Document:

Exhibit
      10.1

     

    EMPLOYMENT
      AGREEMENT

    

    This
      Employment Agreement (“Agreement”)
      is
      entered into by and between NutraCea, a California corporation with principal
      offices at 5090 40th
      North
      Street, Suite 400, Phoenix, Arizona 85018 (“NutraCea”)
      and
      Jeffrey Sanders, an individual residing at 1314 Pamela Ct., Naperville IL 60540
      (“Employee”)
      effective as of April 23,
      2008
      (the “Effective
      Date”),
      as
      follows:

    

    AGREEMENT

    

    1. Employment.
      NutraCea wishes to employ Employee and Employee agrees to provide services
      for
      NutraCea on the terms and conditions set forth below. 

    

    2. Employment;
      Scope of Employment.
      From
      the
      Effective Date until May 13, 2008 (“CFO
      Date”),
      Employee shall act as Special Financial Adviser to NutraCea. Beginning on the
      CFO Date, Employee
      shall act as the Chief Financial Officer of NutraCea. NutraCea reserves the
      exclusive
      right to
      modify and designate Employee’s specific duties from time to time in any manner
      consistent with Employee’s status as Chief Financial Officer. No modification or
      change of Employee’s responsibilities and/or duties shall modify, change or
      revoke any provision of this Agreement.

    

    2.1 Best
      Efforts; Full Working Time. Employee
      agrees to devote his full working time and best efforts
      to the
      performance of Employee’s duties all in accordance with the provisions of this
      Agreement.  

    

    2.2 Supervision
      and Direction of Services.
      All of
      Employee’s services shall be under the supervision and direction of the Chief
      Executive Officer of NutraCea and the Board of Directors of NutraCea.

    

    2.3 Rules. Employee
      shall be bound by all the policies, rules and regulations of NutraCea now in
      force and by all such other policies, rules and regulations as may be hereafter
      implemented and shall faithfully observe and abide by the same. 

    

    2.4 Exclusive
      Services.
      During
      the term of this Agreement and any extension of this Agreement, Employee shall
      not, directly or indirectly, whether as a partner, employee, creditor,
      shareholder, independent contractor or otherwise, promote, participate or engage
      in any activity or other business which is competitive with NutraCea’s business
      operations. Employee agrees that Employee shall not enter into an agreement
      to
      establish, form, contract with or become employed by a competing business of
      NutraCea while Employee is employed by NutraCea. 

    

    2.5 Non-Solicitation.
      To
      the
      fullest extent permissible under applicable law, Employee agrees that both
      during the term of this Agreement and for a period of two (2) year following
      termination of this Agreement, Employee shall not take any action to induce
      employees or independent contractors of NutraCea to sever their relationship
      with NutraCea and accept an employment or an independent contractor relationship
      with any other business.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3. Term
      and Termination; Payments upon Termination.
      

    

    3.1 Term
      and Termination.
      Unless
      earlier terminated for Cause (as defined below), NutraCea hereby employs the
      Employee for a period commencing on the Effective Date and ending on April
      23,
      2011 (the “Term”).
      The
      Term shall be extended automatically for successive one-year terms unless either
      party notifies the other party in writing at least ninety (90) days prior to
      the
      expiration of the then effective Term of such party’s intention not to renew
      this Agreement. The failure of NutraCea to renew the Agreement at the end of
      any
      Term for any reason other than “Cause” (as defined below) or no reason shall be
      deemed a termination of Employee’s employment without Cause.
      Other
      than for Good Reason (defined below), Employee shall deliver written notice
      to
      NutraCea (“Voluntary
      Termination Notice”)
      at
      least ninety (90) days before Employee may voluntarily terminate Employee’s
      employment with NutraCea, which notice shall set forth the date in which
      Employee desires to terminate Employee’s employment (“Voluntary
      Termination”).
      In
      addition to any other remedies available to NutraCea, if in connection with
      Employee’s voluntary termination employee does not provide the Voluntary
      Termination Notice to NutraCea in the time and manner set forth above, all
      stock
      options held by Employee, including the Options (as described below), shall
      immediately terminate at the time of Employee’s termination.

    

    3.1.1 Termination
      for Cause.
      “Cause”
for
      termination of Employee’s employment shall mean the occurrence of any of the
      following: 

    

    (a) Employee
      has breached a material terms hereof, which remains uncured for 20 days after
      a
      written demand for performance is delivered to Employee by the Board of
      Directors that identifies the manner in which the Board of Directors believes
      that Employee has not performed Employee’s material duties;

    

    (b) Employee
      has been grossly negligent or engaged in material willful or gross misconduct
      in
      the performance of his duties;

    

    (c) Employee
      has committed, as determined by the Board of Directors of NutraCea, or has
      been
      convicted by a court of law of, fraud, moral turpitude, embezzlement, theft,
      or
      dishonesty or other criminal conduct, and such misconduct is committed with
      respect to NutraCea or any of its assets (or any such misconduct is committed
      during the course and scope of the performance of his employment with
      NutraCea);

    

    (d) Employee
      has been convicted by a court of law of fraud, moral turpitude, embezzlement,
      theft, or dishonesty or other similar criminal conduct or a felony that does
      not
      comprise misconduct covered by Section 3.1.1 (c); or

    

    
      	 	
              (e)

            	
              Habitual
                misuse of alcohol or drugs.

            

    

    

    3.1.2 Termination
      for Good Reason.
      Termination of employment by the Employee for “Good Reason” shall mean written
      notice from the Employee to NutraCea
      that the
      Employee is terminating his employment for Good Reason, as herein defined,
      which
      notice occurs within six (6) months of the initial occurrence of the condition
      constituting Good Reason, and provided, that the Employee may not terminate
      his
      employment pursuant to this clause unless he has given NutraCea
      within
      ninety (90) days of the initial occurrence of the condition constituting Good
      Reason written notice of such condition in reasonable detail and NutraCea
      fails to
      remedy such condition within thirty (30) days following such written notice.
      As
      used herein, “Good
      Reason”
means
      (i) any material breach by NutraCea
      of this
      Agreement; (ii) the assignment of duties to Employee by NutraCea
      that are
      not consistent with and are adverse to his status as Chief Financial Officer
      of
NutraCea;
      (iii)
      the relocation of Employee’s primary office location outside of the Phoenix
      metropolitan area without Employee’s prior consent; (iv)
      the
      reduction of Employee’s Base Salary; (v) the failure of NutraCea to obtain from
      any successor an agreement to assume and perform this Agreement or
      (vi)
      the
      termination of Employee’s status as Chief Financial Officer of NutraCea;
      provided, however, this Subsection 3.1.2 is subject to the terms of Subsection
      3.1.1 which shall take precedence for the purposes of any termination payments
      in accordance with Section 3.2 hereof.

    
      
        
        

      

      
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    3.2 Payments
      Upon Termination.
      

     

    3.2.1For
      Cause or Voluntary Termination.
      Following any termination by NutraCea
      for
      Cause, or a Vouluntary Termination by Employee, Employee shall be entitled
      to
      receive in cash payment of an amount equal to all previously accrued but unpaid
      or unused compensation, including but not limited to, salary, vacation pay
      and
      Employee may retain the vested portion of any stock and stock options granted
      to
      Employee as of such date, subject and pursuant to the terms of any stock option
      agreements or stock purchase agreements entered into between NutraCea and
      Employee, if any, which provide for the termination of a stock option or grant
      NutraCea certain repurchase rights. 

