todd C. Crow
3.2 COMPANY ACCEPTANCE. The issuance of a certificate representing the
Shares and the Warrant acquired by the Purchaser shall constitute the
Company's acceptance of the Purchaser's investment. No subscriptions will be
accepted that do not include (a) a completed and executed Subscription
Agreement, (b) a completed and executed Questionnaire, (c) a completed and
executed Registration Rights Agreement and (d) payment of the Subscription
Amount by cash, check, money order or cashier's check. The Company reserves
the right, in its sole discretion, to reject any subscription if it believes
the subscriber does not meet the qualifications to invest in the Units or for
any other reason. The Company, in its sole and complete discretion, may
accept a subscription at any time prior to the closing of this Offering.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Purchaser that:
4.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized and existing under the laws of the State of Delaware and is in good
standing under such laws. The Company has the requisite corporate power to
own and operate its properties and assets, and to carry on its business as
presently conducted and as proposed to be conducted as provided in the
Confidential Term Sheet, a copy of which has been provided to each Purchaser.
4.2 CORPORATE POWER. The Company will have at the Closing Date all
requisite legal and corporate power and authority to enter into this
Agreement, to sell and issue the Units as provided herein and to carry out
and perform its obligations under the terms of this Agreement.
4.3 SUBSIDIARIES. The Company owns Food Extrusion Montana, Inc., a
Montana corporation, as a wholly owned subsidiary of the Company. The Company
does not own or control, directly or indirectly, any other interest or
investment in any other corporation, association, partnership or other
business entity.
4.4 AUTHORIZATION. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization,
execution, delivery and performance of this Agreement by the Company and the
authorization, sale, issuance and delivery of the Units pursuant hereto and
the performance of all of the Company's obligations under this Agreement has
been taken or will be taken at or prior to the Closing Date. This Agreement,
when executed and delivered by the Company, shall constitute the valid and
binding obligation of the Company, enforceable in accordance with its terms,
except as enforcement may be limited by applicable bankruptcy laws or other
similar laws affecting creditors' rights generally, and the availability of
equitable remedies may be limited by applicable law. The Shares and the
Warrants comprising the Units, when issued in accordance with the provisions
of this Agreement and the Confidential Term Sheet, will be validly issued,
fully paid and non-assessable.
3
<PAGE>
4.5 USE OF PROCEEDS. The Company shall use the proceeds from the sale
of the Units for the purposes described in the Confidential Term Sheet.
4.6 OFFERING. Subject to the accuracy of the Purchasers'
representations in Section 5 hereof, the offer, sale and issuance of the
Units constitute transactions exempt from the registration requirements of
the Securities Act.
4.7 BROKERS OR FINDERS; OTHER OFFERS. Except as described on the
Confidential Term Sheet, the Company has not incurred, and will not incur,
directly or indirectly, as a result of any action taken by the Company, any
liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. Each Purchaser
hereby represents and warrants to the Company as follows:
5.1 AUTHORITY. If the Purchaser is not a natural person, the Purchaser
is a corporation, partnership, limited liability company, trust or other
organization (as indicated by its signature to this Agreement) and is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. The Purchaser has now, and will have at the
applicable Closing Date, all requisite legal and (if applicable) corporate,
partnership or other power to enter into this Agreement, to purchase the
Units hereunder and to perform its obligations under the terms of this
Agreement.
5.2 AUTHORIZATION. ALL corporate, partnership or other action on the
part of the Purchaser necessary for the purchase of the Units and the
performance of Purchaser's obligations hereunder has been taken or will be
taken prior to the applicable Closing Date. This Agreement, when executed and
delivered by the Purchaser, will constitute a valid and legally binding
obligation of the Purchaser, enforceable in accordance with its terms, except
as enforcement may be limited by (i) applicable bankruptcy laws or other
similar laws affecting creditors' rights generally, and (ii) the availability
of equitable remedies.
5.3 INVESTMENT REPRESENTATIONS. This Agreement is made with the
Purchaser in reliance on the following specific representations to the
Company that:
(a) The Units purchased hereunder will be acquired for the Purchaser's
own account, not as a nominee or agent, and not with a view to the
distribution of any part thereof, and the Purchaser has no present intention
of selling, granting participation in, or otherwise distributing the same. If
the Purchaser is not a natural person, the Purchaser has not been organized
for the purpose of investing in securities of the Company, although such
investment is consistent with its purposes.
(b) The Purchaser understands that the purchase of the Units represents
a speculative investment, and the Purchaser is able, without impairing his,
her or its financial condition, to hold the Units for an indefinite period of
time and to suffer a complete loss of the Purchaser's investment. The
Purchaser is aware of and has investigated the Company's business, management
and financial condition, has had the opportunity to inspect the Company's
facilities and has had access to such other information about the Company as
such Purchaser has
<PAGE>
deemed necessary or desirable to reach an informed and knowledgeable decision
to acquire the Units.
(c) The Purchaser understands that the Units will not be registered
under the Securities Act by reason of, among other things, reliance upon
certain exemptions therefrom, and that the reliance of the Company on such
exemptions is predicated upon, among other things, the bona fide nature of
such Purchaser's investment intent as expressed herein.
(d) Purchaser is experienced in evaluating and investing in securities
of companies in the development stage and has made investments in securities
other than those of the Company. Purchaser acknowledges that by reason of his
or its business or financial experience, he, she or it has the ability to
bear the economic risk of his, her or its investment pursuant to this
Agreement.
5.4 RULE 144. The Purchaser understands that the Units, the Shares and
the Warrant may be restricted securities within the meaning of Rule 144
promulgated under the Securities Act; that such securities are not registered
under the Securities Act, that the Purchaser may be required to hold such
securities indefinitely unless they are subsequently registered or an
exemption from such registration is available; that, in any event, if such
securities are restricted securities, the exemption from registration under
Rule 144 would not be available for at least one year, and even then, if the
Purchaser is an affiliate of the Company or has held the Units, the Shares
and the Warrant for less than two years, such exemption will not be available
unless: (i) a public trading market then exists for the Units, the Shares and
the Warrant; (ii) adequate information concerning the Company is then
available to the public; and (iii) other terms and conditions of Rule 144 are
complied with, including, among other things, the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly
with a "market maker" and the number of such shares sold in any three-month
period not exceeding specified limitations.
5.5 ACCESS TO DATA. The Purchaser has had an opportunity to discuss the
Company's business, management and financial affairs with its management. It
has also had an opportunity to ask questions of officers of the Company,
which questions were answered to its satisfaction. The Purchaser understands
that such discussions, as well as any written information issued by the
Company, were intended to describe certain aspects of the Company's business
and prospects but were not a thorough or exhaustive description.
5.6 BROKERS OR FINDERS. The Company has not, and will not, incur,
directly or indirectly, as a result of any action taken by the Purchaser, any
liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement.
5.7 TAX LIABILITY. The Purchaser has reviewed with its own tax advisors
the federal, state, local and foreign tax consequences of this investment and
the transactions contemplated by this Agreement. The Purchaser has relied
solely on such advisors and not on any statements or representations of the
Company or any of its agents. The Purchaser understands that it (and not the
Company) shall be responsible for its own tax liability that may arise as a
result of this investment or the transactions contemplated by this Agreement.
5
<PAGE>
5.8 ACCREDITED INVESTOR. The Purchaser is an accredited investor as
defined in Rule 501 of Regulation D and, by reason of Purchaser's business or
financial experience or the business or financial experience of the
Purchaser's professional advisors, has the capacity to protect its own
interest in connection with this Offering.
6. CONDITIONS TO CLOSING.
6.1 CONDITIONS TO PURCHASERS' OBLIGATIONS. The obligation of each
Purchaser to purchase the Units on the applicable Closing Date is subject to
the fulfillment on or prior to such Closing Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES CORRECT; PERFORMANCE OF OBLIGATIONS.
The representations and warranties made by the Company in Section 4 hereof
shall be true and correct on the applicable Closing Date and all covenants,
agreements and conditions contained in this Agreement to be performed by the
Company on or prior to the Closing Date shall have been performed or complied
with.
(b) QUALIFICATIONS. All authorizations, approvals or permits of any
governmental authority that are required in connection with the lawful
issuance and sale of the Units under this Agreement shall have been duly
obtained and effective, or will be obtained or made in a timely manner so as
to comply with the requirements of such governmental authority,
6.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's obligation
to sell and issue the Units on the applicable Closing Date is subject to the
fulfillment on or prior to such Closing Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES CORRECT; PERFORMANCE OF OBLIGATIONS.
The representations and warranties of Purchaser in Section 5 hereof shall be
true and correct as of the applicable Closing Date and the Purchaser shall
have performed all obligations and conditions herein required to be performed
by it on or prior to the applicable Closing Date.
(b) QUALIFICATIONS. All other authorizations, approvals or permits of
any other governmental authority that are required in connection with the
lawful issuance and sale of the Units under this Agreement shall have been
duly obtained and effective, or will be obtained or made in a timely manner
so as to comply with the requirements of such governmental authority.
(c) PAYMENT OF THE SUBSCRIPTION AMOUNT. Each Purchaser shall have
tendered payment of the Subscription Amount in accordance with Section 3.1
hereof.
(d) REGISTRATION RIGHTS AGREEMENT. The Purchaser shall have executed
and delivered to the Company the Registration Rights Agreement.
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<PAGE>
7. LEGENDS.
7.1 SECURITIES ACT LEGEND. Each certificate representing the Shares
and the Warrant shall be stamped or otherwise imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR QUALIFIED UNDER
APPLICABLE STATE SECURITIES LAWS (THE "LAWS") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT COVERING THE SECURITIES UNDER THE SECURITIES ACT AND
THE QUALIFICATION OF THE SECURITIES UNDER THE LAWS, UNLESS THE COMPANY AND
ITS COUNSEL ARE SATISFIED THAT SUCH REGISTRATION AND QUALIFICATION IS NOT
THEN REQUIRED UNDER THE CIRCUMSTANCES OF SUCH OFFER, SALE, TRANSFER, PLEDGE
OR HYPOTHECATION.
Such legend shall be removed by the Company upon delivery to it of an opinion
of counsel satisfactory to the Company in form and substance satisfactory to
the Company, that a registration statement under the Securities Act and
qualification under applicable state securities laws is at the time in effect
with respect to the legended security or that such security can be freely
transferred without such registration and qualification.
7.2 STATE SECURITIES LAWS LEGENDS. Any certificate representing the
Shares and the Warrant shall also be endorsed with any legend or legends
required by the securities laws of the jurisdictions of the residence of the
Purchaser.
7.3 RESTRICTIONS ON TRANSFER. The Shares and the Warrant may not be
transferred unless and until one of the following events shall have occurred:
(a) the Company shall have received a statement of the circumstances
surrounding the transfer and, if reasonably requested by the Company, an
opinion of counsel, in form and substance reasonably acceptable to the
Company and its counsel, stating that the transfer is exempt from
registration under the Securities Act as then in effect, and the rules and
regulations promulgated by the SEC thereunder; or
(b) the Shares and the Warrant are transferred pursuant to an effective
registration statement under the Securities Act.
The restrictions on transfer imposed by this Section 7.3 shall cease and
terminate as to the Shares and the Warrant or any portion thereof when (i)
such Shares and the Warrant shall have been effectively registered under the
Securities Act and sold by the holder thereof in accordance with such
registration, or (ii) the Company is provided with an acceptable opinion of
counsel as described in subparagraph (a) above to the effect that all future
transfers of such Shares and the Warrant by the transferor or the
contemplated transferee would be exempt from registration under the
Securities Act.
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8. RIGHT OF FIRST REFUSAL, TRANSFER RESTRICTION.
8.1 RIGHT OF FIRST REFUSAL. Should the Purchaser wish to transfer any
of the Shares and/or the Warrant owned by him, or any interest in such Shares
or Warrant, the Purchaser shall first deliver a written notice (the "Transfer
Notice") to the Company (the "Right of First Refusal"). The Transfer Notice
must specify: (i) that Purchaser has a bona fide intention to sell or
transfer such Shares and/or the Warrant or an interest therein; (ii) the name
and address of the person or firm to whom the Purchaser intends to transfer
the Shares and/or the Warrant or an interest therein; (iii) the number of
Shares or the Warrant, or interest therein, proposed to be sold or
transferred (the "Designated Securities"); (iv) the price or amount to be
paid for the proposed transfer (including the amount of any debt to be paid,
canceled or forgiven upon foreclosure of a security interest in the
Designated Securities or upon any other transfer to Purchaser's creditors);
and (v) all other material terms and conditions of the proposed transfer.
8.2 DEFINITION OF "TRANSFER". As used herein, the term "transfer" means
any sale, assignment, gift, hypothecation, alienation or other disposition
(including any involuntary transfer of the Shares (or part of them) or the
Warrant (or part of it) to a creditor) to any individual, entity, government,
government agency, political subdivision or unincorporated association.
8.3 ELECTION TO PURCHASE. Within fifteen (15) days after receipt of the
Transfer Notice, the Company may elect to purchase the Designated Securities
to which the Transfer Notice refers at the price specified in the Transfer
Notice. If no price is specified in the Transfer Notice, the purchase price
shall be the fair value of the Designated Securities, as determined in good
faith by the Board of Directors of the Company. Such Right of First Refusal
shall be exercised by delivery to the Purchaser of a written election to
exercise such Right of First Refusal, specifying the number of Designated
Securities to be purchased. In the event the election to purchase does not
cover all of the Designated Securities specified in the Transfer Notice, the
selling shareholder may treat the Right of First Refusal as being rejected in
its entirety or may elect to sell the Designated Securities to the Company.
