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Exhibit 10.7
 
SECURITIES EXCHANGE AGREEMENT
 
THIS SECURITIES EXCHANGE AGREEMENT (the “Agreement”), dated as of July 31, 2012,
is entered into by and among NutraCea, a California corporation (the “Company”),
and the persons identified as “Holders” on the signature pages hereto (the
“Holders”).
 
WHEREAS, pursuant to a Securities Purchase Agreement dated January 17, 2012,
among the Company and the Holders (the “January 2012 Purchase Agreement”), the
Company issued to the Holders Original Issue Discount Secured Convertible
Debentures due July 1, 2013 (the “January 2012 Debentures”) in the aggregate
principal amount of $870,000 and Warrants to purchase common stock, no par value
per share, of the Company (the “January 2012 Warrants”); and
 
WHEREAS, the Company and the Holders have agreed to exchange the January 2012
Debentures for new debentures and to acknowledge an adjustment of the exercise
price of the January 2012 Warrants and an increase in the number of Warrant
Shares underlying the January 2012 Warrants.
 
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, each Holder hereby agrees as follows:
 
1.                     Definitions. Terms used as defined terms herein and not
otherwise defined shall have the meanings provided therefore in the January 2012
Purchase Agreement, the January 2012 Debentures and the January 2012 Warrants.
 
“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 405 under the
Securities Act.
 
“Closing Date” means the Trading Day when this Agreement and the New Debentures
have been executed and delivered by the applicable parties thereto.
 
“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.
 
“Company Counsel” means Weintraub Genshlea Chediak Tobin & Tobin Law
Corporation, with offices located at 400 Capitol Mall, 11th Floor, Sacramento,
California 95814.
 
“Disclosure Schedules” means the Disclosure Schedules to this Agreement which
are delivered concurrently herewith.
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
 
 
 

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“Liens” means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
 
“Material Adverse Effect” shall have the meaning assigned to such term in
Section 3(b).
 
“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
 
“Required Minimum” means, as of any date, the maximum aggregate number of shares
of Common Stock then issued or potentially issuable in the future pursuant to
the Transaction Documents, including any Underlying Shares issuable upon
exercise in full of all January 2012 Warrants or conversion or redemption in
full of all New Debentures, ignoring any conversion or exercise limits set forth
therein, and assuming that the Conversion Price is at all times on and after the
date of determination 75% of the then Conversion Price on the Trading Day
immediately prior to the date of determination.
 
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
 
“SEC Reports” means all reports, schedules, forms, statements and other
documents required to be filed by the Company under the Securities Act and the
Exchange Act for the two years preceding the date hereof.
 
“Securities” means the New Debentures and the Underlying Shares.
 
“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
 
“Subsidiary” means any subsidiary of the Company, other than Nutra SA, as set
forth on Schedule 3(a) and shall, where applicable, also include any direct or
indirect subsidiary of the Company formed or acquired after the date hereof.
 
“Trading Day” means a day on which any Trading Market is open for trading.
 
“Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE
MKT (formerly NYSE AMEX), the Nasdaq Capital Market, the Nasdaq Global Market,
the Nasdaq Global Select Market, the New York Stock Exchange, the OTC Bulletin
Board or the Pink OTC Markets (or any successors to any of the foregoing).
 
“Transaction Documents” means this Agreement, the New Debentures and all
“Transaction Documents” as defined in the January 2012 Purchase Agreement, all
schedules and exhibits thereto and hereto and any other documents or agreements
executed in connection with the transactions contemplated hereunder.
 
 
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“Underlying Shares” means the shares of Common Stock issued and issuable upon
conversion or redemption of the New Debentures.
 
