<PAGE>

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

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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

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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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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














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<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
<PAGE>

            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.

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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







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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
<PAGE>

                                 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


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