Document:

ex10_29.htm

    
      

    

    Exhibit
10.29

    
      
        
           

          [*]
- Designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the commission.

           

          ASSET
PURCHASE AGREEMENT

           

           

        

        
           
This Asset Purchase Agreement (this "Agreement"), is dated as of
December 1, 2008, is by and between Farmers' Rice Cooperative, a cooperative
association organized under the California Food and Agricultural Code ("FRC" or "Seller"), with principal
offices at 2525 Natomas Park Drive, Sacramento, California 95851, and NutraCea,
a California corporation with principal offices at 5090 40th
North Street, Suite 400, Phoenix, Arizona 85018 ("Buyer"). Seller and Buyer
agree as follows:

        

        

        
          1.           Sale and
Purchase.

           

           
1.1           Agreement. Seller
agrees to sell, convey and transfer to Buyer and Buyer agrees to purchase and
assume from Seller certain assets of Seller's business identified in Section 1.2
(the "Assets"), for the Purchase Price (as defined below) and on the terms and
conditions set forth herein. The sale of the Assets is entire and inseverable,
and Buyer shall have no obligation to purchase any of the Assets unless all
Assets shall be simultaneously sold.

        

        
          

           
1.2           The Assets. The
Assets to be sold and purchased under this Agreement are as
follows:

          

        

         

        
           
(a)           All rights
and interest in and to all of the accounts (the "Customer Accounts") of the
customers (the "Customers")
of Seller identified in that certain Stabilized Rice Bran Processing,
Sales and Marketing Agreement, dated September 1, 2005 (the "Prior Marketing Agreement"),
between the Seller and The RiceX Company (as predecessor-in-interest to
the Buyer) and listed on Schedule A attached
hereto; and

          

        

        
           
(b)           All rights
in and title to the "Fiberice" trademark, and any associated trade names, logos,
common law trademarks and service mark registrations and applications
registrations and applications therefore and all goodwill associated therewith
throughout the world identified on Schedule B attached
hereto (collectively, the "Trademarks").

          

        

        
          The
Customer Accounts and the Trademarks are referred to collectively as the "Assets".

          

        

        
          For
avoidance of doubt, all rights and claims of Seller to collect accounts
receivable from Customers for shipments completed by Seller to such Customers
prior to the Closing (as defined below) and all obligations and liabilities of
Seller with regard to the Customer Accounts and Trademarks arising with regard
to any shipments, acts, omissions, or obligations for the period prior to the
Closing ("Retained
Liabilities") are not part of the sale and purchase contemplated
hereunder, are excluded from the Assets and assumed obligations and shall remain
the property and liabilities of Seller after the Closing.

          

        

        
           
1.3           Restated Stabilized Rice
Bran Agreement. At the Closing, the parties hereto further agree to enter
into a Restated and Amended Stabilized Rice Bran Processing, Sales and Marketing
Agreement in the form attached hereto as Exhibit B (the "Restated Marketing Agreement"),
to extend and amend the Prior Marketing
Agreement.

        

      

       

      
        
          
            
               

            

            
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          2.           Purchase Price and
Payment.

          

        

        
           
2.1           Purchase Price. In
consideration of the transfer of the Assets and the covenant not to compete
described in Section 7.2, Buyer shall pay to Seller the aggregate purchase price
of Three Million One Hundred Thousand Dollars ($3,100,000) in cash (the "Purchase
Price").

          

        

        
           
2.2           Payment of Purchase
Price. The Purchase Price shall be delivered by Buyer to Seller as
follows:

           

        

        
           
(a)           At the
Closing, Buyer shall deliver to Seller One Million Dollars ($1,000,000) (the
"Initial Payment") by
wire transfer of immediately available funds to the account specified by the
Seller.

          

        

        
           
(b)           The balance
of the Purchase Price (i.e. $2,100,000) shall be payable in twelve (12) equal
quarterly installments of One Hundred and Seventy-Five Thousand Dollars
($175,000) each, commencing on March 1, 2009 and continuing on each following
June 1, September 1, December 1, and March 1 thereafter until paid in full, such
that the entire Purchase Price shall be paid in full by December 1, 2011. Such
payments shall be made by wire transfer of good and valuable funds to the
account specified by Seller.

           

        

        
           
2.3           Security Interest. As
security for the prompt, complete and indefeasible payment when due (whether on
the payment dates or otherwise) of the Purchase Price, Buyer grants to Seller a
security interest in the following personal property of Buyer (collectively, the
"Collateral"): (a) the
Assets, and (b) to the extent not otherwise included, all proceeds (as defined
in the Uniform Commercial Code as the same is, from time to time, in effect in
the State of California (the "UCC")) of the foregoing.

          

        

        
           
2.4           Events of Default.
The occurrence of any one or more of the following events shall be an "Event of Default" " with
respect to Buyer or Seller, as applicable:

           

        

        
           
(a)           Buyer fails
to pay Seller any portion or installments of the Purchase Price and such failure
continues for more than ten (10) days after written notice of default from
Seller to Buyer specifying the amounts past due in sufficient detail to allow
Buyer the reasonable opportunity to cure within such ten (10) day
period;

          

           
(b)           Buyer or
Seller breaches or defaults in the performance of any covenant or obligation
under this Agreement or the Restated Marketing Agreement, and such breach or
default continues for more than thirty (30) days after written notice of such
default from Seller to Buyer, or Buyer to Seller, as applicable, specifying the
breach or default in sufficient detail to allow Buyer or Seller, as applicable,
the reasonable opportunity to cure within such thirty (30) day period;
or

          

        

        
            (c)           Buyer
or Seller (A) (i) shall file a voluntary petition in bankruptcy; or (ii) shall
seek or consent to or acquiesce in the appointment of any trustee, receiver, or
liquidator of Buyer or Seller, as applicable, or of all or substantially all of
the assets or property of Buyer or Seller, as applicable; or (iii) ninety (90)
days shall have expired after the commencement of an involuntary action against
Buyer or Seller, as applicable, seeking reorganization, liquidation, dissolution
or similar relief in bankruptcy without such action being dismissed; or (iv)
Buyer or Seller, as applicable, shall file any answer admitting or not
contesting the material allegations of a petition filed against Buyer or Seller,
as applicable, in any such proceedings; or (v) the court in which such
proceedings are pending shall enter a decree or order granting the relief sought
in any such proceedings.

        

        

        
          
            
               

            

            
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2.5           Remedies Upon an Event of
Default.

        

        
          

        

        
           
2.5.1.       Event of Default of
Buyer.

          

        

        
           
(a)           General. Upon the
occurrence and during the continuance of any one or more Events of Default of
Buyer, Seller may, at its option, accelerate and demand payment of all or any
part of the Purchase Price and declare it to be immediately due and payable.
Seller may exercise all rights and remedies with respect to the Collateral
available to it under the UCC and other applicable law, including the right to
release, hold, sell, lease, liquidate, collect, realize upon, or otherwise
dispose of all or any part of the Collateral and the right to occupy, utilize,
process and commingle the Collateral. All Seller's rights and remedies shall be
cumulative and not exclusive.

          

           
(b)           Collection;
Foreclosure. Upon the occurrence and during the continuance of any Event
of Default of Buyer, Seller may, at any time or from time to time, apply,
collect, liquidate, sell in one or more sales, lease or otherwise dispose of,
any or all of the Collateral, in its then condition or following any
commercially reasonable preparation or processing, in such order as Seller may
elect. Any such sale may be made either at public or private sale at its place
of business or elsewhere. Buyer agrees that any such public or private sale may
occur upon ten (10) calendar days' prior written notice to Buyer. The proceeds
of any sale, disposition or other realization upon all or any part of the
Collateral shall be applied by Seller in the following order of
priorities:

          

        

        
           
First, to Seller in an amount sufficient to pay in full Seller's reasonable
attorneys' fees and expenses;

          

           
Second, to Seller in an amount equal to the then unpaid amount of the Purchase
Price; and

          

           
Finally, to Buyer or its representatives.

          

        

        
          Seller
shall be deemed to have acted reasonably in the custody, preservation and
disposition of any of the Collateral if it complies with the obligations of a
secured party under the UCC.

          

        

        
           
(c)           Termination of Covenant Not
to Compete. Upon the occurrence of any Event of Default of Buyer, the
covenant not to compete set forth in Section 7.2 shall immediately terminate and
be suspended until Seller shall have received the full amount of the Purchase
Price, after which it shall again apply as set forth in Section 7.2; provided
that if Buyer cures all existing Events of Default later than six months after
the first event giving rise to any existing Event of Default, Buyer's covenant
not to compete shall be reinstated and once again take effect only if Buyer also
reimburses Seller for all costs and expenditures expended in good faith in an
effort to obtain an alternate source of stabilized rice bran for distribution to
the Customers.

        

        

        
          
            
               

            

            
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(d)           No Waiver. Seller
shall be under no obligation to marshal any of the Collateral for the benefit of
Buyer or any other person, and Buyer expressly waives all rights, if any, to
require Seller to marshal any Collateral.

        

        
           

           
(e)           Cumulative Remedies.
The rights, powers and remedies of Seller hereunder shall be in addition to all
rights, powers and remedies given by statute or rule of law and are cumulative.
The exercise of any one or more of the rights, powers and remedies provided
herein shall not be construed as a waiver of or election of remedies with
respect to any other rights, powers and remedies of Seller.

          

        

        
           
2.5.2.       Event of Default of
Seller.

        

        
          

        

        
           
(a)           Offset Against or
Satisfaction of Purchase Price. In addition to any other rights at
law or in equity, upon the occurrence of any one or more Events of Default of
Seller, Buyer's payment obligations under Section 2.2(b) shall be reduced by the
greater of (i) Buyer's actual damages resulting from such Event of Default or
(ii) if Seller's breach consists in whole or in part of a breach of the covenant
not to compete, two times the amount of Seller's net profits earned in violation
of the covenant not to compete; provided, if Seller breaches this Agreement a
third time after two prior breaches for which Buyer has given notice of default
and such third breach is not cured within the applicable cure period and a third
Event of Default occurs, the Purchase Price shall be deemed satisfied and paid
in full, and all obligations of Seller under this Agreement shall continue in
full force and effect.

        

        

        
           
(b)           Cumulative Remedies.
The rights, powers and remedies of Buyer hereunder shall be in addition to all
rights, powers and remedies given by statute or rule of law and are cumulative.
The exercise of any one or more of the rights, powers and remedies provided
herein shall not be construed as a waiver of or election of remedies with
respect to any other rights, powers and remedies of Buyer.

          

        

        
           
2.6           Assumed Liabilities.
At the Closing, Buyer assumes and agrees to discharge all obligations under the
Customer Accounts arising with regard to any shipments, acts, omissions, or
obligations for the period on and after the Closing (the "Assumed
Liabilities").

          

        

        
           
2.7           Allocation of Purchase
Price. The Purchase Price shall be allocated as provided on Schedule C. Buyer
shall provide Seller with an allocation of the Purchase Price among the Assets,
which shall be determined in accordance with Treasury Regulation Section
1.1060-1T and which, absent manifest error, shall apply for purposes of
completing IRS Form 8594 (as provided for below). Except in the event of a
subsequent adjustment to the Purchase Price which adjustment shall be reflected
in the allocation hereunder in a manner consistent with the Treasury
Regulations, neither Seller nor Buyer shall file any return or take a position
with any taxing authority that is inconsistent with any allocation pursuant
hereto. "Treasury Regulations"
means the Treasury Regulations (including Temporary Regulations)
promulgated by the United States Department of Treasury with respect to the
Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), or other federal tax
statutes.

        

        
          

           
2.8           Payments Received After
Closing; Pending Shipments. In the event that, after the Closing, (a)
Buyer shall receive any payment of any amount from a Customer that is not an
Asset acquired hereunder or (b) Seller shall receive any payment from a Customer
that is included in the Assets or shall hold a deposit for shipments not
completed prior to the Closing, the party receiving such payment (or deposit
amount) shall promptly deliver it to Seller (in the case of any such amounts
received by Buyer) or Buyer (in the case of any such amounts received by
Seller), endorsed where necessary, without recourse in favor of such other
party, provided, however, that Seller's obligations under this Section 2.8 shall
automatically cease and terminate upon an Event of Default. In addition, if all
or any portion of any Customer orders are pending as of the Closing, then for
the product shipments that are not completed as of the Closing Buyer shall
reimburse Seller for Seller's third-party expenses (excluding items of salary
and other overhead) with respect to such pending shipments and Buyer shall be
entitled to all Customer payments for such shipments.

        

        

        
          
            
               

            

            
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          3.           Closing. The closing
of the purchase and sale contemplated by this Agreement and transfer of
possession of the Assets shall be given to Buyer (the "Closing") at the offices of
Weintraub Genshlea Chediak Law Corporation, 400 Capitol Mall, 11th
Floor, Sacramento, California, on the date hereof (the "Closing Date"). At the
Closing:

          

        

        
           
3.1           Seller. At the
Closing, Seller shall deliver to Buyer:

          

        

        
           
(a)           All
documents and instruments necessary to carry out the terms and provisions of
this Agreement and to effectuate the purpose of the transactions, including,
without limitation, properly executed assignments of Seller's rights to the
Customer Accounts, a list of the following information related to the Customer
Accounts: names, titles, addresses, e-mail addresses, phone numbers, and
complete account history for each such client and customer, conveyances of all
of its right, title and interest in and to the Trademarks, including without
limitation, the Assignment of Trademark instrument attached hereto as Exhibit A, and the
duly executed Restated Marketing Agreement; and

          

        

        
           
(b)           Resolutions
of the Board of Directors of Seller authorizing the execution and delivery of
this Agreement and the performance of the transactions contemplated hereby,
certified by its Secretary.

          

        

        

        
           
3.2           Buyer. Buyer shall
deliver to Seller the Initial Payment by wire transfer to an account specified
by Seller.

          

        

        
           
3.3           Other Documents. Each
of Seller and Buyer shall execute and deliver each of the agreements and
documents required to be executed and delivered by such party pursuant to
Section 8.

          

           
3.4           Form and Content.
Unless otherwise provided herein, all such instruments so delivered shall be
dated the Closing Date and be satisfactory as to form and content to each party
and their respective counsel; provided however that neither party shall
disapprove any instrument that gives that party the substance of what the party
is entitled to receive hereunder.

        

        

        
          
            
               

            

            
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          4.           Representations,
Undertakings and Warranties by Seller. The Seller makes the following
representations and warranties, each of which shall be true and correct as of
the Effective Date of this Agreement and as of the Closing:

          

        

        
           
4.1           Power and Authority.
Seller has full requisite power to own and use the Assets as currently used, and
to convey the Assets to Seller.

          

        

        
           
4.2           Binding Agreement.
This Agreement has been duly executed and delivered by Seller and constitutes
the valid and binding agreement of Seller enforceable in accordance with its
terms subject, as to the enforcement of remedies, to general equitable
principles and to bankruptcy, insolvency and similar laws affecting creditors'
rights generally.