    

    3.2.2 Without
      Cause or Good Reason.
      Following any termination by NutraCea
      without
      Cause, or any termination by the Employee for Good Reason
      (collectively, a “No-Cause
      Termination”),
      Employee (or Employee’s estate) shall be entitled to receive in cash payment an
      amount equal to all previously accrued but unpaid or unused compensation,
      including but not limited to, salary, vacation pay and Employee may retain
      the
      vested portion of any stock and stock options granted to Employee as of such
      date, subject and pursuant to the terms of any stock option agreements or stock
      purchase agreements entered into between NutraCea and Employee, which provide
      for the termination of a stock option or grant NutraCea certain repurchase
      rights.
      Further,
      if a No-Cause Termination occurs in the first nine (9) months of Employee’s
      employment with NutraCea, 1/36th
      of the
      shares of common stock subject to the Initial Option (defined below) shall
      vest
      for each full month that Employee is employed with NutraCea. In
      addition, Employee shall be entitled to receive in a lump sum severance payment,
      within thirty (30) days following such termination, an amount equal in the
      aggregate to the sum of (i) an amount equal to the Employee’s salary otherwise
      payable pursuant to Section 4.1 for the balance of the then effective Term,
      but
      in no event in an amount less than the sum of (x) twelve (12) months of
      Employee’s salary and (y) an amount equal to the bonuses paid to Employee during
      the preceding twelve (12) months, and (ii) any bonus amount that Employee has
      earned during the fiscal year of such termination, but which has not been paid
      to Employee. 

    

    3.2.3 Termination
      Upon a Change of Control.
      In the
      event of a Change of Control (as defined below),
      NutraCea
      or
      Employee may,
      at
      their respective
      option,
      upon
      notice to the other, terminate
      Employee's
      employment
      after
      the
      effective date of the Change of Control by providing the
      other
      party with thirty (30) days' written
      notice; provided, that if Employee elects to terminate, (x) Employee must agree
      to provide reasonable transition services for a period of up to six (6) months
      after the date of Employee’s notice of termination if requested by NutraCea, and
      (y) the compensation for such transition services shall equal Employee’s Base
      Salary pro rated for the period of time of such transition services. Upon
      termination of Employee’s employment during the twelve (12) month period
      following a Change of Control, Employee shall receive (i) the severance and
      other benefits set forth in Section 3.2.2, and (ii) immediate vesting of all
      equity awards or options held by Employee of NutraCea or
      its
      successor. For the purposes of this Agreement, the term "Change
      of Control"
      shall
      mean any of the following events if they occur after the CFO
      Date:
      (x) the direct or indirect beneficial ownership (within the meaning of 13D-G
      of
      the Securities Exchange Act of 1934, as now or hereafter amended (“Exchange
      Act”))
      of
      fifty percent (50%) or more of NutraCea’s
      outstanding stock is acquired or becomes held by any person or group of persons
      (within the meaning of Section 13(d)(3) of the Exchange Act), or (y) the
      sale,
      mortgage, lease or other transfer in one or more transactions not in the
      ordinary course of NutraCea's
      business of assets constituting more than fifty percent (50%) of the assets
      of
NutraCea and
      its
      subsidiaries (taken as a whole) to any such person or group of persons;
      provided, however, that the reincorporation of NutraCea
      to a
      different jurisdiction in a transaction that does not result in NutraCea’s
      shareholders immediately before such transaction holding less than fifty percent
      (50%) of NutraCea’s
      outstanding capital stock after such transaction shall not constitute a Change
      of Control. 

    
      
        
        

      

      
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    3.2.4 Section
      409A; Deferred Compensation.
      Notwithstanding any of the above provisions concerning the timing of payment
      of
      benefits to Employee upon a termination of employment, all of the above
      provisions shall be interpreted in such a manner as to comply with the
      requirements of Section 409A of the Internal Revenue Code of 1986, as amended
      (“Code”),
      and if
      any of the above provisions would cause any of the above payments and benefits
      not to comply with Section 409A and any regulations promulgated thereunder,
      the
      above provisions shall be revised and NutraCea
      shall
      pay the above amounts in such amounts, and as such times, as it concludes are
      consistent with the provisions of Section 409A of the Code and regulations
      promulgated thereunder. Employee agrees that the above benefits may be paid
      sooner, or later, or in different amounts, than as reflected above if necessary
      to comply with the foregoing provisions of the Code. 

    

    Employee’s
      Initials ___________

    

    4. Compensation;
      Benefits.
      

    

    4.1 Salary. Employee
      shall be paid at a rate, which if annualized, equals two hundred twenty thousand
      dollars ($220,000) per year subject to normal payroll withholdings and
      NutraCea’s standard payroll practices
      (“Base
      Salary”).
      Commencing on the second anniversary of the
      CFO
      Date,
      Employee’s Base
      Salary
      shall be
      increased annually by a minimum of a cost of living factor equal to the
      percentage of such salary that is equal to the percentage increase in the
      published Consumer Price Index selected by NutraCea (“CPI”)
      for
      such year over the same CPI for the previous year of the term. 

    
      
        
        

      

      
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    4.2 Expense
      Reimbursement; Bonus Amounts.
      

    

    4.2.1. Expense
      Reimbursement. Employee
      shall be reimbursed for reasonable rental housing expenses not to exceed five
      thousand dollars ($5,000) per month for temporary housing within the Phoenix
      metropolitan area until the earlier of August 31, 2008 or until Employee has
      relocated to a permanent address in such location. In addition,
      NutraCea
      shall pay Employee a
      moving
      expense reimbursement of thirty thousand dollars ($30,000) on the CFO
      Date,
      but
      only after
      Employee
      has relocated the primary residence of Employee and his immediate family to
      Phoenix, Arizona, as evidenced by a written confirmation from Employee to
      NutraCea. 

    

    4.2.2. Annual
      Bonus.
      Employee shall be eligible to participate in any NutraCea bonus program that
      is
      applicable to officers of NutraCea as may be adopted and in effect from time
      to
      time (subject to the terms and conditions of any such program). In addition,
      Employee shall be eligible for an annual discretionary bonus of up to one
      hundred percent (100%) of his salary amount as then in effect pursuant to
      Section 4.1 (and pro-rated for any partial year), as determined by the NutraCea
      Compensation Committee or Board of Directors, after first obtaining the
      recommendations of a third party compensation consultant selected by NutraCea,
      and the Chief Executive Officer of NutraCea. 

    

    4.3 Stock
      Options.
      

    

    4.3.1 Initial
      Option.
      NutraCea
      will grant to Employee on the Effective Date, as part of Employee’s employment
      agreement, a nonqualified stock option (“Initial
      Option”)
      to
      purchase 350,000 shares of NutraCea’s common stock pursuant to the terms and
      conditions of the NutraCea 2005
      Equity
      Incentive Plan (“2005
      Plan”)
      and
      an
associated
      stock
      option agreement (“Initial
      Option Agreement”).
      Subject to the Initial Option Agreement and Employee continuing to be employed
      by NutraCea through the following dates, the Initial Option shall vest as to
      1/4th
      of the
      shares subject to the Initial Option on the nine (9) month anniversary of the
      Effective Date and thereafter one twelfth (1/12th)
      of the
      shares subject to the Initial Option shall vest and become exercisable on each
      successive three (3) month anniversary of the Effective Date. 

    

    4.3.2 Second
      Option.
      Employee shall be granted an additional nonqualified
      performance stock option to purchase 250,000 shares of NutraCea’s common stock
      at the Effective Date (“Second
      Option”,
      and
      together with the Initial Option, the “Options”)
      pursuant to the terms and conditions of the 2005 Plan and an associated stock
      option agreement (“Second
      Option Agreement”,
      and
      together with the Initial Option Agreement, the “Option
      Agreements”).
      Subject to the Second Option Agreement, satisfaction of the same
      performance criteria determined by NutraCea’s
      Board of Directors that apply to the performance stock options granted to
      NutraCea’s other executive officers and Employee continuing to be employed by
      NutraCea through the following dates, the Second Option shall vest as to twenty
      five percent (25%) of the shares subject to the Initial Option on
      the
      first anniversary of the
      CFO
      Date, and thereafter thirty seven and one half percent (37.5%) of the shares
      subject to the Second Option shall vest and become exercisable on each of the
      second and third anniversaries of the CFO Date based on the performance criteria
      of the calendar years 2009 and 2010. 