2.             Agreements and Acknowledgements.
 
(a)           Exchange of Debentures.  The Company hereby agrees to issue to
each Holder an Original Issue Discount Senior Secured Convertible Debenture due
January 1, 2014, in the form attached hereto as Exhibit A (the “New
Debentures”), in the aggregate principal amount of $1,009,200 in exchange for
the cancellation in full of the January 2012 Debentures.  Each Holder
acknowledges and agrees that, upon the issuance and delivery of the New
Debentures, the January 2012 Debentures will be deemed cancelled and each Holder
will deliver the original January 2012 Debentures to the Company.
 
(b)           Acknowledgement on Exercise Price of and Number of Warrant Shares
underlying the January 2012 Warrants.   The Company hereby acknowledges and
agrees that, upon the issuance of the New Debentures, pursuant to the
anti-dilution provisions included in the January 2012 Warrants, the Exercise
Price of the January 2012 Warrants is adjusted to $0.07 per share, subject to
adjustment therein, and the aggregate number of Warrant Shares issuable under
the January 2012 Warrants is increased to 10,714,286.
 
(c)           Definition of “Debentures” in Transaction Documents.  The Company
and Holders hereby agree that, in the Transaction Documents, the term
“Debentures” shall no longer mean the January 2012 Debentures and, from the date
hereof, “Debentures” shall mean the New Debentures.
 
3.             Representations and Warranties.  Except as set forth in the
corresponding section of the disclosure schedules attached hereto, the Company
hereby makes to the Holders the following representations and warranties:
 
(a)           Subsidiaries.  All of the direct and indirect subsidiaries of the
Company are set forth on Schedule 3(a).  The Company owns, directly or
indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any Liens, and all of the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights to subscribe for
or purchase securities.
 
(b)           Organization and Qualification.  The Company and each of the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted.  Neither the Company nor any Subsidiary is in violation
or default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents.  Each of the
Company and the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not have or reasonably be expected to result
in: (i) a material adverse effect on the legality, validity or enforceability of
any Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business, prospects or condition (financial or otherwise) of
the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or (iii),
a “Material Adverse Effect”; and provided, that the changes in the trading price
of the Common Stock shall not, in and of itself, constitute a Material Adverse
Effect) and no Proceeding has been instituted in any such jurisdiction revoking,
limiting or curtailing or seeking to revoke, limit or curtail such power and
authority or qualification.
 
 
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(c)           Authorization; Enforcement.  The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement and otherwise to carry out its obligations
hereunder and thereunder.  The execution and delivery of this Agreement by the
Company and the consummation by it of the transactions contemplated hereby have
been duly authorized by all necessary action on the part of the Company and no
further action is required by the Company, its board of directors or its
stockholders in connection therewith.  This Agreement has been duly executed by
the Company and, when delivered in accordance with the terms hereof will
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
 
(d)           No Conflicts.  The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby do not and will not: (i) conflict with or violate any
provision of the Company’s or any Subsidiary’s certificate or articles of
incorporation, bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, result in the creation of any Lien
upon any of the properties or assets of the Company or any Subsidiary, or give
to others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any material agreement,
credit facility, debt or other material instrument (evidencing a Company or
Subsidiary debt or otherwise) or other material understanding to which the
Company or any Subsidiary is a party or by which any property or asset of the
Company or any Subsidiary is bound or affected, or (iii) conflict with or result
in a violation of any law, rule, regulation, order, judgment, injunction, decree
or other restriction of any court or governmental authority to which the Company
or a Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii), such
as could not have or reasonably be expected to result in a Material Adverse
Effect.
 
 
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(e)           [RESERVED]
 
(f)           Issuance of the New Debentures.  The New Debentures are duly
authorized and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents.  The
Underlying Shares, when issued in accordance with the terms of the Transaction
Documents, will be validly issued, fully paid and nonassessable, free and clear
of all Liens imposed by the Company other than restrictions on transfer provided
for in the Transaction Documents.  The Company has reserved from its duly
authorized capital stock a number of shares of Common Stock for issuance of the
Underlying Shares at least equal to the Required Minimum on the date hereof.
 