          

           
4.3           Absence of Conflicts and
Consent Requirements. Seller's execution and delivery of this Agreement
and performance of its obligations hereunder do not: (a) conflict with or
violate Seller's Articles of Incorporation or Bylaws; (b) violate or, alone or
with notice or the passage of time, result in the breach or the termination of,
or otherwise give any contracting party the right to terminate or declare a
default under, the terms of any written agreement relating to the Assets to
which Seller is a party, or (c) violate any judgment, order, decree, law,
statute, regulation or other judicial or governmental restriction to which
Seller is subject. There is no requirement applicable to Seller to make any
filing with, or to obtain any permit, authorization, consent or approval of, any
governmental or regulatory authority as a condition to the lawful performance by
Seller and of its obligations hereunder. No person has any power of attorney to
act on behalf of Seller in connection with its Assets. The parties acknowledge
that the consents set forth on Schedule 4.3 are required in connection with the
transactions contemplated herein. Seller shall obtain all such consents prior to
Closing.

          

        

        
           
4.4           Title to Assets.
Seller has good and marketable fee simple title to the Assets, and the Assets
are (or as of the Closing shall be) free and clear of all liens, charges,
pledges, claims, security interests, mortgages, adverse claims of ownership or
use, restrictions on transfer, defect of title or other encumbrance of any kind
or character. After the date hereof and prior to the Closing, Seller will not,
without Buyer's written permission, sell or otherwise dispose of any of the
Assets to be acquired hereunder.

          

        

        
           
4.5           Litigation. There are
no actions, suits, arbitrations or proceedings filed or commenced by or before
any court, arbitrator or any governmental or administrative agency with respect
to the Assets and there are no orders, injunctions, awards, judgments or decrees
outstanding against, affecting or relating to the Assets.

          

           
4.6           Customer Accounts.
The list of the Customer Accounts on Exhibit A includes a
true, correct and complete list of the Customers and all Customer deposits and
advance payments for orders not shipped to the Customers prior to the Closing
(which Exhibit shall be updated by Seller immediately prior to the
Closing).

          

        

        
           
4.7           Disclosure. The
representations and warranties of Seller set forth in this Agreement or any
exhibit, schedule, list or other document delivered by Seller to Buyer pursuant
hereto, do not contain any untrue statement of material fact or omit to state
any material fact necessary in light of the circumstances under which they were
made to make the statements contained herein not misleading.

        

        

        
          
            
               

            

            
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4.8           No Omissions. No
representation or warranty of Seller, nor any statement, certificate, schedule
or exhibit, schedule, list or other document furnished or to be furnished by or
on behalf of Seller or pursuant hereto contains or will contain any untrue
statement of a material fact or will omit to state a material fact necessary to
make the statements herein or therein not misleading under the circumstances. No
investigation by or on behalf of Buyer or information revealed as a consequence
thereof shall absolve Seller from any liability for any such untrue statement or
omission.

          

        

        
          5.           Representations and
Warranties by Buyer.   Buyer makes the following
representations and warranties:

        

        
          

           
5.1           Organization. Buyer
is a corporation duly organized, validly existing and in good standing under the
laws of the State of California.

        

        
          

           
5.2           Authority; Binding
Agreement. Buyer has duly approved and ratified the execution and
delivery of this Agreement and the consummation of the transactions provided for
herein. This Agreement has been duly executed and delivered by Buyer and
constitutes the valid and binding agreement of Buyer enforceable in accordance
with its terms subject, as to the enforcement of remedies, to general equitable
principles and to bankruptcy, insolvency and similar laws affecting creditors'
rights generally.

        

        
          

           
5.3           No Violation. Buyer
is not subject to, and is not a party to any charter or by-law, or any mortgage,
lien, lease, agreement, contract, instrument, law, rule, regulation, order,
judgment or decree, or any other restriction of any kind or character, which (i)
would prevent consummation of the transactions contemplated by this Agreement or
would be violated or breached in any material respects by consummation of such
transactions, or (ii) would prevent Buyer from complying in any material
respects with the terms, conditions and provisions of this Agreement, or (iii)
would require the consent of any third party to the transactions contemplated
herein.

        

        
          

          6.           Indemnity.

        

        
          

           
6.1           Seller Indemnity.
Seller agrees to indemnify, defend, save and hold Buyer and Buyer's agents,
affiliates, employees and representatives ("Buyer Indemnitees") harmless
from and against any and all damage, liability, loss, expense, assessment,
judgment or deficiency of any nature whatsoever (including and without
limitation, reasonable attorneys' fees and other costs and expenses incident to
any suit, action or proceeding) (collectively, "Damages") incurred or
sustained by a Buyer Indemnitee that arises out of or in connection with (i) a
breach of any representation, warranty or covenant of this Agreement, or
non-fulfillment of any obligation of Seller under this Agreement or any
certificate furnished in connection herewith, or (ii) the use of the Assets by
Seller prior to the Closing, or (iii) the Retained Liabilities, whether
disclosed or undisclosed, known or unknown, fixed or
contingent.

        

        
          

           
6.2           Buyer Indemnity.
Buyer hereby agrees to indemnify, defend, save and hold Seller and Seller's
agents, affiliates, employees and representatives harmless from and against any
Damages incurred or sustained by Seller that arises out of or in connection with
(i) a breach of any representation, warranty or covenant of this Agreement, or
non-fulfillment of any obligation of Buyer under this Agreement or any
certificate furnished in connection herewith, (ii) the use of the Assets by
Buyer following the Closing, but not resulting from any misconduct of Seller, or
(iii) the Assumed Liabilities.

        

        

        
          
            
               

            

            
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6.3           Claims Procedure. A
party seeking indemnification hereunder (the "Indemnitee") will give prompt
written notice to the party from which indemnification is sought (the "Indemnitor") of any claim
which it discovers or of which it receives notice after the Closing and which
might give rise to a right of indemnification by it against Indemnitor under
this Agreement (a "Claim"),
stating the nature, basis and (to the extent known) amount thereof;
provided that failure to give prompt notice of such Claims shall not jeopardize
Indemnitee's right to indemnification unless such failure shall have materially
prejudiced the ability of Indemnitor to defend such Claim. In the case of any
Claim by any third party with respect to which Indemnitor may have liability
under this Agreement, Indemnitor shall be entitled to participate in the defense
thereof and, to the extent desired by Indemnitor, to assume the defense thereof,
and after written notice from Indemnitor to Indemnitee of its election to assume
such defense, Indemnitor will not be liable to any Indemnitee for any legal or
other expenses subsequently incurred by such Indemnitee in connection with its
participation in the defense of the Claim, other than reasonable costs of
investigation, unless Indemnitor does not actually assume the defense of the
Claim following Indemnitor's notice of such election. The parties will render to
each other such assistance as may reasonably be required of each other in order
to insure proper and adequate defense of any such Claim. Indemnitor will not
agree to a compromise or settlement of any such suit, Claim or proceeding that
would require the payment of any amounts by Indemnitee without the written
consent of Indemnitee; provided that if Indemnitee shall fail or refuse to
provide such written consent, then Indemnitor's liability under this Agreement
with respect to such Claim shall be limited to the amount so offered in
compromise or settlement, together with all legal and other expenses which may
have been incurred prior to the date on which Indemnitee has refused to consent
to such compromise or settlement.

          

        

        
           
6.4           Damages.
Notwithstanding anything to the contrary elsewhere in this Agreement, no
Indemnitor will be liable to any Indemnitee for any Damages other than direct,
compensatory Damages. Each party agrees that it is not entitled to recover and
hereby waives any claim with respect to, and will not seek, indirect, lost
profit, lost opportunity, diminution-in-value, consequential, punitive or any
other special Damages as to any matter under, relating to or arising out of the
transactions contemplated by this Agreement.

          

        

        
           
6.5           No Double Recovery.
Notwithstanding the fact that any party may have the right to assert claims for
indemnification under or in respect of more than one provision of this Agreement
in respect of any fact, event, condition or circumstance, no party shall be
entitled to recover the amount of any Damages suffered by such party more than
once, regardless of whether such Damages may be as a result of a breach of more
than one representation or warranty or covenant

          

        

        
           
6.6           Adjustments to Purchase
Price. Any payments made pursuant to this Section 6 shall be consistently
treated as adjustments to Purchase Price for all tax purposes by the
parties.

        

        

        
          
            
               

            

            
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          7.           Additional
Covenants.

          

        

        
           
7.1           Goodwill
Preservation. Except as otherwise requested by Buyer, and without making
any commitments on Buyer's behalf, Seller shall use commercially reasonable
efforts in the normal course of business to preserve for Buyer the goodwill of
the Customer Accounts. Seller will use commercially reasonable efforts to
preserve the Assets intact. Seller shall notify Buyer of any event or
transaction of which they become aware prior to Closing which could materially
affect the Assets in an adverse manner.

          

        

        
           
7.2           Covenant Not to
Compete. In consideration of payment of the Purchase Price to Seller as
set forth in Section 2, a portion of which shall be allocated to this covenant
not to compete, Seller agrees that, for a period of three (3) years from and
after the Closing Date, Seller shall refrain from, unless first obtaining the
Buyer's prior written consent, in any county in California, any state in the
United States of America and any other country in which Buyer has conducted the
Business, 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,
any business, firm, sole proprietorship, partnership or corporation that engages
in the Business. As used in this Section 7.2, "Business" means the business of
selling stabilized rice bran and/or enhanced stabilized rice bran to third-party
end consumers, and for avoidance of doubt, "Business" shall not include the sale
or processing of raw rice bran.

          

        

        
           
7.3           Further Assurances.
Seller and Buyer agree that, from time to time, at or after the Closing Date,
each of them will execute and deliver such further instruments of conveyance and
transfer and take such other action as may be reasonably necessary to carry out
the purpose and intent of this Agreement.

          

        

        
          8.           Conditions to
Close.

          

        

        
           
8.1          Conditions of Buyer.
The obligations of Buyer to consummate the transactions herein contemplated are
subject to the satisfaction on or prior to the Closing of the following
conditions, and if Buyer shall not consummate the transactions herein
contemplated by reason of the failure of such conditions to have been satisfied
as herein provided, then Buyer shall have no liability to Seller:

          

        

        
           
(a)           The
representations and warranties of Seller contained in this Agreement and in any
exhibit, schedule, instrument, agreement or other document delivered to Buyer
pursuant thereto, shall be true and correct in all respects on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date, and the covenants and agreements of Seller
to be performed on or before the Closing Date in accordance with this Agreement
shall have been duly performed in all respects;

          

        

        
           
(b)           No
litigation or order shall have been instituted by a court or other governmental
body or any public authority restraining or prohibiting the transaction
contemplated herein;

        

        

        
          
            
              
                 

              

              
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(c)           Each of the
required consents identified on Schedule 4.3 shall
have been obtained and shall be in full force and effect;

          

        

        
           
(d)           Seller
shall have delivered to Buyer the Restated Marketing Agreement, duly executed by
Seller; and

          

        

        
           
(e)           Buyer shall
have received from Seller such other and further certificates, assurances and
documents as may reasonably be required by Buyer in connection with the
consummation of the transactions contemplated hereby.

          

        

        
           
8.2           Conditions of Seller.
The obligations of Seller to consummate the transactions herein contemplated are
subject to the satisfaction on or prior to the Closing of the conditions set
forth herein below, and if Seller shall not consummate the transactions herein
contemplated by reason of the failure of such conditions to have been satisfied
as herein provided, then Seller shall have no liability to Buyer:

          

        

        
           
(a)           The
representations and warranties of Buyer contained in this Agreement and in any
exhibit, schedule, instrument, agreement or other document delivered to Seller
pursuant thereto, shall be true and correct on and as of the Closing with the
same effect as though such representations and warranties had been made on and
as of such Closing, or such schedules and instruments had been delivered on such
date, and the covenants and agreements of Buyer to be performed on or before the
Closing Date in accordance with this Agreement shall have been duly performed in
all respects;

          

        

        
           
(b)           No
litigation or order shall have been instituted by a court or other governmental
body or any public authority restraining or prohibiting the transaction
contemplated herein;

          

        

        
           
(c)           Each of the
required consents identified on Schedule 4.3 shall
have been obtained and shall be in full force and effect;

          

        

        
           
(d)           Buyer shall
have delivered to Seller the Restated Marketing Agreement, duly executed by
Buyer; and

          

        

        
           
(e)           Seller
shall have received from Buyer such other and further certificates, assurances
and documents as may reasonably be required by Seller in connection with the
consummation of the transactions contemplated hereby.

          

        

        
          9.           Miscellaneous.

        

        

        
           
9.1           Survival of Representations,
Warranties and Covenants. Each representation and warranty and covenant
contained herein or made pursuant hereto shall be deemed to be material and to
have been relied upon, and shall survive the execution and delivery of this
Agreement, the Closing, any investigation at any time made by or on behalf of
any party hereto, and the transfer of and payment for the Assets. Every schedule
or other document referred to herein and every certificate delivered pursuant
hereto shall be deemed to constitute a representation and warranty made pursuant
hereto. This Agreement creates continuing obligations and it is binding and
active until all undertakings, direct and indirect, are
fulfilled.

        

        

        
          
            
               

            

            
              10

              
                

              

            

            
               

            

          

        

        

        
           
9.2           Successors and
Assigns. This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties hereto. Neither this Agreement nor
any of the rights, interests, or obligations hereunder shall be assigned by any
party hereto by operation of law or otherwise without the prior written consent
of Buyer; provided, that Buyer,
in its sole discretion, may assign all or any portion of its rights, interests
and obligations hereunder to any affiliate of Buyer, and provided, further, that such
assignee assumes and agrees in writing to perform all of Buyer's obligations
hereunder. This Agreement shall be binding upon and inure to the benefit of
successors and assigns of the parties hereto.

          

        

        
           
9.3           Governing Law. This
Agreement shall be governed by and construed under the laws of the State of
California.

          

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

          

           
9.5           Titles and Subtitles.
The titles and subtitles used in this Agreement are used for convenience only
and are not to be considered in construing or interpreting this
Agreement.

          

        

        
           
9.6           Notices. Unless
otherwise provided, any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effective upon personal delivery to the
party to be notified, upon deposit with an overnight delivery service, by
facsimile upon receipt of confirmation of transmission, or upon deposit with the
United States Post Office, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for such party
above, or at such other address as such party may designate by ten (10) days'
advance written notice to the other parties.

          

        

        
           
9.7           Expenses.
Irrespective of whether any closing is effected, each party shall pay all costs
and expenses that it incurs with respect to the negotiation, execution, delivery
and performance of this Agreement.

          

        

        
           
9.8           Amendments and
Waivers. Any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of Seller.

          

        

        
           
9.9           Severability. If one
or more provisions of this Agreement are held to be unenforceable under
applicable law, such provision shall be excluded from this Agreement and the
balance of the Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.

