Exhibit
10.5





SEVERANCE
AND RELEASE AGREEMENT





Margie
Adelman ("Adelman")and
NutraCea ("NutraCea") hereby enter into this Severance Agreement and Release of
Claims ("Agreement")dated November 11, 2008 on the following terms and conditions. Adelman
and NutraCea are each sometimes referred to herein individually as a "Party" or
collectively as the "Parties".





1.            
Recitals - Background
and Purpose.





1.1          
Prior
Employment. Adelman was previously employed by NutraCea pursuant to a
written employment agreement dated January 25, 2005. That agreement and all
rights thereunder, including without limitation all unvested warrants or
options, expired January 25, 2008 and was not renewed or extended. Since that
agreement expired, Adelman has been employed on an "at will" basis. Adelman's
employment with NutraCea shall terminate as of November 11, 2008 ("Separation Date").Adelman
shall receive her salary and all other benefits from NutraCea until her
Separation Date on the next payroll cycle.
 
 1.2         
 Prior
Payment. Adelman acknowledges that she has been paid all wages and other
benefits due and owing by NutraCea, except as expressly set forth
herein.
 
 1.3          
Sever
Employment. Adelman, for her part, and NutraCea, for its part, desire to
mutually sever their employment relationship and settle all claims between them
effective as of the Effective Date on the terms and conditions set forth
below.
 
 2.Consideration.
 
 2.1           Consideration to
Adelman. In consideration of the releases and agreements set forth herein
NutraCea agrees to provide Adelman with the following severance
benefits:


(a)            A
consulting arrangement with NutraCea providing, for a consulting fee in the
amount of $15,827.73 per month for a term of one year. This Retainer shall
commence on November 11, 2008 and continue until November 10, 2009. The terms
and conditions of such consulting arrangement shall be as set forth as attached
hereto as Exhibit
A ("ConsultingAgreement").
 
 (b)           NutraCea
shall issue an advance of $20,000, upon the signing of this agreement as
reasonable and actual moving expenses. Adelman agrees to provide receipts to
NutraCea for all such expenses within 30 days of the date the expense is
incurred. If the total amount of the receipts do not exceed $20,000, Adelman
agrees to refund the difference between the amount actually incurred and $20,000
within 30 days from the time she submits the expense report.


(c)            Upon
the due execution of this Agreement, NutraCea will pay to Adelman promptly, for
all accrued vacation and personal days not used by Adelman, a single payment of
$20, 273.90, less customary withholding amounts.





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2.2          
Consideration to
NutraCea. Adelman agrees to:





(a)            Surrender,
on her last day of employment, all NutraCea property, documentation, or
information, in her possession or under her control, other than the Blackberry,
laptop computer, and other personal business items that Adelman will use during
the period of her consulting arrangement pursuant to the Consulting Agreement.
Adelman agrees that she will not copy or download any tiles or programs from
NutraCea's computer systems, networks or equipment or take any other NutraCea
property with her on her last day of employment, other than that which NutraCea
expressly approves for Adelman's use during the consulting arrangement. NutraCea
agrees that Adelman will continue to have access to certain NutraCea computer
systems and other confidential and proprietary information of NutraCea as and to
the extent provided in the Consulting Agreement. Adelman shall not disclose or
use any of such systems or information for any purpose other than as expressly
permitted by NutraCea pursuant to the Consulting Agreement, and expressly agrees
to preserve and protect the confidentiality of all NutraCea's proprietary or
confidential information.





(b)           
Release NutraCea pursuant to this Agreement and enter into the Consulting
Agreement.


2.3.        
 ERISA 401(k)
Plan. Adelman is entitled to the plan benefits in her account under an
ERISA plan, which vested benefits will be paid pursuant to the terms of such
ERISA plan. NutraCea specifically agrees that she shall be entitled to employer
matching contributions through the last date of her employment in the amounts
specified in such ERISA plan.
 
 2.4.         
Options and
Warrants. All warrants and all options to acquire NutraCea shares of
stock previously granted to Adelman pursuant to her employment agreements with
NutraCea that are not fully vested and exercisable as of the date of this
Agreement shall immediately expire and be of no further force or effect,
including without limitation the Stock Option Agreement dated January 8, 2008,
No. SOP08005A ("Warrant'') and any other performance vesting warrant or option.
The parties acknowledge that Adelman's vested Warrant for the Purchase of Common
Stock dated January 25, 2005, No. "WC-" for 1,000,000 shares of NutraCea Common
Stock that provides for a time based vesting period shall remain in effect for
the balance of the exercise period thereunder (through January 15, 2015)
notwithstanding this termination of her employment ("Warrant Agreement"). A copy
of Adelman's Warrant Agreement is attached hereto as Exhibit
B.
 
 3.Release of
Claims.


3.1          
General
Release. In accordance with applicable law, Adelman, on behalf of
herself, and her successors, representatives, attorneys and assigns, hereby
releases, acquits, and discharges NutraCea, and its employees, agents,
independent contractors, officers, directors, members, executors, partners,
joint venturers, and attorneys and all persons acting by, under, through or in
concert with any of them, from any and all claims, demands, causes of action,
liabilities, judgments, liens, rights, debts, obligations, promises, acts, costs
or expenses (including, but not limited to, attorneys' fees), and charges of
whatever nature ("Claims") which Adelman  has  or
may  have against NutraCea,  whether known or
unknown,  foreseen  or unforeseen, economic or non-economic,
fixed or contingent, which relate in any way to Adelman's employment with
NutraCea or any agent, representative or Adelman (past or present) of
NutraCea.





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3.2          
Specific Release of Statutory
Rights Claims. Title VT1 of the Civil Rights Act of 1964 as amended, the
Civil Rights Act of 1991, the Americans With Disabilities Act, the Vietnam Era
Veterans Readjustments Assistance Act of 1974, the California Family Rights Act
of 1991, the Federal Family and Medical Leave Act of 1993, and the California
Fair Employment and Housing Act, as amended, and applicable provisions of
California's Labor Code provide certain rights to Adelman's in connection with
discrimination on a number of bases, including race, ancestry, color, religion,
sex, marital status, national origin, age, status as a veteran of the Vietnam
era, request or need for family or medical leave, physical or mental disability,
medical condition, or sexual preference. The rights afforded under these federal
and state laws are being waived, and no complaint or suit shall be filed based
on any alleged violation of these federal and state laws, or any successor or
replacement federal or state laws. All rights are hereby waived to assert a
claim for relief available under these federal and state laws including, but not
limited to, back pay, attorneys' fees, damages, reinstatement, or injunctive
relief, which may otherwise be recovered based on any alleged violation of these
federal and state laws, or any successor or replacement federal or state
laws.
 
 3.3          
Older Workers Benefit
Protection Act. Pursuant to the terms of the Older Workers' Benefit
Protection Act (OWBPA), Adelman is waiving any claims she may have under the Age
Discrimination in Employment Act arising prior to the date she executes this
agreement. Adelman acknowledges that she has had twenty-one (21) days in which
to consider the terms of this waiver. Adelman acknowledges that, by the terms of
this Agreement, he/she has been advised in writing that the she should consult
with an attorney regarding the terms and conditions of this Agreement. Adelman
further acknowledges that, by the terms of this Agreement, she has been advised
that following execution of this Agreement, he/she has seven (7) days in which
she may revoke her waiver pursuant to the OWBPA and that this Agreement does not
become effective until the seventh day following execution of the Agreement. The
date, seven (7) days following the execution of the Agreement, shall be the
Effective Date of this Agreement. Adelman further acknowledges that he/she has
consulted with an attorney and is fully aware ofthe rights and claims
being released by his/her execution of this Agreement.
 