    
      
        
        

      

      
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    4.3.3 Additional
      Terms of the Options.
      The
      Options shall have a per share
      exercise
      price equal to ten cents ($0.10) over the closing market price on the date
      of
      grant. All Option
      grants
      shall be subject to Board of Directors (and/or its compensation committee)
      approval and to the terms and conditions of the corresponding Option Agreements.
      If
      at any
      time after six months after the issuance of an Option there is no effective
      registration statement under the Securities Act of 1933 registering the issuance
      or resale by Employee of the vested and exercisable shares underlying the Option
      (“Vested
      Shares”),
      then
      the Option may also be exercised at such time by means of a “net exercise” in
      which Employee shall be entitled to cancel the vested portion of the Option
      and
      receive a certificate for the number of shares of NutraCea’s common stock equal
      to the quotient obtained by dividing [(A-B) (X)] by (A), where:

    

    
      	 	
              (A)
                =

            	
              the
                Fair Market Value of a share of NutraCea’s common stock on that date, as
                determined under NutraCea’s 2005 Equity Incentive
                Plan;

            

    

    

    
      	
            	(B)
              =	
              the
                per share exercise price of the Option on that date;
                and

            

    

    

    
      	 	
              (X)
                =

            	
              the
                number of Vested Shares then issuable upon exercise of the Option
                in
                accordance with the terms of the Option by means of a cash exercise
                rather
                than a cashless exercise.

            

    

    

    Notwithstanding
      the foregoing, Employee may not net-exercise any portion of an Option unless
      Employee pays to NutraCea in cash at the time of the net-exercise the amount
      of
      any applicable federal, state and local withholding taxes.

    

    4.4 Car
      Allowance.
      Employer shall provide Employee with an automobile allowance in the amount
      of
      eight hundred and fifty dollars ($850) per month, payable in accordance with
      NutraCea’s
      payroll periods. Notwithstanding the foregoing, Employer shall not be obligated
      to make any down payments for the purchase of any automobile by or on behalf
      of
      Employee.

    

    4.5. Vacation
      and other Standard Benefits.
      Employee
      shall be entitled to four (4) weeks of paid vacation time per year of Employee’s
      employment. Employee may not accrue vacation time in excess of such four (4)
      week maximum. Accrual of vacation time shall be subject to the terms and
      conditions of NutraCea’s vacation policy. Employee shall be entitled to health
      benefits in accordance with NutraCea’s standard policies. In addition, Employee
      is entitled to paid holidays, sick leave and other benefits in accordance with
      NutraCea’s standard policies. Employee shall be reimbursed for reasonable
      business expenses, subject to prior approval by NutraCea in accordance with
      NutraCea’s standard policies for employees and conditioned upon Employee’s prior
      presentation to NutraCea’s accounting department of appropriate receipts or such
      other verification of expenses as NutraCea may require from time to
      time.

    

    5. Employment
      Information.
      Employee
      represents and warrants to NutraCea that information provided by Employee in
      connection with Employee’s employment and any supplemental information provided
      to NutraCea is complete, true and materially correct in all respects.
Employee
      has not omitted any information that is or may reasonably be considered
      necessary or useful to evaluate the information provided by Employee to
      NutraCea. Employee shall immediately notify NutraCea in writing of any change
      in
      the accuracy or completeness of all such information.

    
      
        
        

      

      
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    6. Trade
      Secrets.
      Employee
      acknowledges that NutraCea has gone to great time and expense to develop
      customers and to develop procedures and processes for development of products
      and services and the sales of products and services. Such procedures and
      processes in addition to various other types of proprietary information are
      included as part of the “confidential information” described in the “Proprietary
      Information Agreement” attached hereto as Exhibit
      A.
      Employee has previously executed the Proprietary Information Agreement or agrees
      to execute NutraCea’s Proprietary Information Agreement contemporaneously with
      the execution of this Agreement and employment. 

     

    7. Remedies
      for Breach of Covenant Regarding Confidentiality.
      The
      parties agree that the breach by Employee of any covenants contained in Sections
      2.4, 2.5, 5 and 6 will result in immediate and irreparable injury to NutraCea.
      In the event of any breach by Employee of the covenants contained in Sections
      2.4, 2.5, 5 or 6, NutraCea shall be entitled to seek recourse through all
      available legal and equitable remedies necessary or useful to prevent any
      likelihood of immediate or irreparable injury to NutraCea. The
      parties agree that, in the case of such a breach or threat of breach by Employee
      of any of the provisions of such Sections, NutraCea may take any appropriate
      legal action, including without limitation action for injunctive relief,
      consisting of orders temporarily restraining and preliminarily and permanently
      enjoining such actual or threatened breach. 

     

    8. Miscellaneous.
      

    

    8.1 Choice
      of Law, Jurisdiction, Venue.
      The
      rights and obligations of the parties and the interpretation and performance
      of
      this Agreement shall be governed by the laws of Arizona, excluding its conflict
      of laws rules, except as such laws may be interpreted, enforced, or pre empted
      by federal law. 

    

    8.2. Entire
      Agreement.
      This
      Agreement, the Proprietary Information Agreement dated April 23, 2008 and
      described in Section 6, and the Option Agreements referenced in Section 4.3
      contain the entire Agreement among the parties and supersede all prior and
      contemporaneous oral and written agreements, understandings and representations
      among the parties. There are no representations, agreements, arrangements,
      or
      understandings, whether oral or written, between or among the parties relating
      to the subject matter of this Agreement that are not fully expressed herein
      and
      therein.

    

    8.3 Notices.
      Any
      notice under this Agreement shall be in writing, and any written notice or
      other
      document shall be deemed to have been duly given (i) on the date of personal
      service on the parties, (ii) on the third business day after mailing, if the
      document is mailed by registered or certified mail, (iii) one day after being
      sent by professional or overnight courier or messenger service guaranteeing
      one-day delivery, with receipt confirmed by the courier, or (iv) on the date
      of
      transmission if sent by telegram, telex, telecopy or other means of electronic
      transmission resulting in written copies, with receipt confirmed. Any
      such
      notice shall be delivered or addressed to the parties at the addresses set
      forth
      above or at the most recent address specified by the addressee through written
      notice under this provision. Failure
      to conform to the requirement that mailings be done by registered or certified
      mail shall not defeat the effectiveness of notice actually received by the
      addressee.

    
      
        
        

      

      
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    8.4 Severability.
      NutraCea
      and Employee agree that should any provision of this Agreement be declared
      or be
      determined by any court of competent jurisdiction to be illegal, invalid or
      unenforceable, the legality, validity and enforceability of the remaining parts,
      terms and provisions shall not be affected thereby, and said illegal,
      unenforceable or invalid part, term or provision shall be deemed not to be
      part
      of this Agreement. 

     

    8.5 Attorneys’
      Fees.
      If
      the
      services of an attorney are used by any party to secure the performance of
      this
      Agreement or otherwise upon the breach or default of another party to this
      Agreement, or if any judicial remedy or arbitration is sought to enforce or
      interpret any provision of this Agreement or the rights and duties of any person
      in relation thereto, the prevailing party shall be entitled to reasonable
      attorneys’ fees, costs and other expenses, in addition to any other relief to
      which such party may be entitled. Any
      award
      of damages by any court or arbitration as a result of the breach of this
      Agreement or any of its provisions shall include an award of prejudgment
      interest from the date of the breach at the maximum amount of interest allowed
      by law. NutraCea will reimburse
      Employee for the reasonable attorneys’ fees and expenses incurred by Employee in
      the negotiation of this Agreement in an amount not to exceed ten thousand
      dollars ($10,000).