          

           
9.10         Entire Agreement.
This Agreement and the documents referred to herein constitute the entire
agreement among the parties and no party shall be liable or bound to any other
party in any manner by any warranties, representations, or covenants except as
specifically set forth herein or therein.

          

        

        
            9.11       
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 if
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 in accordance with applicable
law.

        

        

        
          
            
               

            

            
              11

              
                

              

            

            
               

            

          

        

        

        
           
9.12        Remedies. In the
event of breach of any of the representations, warranties, promises or covenants
of any party hereto or the non-fulfillment of any obligation on the part of such
party under this Agreement, the other party's remedies following the Closing
shall be cumulative and not exclusive, and the exercise by such other party of
any of its remedies at law or in equity to recover any damages shall not affect
any other remedy such other party may have.

          

        

        
           
9.13         Publicity. No notices
to third parties or other publicity, including press releases, prior to Closing
concerning any of the transactions provided for herein shall be made by any
party hereto unless planned and coordinated jointly among the parties hereto,
except to the extent otherwise required by law.

          

          

        

        
          [REMAINDER
OF PAGE LEFT BLANK]

        

        

        
          
            
               

            

            
              12

              
                

              

            

            
               

            

          

        

         

        
           
Farmers' Rice Cooperative and NutraCea have executed and delivered this
Agreement as of the date first set forth above.

           

          Seller:

           

          Farmers'
Rice Cooperative

           

           

          
            	
                    /s/
      Kirk Messick

                  	 
      

          

          Kirk
Messick

          Senior
Vice President

          

           

          Buyer:

           

          NutraCea

           

           

          
            	
                    /s/
      Bradley Edson

                  	 
      

          

          Bradley
Edson

          Chief
Executive Officer

           

           

          Signature
Page to Asset Purchase Agreement

        

         

        
          
            
               

            

            
              13

              
                

              

            

            
               

            

          

        

        

        
          Schedule
A

           

          Customer
Accounts

        

        
          
[*]

        

        
          

            
              
                 

              

              
                14

                
                  

                

              

              
                 

              

            

          

           

        

        
          Schedule
B

           

        

        
          Trademarks

        

        
          
 

        

        
          FIBERICE

        

        

        
          
            
               

            

            
              15

              
                

              

            

            
               

            

          

        

        

        
          Schedule
C

        

        
          

        

        
          Allocation
of Purchase Price

        

        
          

        

        
          Allocation
will be subject to a fair market analysis to be conducted after
Closing.

        

        

        
          
            
               

            

            
              16

              
                

              

            

            
               

            

          

        

        

        
          Exhibit
A

          

        

        
          ASSIGNMENT
AGREEMENT

          

        

        
          This
Trademark Assignment Agreement ("Agreement") is entered into
by and between NutraCea, a California corporation ("NutraCea") with principal
offices at 5090 North 40th
Street, Suite 400, Phoenix, Arizona, 85018, and Farmers' Rice Cooperative, a
cooperative association organized under the California Food and Agricultural
Code ("FRC"), with principal offices at 2525 Natomas Park Drive, Sacramento,
California, 95851. The parties agree as follows, effective as of December 1,
2008:

          

        

        
          1.           Assignment.

        

        
          

          1.1         Trademarks. For
valuable consideration, FRC hereby grants, transfers and assigns to NutraCea all
of FRC's right, title and interest in and to the "FIBERICE" trademark and any
associated trade names, logos, common law trademarks and service marks,
trademark and service mark registrations and applications therefore and all
goodwill associated therewith throughout the world.

        

        
          

          2.           Miscellaneous. This
Agreement shall (i) be binding on the successors and assigns of NutraCea
and FRC, (ii) inure to the benefit of the successors and assigns of the
aforementioned properties,
and (iii) be governed by and construed in accordance with the laws of the State
of California.

          

        

        
            IN
WITNESS WHEREOF, the parties hereto have executed and delivered this Trademark
Assignment Agreement as of the date first written above.

        

        
          

          
             

            
              	 	Farmers' Rice
      Cooperative
	 	 	 	 	 
	 	 	 	 	 
	 	By:	 	/s/ H. Kirk
      Messick	 
	 	Its:	 	SR Vice
      President	 
	 	 	 	 	 
	 	 	 	 	 
	 	NutraCea
	 	 	 	 	 
	 	 	 	 	 
	 	
                      By:

                    	 	/s/ Brad
    Edson	 
	 	Brad Edson,
      CEO	 

            

            

              
                
                   

                

                
                  17

                  
                    

                  

                

                
                   

                

              

            

             

          

        

        
          Exhibit
B

          

          RESTATED
MARKETING AGREEMENT

        

        

        
          
            
               

            

            
              18

              
                

              

            

            
               

            

          

        

        

        
          Schedule
4.3

          

        

        
          Consents

          

        

        
          1.           [*]

          

          2.           National
Rice Company

        

        
           
Confirmation of sale No. 270454 Dated September 28, 2007

           
Seller: Farmers' Rice Cooperative Buyer: Dainty Foods

        

        
          

          3.           Bank
of America

          

          4.           Co
Bank

           

        

      

    

     

    19ex10_30.htm

    
      
        

      

    

    

    WELLS
FARGO BUSINESS CREDIT

    CREDIT
AND SECURITY AGREEMENT

    

    THIS CREDIT AND SECURITY AGREEMENT
(this "Agreement") is dated December 18, 2008, and is entered into among
NutraCea, a California corporation, NutraPhoenix, LLC, a Delaware limited
liability company (collectively, the "Company"), and Wells Fargo Bank, National
Association (as more fully defined in Exhibit A, "Wells
Fargo"), acting through its Wells Fargo Business Credit operating
division.

    

    RECITALS

    

    Company
has asked Wells Fargo to provide it with a $2,500,000.00 revolving line of
credit (the "Line of Credit") for working capital purposes and to facilitate the
issuance of standby letters of credit. Company has also requested: (i) a
$5,000,000.00 term loan (the "Real Estate Loan") to be secured by Company-owned
real estate, and (ii) a $2,500,000.00 term loan (the "Term Loan"), for
additional working capital purposes. Wells Fargo is agreeable to meeting
Company's request, provided that Company agrees to the terms and conditions of
this Agreement.

    

    For
purposes of this Agreement, capitalized terms not otherwise defined in the
Agreement shall have the meaning given them in Exhibit
A.

    

    
      	
              1. 

            	
              AMOUNT
      AND TERMS OF THE LINE OF CREDIT AND TERM
LOAN

            

    

    

    
      	
              1.1 

            	
              Line
      of Credit; Limitations on Borrowings; Termination Date; Use of
      Proceeds.

            

    

    

    
      	
              (a)

            	
              Line of Credit and
      Limitations on Borrowing. Wells Fargo shall make Advances to
      Company under the Line of Credit that, together with the L/C Amount, shall
      not at any time exceed in the aggregate the lesser of (i)
      $2,500,000.00 (the "Maximum Line Amount"), or (ii) the Borrowing Base
      limitations described in Section 1.2. Within these limits, Company may
      periodically borrow, prepay in whole or in part, and reborrow. Wells Fargo has no obligation
      to make an Advance during a Default Period or at any time Wells Fargo
      believes that an Advance would result in an Event of
      Default.

            

    

    

    
      	
              (b)

            	
              Maturity and
      Termination Dates. Company may request Line of Credit Advances from
      the date that the conditions set forth in Section 3 are satisfied until
      the earlier of: (i) November 30, 2011 (the "Maturity Date"), (ii) the date
      Company terminates the Line of Credit, or (iii) the date Wells Fargo
      terminates the Line of Credit following an Event of Default. (The earliest
      of these dates is the "Termination
Date.")

            

    

    

    
      	
              (c)

            	
              Use of Line of Credit
      Proceeds. Company shall use the proceeds of each Line of Credit
      Advance and each Letter of Credit for ordinary working capital
      purposes.

            

    

    

    
      	
              (d)

            	
              Revolving Note.
      Company's obligation to repay Line of Credit Advances, regardless of how
      initiated under Section 1.3, shall be evidenced by a revolving promissory
      note (as renewed, amended or replaced from time to time, the "Revolving
      Note").

            

    

    

    
      	
              1.2 

            	
              Borrowing
      Base; Mandatory Prepayment.

            

    

    

    
      
        
           

        

        
          -1-

          
            

          

        

        
           

        

      

    

    

    (a)           Borrowing Base. The
borrowing base (the "Borrowing Base") is an amount equal to:

    

    (i)           
75% or such lesser percentage of Eligible Accounts as Wells Fargo in its sole
discretion may deem appropriate, plus

    

    (ii)           50%
or such lesser percentage of Eligible Inventory as Wells Fargo in its sole
discretion may deem appropriate, or $1,000,000.00, whichever is less, less

    

    (iii)          the
Borrowing Base Reserve, less

    

    (iv)          Indebtedness
that Company owes Wells Fargo that has not been advanced on the Revolving Note,
less

    

    (v)           Indebtedness
that is not otherwise described in Section 1, including Indebtedness that Wells
Fargo in its sole discretion finds on the date of determination to be equal to
Wells Fargo's net credit exposure with respect to any swap, derivative, foreign
exchange, hedge, deposit, treasury management or similar transaction or
arrangement extended to Company by Wells Fargo and any Indebtedness owed by
Company to Wells Fargo Merchant Services, L.L.C.

    

    
      	
              (b)

            	
              Mandatory Prepayment;
      Overadvances. If unreimbursed Line of Credit Advances evidenced by
      the Revolving Note plus the L/C Amount exceed the Borrowing Base or the
      Maximum Line Amount at any time, then Company shall immediately prepay the
      Revolving Note in an amount sufficient to eliminate the excess, and if
      payment in full of the Revolving Note is insufficient to eliminate this
      excess and the L/C Amount continues to exceed the Borrowing Base, then
      Company shall deliver cash to Wells Fargo in an amount equal to the
      remaining excess for deposit to the Special Account, unless in each case,
      Wells Fargo has delivered to Company an Authenticated Record consenting to
      the Overadvance prior to its
      occurrence, in which event the Overadvance shall be temporarily permitted
      on such terms and conditions as Wells Fargo in its sole discretion may
      deem appropriate, including the payment of additional fees or interest, or
      both.

            

    

    

    
      	
              1.3 

            	
              Procedures
      for Line of Credit Advances.

            

    

    

    
      
        	
                (a)

              	
                Advances to Operating
      Account. Line of Credit Advances shall be credited to Company's
      demand deposit account maintained with Wells Fargo (the "Operating
      Account"), unless the parties agree in a Record Authenticated by both of
      them to disburse to another
account.

              

      

    

    

    (i)   Advances upon Company's
Request. Each Advance will be funded as a Floating Rate Advance upon
Company's request, which must be communicated to Wells Fargo no later than 10:59
a.m. Arizona Time on the Business Day on which Company wants the Advance to be
funded, and no request will be deemed received until Wells Fargo acknowledges
receipt, and Company, if requested by Wells Fargo, confirms the request in an
Authenticated Record. Company shall repay all Advances, even if the Person
requesting the Advance on behalf of Company lacked authorization.

    

    
      
        
           

        

        
          -2-

          
            

          

        

        
           

        

      

    

    

    (ii)   Advances through Loan
Manager. If Wells Fargo has separately agreed that Company may use the
Wells Fargo Loan Manager service ("Loan Manager"), Line of Credit (but not Real
Estate Loan or Term Loan) Advances will be initiated by Wells Fargo and credited
to the Operating Account as Floating Rate Advances as of the end of each
Business Day in an amount sufficient to maintain an agreed upon ledger balance
in the Operating Account, subject only to Line of Credit availability as
provided in Section 1.1(a). If Wells Fargo terminates Company's access to Loan
Manager, Company may continue to request Line of Credit Advances as provided in
Section 1.3(a)(i). Wells Fargo shall have no obligation to make an Advance
through Loan Manager during a Default Period, or in an amount in excess of Line
of Credit availability, and may terminate Loan Manager at any time in its sole
discretion.

    

    
      	
              (b)

            	
              Protective Advances;
      Advances to Pay Indebtedness Due. Wells Fargo may initiate a
      Floating Rate Advance on the Line of Credit in its sole discretion for any
      reason at any time, without Company's compliance with any of the
      conditions of this Agreement, and (i) disburse the proceeds directly to
      third Persons in order to protect Wells Fargo's interest in Collateral or
      to perform any of Company's obligations under this Agreement, or (ii)
      apply the proceeds to the amount of any Indebtedness then due and payable
      to Wells Fargo.

            

    

    

    
      	
              1.4 

            	
              Collection
      of Accounts and Application to Revolving
Note.

            

    

    

    
      	
              (a)

            	
              The Collection
      Account. Company has granted a security interest to Wells Fargo in
      the Collateral, including all Accounts. Except as otherwise agreed by both
      parties in an Authenticated Record, all Proceeds of Accounts and other
      Collateral, upon receipt or collection, shall be deposited each Business
      Day into the Collection Account. Funds so deposited ("Account Funds") are
      the property of Wells Fargo, and may only be withdrawn from the Collection
      Account by Wells Fargo.

            

    

    

    
      	
              (b)

            	
              Payment of Accounts by
      Company's Account Debtors. Company shall instruct all account
      debtors to make payments, as Lender shall designate, either directly to
      the Lockbox for deposit by Wells Fargo directly to the Collection Account,
      or instruct them to deliver such payments to Wells Fargo by wire transfer,
      ACH, or other means as Wells Fargo may direct for deposit to the
      Collection Account or for direct application to the Line of Credit. If
      Company receives a payment or the Proceeds of Collateral directly, Company
      will promptly deposit the payment or Proceeds into the Collection Account.
      Until deposited, it will hold all such payments and Proceeds in trust for
      Wells Fargo without commingling with other funds or property. All deposits
      held in the Collection Account shall constitute Proceeds of Collateral and
      shall not constitute the payment of
  Indebtedness.

            

    

    

    
      	
              (c)

            	
              Application of
      Payments to Revolving Note. Wells Fargo will withdraw Account Funds
      deposited to the Collection Account and pay down borrowings on the Line of
      Credit by applying them to the Revolving Note on the first Business Day
      following the Business Day of deposit to the Collection Account, or, if
      payments are received by Wells Fargo that are not first deposited to the
      Collection Account pursuant to any treasury management service provided to
      Company by Wells Fargo, such payments shall be applied to the Revolving
      Note as provided in the Master Agreement for Treasury Management Services
      and the relevant service
description.

            

    

    

    
      
        
           

        

        
          -3-

          
            

          

        

        
           

        

      

    

    

    
      	
              1.5 

            	
              Real
      Estate Loan.

            

    

    

    
      	
              (a)

            	
              Real Estate
      Loan. Wells Fargo shall extend the Real Estate Loan to Company
      through a single Advance in the amount of
  $5,000,000.00.

            

    

    

    
      	
              (b)

            	
              Real Estate Term
      Note. Company's obligation to repay the Real Estate Loan shall be
      evidenced by an installment promissory note (as renewed, amended, or
      replaced from time to time, the "Real Estate Term
  Note").