 3.4         
Waiver. Adelman
acknowledges that there is a risk that, subsequent to the execution of this
Agreement, she may discover, incur or suffer from claims which are currently
unknown or unanticipated and which, if known, would have materially affected
his/her decision to execute this Agreement. Adelman acknowledges that he/she is
assuming the risk of such unknown and unanticipated claims and expressly waives
the benefits of Section 1542 of the California Civil Code, which provides as
follows:





"A
general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the
debtor."





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4.            
Confidentiality of
NutraCea's Proprietary Information. Adelman acknowledges that by reason
of his/her position with NutraCea, he/she has been given access to confidential
or proprietary information or materials respecting NutraCea’s business affairs.
Such confidential information includes, but is not limited to, NutraCea's
business strategies, financial results, contractual agreements between NutraCea
and other individuals or entities, strategies and ideas, compilation of
information and records which are owned by NutraCea and are regularly used in
operation of NutraCea’s business, procedures, written descriptions, processes,
research projects, protocols or other tangible items and documentation,
including computer programs, reports and marketing information. Adelman
represents that she has held all such information confidential and will continue
to do so. To the fullest extent permitted by applicable law, such confidential
information also includes any such items conceived, originated, discovered or
developed by Adelman during the term of her employment or consulting arrangement
with NutraCea. Adelman represents and agrees that she shall not disclose any
such confidential information. Adelman further represents that all files,
records, documents, fists, equipment, inventions, computer programs, research
projects, protocols, processes and similar items relating to the business of
NutraCea, whether prepared by Adelman or otherwise coming into Adelman's
possession, shall remain the exclusive property of NutraCea and shall not be
removed from the premises of NutraCea, except as expressly approved by NutraCea
for the purpose of performing her consulting agreement. Adelman further
represents that he/she does not have in his/her possession any of the
confidential information described in this paragraph and has returned all such
confidential information to NutraCea, except as expressly approved by NutraCea
for the purpose of performing her consulting agreement. Confidential Information
does not include any information that is in the public domain or readily
ascertainable from publicly-available information, or disclosed to Adelman
outside the course and scope of the performance of Adelman's duties on behalf of
NutraCea by a person or entity who has the legal right to disclose such
information.
 
 5.            
Resolution of
Disputes. Any disputes regarding the rights or obligations of the parties
under this Agreement shall be conclusively determined by binding arbitration.
The arbitration shall be conducted as follows:
 
 5.1          
Binding
Arbitration. Any dispute between the parties shall be submitted to, and
conclusively determined by, binding arbitration in accordance with this
paragraph. The provisions of this paragraph 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 Arizona law.


5.2          
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 paragraph 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.





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5.3          
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 a judge in Phoenix, Arizona. If the
presiding judge, acting in his or her personal capacity, is unable or unwilling
to appoint the additional arbitrator, that arbitrator shall be selected in
accordance with the rules of the Judicial Arbitration and Mediation Service
("JAMS").
 
 5.5           
Applicable Law.
The law applicable to the arbitration of any dispute shall be the law of the
State of Arizona.
 
 5.6        
  Arbitration
Procedures. Except as otherwise provided in this paragraph, the
arbitration shall be governed by the JAMS employment arbitration rules. 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, or resolution of a special defense.
In the event 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.
 
 5.7         
 Limitation on
Scope of Arbitrators' Award or Decision. NutraCea and Adelman 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.
 
 5.8          
Costs of Arbitration:
Attorneys' Fees. Each party shall bear equally the costs of the
arbitration and shall bear its own attorneys' fees. However, NutraCea and
Adelman 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.
 
 6.Adelman
Affirmations.    Adelman affirms that he/she reported
all hours worked as of the date of this Agreement and has been paid, to the
extent applicable, all compensation, including regular wages, overtime, bonuses,
commissions, vacation pay, shares, stock options, and/or other benefits to which
Adelman may have been entitled to. Adelman also affirms that she received or
will receive payment(s) pursuant to this Agreement, all leave (paid or unpaid)
for which she was entitled, and/or that she was not denied requested leave (paid
or unpaid) for which he/she was entitled to under the Family Medical Leave Act
(FMLA), Americans With Disabilities Act (ADA) any leave entitlement provided by
either California or Arizona law, or local leave statute or law. Adelman further
affirms that he/she has no known workplace injuries or occupational diseases for
which he/she has not filed a claim for workers' compensation
benefits.





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7.            
Non-Disparagement.
The Parties agree that they shall not disparage nor defame the other Party, or
their respective agents, members, officers, directors, employees, agents, or
affiliates, so as to harm their business or personal reputation. This provision
does not restrict the Parties from responding fully and truthfully in the
context of a legal or governmental proceeding in which they are compelled to
testify under oath or to respond to a subpoena or otherwise is required by law
to cooperate with a legal or governmental entity.





8.            
Entire
Agreement. This Agreement, the Consulting Agreement and the Warrant
Agreement referred to herein constitute the entire agreement between the
parties, all oral agreements being merged herein, and supersede all prior
representations and agreements except as specifically referred to herein. 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, in the Consulting Agreement, or
in the Warrant Agreement.
 
 9.            
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 hereof.
 
 10.          
Amendment. The
provisions of this Agreement may be modified or amended at any time by agreement
of the parties. Any such amendment or modification as hereinafter may be made,
shall be ineffective to modify this Agreement in any respect unless in writing
and signed by the party or parties against whom enforcement of the modification
or amendment is sought.
 
 11.          
Representation by
Counsel. This Agreement has been carefully read by the parties and the
contents hereof arc known and understood by all parties. The parties have each
had the opportunity to receive independent legal advice from attorneys of their
choice with respect to the preparation, review and advisability of executing
this Agreement. Prior to the execution of this Agreement by each party, the
parties' attorneys had the opportunity to review the Agreement, and the parties
acknowledge that they have executed this Agreement after independent
investigation and without fraud, duress or undue influence.
 
 12.          
No Admissions.
Nothing contained in this Agreement shall be deemed as an admission of any kind
by or to any other party to this Agreement.
 
 13.          
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.





14.          
Succession.
Subject to the provisions otherwise contained in this Agreement, this Agreement
shall inure to the benefit of, and be binding upon, the successors and assigns
of each of the respective parties hereto. The parties expressly agree and intend
that this Agreement shall be binding on any successor entity to NutraCea in the
event of any merger transaction or an acquisition of all or substantially all of
the assets of NutraCea.





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15.          
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. Failure to
give notice in accordance with any of the foregoing methods shall not defeat the
effectiveness of notice actually received by the addressee.





16.         
 Captions.
All paragraph captions are for reference only and should not be considered in
construing this Agreement.
 
 17.         
 Nonassignability.
This Agreement shall not be assigned by any party without the prior written
consent of the other parties. Any assignment contrary to the provisions of this
Agreement shall be deemed a default under the Agreement, allowing the
non-defaulting parties to exercise all remedies available under
law.
 
 18.           Counterparts. The
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one-in-the-same
document.


NutraCea
and Margie Adelman have executed this Severance and Release Agreement on the
date first set forth above:





/s/Margie
      Adelman(Margie
      Adelman)


NutraCea,
a California corporation


By:
            /s/
      Brad Edson(Brad
      Edson, Chief Executive Officer)





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Exhibit
A





Consulting
Agreement





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Exhibit
"A"
 
 CONSULTING
AGREEMENT





This
Consulting Agreement ("Agreement") is made and entered into as of the 11 th day
of November, 2008 by and between NutraCea, a California corporation (the "Company"),and Margie Adelman
("Consultant").The
Company desires to retain Consultant as an independent Consultant to perform
consulting services for the Company and Consultant is willing to perform such
services, on terms set forth more fully below. Adelman and NutraCea are each
sometimes referred to herein individually as a ''Party" or collectively as the
"Parties". In consideration of the mutual promises contained herein, the parties
agree as follows:


1              
BACKGROUND
 
 Consultant
is a former Employee of the Company, whose employment with the Company ended
November 11, 2008. At the time that her Employment with the Company terminated,
Consultant executed a Severance and Release Agreement ("Severance Agreement").
In partial consideration of Consultant's execution of the Severance Agreement,
the Parties have agreed to enter into a consulting agreement. This Agreement is
the consulting agreement called for, and incorporated into, the Severance
Agreement.
 