    

    8.6 Amendment.
      The
      provisions of this Agreement may be modified at any time by agreement of the
      parties. Any
      such
      agreement hereafter made shall be ineffective to modify this Agreement in any
      respect unless in writing and signed by the party against whom enforcement
      of
      the modification or discharge is sought.

     

    8.7 No
      Transfer or Assignment; No Third-Party Beneficiaries.
      The
      rights of Employee hereunder have been granted by NutraCea with the
      understanding that this Agreement is personal to, and shall be performed by
      Employee individually. This Agreement is not transferable or assignable by
      Employee in any manner. No person or entity other than NutraCea and Employee
      shall have any rights whatsoever under this Agreement. No
      person
      or entity other than NutraCea or Employee shall have any right to enforce any
      provision of this Agreement, or to recover damages on account of the breach
      of
      this Agreement. No heir, successor or assign of Employee, whether voluntarily
      or
      by operation of law, shall have or succeed to any rights of NutraCea or Employee
      hereunder.

     

    8.8 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
      of
      that term or condition as it applies on a subsequent occasion or of any other
      term or condition.

     

    8.9 Resolution
      of Disputes.
      

    
      
        
        

      

      
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    8.9.1 Resolution
      of Disputes.
      NutraCea and Employee agree that any claim or controversy arising out of or
      pertaining to this Agreement or the termination of Employee's employment,
      including but not limited to, claims of wrongful treatment or termination
      allegedly resulting from discrimination, harassment or retaliation on the basis
      of race, sex, age, national origin, ancestry, color, religion, marital status,
      status as a veteran of the Vietnam era, physical or mental disability, medical
      condition, or any other basis prohibited by law ("Dispute")
      shall
      be resolved by binding arbitration as provided in this paragraph. The parties
      agree that no party shall have the right to sue any other party regarding a
      Dispute except as provided in this paragraph.

    

    8.9.2
       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. Except as provided herein, the arbitration
      of
      any Dispute between the parties to this Agreement shall be governed by the
      rules
      of arbitration of the American Arbitration Association (“AAA”).
      

    

    8.9.3 Appointment
      of Arbitrator.
      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, who shall be a licensed attorney selected from the AAA list of
      labor
      and employment arbitrators. If they fail to do so within that time period,
      an
      arbitrator shall be selected in accordance with the AAA rules of arbitration.
      

    

    8.9.4 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 within the
      statutory time period from the date the Dispute first arose. 

    

    8.9.5
       Location
      of Arbitration.
      Any
      arbitration hearing shall be conducted in Phoenix, Arizona.

    

    8.9.6
       Applicable
      Law.
      The law
      applicable to the arbitration of any Dispute shall be, as provided in Section
      8.1 and the Federal Arbitrator Act (Title 9, US Code, Section 1 et
      Seq.).

    

    8.9.7
       Arbitration
      Procedures.
      Except
      as otherwise provided in this paragraph, the arbitration shall be governed
      by
      the AAA rules. The parties shall be entitled to conduct discovery sufficient
      to
      adequately arbitrate their claims or defenses, including access to essential
      documents and witnesses, as determined by the arbitrator and subject to limited
      judicial review. 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. 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. 

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    8.9.8
       Scope
      of Arbitrators' Award or Decision.
      NutraCea and Employee agree that if the arbitrators find any Disputed claim
      to
      be meritorious, the arbitrators shall have the authority to order all forms
      of
      legal and/or equitable relief that would otherwise be available in court and
      that is appropriate to the claim. Any decision or award by the arbitrators
      shall
      be a reasoned opinion in writing citing facts and law and shall be specific
      enough to permit limited judicial review if necessary. 

    

    8.9.9 Costs
      of Arbitration; Attorneys’ Fees.
      NutraCea and Employee agree that the arbitrators, in their discretion and
      consistent with applicable law, may award to the prevailing party the costs
      and
      attorneys’ fees incurred by that party in participating in the arbitration
      process as long as they do not exceed those that would be incurred by Employee
      in a court action.

    

    8.9.10  Acknowledgment
      of Consent to Arbitration.
      NOTICE:
      BY EXECUTING THIS AGREEMENT EMPLOYEE AGREES TO HAVE ANY DISPUTE ARISING OUT
      OF
      THE MATTERS INCLUDED IN THE "RESOLUTION OF DISPUTES" PROVISION DECIDED BY
      NEUTRAL ARBITRATION AS PROVIDED HEREIN AND EMPLOYEE WAIVES ANY RIGHTS EMPLOYEE
      MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY
      EXECUTING THIS AGREEMENT EMPLOYEE WAIVES EMPLOYEE’S JUDICIAL RIGHTS TO APPEAL.
      IF EMPLOYEE REFUSES TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION,
      EMPLOYEE MAY BE COMPELLED TO ARBITRATE. EMPLOYEES AGREEMENT TO THIS ARBITRATION
      PROVISION IS VOLUNTARY. BY EXECUTING THIS AGREEMENT EMPLOYEE IS INDICATING
      THAT
      EMPLOYEE HAS READ AND UNDERSTOOD THE FOREGOING AND AGREES TO SUBMIT DISPUTES
      ARISING OUT OF THE MATTERS INCLUDED IN THIS ARBITRATION OF DISPUTES PROVISION
      TO
      NEUTRAL ARBITRATION.

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    

    8.10 Exhibits.
      All
      exhibits to which reference is made are deemed incorporated in this Agreement
      whether or not actually attached.

    

    
      	
              NUTRACEA

            
	 
	 

	
              By:

            	 

	
              Title:

            	 

	 	 
	
              Employee:

            
	 
	 

	
              Jeffrey
                Sanders

            

    

     

    [SIGNATURE
      PAGE TO EMPLOYMENT AGREEMENT]

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

    

    PROPRIETARY
      INFORMATION AGREEMENT

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      B

    

    NUTRACEA
      

    

    TERMINATION
      CERTIFICATION

    

    

    This
      is
      to certify that I do not have in my possession, nor have I failed to return,
      any
      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 me pursuant to employment with NutraCea or otherwise
      belonging to NutraCea, a California corporation ( “NutraCea”),
      its
      successors or assigns or any parent or subsidiary of
      NutraCea. 

    

    I
      further
      certify that I have complied with all the terms of
      NutraCea’s Proprietary Information Agreement signed by me, including the
      reporting of any inventions and original works of authorship (as defined
      therein), conceived or made by me (solely or jointly with others) covered by
      that agreement.

    

    I
      further
      agree that, in compliance with the Proprietary Information Agreement, I will
      preserve as confidential all trade secrets, confidential knowledge, data or
      other proprietary information relating to products, processes, know-how,
      designs, formulas, developmental or experimental work, computer programs, data
      bases, other original works of authorship, customer lists, business plans,
      financial information or other subject matter pertaining to any business of
      NutraCea,
      any parent or subsidiary of
      NutraCea, or any of its respective employees, clients, consultants or
      licensees.

    

    I
      further
      agree that for twenty
      four
      (24)
      months
      from this date, I will not (i) hire any employees of NutraCea,
      or (ii) directly or indirectly, solicit, induce, recruit or encourage any
      NutraCea employee, consultant, vender, supplier, customer or client to sever
      its
      relationship with
      NutraCea
      or accept an employment, consultant or other business relationship with any
      other business.