(g)          Capitalization.  Except as provided on Schedule 3.1(g), the
capitalization of the Company is as described in the SEC Reports. Schedule
3.1(g) also includes the number of shares of Common Stock owned beneficially,
and of record, by each executive officer and director of the Company as of the
date hereof. The Company has not issued any capital stock since its most
recently filed periodic report under the Exchange Act, other than pursuant to
the exercise of employee stock options under the Company’s stock option plans,
the issuance of shares of Common Stock to employees pursuant to the Company’s
employee stock purchase plans and pursuant to the conversion and/or exercise of
Common Stock Equivalents outstanding as of the date of the most recently filed
periodic report under the Exchange Act.  No Person has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents;
provided that the Company is issuing Subordinated Notes and associated Common
Stock Warrants to the persons and in the amounts listed on Schedule 3.1(g) on or
about the same date as this Closing with respect to the Subordinated
Indebtedness.  Except as set forth on Schedule 3.1(g), a result of the purchase
and sale of the Securities, there are no outstanding options, warrants, scrip
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any Person any right to subscribe for
or acquire any shares of Common Stock, or contracts, commitments, understandings
or arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock or Common Stock Equivalents. The
issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Holders) and will not result in a right of any holder of Company securities to
adjust the exercise, conversion, exchange or reset price under any of such
securities. All of the outstanding shares of capital stock of the Company are
duly authorized, validly issued, fully paid and nonassessable, have been issued
in compliance with all federal and state securities laws, and none of such
outstanding shares was issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities.  No further approval or
authorization of any stockholder, the Board of Directors or others is required
for the issuance and sale of the Securities.  There are no stockholders
agreements, voting agreements or other similar agreements with respect to the
Company’s capital stock to which the Company is a party or, to the knowledge of
the Company, between or among any of the Company’s stockholders other than with
respect to the Subordinated Indebtedness, the material terms of which are set
forth on Schedule 3.1(g).
 
 
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(h)           Shell Company. The Company is not subject to Rule 144(i).
 
(i)            Bring Down.  The Company expressly reaffirms that each of the
representations and warranties set forth in the Purchase Agreement (as
supplemented or qualified by the disclosures in any disclosure schedule to
Purchase Agreement), continues to be true, accurate and complete in all material
respects as of the date hereof, and the Company hereby remakes and incorporates
herein by reference each such representation and warranty as though made on the
date of this Agreement and as of the Closing Date (unless as of a specific date
therein), except as set forth in the Disclosure Schedules.
 
4.            [RESERVED]
 
5.             Representations and Warranties of the Holders.  Each Holder, for
itself and for no other Holder, hereby represents and warrants as of the date
hereof and as of the Closing Date to the Company as follows (unless as of a
specific date therein):
 
(a)           Organization; Authority.  Such Holder is either an individual or
an entity duly incorporated or formed, validly existing and in good standing
under the laws of the jurisdiction of its incorporated or formed with full
right, corporate, partnership, limited liability company or similar power and
authority to enter into and to consummate the transactions contemplated by the
Transaction Documents and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of the Transaction Documents and
performance by such Holder of the transactions contemplated by the Transaction
Documents have been duly authorized by all necessary corporate, partnership,
limited liability company or similar action, as applicable, on the part of such
Holder.  Each Transaction Document to which it is a party has been duly executed
by such Holder, and when delivered by such Holder in accordance with the terms
hereof, will constitute the valid and legally binding obligation of such Holder,
enforceable against it in accordance with its terms, except: (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
 
(b)           Own Account.  Such Holder understands that the Securities are
“restricted securities” and have not been registered under the Securities Act or
any applicable state securities law and is acquiring the Securities as principal
for its own account and not with a view to or for distributing or reselling such
Securities or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any applicable state
securities law and has no direct or indirect arrangement or understandings with
any other persons to distribute or regarding the distribution of such Securities
in violation of the Securities Act or any applicable state securities law (this
representation and warranty not limiting such Holder’s right to sell the
Securities in compliance with applicable federal and state securities
laws).  Such Holder is acquiring the Securities hereunder in the ordinary course
of its business.
 