8.4 CLOSING FOR PURCHASE. In the event the Company elects to acquire
Designated Securities of the Purchaser as specified above, the Company shall
so notify the Purchaser within the period set forth above and settlement
thereof shall be made in cash within forty-five (45) days after receipt of
the Transfer Notice, provided that if the terms of payment set forth in the
Transfer Notice were other than cash against delivery, the Company shall pay
for said Designated Securities on the same terms and conditions set forth in
the Transfer Notice.
8.5 TRANSFER FREE OF RIGHT OF FIRST REFUSAL. If the Designated
Securities referred to in the Transfer Notice are not purchased as aforesaid,
Purchaser, within a period of ninety (90) days from the date of delivery of
the Transfer Notice, may sell any of said Designated Securities to any person
named in the Transfer Notice at the price and on the terms specified in the
Transfer Notice, or at a higher price or on terms more favorable to the
Purchaser, provided that such sale or transfer is consummated within ninety
(90) days following the date of delivery of the Transfer Notice to the
Company as set forth above and, provided further, that such sale is in
accordance with all the terms and conditions hereof. The transferee will hold
all Designated Securities transferred hereunder subject to the provisions of
this Agreement. No transfer of the Designated
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Securities shall be made after the end of such ninety (90) day period, nor
shall any change in the terms of the transfer be permitted, without delivery
by the Purchaser to the Company of a new Transfer Notice in compliance with
the requirements of this Section 8.
8.6 GIFTS OF SHARES. Notwithstanding any other term of this Section 8,
Purchaser may make a gift of all or part of the Designated Securities or any
interest therein to any of his parents, spouse or issue, or to a trust for
his or their exclusive benefit. The donee or donees shall hold such
securities subject to all provisions of this Agreement.
8.7 TERMINATION OF RIGHT OF FIRST REFUSAL. The right of first refusal
shall terminate:
(a) The effective date of a registration statement filed by the Company
under the Securities Act with respect to an underwritten public offering of
Common Stock of the Company; or
(b) At such time as the Company's Common Stock is listed on a national
securities exchange (as that term is used in the Securities Exchange Act of
1934); or
(c) If the corporation dissolves, or if more than fifty percent (50%)
of the outstanding shares of the corporation's capital stock entitled to vote
are sold, redeemed or exchanged in any (i) merger, consolidation, or
reorganization involving the corporation and one or more unaffiliated
corporations, (ii) exchange of capital stock of the Company for stock of any
unaffiliated corporation, provided that the security holders of the Company
receive in exchange for the Company's capital stock securities that are
listed on a national securities exchange, or (iii) sale of all or
substantially all of the assets of the Company to an unaffiliated
corporation. For purposes of this subsection, an "unaffiliated corporation"
means any corporation that is not controlled by or under common control with,
directly or indirectly, the Company or any or all of its shareholders.
9. MISCELLANEOUS.
9.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of California without application of principles of
conflicts of laws.
9.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive the closing of the transactions contemplated hereby.
9.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
9.4 ENTIRE AGREEMENT AMENDMENT.
(a) This Agreement and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof. Any provision of this
Agreement may be amended and may be waived (either generally or in a
particular instance and either retroactively or prospectively) only
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with the written consent of the Company and Purchasers holding in excess of
fifty percent (50%) of the total number of Shares issued pursuant to this
Offering.
(b) Any amendment or waiver effected in accordance with this Section
shall be binding upon each holder of any Shares purchased under this
Agreement at the time outstanding, each future holder of all such securities,
and the Company; provided, however, that no condition to closing may be
waived with respect to any Purchaser who does not consent thereto.
9.5 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be (i) delivered personally
or by facsimile, (ii) transmitted by first-class mail, postage prepaid, or
airmail, postage prepaid, in the event of mailing for delivery outside of the
country in which mailed, (iii) transmitted by an overnight courier of
recognized reputation or of recognized international reputation in the event
of an international delivery, or (iv) transmitted by telecopier (with
confirmation by airmail or courier), addressed (a) if to a Purchaser, at such
Purchaser's address as set forth in the Investor Status Questionnaire
attached hereto, or at such other address as such Purchaser shall have
furnished to the Company in writing, or (b) if to any other holder of any
Shares at such address as such holder shall have furnished the Company in
writing, or, until any such holder so furnishes an address to the Company,
then to and at the address of the last holder of such securities who has so
furnished an address to the Company, or (c) if to the Company, at its address
set forth at the signature page of this Agreement, or at such other address
as the Company shall have furnished to each such holder in writing. Except as
otherwise specified herein, all notices and other communications shall be
deemed to have been duly given on (A) the date of receipt if delivered
personally or by facsimile, (B) the date seven (7) days after posting if
transmitted by mail, (C) the date three (3) days after delivery to the
courier if sent by recognized or internationally recognized courier service,
or (D) the date on which written confirmation would be deemed to have been
given as provided above, whether by mail or by courier, as applicable, if
transmitted by telecopier, whichever shall first occur.
9.6 SEPARABILITY OF AGREEMENTS, SEVERABILITY. Unless otherwise
expressly provided herein, the rights of the Purchaser hereunder are several
rights, not rights jointly held with any of the other Purchasers. Any
invalidity, illegality or limitation on the enforceability of any part of
this Agreement, whether arising by reason of the law of the Purchaser's
domicile or otherwise, shall in no way affect or impair the validity,
legality or enforceability of this Agreement with respect to any other
Purchaser or Purchasers. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
9.7 TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
9.8 COUNTERPARTS. 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.
10
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9.9 EXPENSES. The Company shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance
of the Agreements.
9.10 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay
or omission to exercise any right, power or remedy accruing to any holder of
any Shares, upon any breach or default of the Company under this Agreement,
shall impair any such right, power or remedy of such holder nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any waiver,
permit, consent or approval of any kind or character on the part of any
holder of any breach or default under this Agreement, or any waiver on the
part of any holder of any provisions or conditions of this Agreement, must be
in writing and shall be effective only to the extent specifically set forth
in such writing. All remedies, either under this Agreement or by law or
otherwise afforded to any holder, shall be cumulative and not alternative.
[SIGNATURES ON FOLLOWING PAGE]
11
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the day
and year first written above.
SIGNATURE OF INDIVIDUAL PURCHASERS:
I
Signature Signature (if jointly held)
Print Name Print Name
Executed at:
Date:
Professional Adviser(s)/Purchaser Representative(s) (if applicable)
Signature
Print Name
Executed at:
Date:
SUBSCRIPTION AMOUNT: $
12
<PAGE>
SIGNATURE OF PURCHASERS WHO ARE CORPORATIONS, TRUSTS, LIMITED LIABILITY
COMPANIES OR PARTNERSHIPS:
Name of entity (please print or type)
I
Signatures) of authorized officer, trustee, manager or general partner(s)
Title(s) of authorized officer, trustee, manager or general partner(s)
Executed at: Date:
City, State
SUBSCRIPTION AMOUNT:$
13
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SIGNATURE OF THE COMPANY:
The foregoing subscription is hereby accepted by:
The RiceX Company
1241 Hawk's Flight Court
El Dorado Hills, CA 95762
By:
Todd C. Crow, Principal Financial Officer and Secretary
Executed at: Date:
City, State
14
<PAGE>
EXHIBIT 4.55
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON
EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT
APPLICABLE, PURSUANT TO RULES 701 AND 144 UNDER SUCH ACT (OR ANY SIMILAR RULE
UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE
DELIVERY BY THE HOLDER TO THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO COUNSEL FOR THE ISSUER, STATING THAT AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE. THE HOLDER HEREOF MAY NOT ENGAGE IN
HEDGING TRANSACTIONS WITH REGARD TO SUCH SECURITIES UNLESS IN COMPLIANCE WITH
THE ACT.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE HEREWITH.
Warrant to Purchase up to
2,667 Shares of Common Stock
of The RiceX Company
WHEREAS, reference is made to that certain Subscription Agreement,
dated of even date herewith (the "Subscription Agreement"), pursuant to which
The RiceX Company, a Delaware corporation (the "Company"), sold and E. Norton
Darnell ("Investor") purchased units representing an aggregate of 2,667
shares of Common Stock of the Company ("Common Stock") and a Warrant to
purchase an aggregate of 2,667 shares of Common Stock; and
WHEREAS, this Warrant shall represent the Warrant to be granted to
Investor pursuant to the terms of the Subscription Agreement.
NOW, THEREFORE, the Company and Investor agree as follows:
1. GRANT. On the terms and subject to the conditions set
forth herein, Investor is hereby granted the right to purchase, at any time
during the Exercise Period (as hereinafter defined), up to 2,667 shares of
Common Stock (the "Warrant Shares") of the Company at the Exercise Price (as
defined below and as subject to adjustment as provided in Article 5 hereof).
2. EXERCISE OF WARRANT.
2.1 EXERCISE PERIOD. This Warrant is exercisable
at any time during the three (3) year period commencing on the date hereof
(the "Exercise Period").
2.2 CASH EXERCISE. The Warrant is exercisable at a
price of per Warrant Share equal to the Exercise Price (as hereinafter
defined) payable in cash or by check to the order of the Company, or any
combination of cash or check, subject to adjustment as provided in Article 5
hereof. Upon surrender of this Warrant with the annexed Form of Election to
Purchase duly executed, together with payment of the Exercise Price for the
Warrant Shares purchased, at the Company's principal offices, Investor (or
other registered holder of this Warrant (the "Holder") shall be entitled to
receive a certificate or certificates for the Warrant Shares so purchased.
The purchase rights represented by this Warrant are exercisable at the option
of the Holder, in whole or in part (but not as to fractional Warrant Shares).
In the case of the purchase of less than all the Warrant Shares purchasable
under
<PAGE>
this Warrant, the Company shall cancel said Warrant upon the surrender
thereof and shall execute and deliver a new Warrant of like tenor for the
balance of the Warrant Shares purchasable thereunder.
2.3 CASHLESS EXERCISE. At any time during the
Exercise Period, the Holder may, at its option, exchange this Warrant, in
whole or in part (a "Warrant Exchange"), into the number of shares of Common
Stock determined in accordance with this Section 2.3, by surrendering this
Warrant at the principal office of the Company accompanied by a notice
stating such Holder's intent to effect such exchange, the number of Warrant
Shares to be exchanged and the date on which the Holder requests that such
Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange shall
take place on the date specified in the Notice of Exchange or, if later, the
date the Notice of Exchange is received by the Company (the "Exchange Date").
Certificates for the shares of Common Stock issuable upon such Warrant
Exchange and, if applicable, a new Warrant of like tenor evidencing the
balance of the Warrant Shares remaining subject to this Warrant, shall be
issued as of the Exchange Date and delivered to the Holder within seven (7)
days following the Exchange Date. In connection with any Warrant Exchange,
this Warrant shall represent the right to subscribe for and acquire the
number of Warrant Shares (rounded to the next highest integer) equal to (i)
the number of Warrant Shares specified by the Holder in its Notice of
Exchange (the "Total Number") less (ii) the number of Warrant Shares equal to
the quotient obtained by dividing (A) the product of the Total Number and the
then-current Exercise Price by (B) the market value of a share of Common
Stock on the Exchange Date, as determined by the closing price or closing bid
price of the Company's Common Stock as reported by the Over-the-Counter
Bulletin Board Market (the "OTC"), the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or by a national exchange or,
if the Common Stock is not listed on the OTC, on NASDAQ or on an exchange, as
determined in good faith by the Board of the Directors of the Company.
Warrants exchanged for shares of Common Stock shall no longer entitle the
holder thereof to purchase Warrant Shares.
2.4 ISSUANCE OF CERTIFICATES. Upon the exercise of
this Warrant pursuant to Section 2.2 or Section 2.3 above, the issuance of
certificates representing the Warrant Shares purchased shall be made
forthwith without charge to the Holder thereof including, without limitation,
any tax which may be payable in respect of the issuance thereof, and such
certificates shall (subject to the provisions of Article 3 hereof) be issued
in the name of, or in such names as may be directed by, the Holder thereof;
provided, however, that the Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificates in a name other than that of the Holder and
the Company shall not be required to issue or deliver such certificates
unless or until the person or persons requesting the issuance thereof shall
have paid to the Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
Upon exercise, in whole or in part, of this Warrant,
certificates representing the Warrant Shares shall bear a legend
substantially similar to the following:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE
EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER THE ACT (OR ANY
SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF
SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO THE
COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO
THE ISSUER, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER
SUCH ACT IS AVAILABLE."
3. RESTRICTIONS ON TRANSFER OF WARRANTS.
3.1 RIGHT OF FIRST REFUSAL. The transfer of this
Warrant and the Warrant Shares issuable upon exercise of this Warrant is subject
to a right of first refusal in favor of the Company and other restrictions on
transferability set forth in the Subscription Agreement, and the terms of
conditions of such right of
2
<PAGE>
first refusal and such other restrictions on transferability are incorporated
by reference into this Warrant as if fully set forth herein.
3.2 SECURITIES ACT RESTRICTIONS. Investor, by his
acceptance hereof, covenants and agrees that this Warrant is being acquired
as an investment and not with a view to the distribution thereof, and that
neither this Warrant nor, if exercised, any Warrant Shares, may be offered or
sold except (i) pursuant to an effective registration statement under the
Act, (ii) to the extent applicable, pursuant to Rule144 under the Act (or any
similar rule under such Act relating to the disposition of securities), or
(iii) upon the delivery by the holder to the Company of an opinion of
counsel, reasonably satisfactory to the issuer, stating that an exemption
from registration under such Act is available.