 2.            
SERVICES
AND COMPENSATION


2.1.         
Services.
Consultant agrees to perform for the Company the services ("Services") to
consult and provide assistance and advice to the Company as called for the by
Company in the areas of: (a) new business development; (b) investor relations;
and (c) public relations and subject to Consultant's Express Duties as defined
in Section   8 of this Agreement and other services as mutually
acceptable to the Parties.
 
 2.2.          
Fee. The Company agrees to pay Consultant $15,827.73 per month for the Term of
this Agreement. Company shall make payment to Consultant on the 1st and
15th days
of each month, commencing on November 15, 2008.
 
 2.3.         
 Discretionary
Bonus. Consultant shall be eligible for the award of a discretionary
bonus at such times and in such amounts as may be determined by the Company's
Compensation Committee and the CEO in their absolute discretion.


2.4.         
Expenses. The
Company will reimburse Consultant within thirty (30) days following presentation
of receipts and evidence of the expenditures (in accordance with NutraCea’s
standard reimbursement policies for reasonable travel, administrative, equipment
and out-of-pocket expenses incurred in conjunction with the Services. Any single
expense in excess of $500.00 must be pre-approved by the Company in writing. The
Company will advance funds to Consultant for the payment of pre-approved
expenses for a single project that totals in excess of $2,500.00, and Consultant
must submit all associated receipts promptly thereafter.





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2.5.          
Term. Unless
earlier terminated for Cause (as defined below) the term of this Consulting
Agreement shall commence on November 11, 2008 and shall end on November 10, 2009
(the "Term").


3           
CONFIDENTIALITY


3.1.          Confidential
Information.    "Confidential Information"means any Company proprietary
information, technical data, trade secrets or know-how, including, but not
limited to, research, product plans, products, services, customers, customer
lists, markets, journals, notebooks, notes, renderings, samples, data, software,
developments, inventions, processes, formulas, technology, designs, drawings,
engineering, hardware configuration information, marketing, finances or other
business information disclosed by the Company prior to or after the execution of
this Agreement, either directly or indirectly in writing, orally or by drawings
or inspection of parts or equipment.
 
 3.2.         
Limitations on
Use and Disclosure. Consultant
will not, during or subsequent to the term of this Agreement, use the Company's
Confidential Information for any purpose whatsoever other than the performance
of the Services on behalf of the Company or disclose the Company's Confidential
Information to any third party. It is understood that said Confidential
Information shall remain the sole property of the Company. Consultant further
agrees to take all reasonable precautions to prevent any unauthorized disclosure
of such Confidential Information including, but not limited to, having each
employee of Consultant, if any, with access to any Confidential Information,
execute a nondisclosure agreement containing provisions in the Company's favor
identical to Sections 2, 3 and 7 of this Agreement. Confidential Information
does not include information which (i) is known to Consultant at the time of
disclosure to Consultant by the Company as evidenced by written records of
Consultant, (ii) has become publicly known and made generally available through
no wrongful act of Consultant, or (iii) has been rightfully received by
Consultant from a third party who is authorized to make such disclosure. Without
the Company's prior written approval, Consultant will not directly or indirectly
disclose to anyone the contents of this Agreement. Confidential Information does
not include any information that is in the public domain or readily
ascertainable from publicly-available information, or disclosed to Consultant
outside the course and scope of the performance of Consultant's duties on behalf
of Company by a person or entity who has the legal right to disclose such
information.


3.3          
Other Confidential
Information. Consultant agrees that Consultant will not, during the term
of this Agreement, improperly use or disclose any proprietary information or
trade secrets of any former employer, or Company or other person or entity with
which Consultant has an agreement or duty to keep in confidence information
acquired by Consultant, if any, and that Consultant will not bring onto the
premises of the Company any unpublished document or proprietary information
belonging to such employer, person or entity unless consented to in writing by
such employer, person or entity. Consultant will indemnify the Company and hold
it harmless from and against all claims, liabilities, damages and expenses,
including reasonable attorneys fees and costs of suit, arising out of or in
connection with any violation or claimed violation of a third party's rights
resulting in whole or in part from the Company's use of the work product of
Consultant under this Agreement





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3.4.         
Third Party
Confidential Information. Consultant recognizes that the Company has
received and in the future will receive from third parties their confidential or
proprietary information subject to a duty on the Company's part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. Consultant agrees that Consultant owes the Company and such third
parties, during the term of this Agreement and thereafter, a duty to hold all
such confidential or proprietary information in the strictest confidence and not
to disclose it to any person, firm or corporation or to use it except as
necessary in carrying out the Services for the Company consistent with the
Company's agreement with such third party, to the extent that Consultant is
aware of such agreement.
 
 3.5.         
Legal
Compulsion. In the event that Consultant becomes legally compelled to
disclose any Confidential Information, Consultant shall give sufficient notice
to the Company to enable the Company party to prevent or minimize such
disclosure to the extent possible.
 
 3.6.         
Records.
Consultant agrees that she shall only make such notes, copies, photocopies,
backups, or other written, photographic or computer generated records relating
to the Confidential Information as are absolutely necessary. Upon termination of
this Agreement, Consultant shall return all copies of Confidential Information
the Company as arc being held, at Company's reasonable expense
 
 3.7.         
Return.
Consultant agrees that upon the termination of this Agreement Consultant will
deliver to the Company all of the Company's property or Confidential Information
that Consultant may have in Consultant's possession or control, including,
without limitation, 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 Consultant pursuant to her consulting
arrangement (or her prior employment) with the Company or otherwise belonging to
the Company, its successors or assigns, at Company's reasonable
expense.


4.            
OWNERSHIP;
ASSIGNMENT


4.1.Inventions. Consultant agrees that all material,
notes, records, drawings, designs, inventions, improvements, developments,
creations, manuals, findings, evaluations, forms, reviews, information,
materials, trademarks, written materials, discoveries and trade secrets
conceived, whether or not subject to patent or copyright protection, and whether
or not originated, conceived, developed or prepared during regular business
hours, made or discovered by Consultant, solely or in collaboration with others,
prior to and during the period of this Agreement (or during the prior period of
her employment) which relate in any manner to the business of the Company or
that Consultant may be directed to undertake, investigate or experiment with, or
which Consultant may become associated with in work, investigation or
experimentation in the line of business of Company in performing services for
the Company (collectively,"Inventions"),are the sole property of
the Company. In addition, any Inventions which constitute copyrightable subject
matter shall be considered "works made for hire" as that term is defined in the
United States Copyright Act. Consultant further agrees to assign (or cause to be
assigned) and does hereby assign fully to the Company all Inventions and any
copyrights, patents, mask work rights or other intellectual propertyrights
relating thereto. Consultant agrees to keep and maintain adequate and current
written records of all Inventions of Consultant during the term of this
Agreement. Such records shall he in the form of notes, sketches, drawings, and
any other format that may be specified by the Company, and shall be available to
and remain the sole property of the Company at all times. Consultant agrees to
promptly disclose all Inventions in writing to the Company. Further, Consultant
shall not disclose any Inventions other than in the course of her Services to
the Company and with the Company's prior written consent; provided, that any
such disclosure must be (i) in the good faith best interests of the Company, and
(ii) Consultant shall obtain an agreement from any recipient of the Confidential
information to preserve its confidentiality and not use the Confidential
Information other than as expressly approved by the Company.