 
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(c)           Holder Status.  At the time such Holder was offered the
Securities, it was, and as of the date hereof it is, and on each date on which
it exercises any Warrants or converts any Debentures it will be either: (i) an
“accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or
(a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as
defined in Rule 144A(a) under the Securities Act.  Such Holder is not required
to be registered as a broker-dealer under Section 15 of the Exchange Act.
 
The Company acknowledges and agrees that the representations contained in
Section 5 shall not modify, amend or affect such Holder’s right to rely on the
Company’s representations and warranties contained in this Agreement or any
express representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or delivered in
connection with this Agreement or the consummation of the transaction
contemplated hereby.
 
6.             Transfer Restrictions.
 
(a)           The Securities may only be disposed of in compliance with state
and federal securities laws.  In connection with any transfer of Securities
other than pursuant to an effective registration statement or Rule 144, to the
Company or to an Affiliate of a Holder or in connection with a pledge as
contemplated in Section 6(b), the Company may require the transferor thereof to
provide to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the
Securities Act.  As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Agreement and shall make the
representations set forth in Section 5, and then shall have the rights and
obligations of a Holder under this Agreement.
 
(b)           The Holders agree to the imprinting, so long as is required by
this Section 6, of a legend on any of the Securities in the following form:
 
NEITHER THIS SECURITY NOR ANY SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.  THIS SECURITY AND ANY SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN
“ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR
OTHER LOAN SECURED BY SUCH SECURITIES.
 
 
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The Company acknowledges and agrees that a Holder may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and, if required under the terms of such arrangement, such Holder may transfer
pledged or secured Securities to the pledgees or secured parties.  Such a pledge
or transfer would not be subject to approval of the Company and no legal opinion
of legal counsel of the pledgee, secured party or pledgor shall be required in
connection therewith.  Further, no notice shall be required of such pledge.  At
the appropriate Holder’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the Securities.
 
(c)           Certificates evidencing the Underlying Shares shall not contain
any legend (including the legend set forth in Section 6(b) hereof): (i) while a
registration statement covering the resale of such security is effective under
the Securities Act, (ii) following any sale of such Underlying Shares pursuant
to Rule 144, (iii) if such Underlying Shares are eligible for sale under Rule
144, without the requirement for the Company to be in compliance with the
current public information required under Rule 144 as to such Underlying Shares
and without volume or manner-of-sale restrictions or (iv) if such legend is not
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission). The
Company shall cause its counsel to issue a legal opinion to the Transfer Agent
promptly after the effective date of a registration statement covering the
resale of the Underlying Shares if required by the Transfer Agent to effect the
removal of the legend hereunder.  If all or any portion of a Debenture is
converted at a time when there is an effective registration statement to cover
the resale of the Underlying Shares, or if such Underlying Shares may be sold
under Rule 144 without the requirement for the Company to be in compliance with
the current public information required under Rule 144 as to such Underlying
Shares and without volume or manner-of-sale restrictions or if such legend is
not otherwise required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the Commission), then such Underlying Shares shall be issued free of all
legends.  The Company agrees that following the Effective Date or at such time
as such legend is no longer required under this Section 6(c), it will, no later
than three Trading Days following the delivery by a Holder to the Company or the
Transfer Agent of a certificate representing Underlying Shares, as applicable,
issued with a restrictive legend (such third Trading Day, the “Legend Removal
Date”), deliver or cause to be delivered to such Holder a certificate
representing such shares that is free from all restrictive and other
legends.  The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer set
forth in this Section 6.  Certificates for Underlying Shares subject to legend
removal hereunder shall be transmitted by the Transfer Agent to the Holder by
crediting the account of the Holder’s prime broker with the Depository Trust
Company System as directed by such Holder.
 