            

    

    

    
      	
              (c)

            	
              Real Estate Loan
      Advance and Disbursement. Subject to the terms and conditions of
      this Agreement, the Real Estate Loan Advance shall be made on the same
      date as the initial Advance on the Line of
  Credit.

            

    

    

    
      	
              (d)

            	
              Reserve; Cash
      Collateralization. Concurrently with the Real Estate Loan Advance,
      Lender shall reserve $1,500,000.00 from the proceeds Real Estate Loan
      Advance (including any interest or profits thereon, the "Cash
      Collateral"), which Cash Collateral shall be deposited in an account with
      Lender. The Cash Collateral shall be held by Lender as collateral for the
      payment and performance of the obligations of Company under this
      Agreement. Lender shall have exclusive dominion and control, including the
      exclusive right of withdrawal, over such account. Other than any interest
      earned on the investment of such deposits, which investments shall be made
      at the option and sole discretion of Lender and at Company's risk and
      expense, such deposits shall not bear interest. Interest or profits, if
      any, on such investments shall accumulate in such account. The Cash
      Collateral in such account may be applied by Lender to reimburse Lender
      for expenses recoverable under the Loan Documents, and to the extent not
      so applied, shall be held for the satisfaction of the Obligations of the
      Company. Lender agrees to release the Cash Collateral to Company upon
      delivery to Lender of publicly filed financial statements for Company,
      reflecting debt service coverage in excess of 1.0 for a period of three
      rolling quarters, and provided that no default or Event of Default exists
      and provided that the Company's unadvanced amount under the Line of Credit
      is greater than $350,000.00.

            

    

    

    
      	
              (e)

            	
              Setoff.
      Whenever an Event of Default shall have occurred and be continuing on
      account of which Lender shall have the right to exercise any of its rights
      hereunder, Company hereby irrevocably authorizes Lender to set off the
      Obligations under this Agreement and the other Loan Documents or otherwise
      owed to Lender against the Cash Collateral and all deposits and credits of
      Company with, and any all claims of Company against, Lender, but only to
      the extent that said Liabilities of Company to Lender shall be then due,
      whether by acceleration or
otherwise

            

    

    

    
      	
              (f)

            	
              Payments and
      Adjustments to Payments. The unpaid principal amount of the Real
      Estate Term Note shall be amortized over a 120 month period, but shall be
      due and payable in equal monthly principal installments of $41,667.00,
      beginning on February 1, 2009, and on the first calendar day of each
      succeeding month until the earlier of December 31, 2018 or, if Lender
      elects, the Termination Date, when the unpaid principal and interest
      evidenced by the Real Estate Term Note shall be fully due and payable.
      Additionally, accrued and unpaid interest shall be due and payable
      monthly, beginning on January 1, 2009 and on the first calendar day of
      each succeeding month until the earlier of December 31, 2018 or, if Lender
      elects, the Termination Date. Payments shall be collected by Wells Fargo
      through a debit to the Real Estate Term Note and a simultaneous Line of
      Credit Advance in the same amount, or by such other method as the parties
      may agree. Proceeds from the liquidation of Collateral acquired with Real
      Estate Loan proceeds will be applied first to the Real Estate Term Note,
      then to the Term Loan and Line of Credit in such order as Lender may
      elect.

            

    

    

    
      
        
           

        

        
          -4-

          
            

          

        

        
           

        

      

    

    

    
      	
              (g)

            	
              Prepayments and
      Mandatory Prepayments. Company may prepay the Real Estate Loan at
      any time. If Wells Fargo obtains an appraisal of the Real Estate at any
      time as permitted under this Agreement, and the appraisal shows the
      aggregate unpaid principal amount of the Real Estate Term Note to exceed
      sixty-three percent (63%) of the appraised value of the Real Estate, then
      Company, shall immediately prepay the unpaid principal of the Real Estate
      Term Note in the amount of such
excess.

            

    

    

    
      	
              (h)

            	
              Collection of
      Prepayments and Related Fees. All Real Estate Loan prepayments,
      including mandatory prepayments and prepayments due on the Termination
      Date, must be accompanied by any prepayment and breakage fees payable
      under this Agreement, which will be applied to the most remote principal
      installments then due and payable. Any prepayment of principal and any
      related fees shall be collected by Wells Fargo through a debit to the Real
      Estate Term Note and a simultaneous Line of Credit Advance in the same
      amount, or by such other method as the parties may
  agree.

            

    

    

    
      	
              1.6

            	
              Term
      Loan

            

    

    

    
      	
              (a)

            	
              Term Loan.
      Wells Fargo shall extend the Term Loan to Company through a single Advance
      in an amount not in excess of the lesser of (i)
      $2,500,000.00, (ii) ninety percent (90%) of the Net Forced Liquidation
      Value of Company's Eligible Equipment, or (iii) eighty percent (80%) of
      the Net Orderly Liquidation Value of Company's Eligible
      Equipment.

            

    

    

    
      	
              (b)

            	
              Term Note.
      Company's obligation to repay the Term Loan and each Term Loan Advance
      shall be evidenced by an installment promissory note (as renewed, amended,
      or replaced from time to time, the "Term
Note").

            

    

    

    
      	
              (c)

            	
              Term Loan Advance and
      Disbursement. The Term Loan Advance shall be made no later than
      June 30, 2010, and only upon satisfaction of the conditions in Section
      3.3.

            

    

    

    
      	
              (d)

            	
              Payments and
      Adjustments to Payments. The unpaid principal amount of the Term
      Note shall be amortized over a 36 month period, but shall be due and
      payable in equal monthly installments of principal and interest beginning
      on the first calendar day of the first calendar month after Lender makes
      the Term Loan Advance, and on the first calendar day of each succeeding
      month until the earlier of November 30, 2011 or the Termination Date, when
      the unpaid principal and interest evidenced by the Term Note shall be
      fully due and payable. Payments shall be collected by Wells Fargo through
      a debit to the Term Note and a simultaneous Line of Credit Advance in the
      same amount, or by such other method as the parties may agree. Proceeds
      from the liquidation of Collateral acquired with Term Loan proceeds will
      be applied first to the Term Note, then to the Real Estate Loan and Line
      of Credit in such order as Lender may
elect.

            

    

    

    
      
        
           

        

        
          -5-

          
            

          

        

        
           

        

      

    

    

    
      	
              (e)

            	
              Prepayments and
      Mandatory Prepayments. Company may prepay the Term Loan at any
      time. If Wells Fargo obtains an appraisal of the Equipment at any time as
      permitted under this Agreement, and the appraisal shows the aggregate
      unpaid principal amount of the Term Note to exceed (i) ninety percent
      (90%) of the Net Forced Liquidation Value of Company's Eligible Equipment,
      or (ii) eighty percent (80%) of the Net Orderly Liquidation Value of
      Company's Eligible Equipment, then Company, shall immediately prepay the
      unpaid principal of the Term Note in the amount of such
      excess.

            

    

    

    
      	
              (f)

            	
              Collection of
      Prepayments and Related Fees. All Term Loan prepayments, including
      mandatory prepayments and prepayments due on the Termination Date, must be
      accompanied by any prepayment and breakage fees payable under this
      Agreement, which will be applied to the most remote principal installments
      then due and payable. Any prepayment of principal and any related fees
      shall be collected by Wells Fargo through a debit to the Term Note and a
      simultaneous Line of Credit Advance in the same amount, or by such other
      method as the parties may agree.

            

    

    

    
      	
              1.7 

            	
              Interest
      and Interest Related Matters.

            

    

    

    
      	
              (a)

            	
              Interest Rates
      Applicable to Line of Credit and Term Loan. Except as otherwise
      provided in this Agreement, the unpaid principal amount of each Line of
      Credit Advance evidenced by the Revolving Note, the Real Estate Loan
      Advance evidenced by the Real Estate Term Note, and the Term Loan Advance
      evidenced by the Term Note, shall accrue interest at an annual interest
      rate calculated as follows:

            

    

    

    Floating
Rate:

    

    Line of
Credit Advances = the Prime Rate plus two and one half percent
(2.5%);

    

    Real
Estate Loan Advance = the Prime Rate plus three percent (3.0%);

    

    Term Loan
Advance = the Prime Rate plus three percent (3.0%);

    

    which
interest rate shall change whenever the Prime Rate changes (the "Floating
Rate").

    

    
      	
              (b)

            	
              Minimum Interest
      Charge. Notwithstanding the other terms of Section 1.7 to the
      contrary, and except as limited by the usury savings provision of Section
      1.7(e), Company shall pay Wells Fargo at least $10,000.00 of interest each
      calendar month (the "Minimum Interest Charge") during the term of this
      Agreement, and Company shall pay any deficiency between the Minimum
      Interest Charge and the amount of interest otherwise payable on first day
      of each month and on the Termination
Date.

            

    

    

    
      
        
           

        

        
          -6-

          
            

          

        

        
           

        

      

    

    

    
      	
              (c)

            	
              Default Interest
      Rate. Commencing on the day an Event of Default occurs, through and
      including the date identified by Wells Fargo in a Record as the date that
      the Event of Default has been waived (each such period a "Default
      Period"), or during a time period specified in Section 1.10, or at any
      time following the Termination Date, in Wells Fargo's sole discretion and
      without waiving any of its other rights or remedies, the principal amount
      of the Revolving Note, the Real Estate Term Note, and the Term Note shall
      bear interest at a rate that is three percent (3.0%) above the contractual
      rate set forth in Section 1.7(a) (the "Default Rate"), or any lesser rate
      that Wells Fargo may deem appropriate, starting on the first day of the
      month in which the Default Period begins through the last day of that
      Default Period, or any shorter time period to which Wells Fargo may agree
      in an Authenticated Record.

            

    

    

    
      	
              (d)

            	
              Interest Accrual on
      Payments Applied to Revolving Note. Payments received by Wells
      Fargo shall be applied to the Revolving Note as provided in Section
      1.4(c), but the principal amount paid down shall continue to accrue
      interest through the end of the second Business Day following the Business
      Day that the payment was applied to the Revolving
  Note.

            

    

    

    
      	
              (e)

            	
              Usury. No
      interest rate shall be effective which would result in a rate greater than
      the highest rate permitted by law. Payments in the nature of interest and
      other charges made under any Loan Documents or any other document or
      agreement described in or related to this Agreement that are later
      determined to be in excess of the limits imposed by applicable usury law
      will be deemed to be a payment of principal, and the Indebtedness shall be
      reduced by that amount so that such payments will not be deemed
      usurious.

            

    

    

    
      	
              1.8 

            	
              Fees.

            

    

    

    
      	
              (a)

            	
              Origination
      Fee. Company shall pay Wells Fargo a one time origination fee of
      $100,000.00, which fee shall be fully earned and payable upon the
      execution of this Agreement.

            

    

    

    
      	
              (b)

            	
              Unused Line
      Fee. Company shall pay Wells Fargo an annual unused line fee of one
      quarter of one percent (0.25%) of the daily average of the Maximum Line
      Amount reduced by outstanding Advances and the L/C Amount, from the date
      of this Agreement to and including the Termination Date (the "Unused
      Amount"), which unused line fee shall be payable monthly in arrears on the
      first day of each month and on the Termination
  Date.

            

    

    

    
      	
              (c)

            	
              Facility Fee.
      Company shall pay Wells Fargo an annual facility fee of $25,000.00, which
      facility fee shall be payable annually on each the fifteenth of December
      each year, commencing December 15,
2009.

            

    

    

    
      	
              (d)

            	
              Collateral Exam
      Fees. Company shall pay Wells Fargo fees in connection with any
      collateral exams, audits or inspections conducted by or on behalf of Wells
      Fargo at the current rates established from time to time by Wells Fargo as
      its collateral exam fees (which fees are currently $1,000.00 per day per
      collateral examiner), together with all actual out-of-pocket costs and
      expenses incurred in conducting any collateral examination or
      inspection.

            

    

    

    
      
        
           

        

        
          -7-

          
            

          

        

        
           

        

      

    

    

    
      	
              (e)

            	
              Credit Facility
      Termination and/or Reduction Fees. If (i) Wells Fargo terminates
      the Line of Credit, the Real Estate Loan and the Term Loan (collectively,
      the "Credit Facility") during a Default Period, or if (ii) Company
      terminates or prepays all or any portion of the Credit Facility on a date
      prior to the Maturity Date, or if (iii) Company and Wells Fargo agree to
      reduce the Maximum Line Amount, then Company shall pay Wells Fargo as
      liquidated damages a termination or reduction fee in an amount equal to
      the percentage of the Maximum Line Amount plus the
      principal balance outstanding on the Real Estate Loan, calculated as
      follows: (A) three percent (3.0%) if the termination or reduction occurs
      on or before the first anniversary of the first Line of Credit Advance;
      (B) two percent (2.0%) if the termination or reduction occurs after the
      first anniversary of the first Line of Credit Advance, but on or before
      the second anniversary of the first Line of Credit Advance; and (C) one
      percent (1.0%) if the termination or reduction occurs after the second
      anniversary of the first Line of Credit
Advance.

            

    

    

    
      	
              (f)

            	
              Overadvance
      Fees. Company shall pay a $500.00 Overadvance fee for each day that
      an Overadvance exists which was not agreed to by Wells Fargo in an
      Authenticated Record prior to its occurrence; provided that Wells Fargo's
      acceptance of the payment of such fees shall not constitute either consent
      to the Overadvance or waiver of the resulting Event of Default; and
      following an Event of Default, this fee shall increase to $1,000.00 for
      each day that an Overadvance exists, commencing on the first day of the
      month in which the Default Period begins and continuing through the last
      day of such Default Period, or any shorter time period that Wells Fargo in
      its sole discretion may deem appropriate, without waiving any of its other
      rights and remedies. Company shall pay additional Overadvance fees and
      interest in such amounts and on such terms as Wells Fargo in its sole
      discretion may consider appropriate for any Overadvance to which Wells
      Fargo has specifically consented in an Authenticated Record prior to its
      occurrence.

            

    

    

    
      	
              (g)

            	
              Treasury Management
      Fees. Company will pay service fees to Wells Fargo for treasury
      management services provided pursuant to the Master Agreement for Treasury
      Management Services or any other agreement entered into by the parties, in
      the amount prescribed in Wells Fargo's current service fee
      schedule.

            

    

    

    
      	
              (h)

            	
              Letter of Credit
      Fees. Company shall pay a fee with respect to each Letter of Credit
      issued by Wells Fargo of three percent (3.0%) of the aggregate undrawn
      amount of the Letter of Credit (the "Aggregate Face Amount") accruing
      daily from and including the date the Letter of Credit is issued until the
      date that it either expires or is returned, which shall be payable monthly
      in arrears on the first day of each month and on the date that the Letter
      of Credit either expires or is returned; and following an Event of
      Default, this fee shall increase to six percent (6.0%) of the Aggregate
      Face Amount, commencing on the first day of the month in which the Default
      Period begins and continuing through the last day of such Default Period,
      or any shorter time period that Wells Fargo in its sole discretion may
      deem appropriate, without waiving any of its other rights and
      remedies.