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4.2.         
Protection.
Consultant agrees to assist Company, or its designee, at the Company's expense,
in every proper way to secure the Company's rights in the Inventions and any
copyrights, patents, mask work rights or other intellectual property rights
relating thereto in any and all countries, including the disclosure to the
Company of all pertinent information and data with respect thereto, the
execution of ail applications, specifications, oaths, assignments and all other
instruments which the Company shall deem necessary in order to apply for and
obtain such rights and in order to assign and convey to the Company, its
successors, assigns and nominees the sole and exclusive right, title and
interest in and to such Inventions, and any copyrights, patents, mask work
rights or other intellectual property rights relating thereto. Consultant
further agrees that Consultant's obligation to execute or cause to be executed,
when it is in Consultant's power to do so, any such instrument or papers shall
continue after the termination of this Agreement.
 
 4.3.         
License.
Consultant agrees that if in the course of performing the Services, Consultant
incorporates into any Invention developed hereunder any invention, improvement,
development, concept, discovery or other proprietary information owned by
Consultant or in which Consultant has an interest, the Company is hereby granted
and shall have a nonexclusive, royalty-free, perpetual, irrevocable, worldwide
license to make, have made, modify, use and sell such item as part of or in
connection with such Invention.
 
 4.4.         
Agents.
Consultant agrees that if the Company is unable because of Consultant's
unavailability, dissolution, mental or physical incapacity, or for any other
reason, to secure Consultant's signature to apply for or to pursue any
application for any United States or foreign patents or mask work or copyright
registrations covering the Inventions assigned to the Company above, then
Consultant hereby irrevocably designates and appoints the Company and its duly
authorized officers and agents as Consultant's agent and attorney in fact, to
act for and in Consultant's behalf and stead to execute and file any such
applications and to do all other lawfully permitted acts to further the
prosecution and issuance of patents, copyright and mask work registrations
thereon with the same legal force and effect as if executed by
Consultant.
 
 4.5.        
  Notification of Future
Employer. The Company shall have the right to notify any future employers
of Consultant of Consultant's obligations under this Agreement.


4.6.Other
Agreements. Consultant
represents that the performance of all the terms of this Agreement will not
breach any agreement to keep in confidence proprietary information acquired
byConsultant in confidence or in trust
prior to the term hereof. Consultant has not and shall not enter into any oral
or written agreement in conflict with this Agreement.





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5.TIME AND
EFFORT


During
the term of this Agreement, the Consultant shall, devote that portion of
Consultant's working time, attention, abilities, skill, labor and efforts
necessary for the performance of Consultant's obligations hereunder.
Notwithstanding the foregoing, the parties recognize and agree that the
Consultant may engage in personal investments and other business, civic or
charitable activities that do not conflict with the business and affairs of the
Company or interfere any material respect with Consultant's performance of his
duties hereunder. The Consultant will at all times perform all of the duties and
obligations required of the Consultant by the terms of the Consulting Agreement
in a loyal and conscientious manner and to the best of the Consultant's ability
and experience.


6.            
REPORTS


Unless
set forth specifically on Exhibit A attached
hereto, Consultant agrees that it will from time to time during the term of this
Agreement or any extension thereof keep the Company advised as to Consultant's
progress in performing the Services hereunder and that Consultant will, as
requested by the Company, prepare written reports with respect thereto. It is
understood that the time required in the preparation of such written reports
shall be considered time devoted to the performance of Consultant's
Services.


7.            
 CONFLICTING
OBLIGATIONS


Consultant
certifies that Consultant has no outstanding agreement or obligation that is in
conflict with any of the provisions of this Agreement, or that would preclude
Consultant from complying with the provisions hereof, and further certifies that
Consultant will not enter into any such conflicting Agreement during the term of
this Agreement.





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8.EXPRESS
DUTIES


8.1.         
Duty of
Loyalty. Consultant shall, during the Term owe Company a duty of loyalty
including but not limited to the duty and obligation to work in the Company's
interest; to follow lawful direction; to put the Company's interest before her
own in the matters and business the Company is interested in, does pursue, or
may pursue.
 
 8.2.         
No Undertaking
or Enterprise with
Patty McPeak. Consultant shall not, during the Term of this agreement,
discuss, enter into, or otherwise pursue any current or prospective business
activity with Patty McPeak.
 
 8.3.         
Investor/Shareholder
Contact. Without advance written consent of the Company, during the Term
of this agreement, Consultant shall not:





(a)          
 Discuss, enter into, or otherwise pursue any current or prospective
business activity relating to the stabilized rice bran industrywith any of the
Company's current, former or prospective shareholders including, but not limited
to, Moishe Manna or Baruch Halpern; provided, that with the Company's express
prior consent Consultant may contact Baruch Halpern regarding specific matters
authorized by the Company's Chief Executive Officer; or
 
 (b)          
 Contact or communicate with any of the Company's past or current
investment bankers or institutional investors.





8.4.          Non-Disparagement.
The Parties agree that they shall not disparage nor defame the other Parties, or
their respective agents, members, officers, directors, employees, agents,
vendors, or affiliates, so as to harm their business or personal reputation.
This provision does not restrict the Parties from responding fully and
truthfully in the context of a legal or governmental proceeding in which they
are compelled to testify under oath or to respond to a subpoena or otherwise is
required by law to cooperate with a legal or governmental entity.
 
 8.5.          Definition of Express
Duties. As used herein, the "Express Duties"means the duties of
Consultant pursuant to Sections 8.1, 8.2, 8.3, and 8.4 above.


9.NON-SOL1CITA
HON/NON-COMPETE


9.1.         
Non-Solicitation. To
the fullest extent permissible under applicable law, Consultant agrees that both
during the term of this Agreement and for a period of one (1) year following
termination of this Agreement, Consultant shall not take any action to induce
employees or independent contractors of Company to sever their relationship with
Company and accept an employment or an independent contractor relationship with
any other business.


9.2.         
Non-Compete. In
order to protect the Company in the object of this Agreement, to the fullest
extent permissible under Arizona law, Consultant agrees to refrain from, unless
first obtaining Company's prior written consent, directly or indirectly,
engaging in, being employed by. Being associated with, being under contract
with, owning, managing, operating, joining, controlling, or participating in the
ownership, management, operation, or control of, being connected in any manner
with, or having any interest in, (i) any past or then-current customer or vendor
of the Company, or (ii) any business, firm, sole proprietorship, partnership or
corporation that sells, offers for sale, markets, or otherwise commercializes
any products that are competitive with any of products of the Company that are
attributable for fivepercent (5%) or more of
the Company's gross sales. The foregoing provisions of this Section 9.2 shall
apply in Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut,
Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas,
Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota,
Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New
Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon,
Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas,
Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming for a
period of one (1) year after termination of this Agreement.





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9.3.         
Reasonableness.
Consultant acknowledges that the nature and periods of restrictions imposed by
the covenants contained herein are fair, reasonable, and that the Company would
sustain great and irreparable loss and damage if Consultant in any manner were
to breach any of such covenants. Accordingly, in the event of an actual or
threatened breach of the covenants by Consultant, in addition to all other
remedies which Company may have, Company shall be entitled to enforce the
specific performance of this Agreement and to seek both immediate, temporary and
permanent injunctive relief (to the extent permitted by law) restraining such
actual or threatened breach. Consultant waives any requirement that Company post
any bond or other security in order to obtain such injunctive
relief.