 
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(d)           In addition to such Holder’s other available remedies, the Company
shall pay to a Holder, in cash, as partial liquidated damages and not as a
penalty, for each $1,000 of Underlying Shares (based on the VWAP of the Common
Stock on the date such Securities are submitted to the Transfer Agent) delivered
for removal of the restrictive legend and subject to Section 6(c), $10 per
Trading Day (increasing to $20 per Trading Day five (5) Trading Days after such
damages have begun to accrue) for each Trading Day after the Legend Removal Date
until such certificate is delivered without a legend; provided, however, the
parties acknowledge and agree that the Underlying Shares may be issued free of
all legends as of the date hereof and accordingly the obligation to pay
liquidated damages for failing to remove legends upon conversion commences
immediately after the date hereof.  Nothing herein shall limit such Holder’s
right to pursue actual damages for the Company’s failure to deliver certificates
representing any Securities as required by the Transaction Documents, and such
Holder shall have the right to pursue all remedies available to it at law or in
equity including, without limitation, a decree of specific performance and/or
injunctive relief.
 
(e)           Each Holder, severally and not jointly with the other Holders,
agrees with the Company that such Holder will sell any Securities pursuant to
either the registration requirements of the Securities Act, including any
applicable prospectus delivery requirements, or an exemption therefrom, and that
if Securities are sold pursuant to a registration statement, they will be sold
in compliance with the plan of distribution set forth therein, and acknowledges
that the removal of the restrictive legend from certificates representing
Securities as set forth in this Section 6 is predicated upon the Company’s
reliance upon this understanding.
 
7.             Miscellaneous.
 
(a)           The respective obligations and agreements of the Holders hereunder
are subject to the following conditions being met: (a) the accuracy in all
material respects of the representations and warranties of the Company contained
herein (except for those representations and warranties that are qualified by
materiality or Material Adverse Effect, which shall be true and correct in all
respects) and (b) the performance by the Company of all if its obligations,
covenants and agreements required to be performed hereunder.  Except as
expressly set forth above, all of the terms and conditions of the Transaction
Documents shall continue in full force and effect after the execution of this
Agreement and shall not be in any way changed, modified or superseded by the
terms set forth herein.  The Company shall, within 4 Trading Days of the date
hereof, issue a Current Report on Form 8-K with the Commission disclosing the
material terms of the transactions contemplated hereby, and shall attach this
Agreement and the form of New Debenture as exhibits thereto (the “8-K
Filing”).  From and after the 8-K Filing, the Holder shall not be in possession
of any material, nonpublic information received from the Company, any of its
Subsidiaries or any of their respective officers, directors, employees or
agents, that is not disclosed in the 8-K Filing.  The Company will provide all
documentation reasonably requested by the Holders for purposes of qualifying the
Underlying Shares in compliance with Rule 144 to be issued without restriction
and not containing any restrictive legend.  The Company shall consult with the
Holders in issuing any other press releases with respect to the transactions
contemplated hereby.
 
 
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 (b)           This Agreement may be executed in two or more counterparts and by
facsimile signature or otherwise, and each of such counterparts shall be deemed
an original and all of such counterparts together shall constitute one and the
same agreement.  Each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement.
 
(c)           The Company has elected to provide all Holders with the same terms
and form of agreement for the convenience of the Company and not because it was
required or requested to do so by the Holders.  The obligations of each Holder
under this Agreement, and any Transaction Document are several and not joint
with the obligations of any other Holder, and no Holder shall be responsible in
any way for the performance or non-performance of the obligations of any other
Holder under this Agreement or any Transaction Document.  Nothing contained
herein or in any Transaction Document, and no action taken by any Holder
pursuant thereto, shall be deemed to constitute the Holders as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Holders are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by this Agreement
or the Transaction Documents.  Each Holder shall be entitled to independently
protect and enforce its rights, including without limitation, the rights arising
out of this Agreement or out of the other Transaction Documents, and it shall
not be necessary for any other Holder to be joined as an additional party in any
proceeding for such purpose.  Each Holder has been represented by its own
separate legal counsel in their review and negotiation of this Agreement and the
Transaction Documents.
 