    

    
      	 
	 	 	 
	 
	 	 	 
	
              Employee
                Signature

            	 	
              Date:
                

            	 

	 	 	 	 
	 
	 	 	 
	
              Employee
                Name

            	 	 	 

    

    
      
        
        

      

      
        13Exhibit
      10.2

     

    NUTRACEA

    2005
      EQUITY INCENTIVE PLAN 

    

    NOTICE
      OF STOCK OPTION GRANT 

    

    
      	
              Name:

            	 

	 	 
	
              Address:

            	 

	 	 
	 	 

    

    

    You
      (the
“Participant”)
      have
      been granted an option to purchase Common Stock of the Company, subject to
      the
      terms and conditions of this Notice of Stock Option Grant (the “Notice”),
      the
      2005 Equity Incentive Plan, as amended from time to time (the “Plan”)
      and
      the Stock Option Award Agreement (the “Option
      Agreement”)
      attached hereto, as follows. The terms defined in the Plan shall have the same
      meanings in this Notice. 

    

    
      	
              Grant
                Number:

            	 

	 	 
	
              Date
                of Grant: 

            	 

	 	 
	
              Vesting
                Commencement Date: 

            	 

	 	 
	
              Exercise
                Price per Share: 

            	 

	 	 
	
              Total
                Number of Shares: 

            	 

	 	 
	
              Total
                Exercise Price: 

            	 

	 	 
	
              Type
                of Option: 

            	
              _________
                Non-Qualified Stock Option

            
	 	 
	 	
              _________
                Incentive Stock Option

            
	 	 
	
              Expiration
                Date:

            	 
	 	 

	
              Post-Termination
                Exercise Period:

            	
              Termination
                for Cause = None

            
	 	
              Voluntary
                Termination = 3 Months

            
	 	
              Termination
                without Cause = 3 Months

            
	 	
              Disability
                = 12 Months

            
	 	
              Death
                = 12 Months

            

    

    

    Vesting
      Schedule: 

    

    Subject
      to the limitations set forth in this Notice, the Plan and the Option Agreement,
      the Option will vest and may be exercised, in whole or in part, in accordance
      with the following schedule: 

    

    
      	
              [

            	
              ]                 

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    You
      acknowledge receipt of a copy of the Plan and the Option Agreement, and
      represent that you are familiar with the terms and provisions thereof, and
      hereby accept the Option subject to all of the terms and provisions hereof.
      You
      understand that your employment or consulting relationship, or service with
      the
      Company is for an unspecified duration and can be terminated at any time (i.e.,
      is “at-will”), and that nothing in this Notice, the Stock Option Award Agreement
      or the Plan changes the at-will nature of that relationship. You acknowledge
      that the vesting of shares pursuant to this Notice is earned only by your
      continuing service as an Employee or Consultant of the Company. 

    

    
      	
              PARTICIPANT:

            	 	
              NUTRACEA

            
	 	 	 	 	 
	
              Signature:

            	 
	 	
              By:

            	 

	 	 	 	 	 
	
              Print
                Name:

            	 	 	
              Its:

            	 

	 	 	 	 	 
	
              Date:

            	 
	 	
              Date: 

            	 

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    NUTRACEA

    STOCK
      OPTION AWARD AGREEMENT

    2005
      EQUITY INCENTIVE PLAN 

    

    Unless
      otherwise defined herein, the terms defined in the Company’s 2005 Equity
      Incentive Plan (the “Plan”)
      shall
      have the same defined meanings in this Award Agreement (the “Agreement”).
      

    

    Participant
      has been granted an option to purchase Shares (the “Option”),
      subject to the terms and conditions of the Plan, the Notice of Stock Option
      Grant (“Notice
      of Grant”)
      and
      this Agreement. 

     

    1. Vesting
      Rights.
      Subject
      to the applicable provisions of the Plan and this Agreement, this Option may
      be
      exercised, in whole or in part, in accordance with the schedule set forth in
      the
      Notice of Grant. 

     

    2. Termination
      Period.
      

     

    (a) General
      Rule.
      Except
      as provided below, and subject to the Plan, this Option may be exercised for
      3
      months after termination of Participant’s employment with the Company. In no
      event shall this Option be exercised later than the Term/Expiration Date set
      forth in the Notice of Grant. 

     

    (b) Death;
      Disability.
      Upon
      the termination of Participant’s employment with the Company by reason of his or
      her Disability or death, or if a Participant dies within three months of the
      Termination Date, this Option may be exercised for twelve months in the case
      of
      death, and six months in the case of Disability, after the Termination Date,
      provided that in no event shall this Option be exercised later than the
      Term/Expiration Date set forth in the Notice of Grant. 

     

    (c) Cause.
      Upon
      the termination of Participant’s employment by the Company for Cause, the Option
      shall expire on such date of Participant’s Termination Date. 

     

    3. Grant
      of Option.
      The
      Participant named in the Notice of Grant has been granted an Option for the
      number of Shares set forth in the Notice of Grant at the exercise price per
      Share set forth in the Notice of Grant (the “Exercise
      Price”).
      In
      the event of a conflict between the terms and conditions of the Plan and the
      terms and conditions of this Agreement, the terms and conditions of the Plan
      shall prevail. 

    

    If
      designated in the Notice of Grant as an Incentive Stock Option (“ISO”),
      this
      Option is intended to qualify as an Incentive Stock Option under Section 422
      of
      the Code. However, if this Option is intended to be an Incentive Stock Option,
      to the extent that it exceeds the $100,000 rule of Code Section 422(d) it shall
      be treated as a Nonstatutory Stock Option (“NSO”).
      

     

    4. Exercise
      of Option.
      

     

    (a) Right
      to Exercise.
      This
      Option is exercisable during its term in accordance with the Vesting Schedule
      set forth in the Notice of Grant and the applicable provisions of the Plan
      and
      this Agreement. In the event of Participant’s death, Disability, Termination for
      Cause or other Termination, the exercisability of the Option is governed by
      the
      applicable provisions of the Plan, the Notice of Stock Option Grant and this
      Agreement. 

     

    (b) Method
      of Exercise.
      This
      Option is exercisable by delivery of an exercise notice (the “Exercise
      Notice”),
      which
      shall state the election to exercise the Option, the number of Shares in respect
      of which the Option is being exercised (the “Exercised
      Shares”),
      and
      such other representations and agreements as may be required by the Company
      pursuant to the provisions of the Plan. The Exercise Notice shall be delivered
      in person, by mail, via electronic mail or facsimile or by other authorized
      method to the Secretary of the Company or other person designated by the
      Company. The Exercise Notice shall be accompanied by payment of the aggregate
      Exercise Price as to all Exercised Shares. This Option shall be deemed to be
      exercised upon receipt by the Company of such fully executed Exercise Notice
      accompanied by such aggregate Exercise Price. 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (c) Compliance.
      No
      Shares shall be issued pursuant to the exercise of this Option unless such
      issuance and exercise complies with all relevant provisions of law and the
      requirements of any stock exchange or quotation service upon which the Shares
      are then listed. Assuming such compliance, for income tax purposes the Exercised
      Shares shall be considered transferred to the Participant on the date the Option
      is exercised with respect to such Exercised Shares. 

     

    5. Method
      of Payment.
      Payment
      of the aggregate Exercise Price shall be by any of the following, or a
      combination thereof, at the election of the Participant: 

     

    (a) cash;
      or

     

    (b) check;
      or

     

    (c) a
      “broker-assisted” or “same day sale” (as described in Section 8(d) of the
      Plan);
      or

     

    (d) other
      method authorized by the Company. 