9.4.         
 Separate
Covenants. It is understood by and between the parties hereto that the
covenants contained in this Agreement shall be deemed to be a series of separate
covenants, one for each line of business engaged in by Company. Each separate
covenant shall hereinafter be referred to as "separate covenant." If any court
or tribunal of competent jurisdiction shall refuse to enforce one or more of the
separate covenants because the time limit applicable thereto is deemed
unreasonable, it is expressly understood and agreed that such separate covenant
or separate covenants shall not be void but that for the purpose of such
proceedings and such time limitation shall be deemed to be reduced to the extent
necessary to permit the enforcement of such separate covenant or separate
covenants. If any court or tribunal of competent jurisdiction shall refuse to
enforce any or all of the separate covenants because, taken together, they are
more extensive (whether as to geographic area, scope of business or otherwise)
than is deemed to be reasonable, it is expressly understood and agreed between
the parties hereto that such separate covenant or separate covenants shall not
be void but that for the purposes of such proceedings, the restrictions
contained therein (whether as to geographic area, scope of business or
otherwise) shall be deemed to be reduced to the extent necessary to permit the
enforcement of such separate covenant or separate covenants,


10.         
 TERMINATION


This
Agreement will commence on the date first written above and will continue for
twelve (12) months from the date of this Agreement first set forth above or
until termination as provided below. In addition, the Agreement shall
terminate immediately upon a revocation by Consultant of her waiver of claims
under the Age Discrimination in Employment Act during the seven (7) day period
provided in Section 3.3 of the Severance Agreement. The Company may terminate
this Agreement for Cause, immediately upon notice. For purposes of this
Agreement, "Cause" shall mean the Consultant shall have committed a material
breach by the Consultant of any of the Express Duties (as defined in Section 8
herein. Upon such termination all rights and duties of the parties toward each
other shall cease except:





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(a)      that
the Company shall be obliged to pay, within thirty (30) days of the effective
date of termination, all undisputed amounts owing to Consultant for Services
completed and accepted by the Company prior to the termination date and related
expenses, if any, in accordance with the provisions of Section 1 (Services and
Compensation) hereof; and
 
 (b)        Sections
2 (Confidentiality), and 3 (Ownership) shall survive termination of this
Agreement, and Section 9 (Non-Solicitation/Non-Compete) shall survive for a
period of twenty-four (24) months from the date of this Agreement first set
forth above.


11.         
 ASSIGNMENT


Neither
this Agreement, any right hereunder, or interest herein may be assigned,
delegated or transferred by Consultant without the express written consent of
the Company. The parties expressly agree and intend that this Agreement shall be
binding on any successor entity to NutraCea in the event of any merger
transaction or an acquisition of all or substantially all of the assets of
NutraCea


12.         
INDEPENDENT
CONTRACTOR
 
 Nothing
in this Agreement shall in any way be construed to constitute Consultant as an
agent, employee or representative of the Company, but Consultant shall perform
the services hereunder as an independent contractor. Company agrees to furnish
(or reimburse the Consultant for) all tools and materials necessary to
accomplish this contract, and Company shall incur all expenses associated with
performance, except as expressly provided in this Agreement. Consultant
acknowledges and agrees that Consultant is obligated to report as income all
compensation received by Consultant pursuant to the Consulting Agreement
(including, if any, pursuant to Section 409A of the Internal Revenue Code of
1986, as amended), and Consultant agrees to and acknowledges the obligation to
pay all self-employment and other taxes thereon. Consultant further agrees to
indemnify the Company and hold it harmless to the extent of any obligation
imposed on the Company (i) to pay in withholding taxes or similar items or (ii)
resulting from Consultant's being determined not to be an independent
contractor.
 
 13.          
SUBCONTRACT
 
 The
Consultant shall not subcontract the work under this Agreement without the prior
written permission of the Company.


14.         
 EQUITABLE
RELIEF





Page 8 of
11








Consultant
agrees that it would be impossible or inadequate to measure and calculate the
Company's damages from any breach of the covenants set forth in Sections 2 or 3
herein. Accordingly, Consultant agrees that if Consultant breaches Sections 2 or
3, the Company will have available, in addition to any other right or remedy
available, the right to obtain from any court of competent jurisdiction an
injunction restraining such breach or threatened breach and specific performance
of any such provision. Consultant further agrees that no bond or other security
shall be required in obtaining such equitable relief and Consultant hereby
consents to the issuances of such injunction and to the ordering of such
specific performance.
 
 15.          
INTENTIONALLY
OMITTED.
 
 16.GOVERNING
LAW AND JURISDICTION
 
 This
Agreement shall be governed and construed and enforced in accordance with the
internal, substantive laws of the State of Arizona without giving effect to the
conflict of law rules thereof, and shall be deemed to be executed in Arizona.
Any legal action or proceeding relating to this Agreement shall be instituted in
a slate or federal court in Phoenix, Arizona. The parties agree to submit to the
jurisdiction of, and agree that venue is proper in, these courts in any such
legal action or proceeding.
 
 17.          
NOTICE
 
 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. Failure to
give notice in accordance with any of the foregoing methods shall not defeat the
effectiveness of notice actually received by the addressee.
 
 18.         
 ENTIRE
AGREEMENT AND AMENDMENTS
 
 This
Agreement, and the Severance Agreement between the parties dated this same date
and the Warrant Agreement constitute the entire agreement of the parties and
supersede any prior or contemporaneous agreements whether oral or written
between them with respect to the subject matter hereof or thereof. This
Agreement may be changed only if agreed to in writing by both
parties.
 
 19.          
COUNTERPARTS


This
Agreement may be executed in one or more counterparts, each of which shall be an
original, but all of which together shall constitute one and the same
instrument.





20.          
SEVERABILITY





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11





If any
provision of this Agreement is held to be unenforceable for any reason, such
provision shall be adjusted rather than voided, if possible, in order to achieve
the intent of the parties to the maximum extent possible. In any event, all
other provisions of this Agreement shall be deemed valid and enforceable to the
full extent possible.


21.          
WAIVER


The
waiver of any term or condition contained in this Agreement by any party to this
Agreement shall not be construed as a waiver of a subsequent breach or failure
of the same term or condition or a waiver of any other term or condition
contained in this Agreement.


22.          
SUCCESSION


Subject
to the provisions otherwise contained in this Agreement, this Agreement shall
inure to the benefit of, and be binding upon, the successors and assigns of each
of the respective parties hereto. The parties expressly agree and intend that
this Agreement shall be binding on any successor entity to the Company in the
event of any merger transaction or an acquisition of all or substantially all of
the assets of the Company.





[SIGNATURE
PAGE TO FOLLOW]





Page 10 of
11





The
parties hereto have executed this Consulting Agreement as of the day and year
first above written.





COMPANY:NUTRACEABy:
            /s/
      Bradley D. EdsonName:
            Bradley
      D. EdsonAddress:
            Sogo
      N. 40th
      Street, suite 400 Phoenix AZ 85018CONSULTANT:By:
            /s/
      Margie AdelmanMargie
      AdelmanAddress:
            Delray
      Beach, FL 33484





Page 11 of
11





Exhibit
B





Warrant





-9-





EXHIBIT
A-l





THE
WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON THE
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED EXCEPT UPON DELIVERY TO THE
CORPORATION OF AN OPINION OF COUNSEL SATISFACTORY IN FORM AND SUBSTANCE TO IT
THAT SUCH TRANSFER WILL NOT VIOLATE THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE STATE SECURITIES LAWS.





THE
TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.





NutraCea,
a California corporation





Warrant
for the Purchase of Shares of Common Stock, par value $0,001 per
Share





No.
      WC-[___]
            1,000,000
      Shares


Issuance
Date: January 25, 2005


THIS
CERTIFIES that, for value received, Margie Adelman (the "Holder"), is entitled
to subscribe for and purchase from NutraCea, a California corporation (the
''Company"), upon the terms and conditions set forth herein, 1,000,000 shares of
the Company's Common Stock, par value $0,001 per share ("Common Stock"), at a
price of $0.30 per share (the "Exercise Price"). As used herein the term "this
Warrant" shall mean and include this Warrant and any Common Stock or Warrants
hereafter issued as a consequence of the exercise or transfer of this Warrant in
whole or in part and Warrant Shares shall mean the shares of the Company's
Common Stock issued to Holder upon exercise of all or part of the Warrant. The
number of Warrant Shares may be adjusted from time to time as hereinafter set
forth.