(d)           If any provision of this Agreement is prohibited by law or
otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or
unenforceable shall be deemed amended to apply to the broadest extent that it
would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this
Agreement so long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter
hereof and the prohibited nature, invalidity or unenforceability of the
provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the
parties.  The parties will endeavor in good faith negotiations to replace the
prohibited, invalid or unenforceable provision(s) with a valid provision(s), the
effect of which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).
 
 
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(f)           This Agreement shall be governed by and interpreted in accordance
with laws of the State of New York, excluding its choice of law rules.  The
parties hereto hereby waive the right to a jury trial in any litigation
resulting from or related to this Agreement.  The parties hereto consent to
exclusive jurisdiction and venue in the federal courts sitting in the southern
district of New York, unless no federal subject matter jurisdiction exists, in
which case the parties hereto consent to exclusive jurisdiction and venue in the
New York state courts in the borough of Manhattan, New York.  Each party waives
all defenses of lack of personal jurisdiction and forum non conveniens.  Process
may be served on any party hereto in the manner authorized by applicable law or
court rule.
 
***********************
 
 
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IN WITNESS WHEREOF, this Agreement is executed as of the date first set forth
above.
 

  NUTRACEA         By:
/s/  W. John Short
   
       Name: W. John Short
   
       Title:  Chief Executive Officer

 
[signature pages of Holders to follow]
 
 
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SIGNATURE PAGE OF HOLDER TO
SECURITIES EXCHANGE AGREEMENT
AMONG NUTRACEA AND
THE HOLDERS THEREUNDER
 
Name of Holder: ___________________________________
 
By: ______________________________________________
 
Name: ____________________________________________
 
Title: _____________________________________________
 
Principal Amount of January 2012 Debentures: $______________________
 
 
 

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DISCLOSURE SCHEDULE
 
TO
 
SECURITIES EXCHANGE AGREEMENT
_________________________
 
DATE: JULY 31, 2012
 
 
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DISCLOSURE SCHEDULE
 
This document comprises the “Disclosure Schedule” to the Securities Exchange
Agreement (“Agreement”) entered into as of July 31, 2012, by and among NutraCea,
a California corporation (“NutraCea”), and the Holders identified on the
signature pages thereto (each a “Purchaser” and, collectively, the
“Purchasers”). The section numbers in this Disclosure Schedule correspond to the
section numbers in the Agreement; provided, however, that any information
disclosed herein under any section number shall be deemed to be disclosed and
incorporated in any other section of the Agreement where such disclosure would
be appropriate and reasonably apparent.
 
For purposes of third parties’ (which do not include the Purchasers) use of the
Disclosure Schedule:
 
·
No reference to or disclosure of any item or other matter in the Disclosure
Schedule shall be construed as an admission or indication that such item or
other matter is material or that such item or other matter is required to be
referred to or disclosed in the Disclosure Schedule.

 
·
No disclosure in the Disclosure Schedule relating to any possible breach or
violation of any agreement, law or regulation shall be construed as an admission
or indication that any such breach or violation exists or has actually occurred.

 
Terms defined in the Agreement shall have the same meanings when used herein
unless otherwise defined herein.
 