     

    6. Non-Transferability
      of Option.
      This
      Option may not be transferred in any manner other than by will or by the laws
      of
      descent or distribution or court order and may be exercised during the lifetime
      of Participant only by the Participant. The terms of the Plan and this Agreement
      shall be binding upon the executors, administrators, heirs, successors and
      assigns of the Participant. 

     

    7. Term
      of Option.
      This
      Option may be exercised only within the term set out in the Notice of Grant,
      and
      may be exercised during such term only in accordance with the Notice of Grant,
      the Plan and the terms of this Agreement. 

     

    8. U.S.
      Tax Consequences.
      For
      Participants subject to U.S. income tax, some of the federal tax consequences
      relating to this Option, as of the date of this Option, are set forth below.
      All
      other Participants should consult a tax advisor for tax consequences relating
      to
      this Option in their respective jurisdiction. THIS SUMMARY IS NECESSARILY
      INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE
      PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
      DISPOSING OF THE SHARES. 

     

    (a) Exercising
      the Option.
      

     

    (1) Nonstatutory
      Stock Option.
      The
      Participant may incur regular federal income tax liability upon exercise of
      a
      NSO. The Participant will be treated as having received compensation income
      (taxable at ordinary income tax rates) equal to the excess, if any, of the
      Fair
      Market Value of the Exercised Shares on the date of exercise over their
      aggregate Exercise Price. If the Participant is an Employee or a former
      Employee, the Company will be required to withhold from his or her compensation
      or collect from Participant and pay to the applicable taxing authorities an
      amount in cash equal to a percentage of this compensation income at the time
      of
      exercise, and may refuse to honor the exercise and refuse to deliver Shares
      if
      such withholding amounts are not delivered at the time of exercise.

     

    (2) Incentive
      Stock Option.
      If this
      Option qualifies as an ISO, the Participant will have no regular federal income
      tax liability upon its exercise, although the excess, if any, of the aggregate
      Fair Market Value of the Exercised Shares on the date of exercise over their
      aggregate Exercise Price will be treated as an adjustment to alternative minimum
      taxable income for federal tax purposes and may subject the Participant to
      alternative minimum tax in the year of exercise. 

     

    (b) Disposition
      of Shares.
      

     

    (1) NSO.
      If the
      Participant holds NSO Shares for at least one year, any gain realized on
      disposition of the Shares will be treated as long-term capital gain for federal
      income tax purposes. 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (2) ISO.
      If the
      Participant holds ISO Shares for at least one year after exercise and two years
      after the grant date, any gain realized on disposition of the Shares will be
      treated as long-term capital gain for federal income tax purposes. If the
      Participant disposes of ISO Shares within one year after exercise or two years
      after the grant date, any gain realized on such disposition will be treated
      as
      compensation income (taxable at ordinary income rates) to the extent of the
      excess, if any, of the lesser of (A) the difference between the Fair Market
      Value of the Shares acquired on the date of exercise and the aggregate Exercise
      Price, or (B) the difference between the sale price of such Shares and the
      aggregate Exercise Price. 

     

    (c) Notice
      of Disqualifying Disposition of ISO Shares.
      If the
      Participant sells or otherwise disposes of any of the Shares acquired pursuant
      to an ISO on or before the later of (i) two years after the grant date, or
      (ii)
      one year after the exercise date, the Participant shall immediately notify
      the
      Company in writing of such disposition. The Participant agrees that he or she
      may be subject to income tax withholding by the Company on the compensation
      income recognized from such early disposition of ISO Shares by payment in cash
      or out of the current earnings paid to the Participant. 

     

    (d) Possible
      Effect of Section 409A of the Code.
      Section
      409A of the Code applies to arrangements that provide for the deferral of
      compensation. Generally, a stock option granted with an exercise price per
      share
      of not less than the “fair market value” (determined in a manner consistent with
      Section 409A of the Code and the regulations and other guidance promulgated
      thereunder) per share on the date of grant of the stock option and with no
      other
      feature providing for the deferral of compensation will not be subject to
      Section 409A of the Code. However, if the exercise price of the stock option
      is
      less than such “fair market value” or the stock option has another feature for
      the deferral of compensation, then if the stock option is not administered
      within the parameters established under Section 409A the optionholder will
      be
      subject to additional taxes. Also, the amount deemed to be deferred compensation
      under Section 409A of the Code will be subject to ordinary income and employment
      taxes (in this respect the IRS has not yet indicated how it will calculate
      the
      amount of deferred compensation subject to tax and the timing and frequency
      of
      taxation, but it seems likely that the income will be measured and taxes imposed
      at least on the vesting dates of the stock option). If Section 409A of the
      Code
      does apply to this Option, then special rules apply to the timing of making
      and
      effecting certain amendments of this Option with respect to distribution of
      any
      deferred compensation. 

     

    9. Entire
      Agreement; Governing Law.
      The
      Plan is incorporated herein by reference. The Plan, the Notice of Grant, and
      this Agreement constitute the entire agreement of the parties with respect
      to
      the subject matter hereof and supersede in their entirety all prior undertakings
      and agreements of the Company and Participant with respect to the subject matter
      hereof, and may not be modified adversely to the Participant’s interest except
      by means of a writing signed by the Company and Participant. This agreement
      is
      governed by California law except for that body of law pertaining to conflict
      of
      laws. 

     

    10. No
      Rights as Employee, Director or Consultant.
      Nothing
      in this Agreement shall affect in any manner whatsoever the right or power
      of
      the Company, or a Parent or Subsidiary of the Company, to terminate
      Participant’s
      employment, for any reason, with or without cause. 

    

    By
      your
      signature and the signature of the Company’s representative on the Notice of
      Grant, you and the Company agree that this Option is granted under and governed
      by the terms and conditions of the Plan, the Notice of Grant, and this
      Agreement. Participant has reviewed the Plan, the Notice of Grant, and this
      Agreement in their entirety, has had an opportunity to obtain the advice of
      counsel prior to executing the Notice of Grant, and fully understands all
      provisions of the Plan, the Notice of Grant, and this Agreement. Participant
      hereby agrees to accept as binding, conclusive and final all decisions or
      interpretations of the Committee upon any questions relating to the Plan, the
      Notice of Grant, and the Agreement. Participant further agrees to notify the
      Company upon any change in the residence address indicated on the Notice of
      Grant. 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    No.
       

     

    NUTRACEA 

    

    2005
      EQUITY INCENTIVE PLAN 

    

    STOCK
      OPTION EXERCISE AGREEMENT 

    

    This
      Stock Option Exercise Agreement (the “Exercise
      Agreement”)
      is
      made and entered into as of , ___(the “Effective
      Date”)
      by and
      between NutraCea, a California corporation (the “Company”),
      and
      the purchaser named below (the “Purchaser”).
      Capitalized terms not defined herein shall have the meanings ascribed to them
      in
      the Company’s 2005 Equity Incentive Plan (the “Plan”).
      

    

    
      	
              Purchaser:

            	 

	 	 
	
              Social
                Security Number:

            	 

	 	 
	
              Address

            	 

	 	 
	
              Total
                Number of Shares

            	 

	 	 
	
              Exercise
                Price Per Share

            	 

	 	 
	
              Type
                of Stock Option

            	 

	 	 
	
              (Check
                one):

            	
              o
                Incentive
                Stock Option

            
	 	 
	 	
              o
                Nonqualified
                Stock Option

            

    

    

    1.
       EXERCISE
      OF OPTION. 

    

    1.1
       Exercise.
      Pursuant
      to exercise of that certain option (the “Option”)
      granted to Purchaser under the Plan and subject to the terms and conditions
      of
      this Exercise Agreement, Purchaser hereby purchases from the Company, and the
      Company hereby sells to Purchaser, the Total Number of Shares set forth above
      (the “Shares”)
      of the
      Company’s Common Stock, at the Exercise Price Per Share set forth above (the
“Exercise
      Price”).
      As
      used in this Exercise Agreement, the term “Shares”
refers
      to the Shares purchased under this Exercise Agreement and includes all
      securities received (i) in replacement of the Shares, (ii) as a result of stock
      dividends or stock splits with respect to the Shares, and (iii) all securities
      received in replacement of the Shares in a merger, recapitalization,
      reorganization or similar corporate transaction. 