4. EXERCISE PRICE AND ADJUSTED EXERCISE PRICE.
Subject to adjustment as set forth in Section 5, the exercise price of the
Warrant Shares (the "Exercise Price") shall be determined as follows:
(a) In the event that this Warrant is
exercised, in whole or in part, during the one year period commencing on the
date of this Warrant, the Exercise Price applicable to the Warrant Shares so
purchased shall be equal to $1.00 per Warrant Share;
(b) In the event that this Warrant is
exercised, in whole or in part, during the one year period commencing upon
the expiration of one year from the date of this Warrant, the Exercise Price
applicable to the Warrant Shares so purchased shall be equal to $1.25 per
Warrant Share; and
(c) In the event that this Warrant is
exercised, in whole or in part, during the one year period commencing upon
the expiration of two years from the date of this Warrant, the Exercise Price
applicable to the Warrant Shares so purchased shall be equal to $1.50 per
Warrant Share.
5. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF
WARRANT SHARES.
5.1 STOCK SPLIT, STOCK DIVIDEND, SUBDIVISION AND
COMBINATION. In case the Company shall at any time subdivide or combine the
outstanding shares of Common Stock (including by way of a stock dividend),
the Exercise Price shall forthwith be proportionately decreased in the case
of subdivision or increased in the case of combination. Upon each adjustment
of the Exercise Price pursuant to the provisions of this Section 5.1, the
number of Warrant Shares issuable upon the exercise of this Warrant shall be
adjusted to the nearest full Warrant Share by multiplying a number equal to
the Exercise Price in effect immediately prior to such adjustment by the
number of Warrant Shares issuable upon exercise of the Warrant immediately
prior to such adjustment and dividing the product so obtained by the adjusted
Exercise Price.
5.2 RECLASSIFICATION, CONSOLIDATION, MERGER, ETC.
In case of any reclassification or change of the outstanding shares of Common
Stock (other than a change in par value to no par value, or from no par value
to par value, or as a result of a subdivision or combination), or in the case
of any consolidation of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger in which the
Company is the surviving corporation and which does not result in any
reclassification or change of the outstanding shares of Common Stock, except
a change as a result of a subdivision or combination of such shares or a
change in par value, as aforesaid), or in the case of a sale or conveyance to
another corporation of the property of the Company as an entirety, the Holder
shall thereafter have the right to purchase the kind and number of shares of
stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance as if the
Holder were the owners of the Warrant Shares underlying the Warrant at a
price equal to the product of (x) the number of shares of Common Stock
issuable upon conversion of the Warrant Shares and (y) the Exercise Price
prior to the record date for such reclassification, change, consolidation,
merger, sale or conveyance as if such Holder had exercised the Warrant.
3
<PAGE>
5.3 REDEMPTION OF WARRANT; REDEMPTION OF WARRANT
SHARES. Notwithstanding anything to the contrary contained in the Warrant or
elsewhere, the Warrant cannot be redeemed by the Company under any
circumstances.
5.4 DIVIDENDS AND OTHER DISTRIBUTIONS WITH RESPECT
TO OUTSTANDING SECURITIES. In the event that the Company shall at any time
prior to the exercise of the Warrant declare a dividend (other than a
dividend consisting solely of shares of Common Stock (which shall be governed
by Section 5.1) or a cash dividend or distribution payable out of current or
retained earnings) or otherwise distribute to its shareholders any monies,
assets, property, rights, evidences of indebtedness, securities (other than
shares of Common Stock), whether issued by the Company or by another person
or entity, or any other thing of value, the Holder of the Warrant shall
thereafter be entitled, in addition to the securities receivable upon the
exercise thereof, to receive, upon the exercise of such Warrant, the same
monies, property, assets, rights, evidences of indebtedness, securities or
any other thing of value that he would have been entitled to receive at the
time of such dividend or distribution. At the time of any such dividend or
distribution, the Company shall make appropriate reserves to ensure the
timely performance of the provisions of this Section 5.4.
5.5 SUBSCRIPTION RIGHTS FOR SHARES OF COMMON STOCK
OR OTHER SECURITIES. In the case that the Company or an affiliate of the
Company shall at any time after the date hereof and prior to the exercise of
the Warrant issue any rights to subscribe for shares of Common Stock or any
other securities of the Company or of such affiliate to all the shareholders
of the Company, the Holder of the unexercised Warrant shall be entitled, in
addition to the securities receivable upon the exercise of the Warrant, to
receive such rights at the time such rights are distributed to the other
shareholders of the Company.
6. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES.
This Warrant is exchangeable without expense, upon the surrender hereof by
the registered Holder at the principal executive office of the Company, for a
new Warrant Certificate of like tenor and date representing in the aggregate
the right to purchase the same number of Warrant Shares in such denominations
as shall be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of the Warrant Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation of the
Warrant, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
7. ELIMINATION OF FRACTIONAL INTERESTS. The Company
shall not be required to issue certificates representing fractions of Warrant
Shares upon the exercise of this Warrant, nor shall it be required to issue
scrip or pay cash in lieu of fractional interests, it being the intent of the
parties that all fractional interests shall be eliminated by rounding any
fraction up to the nearest whole number of Warrant Shares.
8. RESERVATION OF SECURITIES. The Company shall at
all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of the Warrant,
such number of shares of Common Stock (or other securities) as shall be
issuable upon such exercise. The Company covenants and agrees that, upon
exercise of the Warrant and payment of the Exercise Price therefor, all
shares of Common Stock issuable upon such exercise shall be duly and validly
issued, fully paid, non-assessable and not subject to the preemptive rights
of any shareholder.
9. NOTICES TO WARRANT HOLDER. If, at any time prior
to the expiration or exercise of this Warrant, any of the following events
shall occur:
(a) the Company shall take a record of
the holders of its shares of Common Stock for the purpose of entitling them
to receive a dividend or distribution payable otherwise than in cash, or a
cash dividend or distribution payable otherwise than out of current or
retained earnings, as indicated by the accounting treatment of such dividend
or distribution on the books of the Company; or
4
<PAGE>
(b) the Company shall offer to all the
holders of its Common Stock any additional shares of capital stock of the
Company or securities convertible into or exchangeable for shares of capital
stock of the Company, or any option, right or warrant to subscribe therefor;
or
(c) a dissolution, liquidation or winding
up of the Company (other than in connection with a consolidation or merger)
or a sale of all or substantially all of its property, assets and business as
an entirety shall be proposed;
then, in any one or more of said events, the Company shall give written
notice to the Holder of such event at least fifteen (15) days prior to the
date fixed as a record date or the date of closing the transfer books for the
determination of the shareholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, options or
warrants, or entitled to vote on such proposed dissolution, liquidation,
winding up or sale. Such notice shall specify such record date or the date of
closing the transfer books, as the case may be. Failure to give such notice
or any defect therein shall not affect the validity of any action taken in
connection with the declaration or payment of any such dividend or
distribution, or the issuance of any convertible or exchangeable securities
or subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
10. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or mailed by registered or certified mail, return
receipt requested:
(a) If to the registered Holder of the
Warrant, to the address of such Holder as shown on the books of the Company;
or
(b) If to the Company, to the address set
forth on the signature page of this Warrant or to such other address as the
Company may designate by notice to the Holder.
11. SUCCESSORS. All the covenants and provisions of
this Agreement by or for the benefit of the Company and the Holder inure to
the benefit of their respective successors and assigns hereunder.
12. GOVERNING LAW. This Warrant shall be deemed to be
a contract made under the laws of the State of California and for all
purposes shall be construed in accordance with the laws of said State.
13. COUNTERPARTS. This Warrant may be executed in any
number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and such counterparts shall together constitute
but one and the same instrument.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed.
Dated: February 11, 2000 THE RICEX COMPANY
By:
------------------------------------
Name Daniel L. McPeak
Title: Chairman of the Board and
Chief Executive Officer
5
<PAGE>
ACCEPTED BY AND AGREED TO:
E. NORTON DARNELL
- ----------------------------
6
<PAGE>
ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant, to purchase _________ shares of Common
Stock of The RiceX Company (or its successor) and herewith tenders in payment
for such shares cash or a check payable to the order of The RiceX Company in
the amount of $_______, all in accordance with the terms hereof. The
undersigned requests that a certificate for such shares be registered in the
name of __________________, whose address is __________________, and that
such Certificate be delivered to __________________, whose address is
______________________________.
Dated: Signature:
----------------- --------------------------------
(Signature must conform in
all respects to name of
holder as specified on the
face of the Warrant
Certificate.)
--------------------------------
--------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
7
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ______________________ hereby sells,
assigns and transfers unto ______________________ (Please print name and
address of transferee) this Warrant
[or a portion of this Warrant equal to ____________ shares of Common Stock],
together with all right, title and interest therein, and does hereby
irrevocably constitute and appoint _______________, Attorney, to transfer the
within Warrant Certificate on the books of the within-named Company, with
full power of substitution.
Dated: Signature:
------------------------------------------------
(Signature must conform in all respects to name
of holder as specified on the face of the
Warrant Certificate)
-------------------------------
-------------------------------
(Insert Social Security or Other
Identifying Number of Assignee)
8
<PAGE>
EXHIBIT 10.38
AGREEMENT
THIS AGREEMENT ("Agreement") is executed as of this 1st day of November 1999,
by and between THE RICEX COMPANY, a Delaware corporation ("RiceX"), and
BIOCEUTICS, INC., a Delaware corporation ("BioCeutics").
A. RiceX is a producer of nutritionally dense ingredients and
related products (the "Products").
B. BioCeutics has been formed to engage in the distribution and sale
of nutraceutical products involving nutritionally dense ingredients, and
desires to obtain a supply of nutritionally dense ingredients and an
exclusive arrangement with RiceX for the sale of nutritionally dense
ingredients to the entire human market on the terms set forth below.
C. RiceX is willing to grant BioCeutics a right of first refusal to
acquire its nutritionally dense ingredients and to grant BioCeutics an
exclusive arrangement with RiceX in the entire human market on the terms and
conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing recitals and for other
valuable consideration, the parties agree as follows:
1. SALE OF PRODUCTS. RiceX agrees to sell its Products
identified in EXHIBIT "A" attached hereto to BioCeutics on the terms and
subject to the conditions of this Agreement. BioCeutics shall be entitled to
a "most favored customer" status, exclusive of samples (which shall be free).
The price to be charged to BioCeutics for its purchase of any Products shall
be that price which is published in the RiceX standard price sheet or the
price negotiated with other customers for like quantities and like Products,
whichever is less ("PRICE");PROVIDED, HOWEVER, that for a period of one year
from the date hereof, RiceX shall sell its Products to BioCeutics at a five
percent (5%) discount from the Price, to the extent the Products are to be
resold to existing customers of RiceX, all of which are identified IN EXHIBIT
"B" attached hereto. All payments due to RiceX hereunder shall be paid to
RiceX in United States dollars not later than thirty (30) days following the
date of the applicable invoice from RiceX. All Products delivered to
BioCeutics shall be F.O.B. RiceX's plant of origin of the Products, and upon
delivery to the proper carrier title and risk of loss and delay shall pass to
BioCeutics. RiceX shall deliver Products to the common carrier specified by
BioCeutics within ten (10) days after the date for which delivery of Products
is requested in a purchase order from BioCeutics, and shall assist BioCeutics
in arranging any desired insurance (in amounts that BioCeutics shall determ
ine) and transportation to any destinations specified in writing from time to
time by B ioCeutics. All insurance premiums and other expenses relating to
such transportation and delivery shall be at BioCeutics' expense, RiceX
further agrees that it shall maintain its existing pricing margins (selling
price minus cost of goods sold) in effect throughout the term of this
Agreement.
2. RIGHT OF FIRST REFUSAL.
(a) RIGHT OF FIRST REFUSAL. RiceX hereby grants to
BioCeutics a right of first refusal (the "Right of First Refusal") to
purchase all of the RiceX Products not already under contract to RiceX
non-human/feed customers.
(b) EXERCISE RIGHT OF FIRST REFUSAL. In order to
exercise the right of first refusal granted to it hereunder, RiceX will
provide BioCeutics with production surplus for the remainder of calendar year
1999, and will notify BioCeutics on or before April I and October I of each
year commencing in 1999 of the amount of estimated production of Products
during the following six (6) calendar months. Thereafter, on or before May I
and November I of each year commencing in 1999, BioCeutics shall inform RiceX
in writing of the amount of each Product that BioCeutics is willing to
purchase during the following six (6) calendar months. (By way of example,
BioCeutics shall notify RiceX on or before November 1, 1999 of the amount of
each Product that BioCeutics is willing to purchase for the six (6) months
commencing January 1, 2000 to June 30, 2000.) To the extent that BioCeutics
commits to purchase RiceX Products, RiceX shall be obligated to manufacture
and supply such Products, and BioCeutics then shall be obligated to purchase
the Products on a take or pay basis. In addition, should BioCeutics commit to
purchase a certain quantity of RiceX Products per month, but elects to take
delivery of a lesser amount, RiceX shall be paid for the total contracted
production but will deliver the additional Products as and when directed by
BioCeutics during the ensuing twelve (12) month period. Should BioCeutics
fail to direct delivery of said production during the ensuing twelve (12)
month period, BioCeutics shall FORFEIT PREPAID funds and the right to receive
the Product.