            

    

    

    
      
        
           

        

        
          -8-

          
            

          

        

        
           

        

      

    

    

    
      	
              (i)

            	
              Letter of Credit
      Administrative Fees. Company shall pay all administrative fees
      charged by Wells Fargo in connection with the honoring of drafts under any
      Letter of Credit, and any amendments to or transfers of any Letter of
      Credit, and any other activity with respect to the Letters of Credit at
      the current rates published by Wells Fargo for such services rendered on
      behalf of its customers generally.

            

    

    

    
      	
              (j)

            	
              Other Fees and
      Charges. Wells Fargo may impose additional fees and charges during
      a Default Period for (i) waiving an Event of Default, or for (ii) the
      administration of Collateral by Wells Fargo. All such fees and charges
      shall be imposed at Wells Fargo's sole discretion following oral notice to
      Company on either an hourly, periodic, or flat fee basis, and in lieu of
      or in addition to imposing interest at the Default Rate, and Company's
      request for an Advance following such notice shall constitute Company's
      agreement to pay such fees and
charges.

            

    

    

    
      	
              (k)

            	
              Termination and
      Prepayment Fees Following Transfer Between Wells Fargo Operating
      Divisions. If the Loan Documents, following Company's request and
      the consent of Wells Fargo Business Credit (which consent may be withheld
      by Wells Fargo Business Credit in its sole discretion), are transferred at
      any time after the expiration of 24 months from the date of this
      Agreement, to an operating division of Wells Fargo other than Wells Fargo
      Business Credit, the transfer will not be deemed a termination or
      prepayment resulting in the payment of termination and/or prepayment fees,
      provided that Company agrees, at the time of transfer, to the payment of
      comparable fees in an amount not less than that set forth in this
      Agreement, in the event that any facilities extended under this Agreement
      are terminated early or prepaid after the
  transfer.

            

    

    

    
      	
              1.9

            	
              Interest
      Accrual; Principal and Interest Payments;
  Computation.

            

    

    

    
      	
              (a)

            	
              Interest Payments and
      Interest Accrual. Accrued and unpaid interest under the Revolving
      Note, the Real Estate Term Note, the Term Note on Floating Rate Advances
      shall be due and payable on the first day of each month (each an "Interest
      Payment Date") and on the Termination Date, and shall be paid in the
      manner provided in Section 1.4(c) and Section 1.5(f). Interest shall
      accrue from the most recent date to which interest has been paid or, if no
      interest has been paid, from the date of Advance to the Interest Payment
      Date.

            

    

    

    
      	
              (b)

            	
              Payment of Revolving
      Note, Real Estate Term Note, and Term Note Principal. The principal
      amount of the Revolving Note, Real Estate Term Note, and Term Note shall
      be paid from time to time as provided in this Agreement, and shall be
      fully due and payable on the Termination
Date.

            

    

    

    
      	
              (c)

            	
              Payments Due on
      Non-Business Days. If an Interest Payment Date or the Termination
      Date falls on a day which is not a Business Day, payment shall be made on
      the next Business Day, and interest shall continue to accrue during that
      time period.

            

    

    

    
      	
              (d)

            	
              Computation of
      Interest and Fees. Interest accruing on the unpaid principal amount
      of the Revolving Note and fees payable under this Agreement shall be
      computed on the basis of the actual number of days elapsed in a year of
      360 days.

            

    

    

    
      
        
           

        

        
          -9-

          
            

          

        

        
           

        

      

    

    

    
      	
              (e)

            	
              Liability
      Records. Wells Fargo shall maintain accounting and bookkeeping
      records of all Advances and payments with respect to the Indebtedness in
      such form and content as Wells Fargo in its sole discretion deems
      appropriate. Wells Fargo's calculation of the amount of the Indebtedness
      shall be presumed correct unless proven otherwise by Company. Upon
      request, Company will admit and certify to Wells Fargo in a Record the
      exact unpaid principal amount of Indebtedness that Company then believes
      to be due and payable to Wells Fargo. Any billing statement or accounting
      provided by Wells Fargo shall be conclusive and binding unless Company
      notifies Wells Fargo in a detailed Record of its intention to dispute the
      billing statement or accounting within 30 days of
  receipt.

            

    

    

    
      	
              1.10

            	
              Termination,
      Reduction or Non-Renewal of Line of Credit by Company;
    Notice.

            

    

    

    
      	
              (a)

            	
              Termination or
      Reduction by Company after Advance Notice. Company may terminate or
      reduce the Line of Credit, or terminate the Real Estate Loan or Term Loan,
      at any time prior to the Maturity Date, if it (i) delivers an
      Authenticated Record notifying Wells Fargo of its intentions at least 90
      days prior to the proposed Termination Date, (ii) pays Wells Fargo the
      termination fee set forth in Section 1.8(e), and (iii) pays the
      Indebtedness in full or down to the reduced Maximum Line Amount. Any
      reduction in the Maximum Line Amount shall be in multiples of
      $100,000.00.

            

    

    

    
      	
              (b)

            	
              Termination or
      Reduction by Company without Advance Notice. If Company fails to
      deliver Wells Fargo timely notice of its intention to terminate the Line
      of Credit, Real Estate Loan or Term Loan, or reduce the Maximum Line
      Amount as provided in Section 1.10(a), Company may nevertheless terminate
      the Line of Credit, Real Estate Loan or Term Loan, or reduce the Maximum
      Line Amount and pay the Indebtedness in full or down to the reduced
      Maximum Line Amount if it (i) pays the termination fee set forth in
      Section 1.8(e), and (ii) pays additional interest for each day that the
      notice was short of the required 90 days notice, which interest shall be
      in an amount that is equal to the greater of (A) interest calculated at
      the Default Rate based on the Company's average borrowings under the Line
      of Credit for the two months prior to the date that Wells Fargo receives
      delivery of an Authenticated Record giving it actual notice of Company's
      intention to terminate or reduce the Line of Credit, or (B) the unused
      line fee for the 3 months prior to the date that Wells Fargo receives
      delivery of an Authenticated Record giving it actual notice of Company's
      intention to terminate any portion of the Credit Facility or reduce the
      Line of Credit, calculated as provided in Section 1.8(b) of this
      Agreement.

            

    

    

    
      	
              (c)

            	
              Non-Renewal by
      Company; Notice. If Company does not wish Wells Fargo to consider
      renewal of the Line of Credit on the next Maturity Date, Company shall
      deliver an Authenticated Record to Wells Fargo at least 90 days prior to
      the Maturity Date notifying Wells Fargo of its intention not to renew. If
      Company fails to deliver to Wells Fargo such timely notice, then the
      Revolving Note shall accrue interest at the Default Rate commencing on the
      90th
      day prior to the Maturity Date and continuing through the date that Wells
      Fargo receives delivery of an Authenticated Record giving it actual notice
      of Company's intention not to
renew.

            

    

    

    
      
        
           

        

        
          -10-

          
            

          

        

        
           

        

      

    

    

    
      	
              1.11

            	
              Letters
      of Credit.

            

    

    

    
      	
              (a)

            	
              Issuance of Letters of
      Credit; Amount. Wells Fargo, subject to the terms and conditions of
      this Agreement, shall issue, on or after the date that Wells Fargo is
      obligated to make its first Advance under this Agreement and prior to the
      Termination Date, one or more irrevocable standby letters of credit (each,
      a "Letter of Credit", and collectively, "Letters of Credit") for Company's
      account. Wells Fargo will not issue any Letter of Credit if the face
      amount of the Letter of Credit would exceed the lesser of: (i) $250,000.00
      less the L/C Amount, or (ii) the Borrowing Base, less an amount equal to
      aggregate unreimbursed Line of Credit Advances plus the L/C
      Amount.

            

    

    

    
      	
              (b)

            	
              Additional Letter of
      Credit Documentation. Prior to requesting issuance of a Letter of
      Credit, Company shall first execute and deliver to Wells Fargo a Standby
      Letter of Credit Agreement or a Commercial Letter of Credit Agreement, as
      applicable, an L/C Application, and any other documents that Wells Fargo
      may request, which shall govern the issuance of the Letter of Credit and
      Company's obligation to reimburse Wells Fargo for any related Letter of
      Credit draws (the "Obligation of
  Reimbursement").

            

    

    

    
      	
              (c)

            	
              Expiration. No
      Letter of Credit shall be issued that has an expiry date that is later
      than one year from the date of issuance, or the Maturity Date in effect on
      the date of issuance, whichever is
earlier.

            

    

    

    
      	
              (d)

            	
              Obligation of
      Reimbursement During Default Periods. If Company is unable, due to
      the existence of a Default Period or for any other reason, to obtain an
      Advance to pay any Obligation of Reimbursement, Company shall pay Wells
      Fargo on demand and in immediately available funds, the amount of the
      Obligation of Reimbursement together with interest, accrued from the date
      presentment of the underlying draft until reimbursement in full at the
      Default Rate. Wells Fargo is authorized, alternatively and in its sole
      discretion, to make an Advance in an amount sufficient to discharge the
      Obligation of Reimbursement and pay all accrued but unpaid interest and
      fees with respect to the Obligation of
  Reimbursement.

            

    

    

    
      	
              1.12

            	
              Special
      Account. If the Line of Credit is terminated for any reason while a
      Letter of Credit is outstanding, or if after prepayment of the Revolving
      Note the L/C Amount continues to exceed the Borrowing Base, then Company
      shall promptly pay Wells Fargo in immediately available funds for deposit
      to the Special Account, an amount equal, as the case may be, to either (a)
      the L/C Amount plus any anticipated fees and costs, or (b) the amount by
      which the L/C Amount exceeds the Borrowing Base. If Company fails to pay
      these amounts promptly, then Wells Fargo may in its sole discretion make
      an Advance to pay these amounts and deposit the proceeds to the Special
      Account. The Special Account shall be an interest bearing account
      maintained with Wells Fargo or any other financial institution acceptable
      to Wells Fargo. Wells Fargo may in its sole discretion apply amounts on
      deposit in the Special Account to the Indebtedness. Company may not
      withdraw amounts deposited to the Special Account until the Line of Credit
      has been terminated and all outstanding Letters of Credit have either been
      returned to Wells Fargo or have expired and the Indebtedness has been
      fully paid.

            

    

    

    
      
        
           

        

        
          -11-

          
            

          

        

        
           

        

      

    

    

    
      	
              2.

            	
              SECURITY
      INTEREST AND OCCUPANCY OF COMPANY'S
PREMISES

            

    

    

    
      	
              2.1

            	
              Grant of Security Interest.
      Company hereby pledges, assigns and grants to Wells Fargo, for the
      benefit of Wells Fargo and as agent for Wells Fargo Merchant Services,
      L.L.C., a Lien and security interest (collectively referred to as the
      "Security Interest") in the Collateral, as security for the payment and
      performance of all Indebtedness. Following request by Wells Fargo, Company
      shall grant Wells Fargo, for the benefit of Wells Fargo and as agent for
      Wells Fargo Merchant Services, L.L.C., a Lien and security interest in all
      commercial tort claims that it may have against any
  Person.

            

    

    

    
      	
              2.2

            	
              Notifying Account Debtors and
      Other Obligors; Collection of Collateral. Wells Fargo may at any
      time (whether or not a Default Period then exists) deliver a Record giving
      an account debtor or other Person obligated to pay an Account, a General
      Intangible, or other amount due, notice that the Account, General
      Intangible, or other amount due has been assigned to Wells Fargo for
      security and must be paid directly to Wells Fargo. Company shall join in
      giving such notice and shall Authenticate any Record giving such notice
      upon Wells Fargo's request. After Company or Wells Fargo gives such
      notice, Wells Fargo may, but need not, in Wells Fargo's or in Company's
      name, demand, sue for, collect or receive any money or property at any
      time payable or receivable on account of, or securing, such Account,
      General Intangible, or other amount due, or grant any extension to, make
      any compromise or settlement with or otherwise agree to waive, modify,
      amend or change the obligations (including collateral obligations) of any
      account debtor or other obligor. Wells Fargo may, in Wells Fargo's name or
      in Company's name, as Company's agent and attorney-in-fact, notify the
      United States Postal Service to change the address for delivery of
      Company's mail to any address designated by Wells Fargo, otherwise
      intercept Company's mail, and receive, open and dispose of Company's mail,
      applying all Collateral as permitted under this Agreement and holding all
      other mail for Company's account or forwarding such mail to Company's last
      known address.

            

    

    

    
      	
              2.3

            	
              Assignment of Insurance.
      As additional security for the Indebtedness, Company hereby assigns
      to Wells Fargo and to Wells Fargo Merchant Services, L.L.C., all rights of
      Company under every policy of insurance covering the Collateral and all
      business records and other documents relating to it, and all monies
      (including proceeds and refunds) that may be payable under any policy, and
      Company hereby directs the issuer of each policy to pay all such monies
      directly to Wells Fargo. At any time, whether or not a Default Period then
      exists, Wells Fargo may (but need not), in Wells Fargo's or Company's
      name, execute and deliver proofs of claim, receive payment of proceeds and
      endorse checks and other instruments representing payment of the policy of
      insurance, and adjust, litigate, compromise or release claims against the
      issuer of any policy. Any monies received under any insurance policy
      assigned to Wells Fargo, other than liability insurance policies, or
      received as payment of any award or compensation for condemnation or
      taking by eminent domain, shall be paid to Wells Fargo and, as determined
      by Wells Fargo in its sole discretion, either be applied to prepayment of
      the Indebtedness or disbursed to Company under staged payment terms
      reasonably satisfactory to Wells Fargo for application to the cost of
      repairs, replacements, or restorations which shall be effected with
      reasonable promptness and shall be of a value at least equal to the value
      of the items or property destroyed.

            

    

    

    
      
        
           

        

        
          -12-

          
            

          

        

        
           

        

      

    

    

    
      	
              2.4

            	
              Company's
      Premises

            

    

    

    
      	
              (a)

            	
              Wells Fargo's Right to
      Occupy Company's Premises. Company hereby grants to Wells Fargo the
      right, at any time during a Default Period and without notice or consent,
      to take exclusive possession of all locations where Company conducts its
      business or has any rights of possession, including the locations
      described on Exhibit B (the
      "Premises"), until the earlier of (i) payment in full and discharge of all
      Indebtedness and termination of the Line of Credit, or (ii) final sale or
      disposition of all items constituting Collateral and delivery of those
      items to purchasers.

            

    

    

    
      	
              (b)

            	
              Wells Fargo's Use of
      Company's Premises. Wells Fargo may use the Premises to store,
      process, manufacture, sell, use, and liquidate or otherwise dispose of
      items that are Collateral, and for any other incidental purposes deemed
      appropriate by Wells Fargo in good
faith.