    

    1.2
       Title
      to Shares.
      The
      exact
      spelling of the name(s) under which Purchaser will take title to the Shares
      is:

     

    
      
        

      

       

      
        

      

    

    Purchaser
      desires to take title to the Shares as follows: 

     

    
      	
            	o	
              Individual,
                as separate property 

            

    

     

    
      	
            	o	
              Husband
                and wife, as community property 

            

    

     

    
      	
            	o	
              Joint
                Tenants 

            

    

     

    
      	
            	o	
              Other;
                please specify:           

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    1.3
       Payment.
      Purchaser
      hereby delivers payment of the Exercise Price in the manner permitted in the
      Stock Option Agreement as follows (check and complete as appropriate):

     

    
      	 	
              o

            	
              in
                cash (by check) in the amount of $________, receipt of which is
                acknowledged by the Company;

            

    

     

    
      	 	
              o 

            	
              through
                a “broker-assisted” or “same day sale” program, commitment from the
                Purchaser or Authorized Transferee and an NASD Dealer meeting the
                requirements set forth by the
                Company.

            

    

    

    

    2.
       DELIVERY. 

    

    2.1
       Deliveries
      by Purchaser.
      Purchaser
      hereby delivers to the Company (i) this Exercise Agreement and (ii) the Exercise
      Price and payment or other provision for any applicable tax obligations.

    

    2.2
       Deliveries
      by the Company.
      Upon
      its
      receipt of the Exercise Price, payment or other provision for any applicable
      tax
      obligations and all the documents to be executed and delivered by Purchaser
      to
      the Company under Section 2.1, the Company will issue a duly executed stock
      certificate evidencing the Shares in the name of Purchaser. 

    

    3.
       REPRESENTATIONS
      AND WARRANTIES OF PURCHASER.
      Purchaser
      represents and warrants to the Company that: 

    

    3.1
       Agrees
      to Terms of the Plan.
      Purchaser
      has received a copy of the Plan and the Stock Option Agreement, has read and
      understands the terms of the Plan, the Stock Option Agreement and this Exercise
      Agreement, and agrees to be bound by their terms and conditions. Purchaser
      acknowledges that there may be adverse tax consequences upon exercise of the
      Option or disposition of the Shares, and that Purchaser should consult a tax
      adviser prior to such exercise or disposition. 

    

    3.2
       Access
      to Information.
      Purchaser
      has had access to all information regarding the Company and its present and
      prospective business, assets, liabilities and financial condition that Purchaser
      reasonably considers important in making the decision to purchase the Shares,
      and Purchaser has had ample opportunity to ask questions of the Company’s
      representatives concerning such matters and this investment. 

    

    3.3
       Understanding
      of Risks.
      Purchaser
      has received and reviewed the Form S-8 prospectus for the Plan and Shares and
      is
      fully aware of: (i) the highly speculative nature of the investment in the
      Shares; (ii) the financial hazards involved; (iii) the qualifications and
      backgrounds of the management of the Company; and (iv) the tax consequences
      of
      investment in the Shares. Purchaser is capable of evaluating the merits and
      risks of this investment, has the ability to protect Purchaser’s own interests
      in this transaction and is financially capable of bearing a total loss of this
      investment. 

    

    4.
       COMPLIANCE
      WITH SECURITIES LAWS.
      Purchaser
      understands and acknowledges that the exercise of any rights to purchase any
      Shares is expressly conditioned upon compliance with the Securities Act and
      all
      applicable state securities laws. Purchaser agrees to cooperate with the Company
      to ensure compliance with such laws. 

    

    5.
       RESTRICTED
      SECURITIES. 

    

    5.1
       No
      Transfer Unless Registered or Exempt.
      Purchaser
      understands that Purchaser may not transfer any Shares except when such Shares
      are registered under the Securities Act or qualified under applicable state
      securities laws or unless, in the opinion of counsel to the Company, exemptions
      from such registration and qualification requirements are available. Purchaser
      understands that only the Company may file a registration statement with the
      SEC
      and that the Company is under no obligation to do so with respect to the Shares,
      and may withdraw any such registration statement at any time after filing.
      Purchaser has also been advised that exemptions from registration and
      qualification may not be available or may not permit Purchaser to transfer
      all
      or any of the Shares in the amounts or at the times proposed by Purchaser.
      

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    5.2
       SEC
      Rule 144.
      If
      Purchaser is an “affiliate” for purposes of Rule 144 promulgated under the
      Securities Act, then in addition, Purchaser has been advised that Rule 144
      requires that the Shares be held for a minimum of six (6) months, and in certain
      cases one year year, after they have been purchased and
      paid for
      (within
      the meaning of Rule 144). Purchaser understands that Rule 144 may indefinitely
      restrict transfer of the Shares so long as Purchaser remains an “affiliate” of
      the Company or if “current public information” about the Company (as defined in
      Rule 144) is not publicly available. 

    

    6.
       RIGHTS
      AS A STOCKHOLDER.
      Subject
      to the terms and conditions of this Exercise Agreement, Purchaser will have
      all
      of the rights of a stockholder of the Company with respect to the Shares from
      and after the date that Shares are issued to Purchaser until such time as
      Purchaser disposes of the Shares. 

    

    7.
       RESTRICTIVE
      LEGENDS AND STOP-TRANSFER ORDERS. 

    

    7.1
       Legends.
      Purchaser
      understands and agrees that the Company will place any legends that may be
      required by state or U.S. Federal securities laws, the Company’s Articles of
      Incorporation or Bylaws, any other agreement between Purchaser and the Company
      or, subject to the assent of the Company, any agreement between Purchaser and
      any third party. 

    

    7.2
       Stop-Transfer
      Instructions.
      Purchaser
      agrees that, to ensure compliance with any restrictions imposed by this Exercise
      Agreement, the Company may issue appropriate “stop-transfer” instructions to its
      transfer agent, if any, and if the Company transfers its own securities, it
      may
      make appropriate notations to the same effect in its own records. 

    

    7.3
       Refusal
      to Transfer.
      The
      Company will not be required (i) to transfer on its books any Shares that have
      been sold or otherwise transferred in violation of any of the provisions of
      this
      Exercise Agreement or (ii) to treat as owner of such Shares, or to accord the
      right to vote or pay dividends to any purchaser or other transferee to whom
      such
      Shares have been so transferred. 

    

    8.
       TAX
      CONSEQUENCES.
      PURCHASER
      UNDERSTANDS AND REPRESENTS: (i) THAT PURCHASER HAS REVIEWED THE PROSPECTUS
      PREPARED FOR THE PLAN AND CONSULTED PURCHASER’S PERSONAL TAX ADVISER IN
      CONNECTION WITH THE PURCHASE OR DISPOSITION OF THE SHARES AND (ii) THAT
      PURCHASER IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE. SET FORTH BELOW
      IS A
      BRIEF SUMMARY AS OF THE DATE THE PLAN WAS ADOPTED BY THE BOARD OF SOME OF THE
      U.S. FEDERAL TAX CONSEQUENCES OF EXERCISE OF THE OPTION AND DISPOSITION OF
      THE
      SHARES. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS
      ARE SUBJECT TO CHANGE. PURCHASER SHOULD CONSULT THE PROSPECTUS AND PURCHASER’S
      PERSONAL TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
      

    

    8.1
       Exercise
      of Incentive Stock Option.
      If
      the
      Option qualifies as an ISO, there will be no regular U.S. Federal income tax
      liability upon the exercise of the Option, although the excess, if any, of
      the
      Fair Market Value of the Shares on the date of exercise over the Exercise Price
      will be treated as a tax preference item for U.S. Federal alternative minimum
      tax purposes and may subject Purchaser to the alternative minimum tax in the
      year of exercise. 