1.             Exercise Period. This
Warrant may be exercised as follows: (i) 500,000 upon the execution of this
agreement; and (ii) the remaining 500,000 may be exercised after January 25,
2006 and ending at 5:00 P.M. Pacific time on January 25, 2015, unless earlier
terminated pursuant to this Warrant (the "Exercise Period"). Notwithstanding the
foregoing, in the event that Holder terminates her employment with the Company
or is terminated for Cause (as defined in the Employment Agreement by and
between the Holder and the Company of even date herewith ("Employment
Agreement")) prior to January 25, 2006, all Warrants shall expire. In me event
that Holder terminates her employment With the Company or is terminated for
Cause (as defined in the Employment Agreement) at any time between January 25,
2005 and January 25, 2006 500,000 Warrants shall expire.





1





2.             
Procedure for
Exercise: Effect of Exercise.





(a)         
 Cash Exercise, This Warrant may be exercised, in whole or in part, by the
Holder during normal business hours on any business day during the Exercise
Period by (i) the presentation and surrender of this Warrant to the Company at
its principal office along with a duly executed Notice of Exercise (in the form
attached to this Warrant) specifying the number of Warrant Shares to be
purchased, and (ii) delivery of payment to the Company of the Exercise Price for
the number of Warrant Shares specified in the Notice of Exercise by cash, wire
transfer of immediately available funds to a bank account specified by the
Company, or by certified or bank cashier's check.





(b)          
Cashless
Exercise. This Warrant
may also be exercised by the Holder through a cashless exercise, as described in
this Section 2(b). This Warrant may be exercised, in whole or in part, by the
Holder during normal business hours on any business day during the Exercise
Period by the presentation and surrender of this Warrant to the Company at its
principal office along with a duly executed Notice of Exercise specifying the
number of Warrant Shares to be applied to such exercise. The number of Warrant
Shares to be delivered upon exercise of this Warrant pursuant to this Section
2(b) shall equal the value of this Warrant (or the portion thereof being
canceled) computed as of the date of delivery of this Warrant to the Company
using the following formula:





X
      =
              Y
      (A-B)


A





Where:





X
      =
              the
      number of shares of Common Stock to be issued to Holder under this Section
      2(b);





Y
      =
              the
      number of Warrant Shares identified in the Notice of Exercise as being
      applied to the subject exercise;
 
 A
      =
              the
      Current Market Price on such date;
and





B
      =
              the
      Exercise Price





For
purposes of this Section 2(b) and Section 6, the "Current Market Price" per
share of Common Stock on any date shall mean the average closing price of the
last three trading days with respect to securities listed on the principal
national securities exchange on which such security is listed or admitted to
trading or, if such security is not listed or admitted to trading on any
national securities exchange, the average closing price of such security on the
three (3) consecutive trading days immediately preceding such date in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System or such other system then in use or,
if such security is not quoted by any such organization, the three day average
closing price of such security as of the three (3) consecutive trading days
immediately preceding such date furnished by a New York Stock Exchange member
firm selected by the Company, or if such security is not quoted by any such
organization and no such New York Stock Exchange member firm is able to provide
such prices, such price as is determined by the Board of Directors in good
faith.





2





The
Company acknowledges and agrees that this Warrant was issued on the issuance
Date. Consequently, the Company acknowledges and agrees that, if the Holder
conducts a cashless exercise pursuant to this Section 2(b), the period during
which the Holder held this Warrant may, for purposes of Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Securities Act"), be
"tacked" to the period during which the Holder holds the Warrant Shares received
upon such cashless exercise.
 
 Notwithstanding
the foregoing, except in connection with a transaction described in the proviso
in the first sentence of this Section 2(b), the Holder may conduct a cashless
exercise pursuant to this Section 2(b) only after the first anniversary of the
Issuance Date.





(c)           
Effect of
Exercise, Upon receipt by the Company of this Warrant and a Notice of
Exercise, together with proper payment of the Exercise Price, as provided in
this Section 2,the
Company agrees that such Warrant Shares shall be deemed to be issued to the
Holder as the record holder of such Warrant Shares as of the close of business
on the date on which this Warrant has been surrendered and payment has been made
for such Warrant Shares in accordance with this Warrant and the Holder shall be
deemed to be the holder of record of the Warrant Shares, notwithstanding that
the stock transfer books of the Company shall then be closed or that
certificates representing such Warrant Shares shall not then be actually
delivered to the Holder. A stock certificate or certificates for the Warrant
Shares specified in the Notice of Exercise shall be delivered to the Holder as
promptly as practicable, and in any event within seven (7) business days,
thereafter. The stock certificate(s) so delivered shall be in any such
denominations as may be reasonably specified by the Holder in the Notice of
Exercise. If this Warrant should be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and deliver within
seven (7) business days a new Warrant evidencing the right of the Holder to
purchase the balance of the Warrant Shares subject to purchase
hereunder.





3.            
Registration of
Warrants.





3.1
Warrant Register, Any Warrants issued upon the transfer or exercise in part of
this Warrant shall be numbered and shall be registered in a Warrant Register as
they are issued. The Company shall be entitled to treat the registered holder of
any Warrant on the Warrant Register as the owner in fact thereof for all
purposes and shall not be bound to recognize any equitable or other claim to or
interest in such Warrant on the part of any other person, and shall not be
liable for any registration or transfer of Warrants which are registered or to
be registered in the name of a fiduciary or the nominee of a fiduciary unless
made with the actual knowledge that a fiduciary or nominee is committing a
breach of trust in requesting such registration or transfer, or with the
knowledge of such facts that its participation therein amounts to bad faith.
This Warrant shall be transferable only on the books of the Company upon
delivery thereof duly endorsed by the Holder or by its duly authorized attorney
or representative, or accompanied
by proper evidence of succession, assignment, or authority to transfer. In all
cases of transfer by an attorney, executor, administrator, guardian, or other
legal representative, duly authenticated evidence of his or its authority shall
be produced. Upon any registration of transfer, the Company shall deliver a new
Warrant or Warrants to the person entitled thereto. This Warrant may be
exchanged, at the option of the Holder thereof, for another Warrant or other
Warrants of different denominations, of like tenor and representing in the
aggregate the right to purchase a like number of Warrant Shares, upon surrender
to the Company or its duly authorized agent.





3





3.2           Piggyback Registration
Rights. Subject to the cutback restrictions set forth below, if at any
time after the Issuance Date, the Company shall seek to register any shares of
its Common Stock under the Securities Act for sale to the public for its own
account or on the account of others (except with respect to registration
statements on Form S-4, S-8 or another form not available for registering the
Warrant Shares for sale to the public) the Company will promptly give written
notice thereof to the Holder. If within ten (10) days after Holder's receipt of
such notice the Holder requests the inclusion of Holder's Warrant Shares,
subject to the limitations set forth below, in such registration, the Company
will use its best efforts to effect the registration under the Securities Act of
such Warrant Shares. The number of Holder's Warrant Shares that may be included
on any such registration statement shall be subject to the following: (1) in
tine event the Company seeks to register any shares of its Common Stock at any
time after the second anniversary of the Issuance Date, Holder may be entitled
to include all or part, as determined by Holder and subject to cutbacks required
by underwriters as stated below, of Holder's Warrant Shares; and (2) in the
event the Company seeks to register any shares of its Common Stock at any time
after the Issuance Date and the Company's senior officers and directors
participate in such registration, Holder may be entitled to include the number
of vested Warrant Shares which shall be apportioned pro rata among the Holder
and senior officers and directors according to the total amount of securities
entitled to be included therein owned by Holder and senior officers and
directors of the Company taken as a single group. In the case of the
registration of shares of capital stock by the Company in connection with any
underwritten public offering, if the underwriters) determines that marketing
factors require a limitation on the number of Warrant Shares to be offered,
subject to the following sentence, the Company shall not be required to register
Warrant Shares in excess of the amount, if any, of shares of the capital stock
which the principal underwriter of such underwritten offering shall reasonably
and in good faith agree to include in such offering in addition to any amount to
be registered for the account of the Company. If any limitation of the number of
shares to be registered by holders of the Company's Common Stock or shares of
Warrant Shares to be registered by the Holder is required pursuant to this
Section 3.2, the number of shares to be excluded shall be determined by the
principal underwriter of such underwritten offering.
 