(c) SALES TO OTHER CUSTOMERS. In the event that
BioCeutics does not elect to purchase all of the estimated semi-annual
production of RiceX, RiceX then shall be entitled to sell the balance of its
production to other customers, but not to customers in the human market.
Notwithstanding the foregoing, if BioCeutics declines to sell to any customer
in the human market, BioCeutics will notify RiceX and, if BioCeutices
CONSENTS (IN WRITING), RICEX SHALL be entitled to sell to such human market
customer.
<PAGE>
(d) TERM. The term of this right of first refusal
(and of this Agreement) shall be for ten (10) years commencing on the date
hereof and continuing until November 1, 2009. In addition, provided that
BioCeutics is not then in material default under this Agreement, BioCeutics
shall have the option to extend the term of this Agreement for four (4)
periods of five (5) years each. Such extensions shall occur automatically
unless BioCeutics gives written notice to RiceX at least ninety (90) days
prior to the expiration of the initial term or each renewal term that it does
not elect to extend the term of this Agreement.
3. EXCLUSIVE RIGHT TO SELL.
(a) EXCLUSIVE RIGHT TO SELL. Subject to meeting
the minimum purchase requirements set forth in paragraph 3 (c) below, RiceX
hereby grants to BioCeutics the exclusive right to sell Products which
include RiceX ingredients to the entire human market, including current
customers of RiceX. During the term of this Agreement, no one other than
BioCeutics, shall sell Products for the human market, except as provided in
paragraph 2(c) above. In addition, in the event anyone contacts RiceX with a
business opportunity for the human market, RiceX shall forward that inquiry
to BioCeutics.
(b) MINIMUM PURCHASE REQUIREMENTS. The exclusive
rights granted to BioCeutics under paragraph 3(b) of this Agreement (but no
other rights granted hereunder) shall terminate in the event that BioCeutics
purchases less than $2,000,000 (not including sales to customers indicated on
EXHIBIT "B" ATTACHED HERETO) OF PRODUCTS through December 31, 2000, or
$5,000,000 of Products in 2001. Thereafter, the exclusive rights granted to
BioCeutics hereunder shall be subject to minimum purchases of $6,000,000 in
2002, $7,200,000 in 2003, $8,640,000 in 2004, and increasing thereafter at
the rate of five percent (5%) per annum from 2005 through the remaining term
of this Agreement. All purchases in excess of the required minimum per year
shall be carried over to the following year, and BioCeutics' obligation to
meet such minimum purchase requirements is subject to RiceX manufacturing
sufficient Product to allow BioCeutics to meet such minimum purchases.
(c) LICENSE FOR TRADEMARKS. In addition to the
exclusive right to sell described in this paragraph, so long as BioCeutics is
not in default hereunder, RiceX hereby grants to BioCeutics an exclusive
license to use the trademarks "MiraChol" and "MaxE" BioCeutics also shall be
required to imprint the RiceX trademark brand on all products incorporating
RiceX Products sold by BioCeutics during the term of this Agreement. RiceX
agrees that it is the holder of the trademarks ("Trademarks") mentioned in
this paragraph, and that the sale and use of the Products and the Trademarks
will not infringe any person's right. RiceX shall indemnify and defend
BioCeutics against any and all such infringement claims, demands, actions,
losses, damages, fines, penalties, costs and expenses (including reasonable
attorneys' fees). BioCeutics acknowledges that RiceX's right in the
Trademarks are subject to an existing security interest in favor of a lender.
(d) TERM OF EXCLUSIVE RIGHT TO SELL AND EXCLUSIVE
LICENSE TO USE TRADEMARKS. The term of the exclusive rights granted to
BioCeutics hereunder shall be for the term of this Agreement (including
extensions) as provided in paragraph 2(d) above.
(e) PAYMENT FOR EXCLUSIVE RIGHT. In consideration
for granting the exclusive rights and license to BioCeutics hereunder,
BioCeutics shall pay to RiceX the following:
(i) A royalty of two percent (2%) of
BioCeutics' gross receipts. For purposes of this Agreement, the term "gross
receipts" means the total receipts received by BioCeutics and its affiliates
who are involved in the sale of nutraceutical products from all sources, but
shall be net of freight charges and other similar costs and shall exclude
refunds for merchandise returned which were previously included in gross
receipts, allowances or adjustments granted to customers to the extent that
these were previously included in gross receipts, transfers of merchandise
from warehouse to warehouse provided that such transfer was not for the
purpose of delivery of merchandise sold, merchandise returned to vendors, and
sales, use, gross receipts, excise and like taxes which are added to the
selling price of merchandise at the point of sale and paid for by the
customer,
(ii) BioCeutics shall keep full and
complete records and books of account reflecting all sales and business
transactions in order to enable RiceX to ascertain the royalty payments due
hereunder. BioCeutics agrees to keep all records pertaining to gross receipts
at its main office for a period of not less than three (3) years following
the date on which BioCeutics submits its report of gross receipts based on
such records. BioCeutics also shall prepare and deliver to RiceX within
thirty (30) days after the end of each calendar quarter a true written
statement signed by BioCeutics or its duly authorized officer or agent
showing in such form and detail as RiceX shall reasonably specify the
elements and amounts of gross receipts during such calendar quarter or
fraction thereof. With said statement for each calendar quarter, BioCeutics
shall pay to RiceX the amount of royalty due for such calendar quarter. If
BioCeutics shall fail to prepare and deliver, within the time above
mentioned, any statement of gross receipts or other related information
required hereunder, RiceX may elect to treat BioCeutics' failure as a breach
of this Agreement. RiceX also may elect to conduct an audit of all books and
records of BioCeutics which in any way pertain to or show gross receipts.
Such audit may be conducted by RiceX or by its authorized representative. If
the statement prepared as a result of such audit indicates that any
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additional royalties are due, BioCeutics shall pay such royalties, plus
interest thereon at the maximum rare from the date such payment was due until
the date of payment, and in addition, in any case where the amount of gross
receipts shown by such audit is equal to or in excess of one hundred four
percent (104%) of the amount disclosed by BioCeutics' statement for the same
period, BioCeutics shall pay for the cost of the audit.
(f) INFRINGEMENT. RiceX shall use its best
efforts to prevent others from infringing upon the exclusive rights granted
to BioCeutics hereunder, but shall not be liable for such infringement, nor
shall such infringement affect any payments required hereunder.
(g) TERRITORY. This Agreement shall relate to
domestic and international sales, provided that RiceX shall be entitled to
sell Products, in bulk only, to wholesale customers located in the countries
of China, India, Indonesia, Bangladesh, Vietnam, Thailand, Myanmar,
Philippines, Brazil, Korea, Pakistan, Egypt and Malaysia, but will cease such
activity promptly after BioCeutics gives it notice that it chooses to exploit
such opportunity and substantially maintain RiceX's market share. The
exclusive right granted to BioCeutics hereunder as to international sales
shall be for a term expiring December 31, 2000. Thereafter, BioCeutics shall
have the option, exercisable by giving RiceX written notice thereof at any
time prior to February 28, 2001, to extend the exclusive rights granted
hereunder as to international sales for the remaining term of this Agreement
by giving RiceX written notice thereof accompanied by a cash payment of
$500,000.
(h) INDEMNIFICATION.
(i) RiceX agrees to indemnify BioCeutics for, and
hold it harmless from and against, any and all costs, expenses and damages
(including reasonable attorneys' fees and expenses) incurred in connection
with any suit, action or claim arising out of, or as a result of, any claims
for damages to person or property occasioned from the use of the products to
be sold by BioCeutics after the date hereof, if and only if, such damages are
caused by the Products purchased hereunder from RiceX and not any additions
to or modifications of the Products made by BioCeutics ("Additions and
Modifications").
(ii) BioCeutics agrees to indemnify RiceX for, and
hold it harmless from and against, any and all costs, expenses and damages
(including reasonable attorneys' fees and expenses) incurred in connection
with any suit, action or claim arising out of, or as a result of, any claims
for damages to person or property occasioned from the use of the products to
be sold by BioCeutics after the date hereof, if and only if, such damages are
caused by the Modifications and Additions and not the Products purchased
hereunder from RiceX.
4. DEFAULT. A party shall be in default under this
Agreement if any of the following shall occur:
(a) BioCeutics shall fail to pay any royalty due
hereunder as and when due;
(b) RiceX shall fail to manufacture Products for
sale to BioCeutics hereunder;
or
(c) Either party shall otherwise breach any term
or condition of this Agreement.
If an event of default shall occur and is not cured within thirty (30) days
after the giving of written notice thereof to the defaulting party, the other
party shall be entitled to terminate this Agreement and the exclusive rights
and exclusive license granted hereby, and pursue any and all claims for
damages. In addition, in the event that BioCeutics fails to meet the minimum
purchase requirements for December 31, 2000 as set forth in paragraph 3(c)
above, all results, reports, information and materials derived from the
clinical trials, testing and research to be undertaken by BioCeutics (which
materials and information currently are owned by BioCeutics) shall become the
property of RiceX and shall be delivered to RiceX by BioCeutics, subject to a
non-exclusive right in favor of BioCeutics to continue to use such materials
and information free of charge.
5. MISCELLANEOUS.
(a) TIME IS OF THE ESSENCE. Time is of the essence
in the performance of the parties' respective obligations herein contained.
(b) FURTHER ASSURANCE. Each party agrees that upon
the request of the other it will, from time to time, execute and deliver to
such other party all such instruments and documents of further
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assurance or otherwise, and will do any and all
such acts and things as reasonably may be required to carry out the
obligations of such party hereunder and consummate the transactions
contemplated hereby.
(c) HEADINGS. The headings of this Agreement are
included for purposes of reference and convenience only and shall not limit
or otherwise affect the construction or interpretation of any of the
provisions of this Agreement.
(d) ENTIRE AGREEMENT, MODIFICATION. This
Agreement, including all exhibits, constitutes the entire agreement between
the parties hereto pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements and understandings of the parties in
connection herewith. No supplement, modification or amendment of this
Agreement shall be effective unless executed in writing by all of the parties
hereto.
(e) NOTICE. Whenever the service or the giving of
any document or consent by or on behalf of any party hereto upon any other
party is herein provided for, or becomes necessary or convenient under the
provisions of this Agreement or any document related hereto, a valid and
efficient service of such document shall be effected by delivering the same
in writing to such party in person, by Federal Express or other reputable
courier, by facsimile, or by sending the same by registered or certified
mail, return receipt requested, and shall be deemed received upon personal
delivery if delivered personally, by Federal Express or other reputable
courier or by facsimile, or four (4) business days after deposit in the mail
in the United States, postage prepaid, addressed to the person to receive
such notice or communication at the following address:
RiceX: 1241 Hawk's Flight Court
El Dorado Hills, California 95762
Attention: Daniel L McPeak, Sr.
Telephone:(916) 933-3000
Facsimile: (916) 933-3333
BioCeutics: Graubard Mollen & Miller
600 Third Avenue
New York, New York 100 16
Attention: David Alan Miller
Telephone (212) 818-8800
Facsimile: (212) 818-8881
Notice of change of address shall be given by written notice in the manner
detailed in this paragraph 5(e).
(f) COUNTERPARTS. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but all of which,
together, shall constitute one and the same instrument.
(g) LAW GOVERNING. This Agreement shall be
construed in accordance with, and shall be governed by, the laws of the State
of Delaware.
(h) SUCCESSORS AND ASSIGNS. Neither party may
assign any of its rights or obligations under this Agreement without the
prior written consent of the other party, which consent may be withheld in
such party's sole and absolute discretion. Subject to the foregoing, this
Agreement shall be binding upon and enforceable by, and shall inure to the
benefit of, the parties hereto and their respective successors and assigns.
(i) SEVERABILITY. In the event any portion of
this Agreement shall be declared by any court of competent jurisdiction to be
invalid, illegal or unenforceable, such portion shall be deemed severed from
this Agreement, and the remaining parts hereof shall remain in full force and
effect, as fully as though such invalid, illegal or unenforceable portion had
never been a part of this Agreement.
(J) GENDER AND NUMBER. As used in this Agreement,
the masculine, the feminine and the neuter gender, and the singular or plural
number, shall be deemed to include the others wherever the context so
indicates or requires.
(k) ATTORNEYS' FEES. In the event of the bringing
of any action by any party hereto against any other party arising out of this
Agreement, the party who is determined to be the prevailing party shall be
entitled to recover from the other party all costs and expenses of suit,
including reasonable attorneys' fees.
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(l) GOVERNING LAW, DISPUTE. This Agreement shall
be governed by and construed under the law of the State of Delaware,
disregarding any principles of conflicts of law that would otherwise provide
for the application of the substantive law of another jurisdiction. Each of
the undersigned (i) agrees that any legal suit, action or proceeding arising
out of or relating to this Agreement shall be instituted exclusively in the
Superior Court of the State of Delaware, (ii) waives any objection to the
venue of any such suit, action or proceeding and the right to assert that
such forum is not a convenient forum, and (iii) irrevocably consents to the
jurisdiction of the Superior Court of the State of Delaware in any such
suit,action or proceeding. Each of the undersigned further agrees to accept
and acknowledge service of any and all process which may be served in any
such suit, action or proceeding in the Superior Court of the State of
Delaware and agrees that service of process upon it mailed by certified mail
to its address shall be deemed in every respect effective service of process
upon it in any such suit, action or proceeding.