    

    8.2
       Exercise
      of Nonqualified Stock Option.
      If
      the
      Option does not qualify as an ISO, there may be a regular U.S. Federal income
      tax liability upon the exercise of the Option. Purchaser will be treated as
      having received compensation income (taxable at ordinary income tax rates)
      equal
      to the excess, if any, of the Fair Market Value of the Shares on the date of
      exercise over the Exercise Price. If Purchaser is or was an employee of the
      Company, the Company may be required to withhold from Purchaser’s compensation
      or collect from Purchaser and pay to the applicable taxing authorities an amount
      equal to a percentage of this compensation income at the time of exercise.
      

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    8.3
       Disposition
      of Shares.
      The
      following tax consequences may apply upon disposition of the Shares.

    

    (a)
       Incentive
      Stock Options.
      If the
      Shares are held for more than twelve (12) months after the date of the transfer
      of the Shares pursuant to the exercise of an ISO and are disposed of more than
      two (2) years after the Date of Grant, any gain realized on disposition of
      the
      Shares will be treated as long term capital gain for federal income tax
      purposes. If Shares purchased under an ISO are disposed of within the applicable
      one (1) year or two (2) year period, any gain realized on such disposition
      will
      be treated as compensation income (taxable at ordinary income rates) to the
      extent of the excess, if any, of the Fair Market Value of the Shares on the
      date
      of exercise over the Exercise Price. 

    

    (b)
       Nonqualified
      Stock Options.
      If the
      Shares are held for more than twelve (12) months after the date of the transfer
      of the Shares pursuant to the exercise of an NQSO, any gain realized on
      disposition of the Shares will be treated as long-term capital gain.

    

    (c)
       Withholding.
      The
      Company may be required to withhold from the Purchaser’s compensation or collect
      from the Purchaser and pay to the applicable taxing authorities an amount equal
      to a percentage of this compensation income. 

    

    9.
       COMPLIANCE
      WITH LAWS AND REGULATIONS.
      The
      issuance and transfer of the Shares will be subject to and conditioned upon
      compliance by the Company and Purchaser with all applicable state and federal
      laws and regulations and with all applicable requirements of any stock exchange
      or automated quotation system on which the Company’s Common Stock may be listed
      or quoted at the time of such issuance or transfer. 

    

    10.
       SUCCESSORS
      AND ASSIGNS.
      The
      Company may assign any of its rights under this Exercise Agreement. No other
      party to this Exercise Agreement may assign, whether voluntarily or by operation
      of law, any of its rights and obligations under this Exercise Agreement, except
      with the prior written consent of the Company. This Exercise Agreement shall
      be
      binding upon and inure to the benefit of the successors and assigns of the
      Company. Subject to the restrictions on transfer herein set forth, this Exercise
      Agreement will be binding upon Purchaser and Purchaser’s heirs, executors,
      administrators, legal representatives, successors and assigns. 

    

    11.
       GOVERNING
      LAW.
      This
      Exercise Agreement shall be governed by and construed in accordance with the
      laws of the State of California, without giving effect to that body of laws
      pertaining to conflict of laws. 

    

    12.
       NOTICES.
      Any
      and
      all notices required or permitted to be given to a party pursuant to the
      provisions of this Exercise Agreement will be in writing and will be effective
      and deemed to provide such party sufficient notice under this Exercise Agreement
      on the earliest of the following: (i) at the time of personal delivery, if
      delivery is in person; (ii) one (1) business day after deposit with an express
      overnight courier for United States deliveries, or two (2) business days after
      such deposit for deliveries outside of the United States, with proof of delivery
      from the courier requested; or (iii) three (3) business days after deposit
      in
      the United States mail by certified mail (return receipt requested) for United
      States deliveries. All notices for delivery outside the United States will
      be
      sent by express courier. All notices not delivered personally will be sent
      with
      postage and/or other charges prepaid and properly addressed to the party to
      be
      notified at the address set forth below the signature lines of this Exercise
      Agreement, or at such other address as such other party may designate by one
      of
      the indicated means of notice herein to the other parties hereto. Notices to
      the
      Company will be marked “Attention: Stock Plan Administration”. 

    

    13.
       FURTHER
      ASSURANCES.
      The
      parties agree to execute such further documents and instruments and to take
      such
      further actions as may be reasonably necessary to carry out the purposes and
      intent of this Exercise Agreement. 

    

    14.
       TITLES
      AND HEADINGS.
      The
      titles, captions and headings of this Exercise Agreement are included for ease
      of reference only and will be disregarded in interpreting or construing this
      Exercise Agreement. Unless otherwise specifically stated, all references herein
      to “sections” will mean “sections” to this Exercise Agreement. 

    

    15.
       ENTIRE
      AGREEMENT.
      The
      Plan,
      the Notice, the Stock Option Agreement and this Exercise Agreement constitute
      the entire agreement and understanding of the parties with respect to the
      subject matter of this Exercise Agreement, and supersede all prior
      understandings and agreements, whether oral or written, between or among the
      parties hereto with respect to the specific subject matter hereof.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    16.
       COUNTERPARTS.
      This
      Exercise Agreement may be executed in any number of counterparts, each of which
      when so executed and delivered will be deemed an original, and all of which
      together shall constitute one and the same agreement. 

    

    17.
       SEVERABILITY.
      If
      any
      provision of this Exercise Agreement is determined by any court or arbitrator
      of
      competent jurisdiction to be invalid, illegal or unenforceable in any respect,
      such provision will be enforced to the maximum extent possible given the intent
      of the parties hereto. If such clause or provision cannot be so enforced, such
      provision shall be stricken from this Exercise Agreement and the remainder
      of
      this Exercise Agreement shall be enforced as if such invalid, illegal or
      unenforceable clause or provision had (to the extent not enforceable) never
      been
      contained in this Exercise Agreement. Notwithstanding the forgoing, if the
      value
      of this Exercise Agreement based upon the substantial benefit of the bargain
      for
      any party is materially impaired, which determination as made by the presiding
      court or arbitrator of competent jurisdiction shall be binding, then both
      parties agree to substitute such provision(s) through good faith negotiations.
      

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      the
      Company has caused this Exercise Agreement to be executed by its duly authorized
      representative and Purchaser has executed this Exercise Agreement as of the
      Effective Date, indicated above. 

    

    
      	
              NUTRACEA

            	 	
              PURCHASER

            
	 	 	 	 
	
              By:
                

            	 
	 	 
	 	 	
              (Signature)

            
	 	 	 
	 
	 	 

	
              (Please
                print name)

            	 	
              (Please
                print name)

            
	 	 	 	 
	 
	 	 	 
	
              (Please
                print title)

            	 	 	 
	 	 	 
	
              Address:

            	 	
              Address:

            
	 
	 	 

	 
	 	 

	 
	 	 

	 	 	 	 	 
	
              Fax
                No.: 

            	 
	 	
              Fax
                No.: 

            	 

	 	 	 	 	 
	
              Phone No.:
                

            	 
	 	
              Phone No.:
                

            	 

    

    

    [Signature
      page to NutraCea Stock Option Exercise Agreement]

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