 
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Section 3(a) – Subsidiaries
 
Subsidiaries of the Registrant
State or Other Jurisdiction of Incorporation
Grain Enhancement, LLC (2) (7)
Delaware limited liability company
Nutra SA LLC (3)
Delaware limited liability company
Industria Riograndens De Oleos Vegetais Ltda (4)
Lilimited liability company organized under the laws of the Federative Republic
of Brazil
NutraCea, LLC (1) (7)
Delaware limited liability company
NutraCea Brazil Ltda (1)
Lilimited liability company organized under the laws of the Federative Republic
of Brazil
NutraCea Offshore LTD (5)
Company organized under the laws of the Cayman Islands
Rice Rx, LLC (1)
Delaware limited liability company
Rice Science LLC (1)
Delaware limited liability company
The RiceX Company (1)
Delaware corporation
RiceX Nutrients, Inc. (6)
Montana corporation.
SRB- MERM, LLC (7)(8)
Delaware limited liability company
SRB-LC, LLC (7)(8)
Delaware limited liability company
SRB-MT, LLC (7)(8)
Delaware limited liability company
SRB-WS, LLC (7)(8)
Delaware limited liability company
SRB- IP, LLC (7)(8)
Delaware limited liability company

 
(1)
wholly owned subsidiary of NutraCea

(2)
47.5% interest

(3)
51.0% interest

(4)
wholly owned subsidiary of Nutra SA LLC

(5)
72.0% interest

(6)
wholly owned subsidiary of The RiceX Company

(7)
inactive

(8)
formed February 2, 2012, wholly owned subsidiary of NutraCea, LLC

 
 
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Section 3(g) – Capitalization
 
NutraCea Capitalization Table
 

   
Before
Transaction
   
Cancellation
of Prior OID
Note
   
Convertible
Notes and
Warrants
Issued
   
Increase in
Shares
Underlying
Warrants with
Antidilution
Provisions
   
Proforma
After 7/31/12
Transactions
 
Outstanding shares
    204,833,937                         204,833,937  
Shares issuable upon conversion of Sr.OID note
    5,800,000       (5,800,000 )     18,571,429             18,571,429  
Shares issuable upon conversion of sub. notes
    43,750,000               7,142,857 (a)     18,750,000       69,642,857  
Sr. OID warrants issued
    6,250,000 (d)             18,571,429 (e)     4,464,286 (d)     29,285,714  
Subordinated Note warrants
    43,750,000               7,142,857 (b)     31,250,000       82,142,857  
Shares underlying warrants - all other
    16,937,713 (c)                     6,944,226       23,881,939  
Shares underlying options
    38,565,741                               38,565,741         359,887,391    
  (5,800,000 )     51,428,571       61,408,512       466,924,474  

 
(a) Assumption = $500,000 of subordinated convertible notes issued at $0.07
conversion rate.
(b) Assumption = $500,000 of warrants issued at 100% coverage with $0.08
exercise.
(c) This amount excludes "out of the money" warrants of 38,239,172 with an
exercise price of .95 that expire in August 2012 and 15,075,369 warrants with an
exercise price of .64 that expire in April 2013.
(d)  Total of 6,250,000 + 4,464,286 = 10,714,286 total outstanding old warrants
after ratchet
(e) Number represents 1,300,000 / .07 with an exercise price of 8 cents.
 
 
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Beneficial Ownership of Officers and Directors.

     
A Owned
Common
Stock
12/31/11
   
Exercisable
Options
7/31/12
   
Warrants
7/31/12
   
Convertible
Notes
7/31/12
   
B 
Total
   
(A + B) 
Total
Beneficial
Ownership
 
Short, W John
Director/Officer
    249,900       8,790,373       250,000       250,000       9,290,373      
9,540,273  
Gingras, Leo
Officer (terminated 4/12/12)
    53,000       4,364,343       -       -       4,364,343       4,417,343  
Belt, J Dale
Officer
    -       2,006,263       -       -       2,006,263       2,006,263  
Garner, Colin
Officer
    -       787,704       -       -       787,704       787,704                
                                     