 4.            
Restrictions on
Transfer, (a) The Holder, as of the date of issuance hereof, represents
to the Company that such Holder is acquiring the Warrants for its own account
for investment purposes and not with a view to the distribution thereof or of
the Warrant Shares. Notwithstanding any provisions contained in this Warrant to
the contrary, Holder agrees that
it shall not, directly or indirectly, make any offering, sale, assignment,
transfer, pledge, encumbrance, contract to sell, grant an option to purchase or
make any other disposition of this Warrant or the Warrant Shares issued upon
exercise of the Warrant or enter into any swap or other derivative transaction
that transfer to another, in whole or in part, any of the economic benefit or
risk of ownership of such Warrant or Warrant Shares, whether any such
transaction described above is to be settled by delivery of the Warrant Shares
or other securities, in cash or otherwise for the period of Thirty-Six (36)
months after January 26, 2005 or while Holder is employed by Company, unless
prior written consent is obtained by Holder from the Company. In addition to the
foregoing, any potential transfer by Holder shall be subject to the delivery to
the Company of an opinion of the Holder's counsel or a registration of such
Warrant Shares under the Securities Act has become effective or after a sale of
such Warrant or Warrant Shares has been consummated pursuant to Rule 144 or Rule
144 A under the Securities Act. The Company may place restrictive legends on the
certificates representing the Warrant Shares issued upon exercise of the
Warrants and impose stop transfer instructions with respect to the Warrant
Shares beneficially held by Holder until the end of such
period.





4








(b)          
Each stock certificate representing Warrant Shares issued upon exercise or
exchange of this Warrant shall bear the following legend, and any other legend
deemed appropriate and in accordance with this Warrant, unless the opinion of
counsel referred to in Section 4(b) states such legend is not
required:





'THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED
EXCEPT UPON DELIVERY TO THE CORPORATION OF AN OPINION OF COUNSEL SATISFACTORY IN
FORM AND SUBSTANCE TO IT THAT SUCH TRANSFER WILL NOT VIOLATE THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS."





5.            
Reservation of
Shares, The Company shall at all times during the Exercise Period reserve
and keep available out of its authorized and unissued Common Stock, solely for
the purpose of providing for the exercise of the rights to purchase all Warrant
Shares granted pursuant to the Warrants, such number of shares of Common Stock
as shall, from time to time, be sufficient therefore. The Company covenants that
all shares of Common Stock issuable upon exercise of this Warrant, upon receipt
by the Company of the full Exercise Price therefore, and all shares of Common
Stock issuable upon conversion of this Warrant, shall be validly issued, fully
paid, non-assessable, and free of preemptive rights.
 
 6.           
 Adjustments. The number of
shares of Common Stock issuable upon exercise of the Warrants shall be adjusted
from time to time as follows:





(a)           
(i) In the event that the Company shall (A) pay a dividend or make a
distribution, in shares of Common Stocks on any
class of capital stock of the Company or any subsidiary which is not directly or
indirectly wholly owned by the Company, (B) split or subdivide its outstanding
Common Stock into a greater number of shares, (C) combine its outstanding Common
Stock into a smaller number of shares, then in each such case the number of
shares issuable upon exercise of this Warrant shall be adjusted so that the
Holder of a Warrant thereafter surrendered for exercise shall be entitled to
receive the number of shares of Common Stock that such Holder would have owned
or have been entitled to receive after the occurrence of any of the events
described above had such Warrant been exercised immediately prior to the
occurrence of such event- An adjustment made pursuant to this Section 6(a)(1)
shall become effective immediately after the close of business on the record
date in the case of a dividend or distribution (except as provided in Section
6(e) below) and shall become effective immediately after the close of business
on the effective date in the case of such subdivision, split or combination, as
the case may be.





5




(ii)            
Mo adjustment in the Exercise Price shall be required unless the adjustment
would require an increase or decrease of at least 1% in the Exercise Price then
in effect; provided, however,that any adjustments that by reason of this Section 6(a) are not required
to be made shall be carried forward and taken into account in any subsequent
adjustment.  All calculations under this Section 6(a) shall be made to
the nearest cent or nearest 1/100th of a share.
 
 (iii)           
In the event that, at any time as a result of an adjustment made pursuant to
Sections 6(a)(1) and 6(a)(ii) above, the Holder of any Warrant thereafter
surrendered for exercise shall become entitled to receive any shares of the
Company other than shares of the Common Stock, thereafter the number of such
other shares so receivable upon exercise of any such Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
Sections 6(a)(1) and 6(a)(ii) above, and the other provisions of this Section
6(a) with respect to the Common Stock shall apply on like terms to any such
other shares.





(b)         
 In case of any reclassification of the Common Stock (other than in a
transaction to which Section 6(a)(1) applies), any consolidation of the Company
with, or merger of the Company into, any other entity, any merger of another
entity into the Company (other than a merger that does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock of the Company), any sale or transfer of all or substantially all
of the assets of the Company or any compulsory share exchange which does not
result in the cashless exercise or cancellation of this Warrant pursuant to
Section 2(b), pursuant to which share exchange the Common Stock is converted
into other securities, cash or other property, then lawful provision shall be
made as part of the terms of such transaction whereby the Holder of a Warrant
then outstanding shall have the right thereafter, during the period such Warrant
shall be exercisable, to exercise such Warrant only for the kind and amount of
securities, cash and other property receivable upon the reclassification,
consolidation, merger, sale, transfer or share exchange by a holder of the
number of shares of Common Stock of the Company into which a Warrant might have
been able to exercise forimmediately
prior to the reclassification, consolidation, merger, sale, transfer or share
exchange assuming that such holder of Common Stock failed to exercise rights of
election, if any. as to the kind or amount of securities, cash or other property
receivable upon consummation of such transaction subject to adjustment as
provided in Section 6{a) above following the date of consummation of such
transaction. The Company shall not effect any such reclassification,
consolidation, merger, sale, transfer, share exchange orother disposition unless
prior to or simultaneously with the consummation thereof the successor
corporation (if other than the Company) resulting from such consolidation or
merger, or the corporation purchasing or otherwise acquiring such assets or
other appropriate corporation or entity shall assume, by written instrument
executed and delivered to the Holder, the obligation to deliver to the Holder
upon its exercise of the Warrant such shares of stock, securities or assets as,
in accordance with the foregoing provisions, the Holder may be entitled to
purchase and the other obligations under this Warrant. The provisions of this
Section 6(b) shall similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.





6





(c)         
  If:




(i)
              the
      Company shall take any action which would require an adjustment pursuant
      to Section 6(a); or
 
 (ii)
              the
      Company shall authorize the granting to the holders of its Common Stock
      generally of rights, warrants or options to subscribe for or purchase any
      shares of any class or any other rights, warrants or options;
      or
 
 (iii)
              there
      shall be any reclassification or change of the Common Stock (other than a
      subdivision or combination of its outstanding Common Stock or a change in
      par value) or any consolidation, merger or statutory share exchange to
      which the Company is a party and for which approval of any stockholders of
      the Company is required, or the sale or transfer of all or substantially
      all of the assets of the Company;
or
 
 (iv)
              there
      shall be a voluntary or involuntary dissolution, liquidation or winding up
      of the Company;





then, the
Company shall cause to be filed with the transfer agent for the Warrants and
shall cause to be mailed to each Holder at such Holder's address as shown on the
books of the transfer agent for the Warrants, as promptly as possible, but at
least 30 days prior to the applicable date hereinafter specified, a notice
stating (A) the date on which a record is to be taken for the purpose of such
dividend, distribution or granting of rights, warrants or options, or, if a
record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution or rights, warrants or
options are to be determined, or (B) the date on which such reclassification,
change, consolidation, merger, statutory share exchange, sale, transfer,
dissolution, liquidation or winding-up is expected to become effective or occur,
and the date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such reclassification, change, consolidation,
merger, statutory share exchange, sale, transfer, dissolution, liquidation or
winding up. Failure to give such notice or any defect therein shall not affect
the legality or validity of the proceedings described in this Section
6(c).