(m) FORCE MAJEURE. Either party shall be excused
from all obligations under this Agreement to the extent performance is
prevented by a Force Majeure. For purposes of this Agreement, a "Force
Majeure" includes only Acts of God; hurricane, tornado and other weather
conditions; labor strike, lockout or other major industrial disturbance; war,
riot, sabotage, act of public enemy, terrorist act or gang violence; serious
illness or epidemic; earthquake or other earth movement, flood or other
natural disaster; bomb blast or other explosion; fire or, government action
that prevents performance.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE RICEX COMPANY
A Delaware Corporation
("RiceX")
Name: Daniel McPeak, Sr
By:/s/Daniel L. McPeak
Its: Chief Executive Officer and Chairman of the Board
BIOCEUTICS, INC.
A Delaware Corporation
("BioCeutics")
Name: Samuel Rozzi
By:/s/Samuel Rozzi
Its: Vice President
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EXHIBIT 10.39
EMPLOYMENT AGREEMENT
THE RICEX COMPANY, a Delaware corporation ("Employer"), and Daniel
L. McPeak, Jr. ("Employee"), agree as follows, effective as of the first of
May 1999 (the "Effective Date").
1. EMPLOYMENT. Employer hereby employs Employee and Employee hereby
accepts employment with Employer on the terms and conditions set forth below.
2. POSITION; SCOPE OF EMPLOYMENT. Employee shall have the position
of Executive Vice President and General Manager. Employee's duties shall
include development of primary goals, operating plans, policies, and short
and long range objectives for the Company. Implements these following Board
of Directors' approval. Directs and coordinates activities to achieve profit
and return on capital. Establishes organizational structure and delegates
authority to subordinates. Leads the organization towards objectives, meets
with and advises other executives and reviews results of business operations.
Determines action plans to meet needs of stakeholders. Shall include such
other duties and authority as specified by Employer and as may be modified
from time to time.
2.1. ENTIRE TIME AND EFFORT. Employee shall devote
Employee's full working time, attention, abilities, skill, labor and efforts
to the performance of Employee's employment. Employee shall not directly or
indirectly (i) be substantially engaged in or concerned with any other duties
or pursuits, (ii) render services to any third party for compensation or
other benefit, or (iii) engage in any other business activity that will in
any way interfere with the performance of Employee's duties under this
Agreement, except with the prior written consent of Employer; provided,
however, that Employee may engage in charitable, philanthropic, educational,
religious, civic and similar such activities to the extent that such
activities do not unreasonably interfere with the performance of Employee's
duties under this Agreement.
2.2. RULES AND REGULATIONS. Employee agrees to observe and
comply with Employer's rules and regulations as provided by Employer and as
may be amended from time to time by Employer, and will carry out and
faithfully perform such orders, directions and policies of Employer.
3. TERM OF EMPLOYMENT. Employee's term of employment under the
terms of this Agreement shall commence on May 1, 1999 and shall terminate
five years from that date, unless terminated earlier as provided herein. At
the end of the initial five-year term, this Agreement shall automatically
renew for an additional five-year term unless either party notifies the other
party in writing ninety (90) days prior to the expiration of the term of his
or its intention not to renew this Agreement.
4. COMPENSATION. Employer shall pay Employee the base pay ("Base
Salary") per year which is in effect on the date of this agreement. Effective
six months from the date of this Agreement (November 1, 1999) the Employer
shall pay Employee an effective annual rate equivalent to One Hundred Twenty
Five Thousand Dollars ($125,000) per year. Effective in twelve months of this
Agreement (May 1, 2000), Employer shall pay to Employee an effective
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rate equivalent to One Hundred Thirty Five Thousand Dollars ($135,000) per
year. Salary payments will be payable in periodic installments in accordance
with Employer's pay schedule, but not less than twice per month. The Base
Salary shall be reviewed at least annually
4.1. BENEFITS. Employee shall be provided with medical
insurance and such other benefits as provided to Employer's other similarly
situated employees and in accordance with Employer's policies, as modified
from time to time in Employer's sole discretion.
4.2. VACATION AND SICK LEAVE. Employee shall be entitled to
four weeks of vacation each calendar year. Employee's vacation shall accrue
at the rate of thirteen and one-thirds (13 1/3) hours per month but in no
event shall Employee's total accrued vacation exceed eight (8) weeks.
Employee shall be entitled to sick leave in accordance with Employer's sick
leave policy.
4.3. AUTOMOBILE. Employer shall make lease payments on
behalf of the Employee, up to a maximum amount of six hundred dollars
($600.00) per month. Employer shall also reimburse Employee for his actual
expenses incurred in the operation of one automobile for automobile
insurance, annual registration, and maintenance.
4.4. BONUS. Employee shall be eligible to participate in
Employer's bonus program when implemented to the same extent as other
executive employees of Employer. Employer intends to adopt such a program
prior to the expiration of this Agreement, but makes no further
representations as to the terms of such program or the date such program will
be enacted.
4.5. STOCK OR STOCK OPTION PLAN. As additional compensation
for Employee's services, prior to December 31, 1999, Employer shall grant,
and/or shall cause its affiliates, successors, or assigns to grant, to
Employee equity compensation in the form of an option to purchase 900,000
shares of Employer's Common Stock (the "Option") under Employer's 1997 Stock
Option Plan.
5. TERMINATION OF EMPLOYMENT
5.1. TERMINATION EVENTS. Employee's employment shall be
terminated prior to the expiration of this Agreement ("Early Termination")
upon the occurrence of any of the following events: (i) the mutual written
agreement of Employer and Employee; (ii) Employee's disability, which shall
for the purposes of this Agreement mean Employee's inability due to physical
or mental impairment to perform Employee's duties and obligations under this
Agreement, despite reasonable accommodation by Employer, for a period
exceeding three months; (iii) Employee's death; (iv) notice by Employer of
termination for cause as defined in Section 5.2 below; (iv) written notice of
termination by Employer without cause upon fourteen (14) days' notice,
subject to the Compensation Upon Early Termination provisions of Section 5.3
below.
5.2. TERMINATION FOR CAUSE. Employer reserves the right to
terminate this Agreement for cause upon (i) Employee's willful and continued
failure substantially to perform
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his duties and obligations under this Agreement after written demand for
substantial performance has been delivered to Employee by Employer which sets
forth with reasonable specificity the deficiencies in Employee's performance
and giving Employee not less than thirty (30) days to correct such
deficiencies; (ii) fraud or intentional material misrepresentation by
Employee, (iii) unauthorized disclosure or use of Employer's trade secrets or
Confidential Information by Employee; (iv) Employee's conviction of a felony;
(v) theft or conversion of Employer's property by Employee; or (vi)
Employee's habitual misuse of alcohol, illegal narcotics, or other intoxicant.
5.3. COMPENSATION UPON EARLY TERMINATION. Upon early
termination, Employer shall pay Employee compensation as follows.
(A) If Employee is terminated by Employer for
cause, voluntarily resigns, dies, or becomes disabled as such term is used in
Section 5.1 of this Agreement, Employer shall pay Employee, or Employee's
representative, all accrued but unpaid salary and vacation pay accrued
through the effective date of the termination.
(B) If Employee is terminated by Employer without
cause, Employer shall pay to Employee as liquidated damages and in lieu of
any and all other claims which Employee may have against Employer the amount
equal to Employee's monthly base salary multiplied by the number of months
remaining in the term of this Agreement, or payment amount equal to two years
of Employee's Base Salary, which ever is greater. Employer's payment pursuant
to this section shall fully and completely discharge any and all obligations
of Employer to Employee arising out of or related to this Agreement and shall
constitute liquidated damages in lieu of any and all claims which Employee
may have against Employer, not including any obligation under the Worker's
Compensation laws including its Employer's Liability provisions.
(C) If Employee is terminated as the result of a
Change in Control and Employee is not employed in the same capacity or being
paid the same Base Salary by the new entity, then Employee shall receive a
severance payment equal to two years of Employee's Base Salary or the balance
remaining to be paid under the terms of this Agreement, whichever is greater.
In addition, if Employee is terminated as the result of a Change in Control
and Employee is not employed in the same capacity by the new entity, Employer
agrees to continue Employee's medical and dental insurance benefits as
provided during Employee's employment with Employer for a period of two years
from the effective date of the Change in Control, except as provided below in
Section 5.3(C)(1) and Section 5.3(C)(2).
(1) Employee agrees that he shall accept
any plan coverage changes that may occur during the two-year period which
apply to all employees in the workforce.
(2) Employee agrees that he will notify
Employer (or any successor of Employer) if he becomes employed in any
capacity with another employer and becomes eligible to receive medical and
dental insurance benefits through that employment prior to the expiration
date of the two-year period set forth in this section. At such time, Employer
shall no longer be obligated to provide Employee with medical and dental
insurance benefits.
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6. UNFAIR COMPETITION. During Employee's employment under this
Agreement, Employee shall not directly or indirectly, whether as a partner,
employee, creditor, shareholder or otherwise, promote or engage in any
activity or other business which is competitive in any way with Employer's
business, and shall not take any action or make any agreement to establish,
or become employed by, a competing business.
7. PROPRIETARY INFORMATION; CONFIDENTIALITY.
7.1. CONFIDENTIAL INFORMATION. Employee agrees not to
disclose to any others, or take or use for Employee's own purposes or
purposes of any others, during the term of this Agreement, any of Employer's
Confidential Information (as defined below). Employee agrees that these
restrictions shall also apply to (1) Confidential Information belonging to
third parties in Employer's possession and (2) Confidential Information
conceived, originated, discovered or developed by Employee during the term of
this Agreement. "Confidential Information" means any Employer proprietary
information, technical data, trade secrets or know-how, including, but not
limited to, research, product plans, products, services, customer lists and
customers, markets, software, developments, inventions, processes, formulas,
technology, designs, drawings, engineering, marketing, finances or other
business information disclosed to Employee by Employer, either directly or
indirectly, in writing, orally or by drawings, or by observation of products.
Confidential Information does not include any of the foregoing items which
has become publicly known and made generally available through no wrongful
act of Employee. Employee further agrees not to use improperly or disclose or
bring onto the premises of Employer any trade secrets of another person or
entity during the term of this Agreement.
7.2. RETURN OF PROPERTY. Employee agrees that upon
termination of employment with Employer, Employee will deliver to Employer
all devices, records, data, disks, computer files, notes, reports, proposals,
lists, correspondence, specifications, drawings, blueprints, sketches,
materials, equipment, other documents or property, or reproductions of any
aforementioned items developed by Employee pursuant to employment with
Employer or otherwise belonging to Employer, its successors or assigns.
7.3. NONCOMPETITION. Employee shall not use any of the
Confidential Information to compete with Employer in connection with a
business or enterprise of any kind, foreign or domestic, profit or
non-profit, as an investor, partner, shareholder, LLC member, employee,
agent, consultant or independent contractor. Nothing in this Section 7.3
shall be construed to limit the more general prohibitions against
unauthorized use or disclosure of the Confidential Information contained in
other sections of this Agreement.
7.4. NOTIFICATION OF NEW EMPLOYER. Employer shall have the
right to notify any actual or potential future employer of Employee of
Employee's rights and obligations under this Section 7 of the Agreement.
Employee expressly authorizes such disclosure and waives any claims Employee
may have against Employer resulting from the disclosure of Employee's
obligations under this Section 7 to an actual or potential future employer of
Employee.
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7.5. OTHER AGREEMENTS. Employee represents that the
performance of all the terms of this Agreement will not breach any agreement
to keep in confidence proprietary information acquired by Employee in
confidence or in trust prior to employment with Employer. Employee has not
and shall not enter into any oral or written agreement in conflict with this
Agreement.
7.6. EQUITABLE REMEDIES. Employee agrees that it would be
impossible or inadequate to measure and calculate Employer's damages from any
breach of the covenants set forth in this Section 7 of the Agreement.
Accordingly, Employer shall have available, in addition to any other right or
remedy available under law or equity, the right to obtain any injunction from
a court of competent jurisdiction restraining such breach or threatened
breach and to specific performance of any such provision of this Section 7.
Employee further agrees that no bond or other security shall be required in
obtaining such equitable relief and consents to the issuance of such
injunction and to the ordering of specific performance.
8. DISPUTE RESOLUTION. Employee and Employer shall use their best
efforts to settle any disputes regarding the rights or obligations of the
parties under this Agreement through negotiation and agreement. Any disputes
which cannot be settled in this manner shall be conclusively determined by
binding arbitration. The arbitration shall be conducted as follows:
8.1. BINDING ARBITRATION. Any dispute between the parties
shall be submitted to, and conclusively determined by, binding arbitration in
accordance with this Section 8. The provisions of this section shall not
preclude any party from seeking injunctive or other provisional or equitable
relief in order to preserve the status quo of the parties pending resolution
of the dispute, and the filing of an action seeking injunctive or other
provisional relief shall not be construed as a waiver of that party's
arbitration rights. The arbitration of any dispute between the parties to
this Agreement shall be governed by the provisions of the California
Arbitration Act (California Code of Civil Procedure sections 1280, ET SEQ.),
excluding the provisions of Code of Civil Procedure section 1283.05.
8.2. INITIATION OF ARBITRATION. In the case of any dispute
between the parties to this Agreement, either party shall have the right to
initiate the binding arbitration process provided for in this section by
serving upon the other party a demand for arbitration. Notwithstanding any
other provision of law, in order to be enforceable a demand for arbitration
must be served within sixty (60) days of the date on which a party discovers,
or reasonably should have discovered, facts giving rise to a dispute as
defined above.