Hoogenkamp, Henk
Director
    1,840,750       577,281       -       -       577,281       2,418,031  
Koppes, Richard
Director
    296,635       448,984       -       -       448,984       745,619  
Lintzenich, James (Zanesville and Trust)
Director
    1,628,371       1,414,342       500,000       500,000       2,414,342      
4,042,713  
McMillan, Edward (and Trust)
Director
    293,690       1,452,208       250,000       250,000       1,952,208      
2,245,898  
Quinn, John
Director
    220,465       955,924       -       -       955,924       1,176,389  
Halpern, Baruch
Director
    790,000       224,129       31,041,520       25,000,000       56,265,649    
  57,055,649  

 
Investors under July 31, 2012 Subsequent Closing of Note and Warrant Purchase
Agreement
 
Greg Vislocky - $500,000
 
Harold Guy Delamarter - $250,000
 
NTC & CO. Custodian FBO
Baruch Halpern, IRA - $100,000
 
 
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Financing Warrants with Price Based Anti-dilution
 
Date Issued
 
 
Financing
Description
 
Type of Anti-
Dilution
 
Expiration
Date
 
 
Exercise Price as
of
01/12/12
   
Outstanding
Warrants
 
 
February 2007
Common Stock and Warrant PIPE
Weighted Average
August 2012
  $ 0.95       38,239,175  
April 2008
Common Stock and Warrant Registered Direct
Weighted Average
April 2013
  $ 0.64       15,075,369  
May 2009
Exchange Offer
(Cranshire & Midsummer)
Full Ratchet*
May 2014
  $ 0.10       5,678,200  
July 2009
Halpern Settlement
Full Ratchet
July 2014
  $ 0.10       8,633,327  

 

 
*
sharesof common stock and options issued to directors, officers, employees or
consultants are excluded if the number of such securities issued, in the
aggregate, do not exceed 2.5% of the outstanding shares on October 16, 2008
which equals approximately 3,600,000 shares.

 
Alothon – Conversion of NutraSA, LLC units into shares of NutraCea common stock
 
On December 29, 2010, NutraCea entered into a Membership Interest Purchase
Agreement (the “Purchase Agreement”) with Nutra SA, LLC, NutraCea’s wholly-owned
subsidiary (“Nutra SA”), Industria Riograndens De Oleos Vegetais Ltda., Nutra
SA’s wholly-owned subsidiary (“Irgovel”), and AF Bran Holdings-NL LLC and AF
Bran Holdings LLC (collectively, the “Investor”).  In connection with the
Purchase Agreement, NutraCea entered into an Investor Rights Agreement (the
“Investor Rights Agreement”) with Nutra SA, Irgovel and the Investor.  Pursuant
to the Investor Rights Agreement, the Investor may elect to convert its units of
Nutra SA into shares of NutraCea common stock following the earlier of the third
anniversary of the initial closing or, upon the occurance of an Event of Default
(as defined in the Purchase Agreement), then the second anniversary of the
initial closing.  The number of shares of NutraCea common stock that the
Investor will receive in exchange for its units in Nutra SA will be an amount
such that the aggregate price of the NutraCea common stock issued to the
Investor will equal the aggregate value of the Nutra SA units held by the
Investor.  In no event will the Investor be issued a percentage of the
outstanding common stock of NutraCea greater than the lesser of the Investor’s
percentage ownership interest in Nutra SA or 49%.  In the event that the number
of shares of NutraCea common stock issued to the Investor is limited to 49% of
the outstanding shares of NutraCea, NutraCea shall issue a warrant to the
Investor to purchase a number of shares of common stock equal to the difference
between 49% of the number of fully diluted shares of NutraCea common stock,
which number includes shares of common stock underlying options, warrants and
other convertible securities, minus the number of shares actually issued to the
Investor.
 
 
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Section 3(i) – Bring Down
 
The disclosure schedules delivered to the Purchasers on July 31, 2012 in
connection with the Securities Purchase Agreement dated July 31, 2012 updates
and modifies the disclosure schedules provided to the Purchasers in connection
with the Securities Purchase Agreement dated January 17, 2012.
 
 
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