            

    

    

    
      	
              (c)

            	
              Company's Obligation
      to Reimburse Wells Fargo. Wells Fargo shall not be obligated to pay
      rent or other compensation for the possession or use of any Premises, but
      if Wells Fargo elects to pay rent or other compensation to the owner of
      any Premises in order to have access to the Premises, then Company shall
      promptly reimburse Wells Fargo all such amounts, as well as all taxes,
      fees, charges and other expenses at any time payable by Wells Fargo with
      respect to the Premises by reason of the execution, delivery, recordation,
      performance or enforcement of any terms of this
  Agreement.

            

    

    

    
      	
              2.5

            	
              License. Without
      limiting the generality of any other Security Document, Company hereby
      grants to Wells Fargo a non-exclusive, worldwide and royalty-free license
      to use or otherwise exploit all Intellectual Property Rights of Company
      for the purpose of: (a) completing the manufacture of any in-process
      materials during any Default Period so that such materials become saleable
      Inventory, all in accordance with the same quality standards previously
      adopted by Company for its own manufacturing and subject to Company's
      reasonable exercise of quality control; and (b) selling, leasing or
      otherwise disposing of any or all Collateral during any Default
      Period.

            

    

    

    
      	
              2.6 

            	
              Financing
      Statements.

            

    

    

    
      	
              (a)

            	
              Authorization to
      File. Company authorizes Wells Fargo to file financing statements
      describing Collateral to perfect Wells Fargo's Security Interest in the
      Collateral, and Wells Fargo may describe the Collateral as "all personal
      property" or "all assets" or describe specific items of Collateral
      including commercial tort claims as Wells Fargo may consider necessary or
      useful to perfect the Security Interest. All financing statements filed
      before the date of this Agreement to perfect the Security Interest were
      authorized by Company and are hereby
  re-authorized.

            

    

    

    
      	
              (b)

            	
              Termination.
      Wells Fargo shall, at Company's expense, release or terminate any filings
      or other agreements that perfect the Security Interest, provided that
      there are no suits, actions, proceedings or claims pending or threatened
      against any Indemnitee under this Agreement with respect to any
      Indemnified Liabilities, upon Wells Fargo's receipt of the following, in
      form and content satisfactory to Wells Fargo: (i) cash payment in full of
      all Indebtedness and a completed performance by Company with respect to
      its other obligations under this Agreement, (ii) evidence that the
      commitment of Wells Fargo to make Advances under the Line of Credit or
      under any other facility with Company has been terminated, (iii) a release
      of all claims against Wells Fargo by Company relating to Wells Fargo's
      performance and obligations under the Loan Documents, and (iv) an
      agreement by Company, any guarantor, and any new lender to Company to
      indemnify Wells Fargo for any payments received by Wells Fargo that are
      applied to the Indebtedness as a final payoff that may subsequently be
      returned or otherwise not paid for any
reason.

            

    

    

    
      
        
           

        

        
          -13-

          
            

          

        

        
           

        

      

    

    

    
      	
              2.7

            	
              Setoff. Wells Fargo may
      at any time, in its sole discretion and without demand or notice to
      anyone, setoff any liability owed to Company by Wells Fargo against any
      Indebtedness, whether or not due.

            

    

    

    
      	
              2.8

            	
              Collateral Related Matters.
      This Agreement does not contemplate a sale of Accounts or chattel
      paper, and, as provided by law, Company is entitled to any surplus and
      shall remain liable for any deficiency. Wells Fargo's duty of care with
      respect to Collateral in its possession (as imposed by law) will be deemed
      fulfilled if it exercises reasonable care in physically keeping such
      Collateral, or in the case of Collateral in the custody or possession of a
      bailee or other third Person, exercises reasonable care in the selection
      of the bailee or third Person, and Wells Fargo need not otherwise
      preserve, protect, insure or care for such Collateral. Wells Fargo shall
      not be obligated to preserve rights Company may have against prior
      parties, to liquidate the Collateral at all or in any particular manner or
      order or apply the Proceeds of the Collateral in any particular order of
      application. Wells Fargo has no obligation to clean-up or prepare
      Collateral for sale. Company waives any right it may have to require Wells
      Fargo to pursue any third Person for any of the
    Indebtedness.

            

    

    

    
      	
              2.9

            	
              Notices Regarding Disposition
      of Collateral. If notice to Company of any intended disposition of
      Collateral or any other intended action is required by applicable law in a
      particular situation, such notice will be deemed commercially reasonable
      if given in the manner specified in Section 7.4 at least ten calendar days
      before the date of intended disposition or other
  action.

            

    

    

    
      	
              3.

            	
              CONDITIONS
      PRECEDENT

            

    

    

    
      	
              3.1

            	
              Conditions
      Precedent to Initial Advance and Issuance of Initial Letter of
      Credit.

            

    

    

    Wells
Fargo's obligation to make the initial Advance or issue the first Letter of
Credit shall be subject to the condition that Wells Fargo shall have received
this Agreement and each of the Loan Documents, and any document, agreement, or
other item described in or related to this Agreement, and all fees and
information described in Exhibit C, executed
and in form and content satisfactory to Wells Fargo.

    

    
      
        
           

        

        
          -14-

          
            

          

        

        
           

        

      

    

    

    
      	
              3.2

            	
              Additional Conditions Precedent
      to All Advances and Letters of Credit. Wells Fargo's obligation to
      make any Advance (including the initial Advance) or issue any Letter of
      Credit shall be subject to the further additional conditions: (a) that the
      representations and warranties described in Exhibit D are
      correct on the date of the Advance or the issuance of the Letter of
      Credit, except to the extent that such representations and warranties
      relate solely to an earlier date; and (b) that no event has occurred and
      is continuing, or would result from the requested Advance or issuance of
      the Letter of Credit that would result in an Event of
    Default.

            

    

    

    
      	
              3.3

            	
              Additional Conditions Precedent
      to Term Loan Advance. Wells Fargo's obligation to make the Term
      Loan Advance shall be subject to the further additional condition that
      Company shall have provided to Lender an appraisal of Company's equipment
      in form and substance acceptable to Lender, as well as evidence
      satisfactory to Lender in its sole and absolute discretion, that (i)
      Company's operations have produced a positive cash flow for at least 3
      rolling fiscal quarters as determined in accordance with GAAP, and (ii)
      Company is current with its trade
vendors.

            

    

    

    
      	
              4. 

            	
              REPRESENTATIONS
      AND WARRANTIES

            

    

    

    To induce
Wells Fargo to enter into this Agreement, Company makes the representations and
warranties described in Exhibit D. Any
request for an Advance will be deemed a representation by Company that all
representations and warranties described in Exhibit D are true,
correct and complete as of the time of the request, unless they relate
exclusively to an earlier date. Company shall promptly deliver a Record
notifying Wells Fargo of any change in circumstance that would affect the
accuracy of any representation or warranty, unless the representation and
warranty specifically relates to an earlier date.

    

    
      	
              5. 

            	
              COVENANTS

            

    

    

    So long
as the Indebtedness remains unpaid, or the Line of Credit has not been
terminated, Company shall comply with each of the following covenants, unless
Wells Fargo shall consent otherwise in an Authenticated Record delivered to
Company.

    

    
      	
              5.1

            	
              Reporting Requirements.
      Company shall deliver to Wells Fargo the following information,
      compiled where applicable using GAAP consistently applied, in form and
      content acceptable to Wells Fargo:

            

    

    

    
      	
              (a)

            	
              Annual Financial
      Statements. As soon as available and in any event within 90 days
      after Company's fiscal year end, Company's audited financial statements
      prepared by an independent certified public accountant acceptable to Wells
      Fargo, which shall include Company's balance sheet, income statement, and
      statement of retained earnings and cash flows prepared on a consolidated
      and consolidating basis to include Company's Affiliates. The annual
      financial statements shall be accompanied by a certificate (the
      "Compliance Certificate") in the form of Exhibit E that
      is signed by Company's chief financial
officer.

            

    

    

    
      
        
           

        

        
          -15-

          
            

          

        

        
           

        

      

    

    

    Each
Compliance Certificate that accompanies an annual financial statement shall also
be accompanied by (i) copies of all management letters prepared by Company's
accountants; and (ii) a report signed by the accountant stating that in making
the investigations necessary to render the opinion, the accountant obtained no
knowledge, except as specifically stated, of any Event of Default under the
Agreement, and a detailed statement, including computations, demonstrating
whether or not Company is in compliance with the financial covenants of this
Agreement.

    

    
      	
              (b)

            	
              Interim Financial
      Statements. So long as the principal outstanding on the Line of
      Credit is less than $500,000.00, as soon as available and in any event
      within 40 days of each calendar quarter, a Company prepared balance sheet,
      income statement, and statement of retained earnings prepared for that
      quarter and for the year-to-date period then ended, prepared, if requested
      by Wells Fargo, on a consolidated and consolidating basis to include
      Company's Affiliates, and stating in comparative form the figures for the
      corresponding date and periods in the prior fiscal year, subject to
      year-end adjustments. For any month in which the principal outstanding on
      the Line of Credit is at any time $500,000.00 or greater, as soon as
      available and in any event within 30 days after the end of such month, a
      Company prepared balance sheet, income statement, and statement of
      retained earnings prepared for that month and for the year-to-date period
      then ended, prepared, if requested by Wells Fargo, on a consolidated and
      consolidating basis to include Company's Affiliates, and stating in
      comparative form the figures for the corresponding date and periods in the
      prior fiscal year, subject to year-end adjustments. In each case, the
      financial statements shall be accompanied by a Compliance Certificate in
      the form of Exhibit E that
      is signed by Company's chief financial
officer.

            

    

    

    
      	
              (c)

            	
              Collateral
      Reports. No later than 15 days after each month end (or more
      frequently if Wells Fargo shall request it), a Borrowing Base certificate,
      detailed agings of Company's accounts receivable and accounts payable, a
      detailed inventory report, and a calculation of Company's Accounts,
      Eligible Accounts, Inventory and Eligible Inventory as of the end of that
      month or shorter time period requested by Wells
  Fargo.

            

    

    

    
      	
              (d)

            	
              Projections. No
      later than 30 days prior to each fiscal year end, Company's projected
      balance sheet and income statement and statement of cash flows for each
      month of the next fiscal year, certified as accurate by Company's chief
      financial officer and accompanied by a statement of assumptions and
      supporting schedules and
information.

            

    

    

    
      	
              (e)

            	
              Supplemental
      Reports. When an Advance made pursuant to an Advance request of the
      Company is outstanding, weekly, or more frequently if Wells Fargo
      requests, standard form "daily collateral report," together with
      receivables schedules, collection reports, and copies of invoices in
      excess of $50,000.00, shipment documents and delivery receipts for goods
      sold to account debtors in excess of
$50,000.00.

            

    

    

    
      	
              (f)

            	
              Litigation. No
      later than three days after discovery, a Record notifying Wells Fargo of
      any litigation or other proceeding before any court or governmental agency
      which seeks a monetary recovery against Company in excess of
      $10,000.00.

            

    

    

    
      
        
           

        

        
          -16-

          
            

          

        

        
           

        

      

    

    

    
      	
              (g)

            	
              Intellectual
      Property, (i) No later than 30 days before it acquires material
      Intellectual Property Rights, a Record notifying Wells Fargo of Company's
      intention to acquire such rights; (ii) except for transfers permitted
      under Section 5.18, no later than 30 days before it disposes of material
      Intellectual Property Rights, a Record notifying Wells Fargo of Company's
      intention to dispose of such rights, along with copies of all proposed
      documents and agreements concerning the disposal of such rights as
      requested by Wells Fargo; (iii) promptly upon discovery, a Record
      notifying Wells Fargo of (A) any Infringement of Company's Intellectual
      Property Rights by any Person, (B) claims that Company is Infringing
      another Person's Intellectual Property Rights and (C) any threatened
      cancellation, termination or material limitation of Company's Intellectual
      Property Rights; and (iv) promptly upon receipt, copies of all
      registrations and filings with respect to Company's Intellectual Property
      Rights.

            

    

    

    
      	
              (h)

            	
              Defaults. No
      later than three days after learning of the probable occurrence of any
      Event of Default, a Record notifying Wells Fargo of the Event of Default
      and the steps being taken by Company to cure the Event of
      Default.

            

    

    

    
      	
              (i)

            	
              Disputes.
      Promptly upon discovery, a Record notifying Wells Fargo of (i) any
      disputes or claims by Company's customers exceeding $5,000.00 individually
      or $10,000.00 in the aggregate during any fiscal year; (ii) credit memos
      not previously reported in Section 5.1(e); and (iii) any goods returned to
      or recovered by Company outside of the ordinary course of business or in
      the ordinary course of business but with a value in an amount in excess of
      $50,000.00.

            

    

    

    
      	
              (j)

            	
              Changes in Officers
      and Directors. Promptly following occurrence, a Record notifying
      Wells Fargo of any change in the persons constituting Company's Officers
      and Directors.

            

    

    

    
      	
              (k)

            	
              Collateral.
      Promptly upon discovery, a Record notifying Wells Fargo of any loss of or
      material damage to any Collateral or of any substantial adverse change in
      any Collateral or the prospect of its
payment.

            

    

    

    
      	
              (l)

            	
              Commercial Tort
      Claims. Promptly upon discovery, a Record notifying Wells Fargo of
      any commercial tort claims brought by Company against any Person,
      including the name and address of each defendant, a summary of the facts,
      an estimate of Company's damages, copies of any complaint or demand letter
      submitted by Company, and such other information as Wells Fargo may
      request.

            

    

    

    
      	
              (m)

            	
              Reports to
      Owners. Promptly upon distribution, copies of all financial
      statements, reports and proxy statements which Company shall have sent to
      its Owners.

            

    

    

    
      	
              (n)

            	
              Tax Returns of
      Company. No later than five days after they are required to be
      filed, copies of Company's signed and dated state and federal income tax
      returns and all related schedules, and copies of any extension
      requests.

            

    

    

    
      	
              (o)

            	
              Violations of
      Law. No later than three days after discovery of any violation, a
      Record notifying Wells Fargo of Company's violation of any law, rule or
      regulation, the non­compliance with which could have a Material
      Adverse Effect on Company.

            

    

    

    
      
        
           

        

        
          -17-

          
            

          

        

        
           

        

      

    

    

    
      	
              (p)

            	
              Pension Plans,
      (i) Promptly upon discovery, and in any event within 30 days after Company
      knows or has reason to know that any Reportable Event with respect to any
      Pension Plan has occurred, a Record authenticated by Company's chief
      financial officer notifying Wells Fargo of the Reportable Event in detail
      and the actions which Company proposes to take to correct the deficiency,
      together with a copy of any related notice sent to the Pension Benefit
      Guaranty Corporation; (ii) promptly upon discovery, and in any event
      within 10 days after Company fails to make a required quarterly Pension
      Plan contribution under Section 412(m) of the IRC, a Record authenticated
      by Company's chief financial officer notifying Wells Fargo of the failure
      in detail and the actions that Company will take to cure the failure,
      together with a copy of any related notice sent to the Pension Benefit
      Guaranty Corporation; and (iii) promptly upon discovery, and in any event
      within 10 days after Company knows or has reason to know that it may be
      liable or may be reasonably expected to have liability for any withdrawal,
      partial withdrawal, reorganization or other event under any Multiemployer
      Plan under Sections 4201 or 4243 of ERISA, a Record authenticated by
      Company's chief financial officer notifying Wells Fargo of the details of
      the event and the actions that Company proposes to take in
      response.