8.3. SELECTION OF ARBITRATORS. Within thirty (30) days of
service of a demand for arbitration by either party to this Agreement, the
parties shall endeavor in good faith to select a single arbitrator. If they
fail to do so within that time period, each party shall have an additional
period of fifteen (15) days in which to appoint an arbitrator and those
arbitrators within fifteen (15) days shall select an additional arbitrator.
If any party fails to appoint an arbitrator or if the arbitrators initially
selected by the parties fail to appoint an additional arbitrator within the
time specified herein, any party may apply to have an arbitrator appointed
for the party who has failed to appoint, or to have the additional arbitrator
appointed, by the presiding judge for the Superior Court, Sacramento County,
California. If the presiding judge,
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acting in his or her personal capacity, is unable or unwilling to appoint the
additional arbitrator, that arbitrator shall be selected in accordance with
California Code of Civil Procedure section 1281.6.
8.4. LOCATION OF ARBITRATION. Any arbitration hearing shall
be conducted in Sacramento County, California.
8.5. APPLICABLE LAW. The law applicable to the arbitration
of any dispute shall be the law of the State of California, excluding its
conflicts of law rules.
8.6. ARBITRATION PROCEDURES. Except as otherwise provided
in this section, the arbitration shall be governed by the California
Arbitration Act (Code Civ. Proc. SectionsSECTIOns 1280 et seq.), excluding
the provisions of Code of Civil Procedure section 1283.05. In addition,
either party may choose, at that party's discretion, to request that the
arbitrators resolve any dispositive motions prior to the taking of evidence
on the merits of the dispute. By way of example, such dispositive motions
would include, but not be limited to, those which would entitle a party to
summary judgment or summary adjudication of issues pursuant to Code of Civil
Procedure section 437c or resolution of a special defense as provided for at
Code of Civil Procedure section 597. In the event that a party to the
arbitration requests that the arbitrators resolve a dispositive motion, the
arbitrators shall receive and consider any written or oral arguments
regarding the dispositive motion, and shall receive and consider any evidence
specifically relating thereto, and shall render a decision thereon, before
hearing any evidence on the merits of the dispute.
8.7. LIMITATION ON SCOPE OF ARBITRATORS' AWARD OR DECISION.
Employer and Employee agree that if the arbitrators find any disputed claim
to be meritorious, the arbitrators shall have the authority to order legal
and/or equitable relief appropriate to the claim, but that in no event shall
the arbitrators have authority to award punitive or exemplary damages.
8.8. COSTS OF ARBITRATION; ATTORNEYS' FEES. Each party
shall bear equally the costs of the arbitration and shall bear its own
attorneys' fees. However, Employer and Employee agree that the arbitrators,
in their discretion, may award to the prevailing party the costs, including
the costs of the arbitration, and attorneys' fees incurred by that party in
participating in the arbitration process.
8.9. ACKNOWLEDGMENT OF CONSENT TO ARBITRATION. NOTICE: BY
INITIALING IN THE SPACE BELOW, YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING
OUT OF THE MATTERS INCLUDED IN THIS "DISPUTE RESOLUTION" SECTION DECIDED BY
NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY
RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY
TRIAL. BY INITIALING IN THE SPACE BELOW, YOU ARE GIVING UP YOUR JUDICIAL
RIGHTS TO DISCOVERY AND APPEAL UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED
IN THIS "DISPUTE RESOLUTION" SECTION. IF YOU REFUSE TO SUBMIT TO ARBITRATION
AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE
AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS
ARBITRATION PROVISION IS VOLUNTARY.
6
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WE HAVE READ AND UNDERSTOOD THE FOREGOING AND AGREE TO SUBMIT DISPUTES
ARISING OUT OF THE MATTERS INCLUDED IN THIS DISPUTE RESOLUTION PROVISION TO
NEUTRAL ARBITRATION.
INITIALS OF EMPLOYER'S AUTHORIZED REPRESENTATIVE
------------
INITIALS OF EMPLOYEE
------------
9. MISCELLANEOUS.
9.1. NOTICES. Any notice under this Agreement shall be in
writing, and any written notice or other document shall be deemed to have
been duly given (i) on the date of personal service on the parties, (ii) on
the third business day after mailing, if the document is mailed by registered
or certified mail, (iii) one day after being sent by professional or
overnight courier or messenger service guaranteeing one-day delivery, with
receipt confirmed by the courier, or (iv) on the date of transmission if sent
by telegram, telex, telecopy or other means of electronic transmission
resulting in written copies, with receipt confirmed. Any such notice shall be
delivered or addressed to the parties at the addresses set forth below or at
the most recent address specified by the addressee through written notice
under this provision. Failure to give notice in accordance with any of the
foregoing methods shall not defeat the effectiveness of notice actually
received by the addressee.
9.2. FEES; PREJUDGMENT INTEREST. If the services of an
attorney are required by any party to secure the performance hereof or
otherwise upon the breach or default of another party to this Agreement, or
if any judicial remedy is necessary to enforce or interpret any provision of
this Agreement or the rights and duties of any person in relation thereto,
the prevailing party shall be entitled to reasonable attorneys' fees, costs
and other expenses, in addition to any other relief to which such party may
be entitled. Any award of damages following judicial remedy or arbitration as
a result of the breach of this Agreement or any of its provisions shall
include an award of prejudgment interest from the date of the breach at the
maximum amount of interest allowed by law.
9.3. CHOICE OF LAW, JURISDICTION, VENUE. This Agreement is
drawn to be effective in the State of California, and shall be construed in
accordance with California law. The exclusive jurisdiction and venue of any
legal action by either party under this Agreement shall be the County of
Sacramento, California.
9.4. AMENDMENT. The provisions of this Agreement may be
modified at any time by agreement of the parties. Any such agreement
hereafter made shall be ineffective to modify this Agreement in any respect
unless in writing and signed by the parties against whom enforcement of the
modification or discharge is sought.
9.5. WAIVER. Any of the terms or conditions of this
Agreement may be waived at any time by the party entitled to the benefit
thereof, but no such waiver shall affect or impair
7
<PAGE>
the right of the waiving party to require observance, performance or
satisfaction either of that term or condition as it applies on a subsequent
occasion or of any other term or condition.
9.6. ASSIGNMENT. The parties agree that Employee's rights
and obligations under this Agreement are personal and not assignable. This
Agreement contains the entire agreement between the parties to it and shall
be binding on and inure to the benefit of the heirs, personal
representatives, successors and assigns of Employer.
9.7. INDEPENDENT COVENANTS. All provisions herein concerning
unfair competition and confidentiality shall be deemed independent covenants
and shall be enforceable without regard to any breach by Employer unless such
breach by Employer is willful and reckless.
9.8. ENTIRE AGREEMENT. This document constitutes the entire
agreement between the parties, all oral agreements being merged herein, and
supersedes all prior representations and written agreements. There are no
representations, agreements, arrangements, or understandings, oral or
written, between or among the parties relating to the subject matter of this
Agreement that are not fully expressed herein.
9.9. SEVERABILITY. If any provision of this Agreement is
held by a court of competent jurisdiction to be invalid or unenforceable, the
remainder of the Agreement which can be given effect without the invalid
provision shall continue in full force and effect and shall in no way be
impaired or invalidated.
9.10. CAPTIONS. All paragraph captions are for reference
only and shall not be considered in construing this Agreement.
DATED: May 3, 1999
THE RICEX COMPANY EMPLOYEE
By:
------------------------------ --------------------------------------
Daniel L. McPeak Daniel L. McPeak, Jr.
Its: Chief Executive Officer Address:
---------------------------
--------------------------------------
8
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EXHIBIT 10.39
SCHEDULE TO IDENTICAL DOCUMENTS FILED
Todd C. Crow
Ike Lynch
9
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EXHIBIT 10.40
ADDENDUM TO LETTER OF INTENT TO INVEST
AGREEMENT IN PRINCIPLE
(1) Intermark Partners LLC (Intermark), agrees to invest Six Million Dollars
($6,000,000 (USD) in equity capital in the RiceX Company (the Company) at a
basis price of seventy cents ($.70) per share of Company stock (with
piggyback registration rights), subject to appropriate due diligence and
mutual consensus on final terms and conditions in a Definitive Agreement to
Invest.
(2) Intermark agrees to invest an initial amount of Two Million Five Hundred
Thousand Dollars ) (USD) in the Company immediately upon reaching mutual
consensus, Board approval, and endorsement of this AGREEMENT by the
undersigned principal parties not later than November 16, 1999. Said initial
investment amount shall be made on a convertible loan (seventy cents ($.70)
per share) against assets basis, with the property, plant, equipment, and
intellectual property of the Company's Montana manufacturing facilities held
as collateral. The aforesaid loan against assets (2,500,000) (USD) SHALL be
on terms and conditions described below. Funds will be deposited by wire
transfer to the Company's account (number 4114-145345) at Wells Fargo Bank,
Sacramento, California, ABA number 121000248, within twenty four (24) hours
from receipt of aforesaid Board approval, in writing, by Intermark at -the
offices of Granite Bay Ventures LLC Roseville, California.
To this end the Company and its officers warrant that the Company owns good
and marketable fee title, of record and in fact, to the real property and to
all other assets and properties reflected in part and/or whole in the
Company's December 31, 1998 Annual Report filed under Section 12/15 (d) of
the Securities Exchange Act of 1934, and the Company's June 30, 1999
Quarterly Report filed under the same Act, (except for supplies consumed, or
inventory sold, or any other assets not in the books for more than Ten
Thousand ($10,000 USD Dollars in aggregate), sold in each case in the
ordinary course of business subsequent to such date. The Company and its
officers warrant that such assets and properties are owned fee simple, and in
each case, are free of all mortgages, hens, charges, encumbrances, and
restrictions of any nature whatsoever.
The Company and its officers warrant that at the time of signature to this
Agreement in Principle, and within ten (10) business days thereafter, the
Company shall execute and deliver to Intermark all mortgages, deeds of trust,
security agreements, and/or financing statements required to perfect and
secure the aforesaid warranted property, plant, equipment, and intellectual
property issued by the Company as collateral for the aforesaid interim loan
against assets.
Assuming that Intermark, after sufficient due diligence and discovery, is
fully satisfied that the Company's position is as warranted, represented and
currently understood, the aforesaid loan against assets ($2,500,000) USD)
shall be converted to equity in the Company in accordance with Section (1)
above. It is understood that the objective shall be to complete all due
diligence, discovery, and conversion to equity by December 31, 1999 if
possible, with a maximum period of one hundred and twenty (120) days for said
activity to be completed.
Assuming, as anticipated at the time of signing this AGREEMENT, Intermark
concludes that equity investment in the Company is prudent and commensurate
with current warrants, representations and understandings, and agree to
proceed as defined in Section (1) above, then in addition to the equity
conversion of the aforesaid loan against assets ($2,500,000) USD) within the
maximum period of 120 days, Intermark shall commit an additional One Million
Eight Hundred and Fifty Thousand Dollars ($1,850,000) USD) on or before 120
days from date of signing this
1
AGREEMENT, and another One Million Six Hundred and Fifty
Thousand Dollars ($1,650,000 USD) on or before 180 days from date of signing
this AGREEMENT.
If, however, for some reason unforeseen at the time of signing this
AGREEMENT, Intermark concludes that equity investment in the Company is not
prudent, said parties shall herein agree to carry the aforesaid loan against
assets on the following terms and conditions: FOR VALUE RECEIVED, The RiceX
Company ("RiceX"), by and through its undersigned authorized representative,
hereby promises to pay to the order of Intermark Partners LLC ("Intermark")
for and on behalf of its investors, at its main office in Carmel, Indiana,
the principal sum of Two Million Five Hundred Thousand Dollars ($2,500,000),
together with interest on the principal whether by acceleration or otherwise,
and payable as follows: (1) No payments of principal and interest will be due
and owing during the discovery and due diligence period herein established at
one hundred and twenty (120) days maximum. (2) At the
<PAGE>
end of the aforesaid one hundred and twenty (120) day period, the said Two
Million Five Hundred Thousand Dollars ($2,500,000) USD loan shall be extended
for a maximum of two (2) periods of six (6) months each from effective date
of this AGREEMENT, with interest calculated at the Wall Street Journal prime
interest rate plus two (2) percent, plus two (2) points on any remaining
unpaid balance.
In accordance with the aforesaid, each payment made by RiceX shall be applied
first to interest due on the Note with the balance of any payment applied to
the principal due and owing under this note, in accordance with the following
schedules:
a) the first six (6)month period shall be exempt from principal, interest,
and premium points payments for the first one hundred and twenty days, and
interest only shall
accrue for the remaining sixty (60) days during the period.
b) the second six (6) month period from effective date of this AGREEMENT
shall be at an interest rate of two (2) percent plus a premium payment of two
(2) points on any remaining principal balance.
(3) For and in consideration of the above, assuming as anticipated a full
commitment to convert to equity and invest additional capital in the Company,
and in addition to the shares of Company stock issued commensurate with
Section (1) above, and in consideration for value brought to the Company over
and above the equity capital investment (reference Attachment I) Intermark
Investors shall be awarded an additional fifty (50) percent performance
incentive stock warrant, with a cashless exercise option, when the Company's
annualized sales reach Twelve Mahon
Dollars ($12,000,000 USD on a trailing twelve months basis, and an additional
compounded fifty (50) percent performance incentive warrant, with a cashless
exercise option, when the Company's monthly sales reach an annualized
equivalent of Twenty Five Million Dollars ($25,000,000 USD for four (4)
consecutive months (e.g., $2,083,333 monthly sales average for four (4)
consecutive months). In the latter instance, should the aforesaid consecutive
monthly sales performances fall within the final months of this thirty six
month agreement, the incentive performance period shall be extended an
additional twelve (12) months to allow for fulfillment, consistent with the
trailing twelve months basis.