7





(d)         
 Whenever an adjustment is made as herein provided, the Company shall
promptly file with the transfer agent for the Warrants a certificate of an
officer of the Company setting forth the adjustment and setting forth a brief
statement of the facts requiring such adjustment and a computation thereof. The
Company shall promptly cause a notice of such adjustment to be mailed to each
Holder.




(e)        
  In any case in which Section 6(a) provides that an adjustment shall
become effective immediately after a record date for an event and the date fixed
for such adjustment pursuant to Section 6(a) occurs after such record date but
before the occurrence of such event the Company may defer until the actual
occurrence of such event (i) issuing to the Holder of any Warrants exercised
after such record date and before the occurrence of such event the additional
shares of Common Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable upon such
exercise before giving effect to such adjustment, and (ii) paying to such holder
any amount in cash in lieu of any fraction pursuant to Section 6(g),
 
 (f)           
Upon each adjustment of the Exercise Price, this Warrant shall thereafter
evidence the right to purchase, at the adjusted Exercise Price, that number of
shares (calculated to the nearest thousandth) obtained by dividing (i) the
product obtained by multiplying the number of shares purchasable upon exercise
of this Warrant prior to adjustment of the number of shares by the Exercise
Price in effect prior to adjustment of the Exercise Price, by (ii) the Exercise
Price in effect after such adjustment of the Exercise Price,
 
 (g)           The
Company shall not be required to issue fractions of shares of Common Stock or
other capital stock of the Company upon the exercise of this Warrant. If any
fraction of a share would be issuable on the exercise of this Warrant (or
specified portions thereof), the Company shall purchase such fraction for an
amount in cash equal tothe same fraction of the Current Market Price of such share of Common
Stock on the date of exercise of this Warrant.


(h)          
In case the Company shall take any action affecting the Common Stock, other than
actions described in this Section 6, which in the opinion of the Board of
Directors would materially adversely affect the exercise right of the Holder,
the Exercise Price may be adjusted, to the extent permitted by law, in such
manner, if any, and at such time, as the Boardof
Directors may determine to be equitable in the circumstances; provided, however,that in no
event shall the Board of Directors he required to take any such
action.





8





7.Transfer Taxes. The
issuance of any shares or other securities upon the exercise of this Warrant,
and the delivery of certificates or other instruments representing such, shares
or other securities, shall be made without charge to the Holder for any tax or
other charge in respect of such issuance. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue and delivery of any certificate in a name other than that of the
Holder and the Company shall not be required to issue or deliver any such
certificate unless and until the person or persons requesting the issue 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.
 
 8.           
 Loss or
Mutilation of Warrant Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction, or mutilation of any Warrant (and upon
surrender of any Warrant if mutilated), and upon reimbursement of the Company's
reasonable incidental expenses, the Company shall execute and deliver to the
Holder thereof a new Warrant of like date, tenor, and denomination.
 
 9.           
 No Rights as a
Stockholder. The Holder of any Warrant shall not have, solely on account
of such status, any rights of a stockholder of the Company, either at law or in
equity, or to any notice of meetings of stockholders or of any other proceedings
of the Company, except as provided in this Warrant.
 
 10.          
Governing Law.
This Warrant shall be construed in accordance with the laws of the State of
California applicable to contracts made and performed within such State, without
regard to principles of conflicts of law.


11.          
Beneficial
Ownership. The Company shall not effect the exercise of this Warrant by
any Holder, and no person who is a holder of this Warrant shall have the right
to exercise this Warrant, to the extent that after giving effect to such
exercise, such person (together with such person's affiliates) would
beneficially own in excess of 10% of the shares of the Common Stock outstanding
immediately after giving effect to such exercise. For purposes of the foregoing
sentence, the aggregate number of shares of Common Stock beneficially owned by
such person and its affiliates shall include, without limitation, the number of
shares of Common Stock issuable upon exercise of this Warrant with respect to
which the determination of such sentence is being made, but shall exclude shares
of Common Stock which would be issuable upon (a) exercise of the remaining,
unexercised portion of this Warrant beneficially owned by such person and its
affiliates, and (b) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company beneficially owned by such person
and its affiliates (including, without limitation, any debentures, convertible
notes or convertible preferred stock or warrants) subject to a limitation on
conversion or exercise analogous to the limitation contained herein. Except as
set forth inthe
preceding sentence, for purposes of this Section 11, beneficial ownership shall
be calculated in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended. For purposes of this Warrant, in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as reflected in (i) the Company's most recent
Form 10-Q, Form 10-K or other public filing with the Securities and Exchange
Commission, as the case may be, (ii) a more recent public announcement by the
Company, or (iii) any other notice by the Company or its transfer agent setting
forth the number of shares of Common Stock outstanding. For any reason at any
time, upon the written or oral request of the Holder of this Warrant, the
Company shall within two business days confirm orally and in writing to the
Holder of this Warrant the number of shares of Common Stock then outstanding. In
any case, the number of outstanding shares of Common Stock shall be determined
after giving effect to the conversion or exercise of securities of the Company
by the Holder of this Warrant and its affiliates since thedate as of which such
number of outstanding shares of Common Stock was reported. In effecting the
exercise of this Warrant, the Company shall be entitled to rely on a
representation by the Holder of this Warrant as to the number of shares that it
beneficially owns for purposes of the above 10% limitation
calculation.





9





Dated:
January 25, 2005


NUTRACEA.a
      California corporation,By:
            /s/Patricia
      McPeakPatricia
      McPeakChief
      Executive Officer




[Signature Page
to Warrant]





10








FORM OF
ASSIGNMENT





(To be
executed by the registered holder if such holder desires to transfer the
attached Warrant.)
 
 FOR VALUE
RECEIVED._______________________________ hereby sells, assigns, and transfers
unto_________________ a Warrant to purchase ______________ shares of Common
Stock, par value $[0,001] per share, of NUTRACEA. (the "Company"), together with
all right, title, and interest therein, and does hereby irrevocably constitute
and appoint __________________________ attorney to transfer such Warrant on the
books of the Company, with full power of substitution.





Dated:By:Signature





The
signature on the foregoing Assignment must correspond to the name as written
upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.





11





To:
              NutraCea


261 Hawks' Flight
      Court
 El Dorado Hills. CA
      95762
 Attention:
      Chief Executive Officer





NOTICE OF
EXERCISE





The
undersigned hereby exercises his or its rights to purchase ______ Warrant Shares
covered by the within Warrant and tenders payment herewith in the amount of
$_________by [tendering cash or delivering a certified check or bank cashier's
check, payable to the order of the Company] [surrendering ______ shares of
Common Stock received upon exercise of the attached Warrant, which shares have a
Current Market Price equal to such payment] in accordance with the terms
thereof, and requests that certificates for such securities be issued in the
name of, and delivered to:











(Print
Name, Address and Social Security or Tax Identification
Number)





and, if
such number of Warrant Shares shall not be all the Warrant Shares covered by the
within Warrant, that a new Warrant for the balance of the Warrant Shares covered
by the within Warrant be registered in the name of, and delivered to, the
undersigned at the address stated below.


Dated:By:Print
      NameSignature





Address:










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