            

    

    

    
      	
              (q)

            	
              Other Reports.
      From time to time, with reasonable promptness, all customer lists,
      receivables schedules, inventory reports, collection reports, deposit
      records, equipment schedules, invoices to account debtors, shipment
      documents and delivery receipts for goods sold, and such other materials,
      reports, records or information as Wells Fargo may
  request.

            

    

    

    
      	
              5.2

            	
              Financial Covenants.
      Company agrees to comply with the financial covenants described
      below, which shall be calculated using GAAP consistently applied, except
      as they may be otherwise modified by the following capitalized
      definitions, and which shall be if requested by Wells Fargo, calculated on
      a consolidated and consolidating basis to include Company's
      Affiliates:

            

    

    

    
      	
              (a)

            	
              Minimum Quarterly Net
      Income. Company shall achieve, for each period described below, Net
      Income of not less than the amount set forth for each such period (numbers
      appearing between "< >" are negative):

               

               

            

    

    
    

    
      	
              Quarter Ending

               

            	
              Minimum Net Income

               

            
	
              December
      31, 2008

               

            	
              <$3,000,000.00>

               

            

    

       

    (b)           Minimum Cumulative Quarterly
Net Income. Company will maintain, as of the end of each period described
below, year-to-date consolidated aggregate Net Income, minus the Company's
year-to-date consolidated aggregate Net Income, as of December 31st of
the preceding year (as set forth in the Company's audited financial statements),
in an amount not less than the amount set forth for each such period (numbers
appearing between "< >" are negative):

    

    
      
        
           

        

        
          -18-

          
            

          

        

        
           

        

      

    

    

    
      	
              Quarter Ending

            	 
      	
              Minimum Quarterly Cumulative

              Net Income Step Up

            
	
              Each
      March 31, 2009

            	 
      	
              <$1,000,000.00>

            
	
              Each
      June 30, 2009

            	 
      	
              <$500,000.00>

            
	
              Each
      September 30, 2009

            	 
      	
              $750,000.00

            
	
              Each
      December 31, 2009

            	 
      	
              $2,000,000.00

            

    

    

    (c)           Minimum Debt Service
Coverage Ratio. Company will maintain, as of each fiscal quarter end, a
cumulative quarterly Debt Service Coverage Ratio of not less than 1.2 to 1.0,
beginning the quarter ending March 31, 2009.

    

    (d)           Capital Expenditures.
Company shall not incur or contract to incur Capital Expenditures of more than
$5,000,000.00 in the aggregate during the fourth quarter 2008. Company shall not
incur or contract to incur Capital Expenditures of more than $4,500,000.00 in
the aggregate during 2009; except that Company may carry over up to
$2,500,000.00 of the above-referenced fourth quarter 2008 Capital Expenditures
to 2009. Lender may, in its sole discretion, increase the Capital Expenditure
limit in the event that Company subsequently raises additional
capital.

    

    (e)           Minimum Availability.
Company's availability under the Line of Credit plus its unrestricted cash shall
not be less than $4,000,000.00 measured at each month end.

    

    (f)       
    Future Covenants.
Company and Lender shall establish financial covenants for the Company, which
covenants shall be acceptable to Lender in its sole and absolute discretion, for
fiscal year 2010 by December 31, 2009.

    

    
      	
              5.3 

            	
              Other
      Liens and Permitted Liens.

            

    

    

    
      	
              (a)

            	
              Other Liens; Permitted
      Liens. Company shall not create, incur or suffer to exist any Lien
      upon any of its assets, now owned or later acquired, as security for any
      indebtedness, with the exception of the following (each a "Permitted
      Lien"; collectively, "Permitted Liens"): (i) In the case of real property,
      covenants, restrictions, rights, easements and minor irregularities in
      title which do not materially interfere with Company's business or
      operations as presently conducted; (ii) Liens in existence on the date of
      this Agreement that are described in Exhibit F and
      secure indebtedness for borrowed money permitted under Section 5.4; (iii)
      The Security Interest and Liens created by the Security Documents; and
      (iv) Purchase money Liens relating to the acquisition of Equipment not
      exceeding the lesser of cost or fair market value, not exceeding
      $500,000.00 for any one purchase or $1,000,000.00 in the aggregate during
      any fiscal year, and so long as no Default Period is then in existence and
      none would exist immediately after such
  acquisition.

            

    

    

    
      	
              (b)

            	
              Financing
      Statements. Company shall not authorize the filing of any financing
      statement by any Person as Secured Party with respect to any of Company's
      assets, other than Wells Fargo. Company shall not amend any financing
      statement filed by Wells Fargo as Secured Party except as permitted by
      law.

            

    

    

    
      
        
           

        

        
          -19-

          
            

          

        

        
           

        

      

    

    

    
      	
              5.4

            	
              Indebtedness. Company
      shall not incur, create, assume or permit to exist any indebtedness or
      liability on account of deposits or letters of credit issued on Company's
      behalf, or advances or any indebtedness for borrowed money of any kind,
      whether or not evidenced by an instrument, except: (a) Indebtedness
      described in this Agreement; (b) indebtedness of Company described in
      Exhibit
      F; and (c) indebtedness secured by Permitted
  Liens.

            

    

    

    
      	
              5.5

            	
              Guaranties. Company
      shall not assume, guarantee, endorse or otherwise become directly or
      contingently liable for the obligations of any Person, except: (a) the
      endorsement of negotiable instruments by Company for deposit or collection
      or similar transactions in the ordinary course of business; and (b)
      guaranties, endorsements and other direct or contingent liabilities in
      connection with the obligations of other Persons in existence on the date
      of this Agreement and described in Exhibit
      F.

            

    

    

    
      	
              5.6

            	
              Investments and Subsidiaries.
      Company shall not make or permit to exist any loans or advances to,
      or make any investment or acquire any interest whatsoever in, any Person
      or Affiliate, including any partnership or joint venture, nor purchase or
      hold beneficially any stock or other securities or evidence of
      indebtedness of any Person or Affiliate, except:

            

    

    

    
      	
              (a)

            	
              Investments
      in direct obligations of the United States of America or any of its
      political subdivisions whose obligations constitute the full faith and
      credit obligations of the United States of America and have a maturity of
      one year or less, commercial paper issued by U.S. corporations rated "A-l"
      or "A-2" by Standard & Poor's Ratings Services or "P-1" or "P-2" by
      Moody's Investors Service or certificates of deposit or bankers'
      acceptances having a maturity of one year or less issued by members of the
      Federal Reserve System having deposits in excess of $100,000,000.00 (which
      certificates of deposit or bankers' acceptances are fully insured by the
      Federal Deposit Insurance
Corporation);

            

    

    

    
      	
              (b)

            	
              Travel
      advances or loans to Company's Officers and employees not exceeding at any
      one time an aggregate of
$10,000.00;

            

    

    

    
      	
              (c) 

            	
              Prepaid
      rent not exceeding one month or security deposits;
  and

            

    

    

    
      	
              (d)

            	
              Current
      investments in those Subsidiaries in existence on the date of this
      Agreement which are identified on Exhibit
      D.

            

    

    

    
      	
              5.7

            	
              Dividends and Distributions.
      Company shall not declare or pay any dividends (other than
      dividends payable solely in stock or membership interests of Company, as
      applicable) on any class of its stock or membership interests, or make any
      payment on account of the purchase, redemption or retirement of any shares
      of its stock or membership interests, or other securities or evidence of
      its indebtedness or make any distribution regarding its stock or
      membership interests, either directly or
  indirectly.

            

    

    

    
      	
              5.8

            	
              Salaries. Company shall
      not pay excessive or unreasonable salaries, bonuses, commissions,
      consultant fees or other compensation. Company shall not increase the
      salary, commissions, consultant fees or other compensation of any
      Director, Officer or consultant, or any member of their families, by more
      than 20% in any one year, either individually or for all such Persons in
      the aggregate, or pay such an increase from any source other than profits
      earned in the year of payment; provided however, that the restriction in
      this sentence shall not apply to existing employment contracts that have
      been approved by Company's board of directors. No bonuses shall be paid
      that would result in the occurrence of an Event of
  Default.

            

    

    

    
      
        
           

        

        
          -20-

          
            

          

        

        
           

        

      

    

    

    
      	
              5.9 

            	
              Books
      and Records; Collateral Examination; Inspection and
      Appraisals.

            

    

    

    
      	
              (a)

            	
              Books and Records;
      Inspection. Company shall keep complete and accurate books and
      records with respect to the Collateral and Company's business and
      financial condition and any other matters that Wells Fargo may request, in
      accordance with GAAP. Company shall permit any employee, attorney,
      accountant or other agent of Wells Fargo to audit, review, make extracts
      from and copy any of its books and records at any time during ordinary
      business hours, and to discuss Company's affairs with any of its
      Directors, Officers, employees, Owners or
  agents.

            

    

    

    
      	
              (b)

            	
              Authorization to
      Company's Agents to Make Disclosures to Wells Fargo. Company
      authorizes all accountants and other Persons acting as its agent to
      disclose and deliver to Wells Fargo's employees, accountants, attorneys
      and other Persons acting as its agent, at Company's expense, all financial
      information, books and records, work papers, management reports and other
      information in their possession regarding Company, other than materials
      subject to attorney-client
privilege.

            

    

    

    
      	
              (c)

            	
              Collateral Exams and
      Inspections. Company shall permit Wells Fargo's employees,
      accountants, attorneys or other Persons acting as its agent, to examine
      and inspect any Collateral or any other property of Company at any time
      during ordinary business hours.

            

    

    

    
      	
              (d)

            	
              Collateral
      Appraisals. Wells Fargo may also obtain, from time to time, at
      Company's expense, an appraisal of Company's Collateral, by an appraiser
      acceptable to Wells Fargo in its sole
  discretion.

            

    

    

    
      	
              5.10 

            	
              Account
      Verification; Payment of Permitted
Liens.

            

    

    

    
      	
              (a)

            	
              Account
      Verification. Wells Fargo or its agents may (i) contact account
      debtors and other obligors at any time to verify Company's Accounts; and
      (ii) require Company to send requests for verification of Accounts or send
      notices of assignment of Accounts to account debtors and other
      obligors.

            

    

    

    
      	
              (b)

            	
              Covenant to Pay
      Permitted Liens. Company shall pay when due each account payable
      due to any Person holding a Permitted Lien (as a result of such payable)
      on any Collateral.

            

    

    

    
      	
              5.11 

            	
              Compliance
      with Laws.

            

    

    

    
      	
              (a)

            	
              General Compliance
      with Applicable Law; Use of Collateral. Company shall (i) comply,
      and cause each Subsidiary to comply, with the requirements of applicable
      laws and regulations, the non-compliance with which would have a Material
      Adverse Effect on its business or its financial condition and (ii) use and
      keep the Collateral, and require that others use and keep the Collateral,
      only for lawful purposes, without violation of any federal, state or local
      law, statute or ordinance.

            

    

    

    
      
        
           

        

        
          -21-

          
            

          

        

        
           

        

      

    

    

    
      	
              (b)

            	
              Compliance with
      Federal Regulatory Laws. Company shall (i) prohibit, and cause each
      Subsidiary to prohibit, any Person that is an Owner or Officer from being
      listed on the Specially Designated Nationals and Blocked Person List or
      other similar lists maintained by the Office of Foreign Assets Control
      ("OFAC"), the Department of the Treasury or included in any Executive
      Orders, (ii) not permit the proceeds of the Line of Credit or any other
      financial accommodation extended by Wells Fargo to be used in any way that
      violates any foreign asset control regulations of OFAC or other applicable
      law, (iii) comply, and cause each Subsidiary to comply, with all
      applicable Bank Secrecy Act laws and regulations, as amended from time to
      time, and (iv) otherwise comply with the USA Patriot Act and Wells Fargo's
      related policies and procedures.

            

    

    

    
      	
              (c)

            	
              Compliance with
      Environmental Laws. Company shall (i) comply, and cause each
      Subsidiary to comply, with the requirements of applicable Environmental
      Laws and obtain and comply with all permits, licenses and similar
      approvals required by them, and (ii) not generate, use, transport, treat,
      store or dispose of any Hazardous Substances in such a manner as to create
      any material liability or obligation under the common law of any
      jurisdiction or any Environmental
Law.

            

    

    

    
      	
              5.12

            	
              Payment of Taxes and Other
      Claims. Company shall pay or discharge, when due, and cause each
      Subsidiary to pay or discharge, when due, (a) all taxes, assessments and
      governmental charges levied or imposed upon it or upon its income or
      profits, upon any properties belonging to it (including the Collateral) or
      upon or against the creation, perfection or continuance of the Security
      Interest, prior to the date on which penalties attach, (b) all federal,
      state and local taxes required to be withheld by it, and (c) all lawful
      claims for labor, materials and supplies which, if unpaid, might by law
      become a Lien upon any properties of Company, although Company shall not
      be required to pay any such tax, assessment, charge or claim whose amount,
      applicability or validity is being contested in good faith by appropriate
      proceedings and for which proper reserves have been
  made.

            

    

    

    
      	
              5.13 

            	
              Maintenance
      of Collateral and Properties.

            

    

    

    
      	
              (a)

            	
              Company
      shall keep and maintain the Collateral and all of its other properties
      necessary or useful in its business in good condition, repair and working
      order (normal wear and tear excepted) and will from time to time replace
      or repair any worn, defective or broken parts, although Company may
      discontinue the operation and maintenance of any properties if Company
      believes that such discontinuance is desirable to the conduct of its
      business and not disadvantageous in any material respect to Wells Fargo.
      Company shall take all commercially reasonable steps necessary to protect
      and maintain its Intellectual Property
Rights.

            

    

    

    
      	
              (b)

            	
              Company
      shall defend the Collateral against all Liens, claims and demands of all
      third Persons claiming any interest in the Collateral. Company shall keep
      all Collateral free and clear of all Liens except Permitted Liens. Company
      shall take all commercially reasonable steps necessary to prosecute any
      Person Infringing its Intellectual Property Rights and to defend itself
      against any Person accusing it of Infringing any Person's Intellectual
      Property Rights.

            

    

    

    
      
        
           

        

        
          -22-

          
            

          

        

        
           

        

      

    

    

    
      	
              5.14

            	
              Insurance. Company shall
      at all times maintain insurance with insurers acceptable to Wells Fargo,
      in such amounts and on such terms (including deductibles) as Wells Fargo
      in its sole discretion may require and including, as applicable and
      without limitation, business interruption insurance (including force
      majeure coverage), hazard coverage on an "all risks" basis for all
      tangible Collateral, and theft and physical damage coverage for Collateral
      consisting of motor vehicles. All insurance policies must contain an
      appropriate lender's interest endorsement or clause, and name Wells Fargo
      as an additional insured.