Except for the aforementioned accomodation all said warrants shall
be earned within the initial thirty-six (36) month strategic market and
business development period directed by the Intermark management team, or
said warrants shall become null and void. When earned, the aforesaid
performance incentive warrants shall be immediately vested on the same basis
price as defined in Section (1), of this AGREEMENT (70 cents ($.70) per
share). All said warrants shall be exercisable for a period of up to five (5)
years from date of award and vestment.
(4) It is herein agreed by the undersigned principal parties that the
Intermark strategic management and market development team shall be
responsible for providing the leadership in developing and implementing a
strategic business plan for achieving the business development objectives of
the investors during the three year period following effective date of this
AGREEMENT. Operating management in collaboration with the strategic
management team shall coordinate the implementation of the. strategic
business plan for development of the Company's marketing, sales, management
support, and corporate development programs.
To this end, Intermark's strategic management team shall be compensated
solely through performance incentive stock warrants in the Company, with said
warrants (3,500,000 shares) generally awarded, earned and vested commensurate
with the preliminary RiceX Business Development Proposal dated October 8,
1999 (see attached Attachment I). In addition, the Intermark Partners'
strategic management team shall be awarded performance incentive stock
warrants commensurate with the performance incentive compensation terms and
conditions for the Investors as defined in Section (3) above. Said warrants
shall be issued at a basis price and on terms and conditions generally
described in Sections (1) and (3) above (seventy cents ($.70) per share)
Aforesaid warrants shall be awarded and vested when earned, and shall be
exercisable for a period of up to five (5) years. In addition, the Company
shall reimburse all approved expenses of the Intermark strategic management
team, including those expenses associated with all travel, lodging, per them
expenses, and routine operating expenses incur-red during the initial period
of due diligence, strategic market planning, business ramp-up and in the
overall pursuit of the Company's market and business objectives embodied in
the general understandings of this AGREEMENT, and the aforesaid preliminary
development proposal (Attachment I). It is further understood
2
<PAGE>
that the Company shall reimburse legal and accounting fees incurred during
the period of discovery and due diligence up to a maximum amount of Fifty
Thousand Dollars ($50,OOOUSD).
(5) It is agreed that, in the due diligence, strategic market planning,
business ramp-up and corporate development period, the overall leadership for
direction of the Company shall be vested with the strategic management team
through Intermark. Said leadership shall be accomplished in collaboration
with the current operating management of the company and effectuated through
an executive management team comprised of the current senior operating
management of the Company (Dan McPeak, Sr., Dan McPeak, Jr,, Todd Crow, and
Ike Lynch) and the two senior members of Intermark Partners (Glenn Sullivan
and Alan Kimbell). The objectives of this shared management approach center
on establishing a focussed and coordinated effort for reaching all policy and
significant operating level decisions needed to achieve timely fulfillment of
the strategic plan for business development and the creation of sustainable
shareholder value in the Company. In addition, this management approach
assures all principal parties of appropriate involvement during the critical
early stages of business planning and development, and in the "checks-
and-balances"of the strategic and tactical (operating) decision processes for
"growing" the Company. To this end, and in consideration of Intermark's
fiduciary responsibilities for equity capital contributions to the Company,
it is agreed that all binding contracts, agreements, and commitments for the
Company in excess of Ten Thousand Dollars ($ 10,000 USD) shall require dual
authorization (one signature from a designated representative of the current
senior operating management and one signature from a designated
representative of Intermark All disbursements over Ten Thousand Dollars
($10,000 USD) and not in the normal course of the Company's day-to-day
business, to be defined within ten (10) business days from effective date of
this AGREEMENT, shall require like dual signatures.
It is agreed that the aforesaid policy and significant operating level
decisions during the aforementioned due diligence, market planning, business
ramp-up period shall be realized through a "super majority" consensus of the
aforesaid executive management team (i.e. the aforesaid six member executive
management team) will require a policy consensus majority of five (5) to be
effectuated and/or taken forward for implementation and/or Board approval),
except in such situations where executive team consensus cannot be achieved,
In such situations it is agreed that the Company's Board shall have final
decision authority.
It is generally understood and agreed that upon execution of the
aforementioned Definitive Agreement and conversion to equity, the Intermark
strategic management team shall assume a significant and integral role in the
overall management and development of the Company
to assure continuity in attainment of the overall business growth objectives
embodied in this AGREEMENT. Said responsibility and authority shall
eventually accrue through appropriate Board participation. Aforesaid
Intermark Board participation shall be defined in the Definitive Agreement,
and is herein understood to be two (2) of five (5) total Board memberships
subject to fulfillment of certain debt obligations as defined in Attachment
II herein. It is further understood that one (1) of the aforesaid two (2)
Board memberships held by Intermark shall be awarded to a senior partner of
Granite Bay Ventures, LLC or a designee of said group.
(6) It is agreed that during the period of discovery and due diligence, every
effort will be made to maintain a "quiet period". It is understood that there
will be no third party capitalization transactions concluded during this
period outside the parameters of the current public equity offering dated May
27, 1999, and further understood that aforesaid current offering shall be
capped at Two Million Five Hundred Thousand Dollars ($2,500,000 USD) unless
otherwise agreed in writing between the undersigned principal parties. The
undersigned parties further agree to discuss, within the "spirit" of this
AGREEMENT, any related matters that may arise and that Intermark and its
investors shall have the first right of refusal on any capitalization offers
that may arise including any mutually agreed subscription extensions in the
current May 27, 1999 offering over and above the aforesaid Two Million Five
Hundred Thousand Dollars ($2,500,000 USD). Finally, it is understood that the
aforementioned "quiet period" conditions shall exist only during the one
hundred twenty (120) day period prior to a conversion decision, and after a
decision by Intermark to convert the initial loan to equity.
(7) The undersigned representative for the Company and signatory to this
AGREEMENT warrants that the execution, delivery, and performance of this
Agreement in Principle, compliance with the provisions hereof by the Company,
and consummation of the transactions contemplated herein are consistent with
the desires of the RiceX Company's Board of Directors, and agrees to confirm
such Board approval in writing prior to finalization of this AGREEMENT and
the initial funding by Intermark.
(8) CALIFORNIA LAW TO APPLY. This AGREEMENT shall be construed under and in
accordance with the laws of the State of California. All obligations created
under this AGREEMENT are performable in Sacramento County, California.
This AGREEMENT signed and effectuated this first day of November, 1999, and
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<PAGE>
thereby supercedes all prior understandings and documentations between the
undersigned parties.
For The RiceX Company For Intermark Partners, LLC
Daniel L. McPeak Glenn H. Sullivan, Ph.D.
Chairman of the Board Senior Partner
and Chief Executive Officer Witnessed By:
R. Kimbell
Senior Partner
4
<PAGE>
ATTACHMENT I
THE RICEX COMPANY BUSINESS DEVELOPMENT PROPOSAL
PHASE ONE:
First, we propose that the two most pressing issues for RiceX (strategic
focus / market development and debt restructuring) be addressed
simultaneously. Although we normally prefer to initiate our proposed
activities with the development of a comprehensive strategic plan that
"catalyzes" and "galvanizes" the client company's market/business development
processes, we fully appreciate the urgency for reducing the financial
pressures under which the RiceX Company is currently operating. Thus, we are
prepared to initiate concurrently the company's COMPREHENSIVE STRATEGIC
PLANNING priority (ref. p. 24 of the RiceX Business Plan dated April 1999)
and its equity FINANCING priorities commensurate with the following areas of
activity:
Part I - The development of a three-year comprehensive and performance
benchmarked STRATEGIC PLAN for achieving targeted/attainable market and
business objectives, including:
(I.a) Targeted market/business development in rice producing countries.
- - Assess and target the "optimum leverage" opportunities for stabilized
rice bran processing and sales in North and Central America, with focus on
the animal feeds and functional food sectors.
- - Qualify and target 3-way joint ventures to achieve RiceX market/business
objectives (i.e. RiceX, rice milling operation, market- driven sales entity)
where appropriate.
- - Target OPIC, InterAmerican Development Bank (IDB), and capital market
program funding to achieve 3 to 5 stabilized rice bran processing joint
ventures.
(I.b) Target market/business development in rice consuming countries.
- - Assess and target Mexico and Central America (Guatemala, Honduras, El
Salvador, Costa Rica, Nicaragua, and Panama). Currently these countries
consume over 1.2 million MT of rough rice annually, most of which is
purchased from the United States.
- - Target market development in the functional foods and animal feeds
sectors.
- - Qualify and target 2-way and 3-way joint ventures to achieve RiceX
market/business development objectives.
- - Target OPIC, Bancomext, IDB, and private sector program funding and/or
loan guarantees to achieve 2 to 3 stabilized rice bran processing joint
ventures in the region.
(I.c) Develop and deliver the CONSENSUS STRATEGIC -plan, including: (1)
definition and documentation of optimum strategies for RiceX growth and
performance; (2) assessment of RiceX's market development opportunities,
potential barriers to opportunity exploitation, and tactical strategies
needed to maximize success; (3) performance-driven development schedules for
business ramp-up and sales/marketing program staffing for RiceX; (4)
documentation of achievable market development and sales targets given
available resources and attainment of benchmark performance thresholds; and
(5) development of defensible/performance based proforma needed to establish
credibility and proactive response from the strategic stakeholders/investors
and the equity capital markets.
Part II - Assistance in corporate debt reduction through equity
capitalization. Currently, approximately 7 potential strategic stakeholders
and/or "angel investors" have been preliminarily identified by the Concord
Partners team.
(II.a) Address short-term financial needs of RiceX (November 1999;
approximately $2.5 million).
- - Target current stakeholders/investors.
- - Target new stakeholderslinvestors with possible reciprocal business
interests.
3
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Target potential new users/clients of current stabilized rice bran
products for development of "front-loaded" purchase orders.
- - Target potential "angel investors" with future strategic interests in
the RiceX product lines.
(II.b) Address the intermediate term (1/2000 through 6/2000) financial needs
of Rice X (approximately $3.5 million).
Develop North American strategic alliances in the animal feed and functional
foods sectors.
Develop functional food markets in Central America.
Develop joint venture partners and new performance-based strategic alliances
in rice producing/consuming countries.
The aforesaid activities comprise the FIRST PHASE of our proposed business
development initiative with the RiceX Company. It is anticipated that these
activities will occupy most of the first 18 months, with performances
scheduled to meet the priority needs of the company. We propose that
engagement for Part I activities be "performance fee based", with
compensation in the form of incentive stock options (ISO's) to be vested at
time of strategic plan delivery; plus payment of all approved direct
expenses. We further propose that Part II be "success fee based", with
compensation again in the form of incentive stock options (ISO's) to be fully
vested at the time of delivery of the financing commitments; plus payment of
all approved direct expenses (see Compensation section).
PHASE TWO:
Properly designed strategic plans for market/business development are dynamic
and proactive documents that require timely and focused implementation in
order to effectively achieve their desired result. In our experience we find
that the benefits from such strategic plans are most fully realized when the
planners are directly involved in the follow-up implementation, monitoring,
and oversight activities. This is particularly true in firms with restricted
financial resources and limited sales/marketing staff, where current overhead
burdens limit the firm's capacity to achieve full implementation in a timely
manner. Thus, we propose achieving the critical mass" of strategic plan
implementation through the continuation of our market/business development
services during years 2 and 3 (Part III). This approach achieves two
important objectives: (1) the strategic plan will be implemented under the
direction and oversight of experienced professionals with minimum overhead
burden to RiceX, and (2) the RiceX sales and marketing staff can be fully
developed as the strategic plan is implemented, and as performance thresholds
are achieved, thus helping assure long-term sustainability and corporate
growth. To this end, we propose the following activities:
Part III - Assist RiceX in the comprehensive implementation of the consensus
strategic plan, and focus on "filling" unused manufacturing capacity at
existing stabilized rice bran milling installations, as well as, the
development of new stabilized rice bran joint ventures.
- - Monitor and oversee implementation of the market/business development
activities during early stages of strategic plan implementation.
- - Identify and target additional potential strategic end buyers/users of
stabilized rice bran products to optimize current manufacturing capacity and
lower current unit operating costs.
- - Provide assistance and leadership in developing strategic joint ventures
and joint venture funding options.
- - Assist in planning and development of the permanent RiceX sales and
marketing staff to assure sustainability and future growth.
- - Assess new stabilized rice bran market opportunities and recommend
strategies for development, "bottom-up" market development that leads to
future high value market opportunities.
- - Assist in corporate planning for STRATEGIC THRUSTS into new market
segments (domestic functional foods, nutraceuticals, etc.)
- - Provide "financial advisory" services for preparing the company for an
expanded public offering and increased shareholder value.
4
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Provide the principal leadership and management services for RiceX senior
management and Board of Directors during the aforesaid three-year business
ramp-up and growth period (i.e. reducing the need for added overhead and/or
expense for outside consultants - like Anderson, McKinsey, etc. as the
company achieves growth momentum).
PROPOSED COMPENSATION:
In an effort to provide the maximum benefit to the RiceX Company at minimum
cost, we propose an incentive compensation package through the warranting of
stock options in RiceX at a basis price (Incentive Stock Option - ISO), plus
reimbursement of all approved direct expenses associated with our business
planning and development activities for the company. The warrant price for 0
ISO's shall be mutually agreed, with a basis no less than $.50 per share or
not higher than $.70 per share. All ISO's shall be vested as of the date
earned. Assuming a $.70 per share basis price, the proposed compensation fees
to the strategic management entity (Sullivan, et. al.) for services rendered
are as follows:
<TABLE>
<CAPTION>
Fixed Fees Success Fees
<S> <C> <C>
Part (1) 500,000 -
Part (IIa) 900,000
(IIb) 900,000
Part (III) 1,200,000
</TABLE>
RiceX stock options warranted as fees for services rendered at the basis
price of $.70 per share, plus all approved direct expenses associated with
related development activities. 21 RiceX stock options warranted as success
fees to the strategic management entity (Sullivan, et. al.) for equity
business plan implementation and sourcing capital commitments executed and
delivered, at the basis price of $.70 per share, plus all approved direct
expenses associated with said activities. Success fees shall be earned as
follows: 900,000 shares on the first $2.5 million in equity; 900,000 shares
for the next $3.5 million in equity; 100,000 shares for each $1.5 million in
additional capital raised through equity, debt, or loan guarantees.
SUBMITTED BY:
GLENN H. SULLIVAN, PHD
10/8/99
5
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ATTACHMENT IL
LETTER OF UNDERSTANDING ON UTILIZATION OF INVESTOR FUNDS
It is understood and agreed by the signature parties to the AGREEMENT IN
PRINCIPLE between the Intermark Partners, LLC and The RiceX Company (the
Company) that the initial Two Million Five Hundred Thousand Dollars
($2,500,000 USD) invested in the Company shall be utilized first to liquidate
the current debt obligation to Dominion Resources, Inc. (approximately Two
Million One Hundred Thousand Dollars), with the balance (approximately Four
Hundred Thousand Dollars) dedicated to costs and expense incurred by the
Intermark Partners' strategic management team during the due diligence,
market planning, and initial business development phase of the Company.
It is further understood that upon conversion to equity as defined in the
aforesaid AGREEMENT, and with the second funding of One Million Eight Hundred
Thousand and Fifty Dollars ($1,850,000 USD) the Foodceuticals note shall be
paid in full. The balance of investor funds (approximately $1,650,000 USD)
shall be committed to the market and business development activities of the
Company.
Agreed and signed this day of November, 1999
For The RiceX Company For Intermark Partners, LLC
Daniel L. McPeak H. Sullivan, Ph.D.
Chairman of the Board and Senior Partner Chief Executive Officer
Witnessed By:/s/Daniel L. McPeak
Alan R. Kimbell
Senior Partner
6
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PROMISSORY NOTE
El Dorado Hills, California
November 1, 1999
$2,500,000.00
FOR VALUE RECEIVED, The RiceX Company ("RiceX"), by and through its
undersigned authorized representative, hereby promises to pay to the order of
Intermark Partners LLC ("Intermark"), for and on behalf of its investors, the
principal sum of Two Million Five Hundred Thousand Dollars ($2,500,000.00),
together with interest on the principal from time to time unpaid from the
date hereof until due, whether by acceleration or otherwise, on the following
terms and. conditions, and payable as follows:
(1) No payments of principal and interest will be due and owing during the
discovery and due diligence period herein established at one hundred and
twenty (120) days maximum.
(2) At the end of the aforesaid one hundred and twenty (120) day period, the
Two Million Five Hundred Thousand Dollars ($2,500,000 LSD) loan shall either
be converted to equity in the Company, or assuming a decision by Intermark
Partners, LLC NOT TO CONVERT to equity, said loan shall be rolled over for a
maximum of two (2) periods of six (6) months each from effective date of this
AGREEMENT, with interest calculated at the Wall Street Journal prime interest
rate plus two (2) percent, plus two (2) points on any remaining unpaid
balance as further defined below.
Therefore, in accordance with the aforesaid, each payment made by RiceX shall
be applied first to interest due on the Note with the balance of any payment
applied to the principal due and owing under this note, in accordance with
the following schedules: a) the first six (6)month period shall be exempt
from principal, interest, and premium payments for the first one hundred and
twenty days, and interest only shall accrue for the remaining sixty (60) days
during the period. b) the second six (6) month period from effective date of
this AGREEMENT shall carry full interest and premium payments as defined
above.
As security for payment of this note, RiceX has granted Intermark, by
separate instruments, a mortgage, together with a security interest in all
property, plant, equipment, and intellectual property of the Company's
Montana manufacturing facilities.
This Note is issued under and entitled to the benefits of the provisions of
the Agreement in Principle entered into by the parties on this date, and
incorporated hereunder by reference.
CALIFORNIA LAW TO APPLY. This AGREEMENT shall be construed under and in
accordance with the laws of the State of California. All obligations created
under this AGREEMENT are performable in Sacramento County, California.
THE RICEX COMPANY
By: Daniel L. McPeak Chairman of the Board and Chief Executive Officer
7
<PAGE>
EXHIBIT 10.41
SUPPLEMENTAL AGREEMENT
WHEREAS, the undersigned parties to the attached agreement, titled "Addendum
to Letter of Intent to Invest, Agreement in Principle", dated November 12,
1999, and the attached Promissory Note from The RiceX Company to Intermark
Partners, LLC, dated November 12, 1999, mutually desire additional time to
conclude a Definitive Agreement,
NOW THEREFORE the undersigned agree to the following: 1. The effective dates
of the aforementioned agreement and note are changed from November 12, 1999
to December 1, 1999. 2. All of the time periods cited in the aforementioned
agreement and note shall be deemed to have the starting date of December 1,
1999. 3. All of the other terms and conditions of the aforementioned
agreement and note remain unchanged.
IN WITNESS WHEREOF, the parties have entered into this supplemental agreement
on this 10th day of March, 2000.
THE RICEX COMPANY INTERMARK
PARTNERS, LLC
By: By:
Daniel L. McPeak, Sr., Chairman of Alan R. Kimbell, Senior Partner
the Board and Chief Executive Officer
<PAGE>
EXHIBIT 10.42
CONSULTING AGREEMENT
AMENDMENT NUMBER 1
(NOTE: This Agreement Supersedes Original Agreement Attached)
This consulting agreement ("Agreement") is executed as of this 20th day of
October, 1999, by and between The RiceX Company, a Delaware corporation
("RiceX"), and JDK & Associates, Inc., a California corporation
("Consultant").
RECITALS
A. Consultant is experienced in providing public relations and
consulting services to corporations similar to RiceX.
B. RiceX desires to retain the services of Consultant on the
terms set forth below, and Consultant is willing to provide
such services on the terms set forth below.
NOW, THEREFORE, the parties agree as follows:
1. TERM. The term of this Agreement shall be for one (1)
year commencing on November 1, 1999 and ending on
October 31, 2000. Either party shall have the right
to terminate this Agreement upon sixty (60) days
advance written notice. The term of this Agreement
also may be extended by the mutual agreement of the
parties.
2. CONSULTING SERVICES. During the term of this
Agreement, Consultant shall provide the following
consulting services to RiceX:
a. Develop and deliver a clear, concise and
compelling investment story regarding RiceX
in order to attract and enlist long term
relationships for RiceX;
b. Expose the products and possibilities of
RiceX to the financial community and
generally provide a community awareness of
RiceX's activities to stimulate investor
interest;
c. Review and, where necessary, revise all of
RiceX's promotional materials, including,
but not limited to investment summaries,
news releases, article reprints, short
research reports and other direct mail
materials; and
d. Provide such other consulting advice and
services as reasonably requested by RiceX.
1
<PAGE>
3. COMPENSATION. As compensation for its services
rendered to RiceX hereunder, Consultant shall be
entitled to receive the following compensation:
a. Concurrent with the execution of this
Agreement, RiceX shall pay Consultant Twenty
Five Thousand Dollars ($25,000) in
reimbursement of its due diligence expenses.
b. RiceX shall pay Consultant the sum of Ten
Thousand Dollars ($10,000) per month for
general public relations purposes. Such
payments shall commence on November 1, 1999
and shall be paid on the first day of each
month thereafter until October 31, 2000.
c. Concurrent with the execution of this
Agreement, Consultant shall receive
1,600,000 shares of RiceX common stock, to
be issued by RiceX consistent with all rules
and regulations of the Securities and
Exchange Commission.
d. Consultant shall receive warrants, to
purchase up to 1,000,000 shares of RiceX's
common stock, exercisable at a strike price
of $0.75 per share, commencing on the
signing date of this certificate.
e. Consultant acknowledges that the shares and
warrants to be received by it hereunder
shall be restricted securities and subject
to the rules and regulations of the
Securities and Exchange Commission,
including but not limited to Rule 144.
Consultant acknowledges that it is familiar
with such rules and regulations.
f. Effective March 1, 2000, RiceX hereby grants
Consultant a demand registration right with
respect to the shares issued under Section
3.c. and the warrants to be issued under
Section 3.d.
Upon receipt of demand registration request
by Consultant, RiceX will use its best
efforts to file the appropriate registration
statement with the SEC upon receipt of all
required legal and accounting data. Failure
to file within ninety (90) days of receipt
of the demand will result in a penalty equal
to 100,000 shares per month for each month
the registration remains unfiled.
4. TIME IS OF THE ESSENCE. Time is of the essence in the
performance of the parties' respective obligations
herein contained.
2
<PAGE>
5. FURTHER ASSURANCE. Each party agrees that upon the
request of the other it will, from time to time,
execute and deliver to such other party all such
instruments and documents of further assurance or
otherwise, and will do any and all such acts and
things, as reasonably may be required to carry out
the obligations of such party hereunder and
consummate the transactions contemplated hereby.
6. HEADINGS. The headings of this Agreement are included
for purposes of reference and convenience only and
shall not limit or otherwise affect the construction
or interpretation of any of the provisions of this
Agreement.
7. ENTIRE AGREEMENT MODIFICATION. This Agreement,
including all exhibits, constitutes the entire
agreement between the parties hereto pertaining to
the subject matter hereof and supersedes all prior
and contemporaneous agreements and understandings of
the parties in connection herewith. No supplement,
modification or amendment of this Agreement shall be
effective unless executed in writing by the parties
hereto.
8. NOTICE. Whenever the service or the giving of any
document or consent by or on behalf of any party
hereto upon any other party is herein provided for,
or becomes necessary or convenient under the
provisions of this Agreement or any document related
hereto, a valid and efficient service of such
document shall be affected by delivering the same in
writing to such party in person, by Federal Express
or other reputable courier, by facsimile, or by
sending the same by registered or certified mail,
return receipt requested, and shall be deemed
received upon personal delivery if delivered
personally, by Federal Express or other reputable
courier or by facsimile, or four (4) business days
after deposit in the mail in the United States,
postage prepaid, addressed to the person to receive
such notice or communication at the following
address:
RiceX: The RiceX Company
1241 Hawk's Flight Court, Suite 103
El Dorado Hills, CA 95762
Attn: Daniel L. McPeak, Sr.
Telephone: (916) 933-3000
Facsimile: (916) 933-3232
Consultant: JDK & Associates, Inc.
19800 MacArther Boulevard, Suite 880
Irvine, CA 92612
Telephone: (949) 222-2955
Facsimile: (949) 222-2965
Notice of change of address shall be given by written
notice in the manner detailed in this paragraph 8.
3
<PAGE>
9. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an
original, but all of which, together, shall
constitute one and the same instrument.
10. LAW GOVERNING. This Agreement shall be construed in
accordance with, and shall be governed by, the laws
of the State of California.
11. ATTORNEYS' FEES. In the event of the bringing of any
action by any party hereto against any other party
arising out of this Agreement, the party who is
determined to be the prevailing party shall be
entitled to recover from the other party all costs
and expenses of suit, including reasonable attorneys'
fees.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first set forth above.
THE RICEX COMPANY
A Delaware Corporation
("RiceX")
By:
-------------------------------
Its: CHAIRMAN OF THE BOARD/CEO
---------------------------
JDK & ASSOCIATES, INC.
A California Corporation
By:
-------------------------------
Its:
---------------------------
4
<PAGE>
EXHIBIT 10.43
TERMINATION Of CONSULTING AGREEMENT
AMENDMENT NO. I
JDK & Associates, Inc.
19800 MacArthur Boulevard, Suite 990
Irvine, California 92612
Please take notice that The RiceX Company ("RiceX") hereby elects to
terminate the CONSULTING AGREEMENT AMENDMENT NO. 1 ("Consulting Agreement")
dated as of October 20,1999, by and between RiceX and JDK & Associates, Inc.
This termination is given pursuant to paragraph I of the Consulting Agreement
and shall be effective sixty (60) days after the date hereof.
DATED: February 17,2000
THE RICEX COMPANY
/s/Daniel L. McPeak
By:
DANIEL L. MCPEAK, SR.
Chairman and CEO
<PAGE>
EXHIBIT 10.44
Stabilized Rice Bran Processing, Sales and Marketing Agreement between
Farmers' Rice Cooperative and the Company dated May 1, 1999.*
* Confidential treatment granted as to certain portions.
<PAGE>
Exhibit 21
Subsidiaries of the Company
Food Extrusion Montana, Inc.
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<PAGE>
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
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YEAR ENDED 12/31/1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
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