            

    

    

    
      	
              5.15

            	
              Preservation of Existence.
      Company shall preserve and maintain its existence and all of its
      rights, privileges and franchises necessary or desirable in the normal
      conduct of its business and shall conduct its business in an orderly,
      efficient and regular manner.

            

    

    

    
      	
              5.16

            	
              Delivery of Instruments, etc.
      Upon request by Wells Fargo, Company shall promptly deliver to
      Wells Fargo in pledge all instruments, documents and chattel paper
      constituting Collateral, endorsed or assigned by
  Company.

            

    

    

    
      	
              5.17

            	
              Sale or Transfer of Assets;
      Suspension of Business Operations. Company shall not sell, lease,
      assign, transfer or otherwise dispose of (a) the stock of any Subsidiary,
      (b) all or a substantial part of its assets, or (c) any Collateral or any
      interest in Collateral (whether in one transaction or in a series of
      transactions) to any other Person other than the sale of Equipment not
      exceeding $250,000.00 in the aggregate or Inventory in the ordinary course
      of business and shall not liquidate, dissolve or suspend business
      operations. Company shall not transfer any part of its ownership interest
      in any Intellectual Property Rights and shall not permit its rights as
      licensee of Licensed Intellectual Property to lapse, except that Company
      may transfer such rights or permit them to lapse if it has reasonably
      determined that such Intellectual Property Rights are no longer useful in
      its business. If Company transfers any Intellectual Property Rights for
      value, Company shall pay the Proceeds to Wells Fargo for application to
      the Indebtedness. Company shall not license any other Person to use any of
      Company's Intellectual Property Rights, except that Company may grant
      licenses in the ordinary course of its business in connection with sales
      of Inventory or the provision of services to its
  customers.

            

    

    

    
      	
              5.18

            	
              Consolidation and Merger; Asset
      Acquisitions. Company shall not consolidate with or merge into any
      other entity, or permit any other entity to merge into it, or acquire (in
      a transaction analogous in purpose or effect to a consolidation or merger)
      all or substantially all of the assets of any other
  entity.

            

    

    

    
      	
              5.19

            	
              Sale and Leaseback.
      Company shall not enter into any arrangement, directly or
      indirectly, with any other Person pursuant to which Company shall sell or
      transfer any real or personal property, whether owned now or acquired in
      the future, and then rent or lease all or part of such property or any
      other property which Company intends to use for substantially the same
      purpose or purposes as the property being sold or
    transferred.

            

    

    

    
      
        
           

        

        
          -23-

          
            

          

        

        
           

        

      

    

    

    
      	
              5.20

            	
              Restrictions on Nature of
      Business. Company will not engage in any line of business
      materially different from that presently engaged in by Company, and will
      not purchase, lease or otherwise acquire assets not related to its
      business.

            

    

    

    
      	
              5.21

            	
              Accounting. Company will
      not adopt any material change in accounting principles except as required
      by GAAP, consistently applied. Company will not change its fiscal
      year.

            

    

    

    
      	
              5.22

            	
              Discounts, etc. After
      notice from Wells Fargo, Company will not grant any discount, credit or
      allowance to any customer of Company or accept any return of goods sold.
      Company will not at any time modify, amend, subordinate, cancel or
      terminate any Account.

            

    

    

    
      	
              5.23

            	
              Pension Plans. Except as
      disclosed to Wells Fargo in a Record prior to the date of this Agreement,
      neither Company nor any ERISA Affiliate will (a) adopt, create, assume or
      become party to any Pension Plan, (b) become obligated to contribute to
      any Multiemployer Plan, (c) incur any obligation to provide
      post-retirement medical or insurance benefits with respect to employees or
      former employees (other than benefits required by law) or (d) amend any
      Plan in a manner that would materially increase its funding
      obligations.

            

    

    

    
      	
              5.24

            	
              Place of Business; Name.
      Company will not transfer its chief executive office or principal
      place of business, or move, relocate, close or sell any business Premises.
      Company will not permit any tangible Collateral or any records relating to
      the Collateral to be located in any state or area in which, in the event
      of such location, a financing statement covering such Collateral would be
      required to be, but has not in fact been, filed in order to perfect the
      Security Interest. Company will not change its name or jurisdiction of
      organization.

            

    

    

    
      	
              5.25

            	
              Constituent Documents; S
      Corporation Status. Company will not amend its Constituent
      Documents. Company will not become an S
  Corporation.

            

    

    

    
      	
              5.26

            	
              Performance by Wells Fargo.
      If Company fails to perform or observe any of its obligations under
      this Agreement at any time, Wells Fargo may, but need not, perform or
      observe them on behalf of Company and may, but need not, take any other
      actions which Wells Fargo may reasonably deem necessary to cure or correct
      this failure; and Company shall pay Wells Fargo upon demand the amount of
      all costs and expenses (including reasonable attorneys' fees and legal
      expense) incurred by Wells Fargo in performing these obligations, together
      with interest on these amounts at the Default
  Rate.

            

    

    

    
      	
              5.27

            	
              Wells Fargo Appointed as
      Company's Attorney in Fact. To facilitate Wells Fargo's performance
      or observance of Company's obligations under this Agreement, Company
      hereby irrevocably appoints Wells Fargo and Wells Fargo's agents, as
      Company's attorney in fact (which appointment is coupled with an interest)
      with the right (but not the duty) to create, prepare, complete, execute,
      deliver, endorse or file on behalf of Company any instruments, documents,
      assignments, security agreements, financing statements, applications for
      insurance and any other agreements or any Record required to be obtained,
      executed, delivered or endorsed by Company in accordance with the terms of
      this Agreement.

            

    

    

    
      
        
           

        

        
          -24-

          
            

          

        

        
           

        

      

    

    

    
      	
              6. 

            	
              EVENTS
      OF DEFAULT AND REMEDIES

            

    

    

    
      	
              6.1

            	
              Events of Default. An
      "Event of Default" means any of the
following:

            

    

    

    
      	
              (a)

            	
              Company
      fails to pay the amount of any Indebtedness on the date that it becomes
      due and payable;

            

    

    

    
      	
              (b)

            	
              Company
      fails to observe or perform any covenant or agreement of Company set forth
      in this Agreement, or in any of the Loan Documents, or in any other
      document or agreement described in or related to this Agreement or to any
      Indebtedness, or any covenant in Section 5.2 becomes inapplicable due to
      the lapse of time, and Company and Wells Fargo fail to come to an
      agreement acceptable to Wells Fargo in Wells Fargo's sole discretion to
      amend the covenant to apply to future
periods;

            

    

    

    
      	
              (c)

            	
              An
      Overadvance arises as the result of any reduction in the Borrowing Base,
      or arises in any manner or on terms not otherwise approved of in advance
      by Wells Fargo in a Record that it has
  Authenticated;

            

    

    

    
      	
              (d)

            	
              An
      event of default or termination event (however defined) occurs under any
      swap, derivative, foreign exchange, hedge or any similar transaction or
      arrangement entered into between Company and Wells
  Fargo;

            

    

    

    
      	
              (e) 

            	
              A
      Change of Control shall occur;

            

    

    

    
      	
              (f)

            	
              Company
      or any Guarantor becomes insolvent or admits in a Record an inability to
      pay debts as they mature, or Company or any Guarantor makes an assignment
      for the benefit of creditors; or Company or any Guarantor applies for or
      consents to the appointment of any receiver, trustee, or similar officer
      for the benefit of Company or any Guarantor, or for any of their
      properties; or any receiver, trustee or similar officer is appointed
      without the application or consent of Company or such Guarantor; or any
      judgment, writ, warrant of attachment or execution or similar process is
      issued or levied against a substantial part of the property of Company or
      any Guarantor;

            

    

    

    
      	
              (g)

            	
              Company
      or any Guarantor files a petition under any chapter of the United States
      Bankruptcy Code or under the laws of any other jurisdiction naming Company
      or such Guarantor as debtor; or any such petition is instituted against
      Company or any such Guarantor; or Company or any Guarantor institutes (by
      petition, application, answer, consent or otherwise) any bankruptcy,
      insolvency, reorganization, debt arrangement, dissolution, liquidation or
      similar proceeding under the laws of any jurisdiction; or any such
      proceeding is instituted (by petition, application or otherwise) against
      Company or any such Guarantor.

            

    

    

    
      
        
           

        

        
          -25-

          
            

          

        

        
           

        

      

    

    

    
      	
              (h)

            	
              Any
      representation or warranty made by Company in this Agreement or by any
      Guarantor in any Guaranty, or by Company (or any of its Officers) or any
      Guarantor in any agreement, certificate, instrument or financial statement
      or other statement delivered to Wells Fargo in connection with this
      Agreement or pursuant to such Guaranty is untrue or misleading in any
      material respect when delivered to Wells
Fargo;

            

    

    

    
      	
              (i)

            	
              A
      final, non-appealable arbitration award, judgment, or decree or order for
      the payment of money in an amount in excess of $10,000.00 is entered
      against Company, which is not insured, subject to indemnity, immediately
      stayed or appealed, or paid immediately without resulting in an Event of
      Default;

            

    

    

    
      	
              (j)

            	
              Company
      is in default with respect to any bond, debenture, note or other evidence
      of material indebtedness issued by Company that is held by any third
      Person other than Wells Fargo, or under any instrument under which any
      such evidence of indebtedness has been issued or by which it is governed,
      or under any material lease or other contract, and the applicable grace
      period, if any, has expired, regardless of whether such default has been
      waived by the holder of such
indebtedness;

            

    

    

    
      	
              (k)

            	
              Company
      liquidates, dissolves, terminates or suspends its business operations or
      otherwise fails to operate its business in the ordinary course, or merges
      with another Person; or sells or attempts to sell all or substantially all
      of its assets;

            

    

    

    
      	
              (1)

            	
              Company
      fails to pay any indebtedness or obligation owed to Wells Fargo which is
      unrelated to the Line of Credit or this Agreement as it becomes due and
      payable;

            

    

    

    
      	
              (m)

            	
              Any
      Guarantor repudiates or purports to revoke the Guarantor's Guaranty, or
      fails to perform any obligation under such Guaranty, or any individual
      Guarantor dies or becomes incapacitated, or any other Guarantor ceases to
      exist for any reason;

            

    

    

    
      	
              (n)

            	
              Company
      engages in any act prohibited by any Subordination Agreement, or makes any
      payment on Subordinated Indebtedness (as defined in the Subordination
      Agreement) that the Subordinated Creditor was not contractually entitled
      to receive;

            

    

    

    
      	
              (o)

            	
              Any
      event or circumstance occurs that Wells Fargo in good faith believes may
      impair the prospect of payment of all or a material part of the
      Indebtedness, or Company's ability to perform any of its material
      obligations under any of the Loan Documents, or any other document or
      agreement described in or related to this Agreement, or there occurs any
      Material Adverse Change.

            

    

    

    
      	
              (p)

            	
              Any
      Director or Officer of Company is indicted for a felony offence under
      state or federal law, or Company hires an Officer or appoints a Director
      who has been convicted of any such felony
  offense.

            

    

    

    
      	
              (q)

            	
              Any
      Reportable Event, which Wells Fargo in good faith believes to constitute
      sufficient grounds for termination of any Pension Plan or for the
      appointment of a trustee to administer any Pension Plan, has occurred and
      is continuing 30 days after Company gives Wells Fargo a Record notifying
      it of the Reportable Event; or a trustee is appointed by an appropriate
      court to administer any Pension Plan; or the Pension Benefit Guaranty
      Corporation institutes proceedings to terminate or appoint a trustee to
      administer any Pension Plan; or Company or any ERISA Affiliate files for a
      distress termination of any Pension Plan under Title IV of ERISA; or
      Company or any ERISA Affiliate fails to make any quarterly Pension Plan
      contribution required under Section 412(m) of the IRC, which Wells Fargo
      in good faith believes may, either by itself or in combination with other
      failures, result in the imposition of a Lien on Company's assets in favor
      of the Pension Plan; or any withdrawal, partial withdrawal, reorganization
      or other event occurs with respect to a Multiemployer Plan which could
      reasonably be expected to result in a material liability by Company to the
      Multiemployer Plan under Title IV of
ERISA.

            

    

    

    
      
        
           

        

        
          -26-

          
            

          

        

        
           

        

      

    

     

    
      	
              6.2

            	
              Rights and Remedies.
      During any Default Period, Wells Fargo may in its discretion
      exercise any or all of the following rights and
  remedies:

            

    

    

    
      	
              (a)

            	
              Wells
      Fargo may terminate the Line of Credit and decline to make Advances
      including any unfunded Term Loan Advances, if any, and terminate any
      services extended to Company under the Master Agreement for Treasury
      Management Services;

            

    

    

    
      	
              (b)

            	
              Wells
      Fargo may declare the Indebtedness to be immediately due and payable and
      accelerate payment of the Revolving Note, the Real Estate Term Note, and
      the Term Note, and all Indebtedness shall immediately become due and
      payable, without presentment, notice of dishonor, protest or further
      notice of any kind, all of which Company hereby expressly
      waives;

            

    

    

    
      	
              (c)

            	
              Wells
      Fargo may, without notice to Company, apply any money owing by Wells Fargo
      to Company to payment of the
Indebtedness;

            

    

    

    
      	
              (d)

            	
              Wells
      Fargo may exercise and enforce any rights and remedies available upon
      default to a secured party under the UCC, including the right to take
      possession of Collateral, proceeding with or without judicial process
      (without a prior hearing or notice of hearing, which Company hereby
      expressly waives) and sell, lease or otherwise dispose of Collateral for
      cash or on credit (with or without giving warranties as to condition,
      fitness, merchantability or title to Collateral, and in the event of a
      credit sale, Indebtedness shall be reduced only to the extent that
      payments are actually received), and Company will upon Wells Fargo's
      demand assemble the Collateral and make it available to Wells Fargo at any
      place designated by Wells Fargo which is reasonably convenient to both
      parties;

            

    

    

    
      	
              (e)

            	
              Wells
      Fargo may exercise and enforce its rights and remedies under any of the
      Loan Documents and any other document or agreement described in or related
      to this Agreement;

            

    

    

    
      	
              (f)

            	
              Company
      will pay Wells Fargo upon demand in immediately available funds an amount
      equal to the Aggregate Face Amount plus any anticipated costs and fees for
      deposit to the Special Account pursuant to Section
  1.12;

            

    

    

    
      	
              (g)

            	
              Wells
      Fargo may for any reason apply for the appointment of a receiver of the
      Collateral, to which appointment Company hereby consents;
    and

            

    

    

    
      
        
           

        

        
          -27-

          
            

          

        

        
           

        

      

    

    

    
      	
              (h)

            	
              Wells
      Fargo may exercise any other rights and remedies available to it by law or
      agreement.

            

    

    

    
      	
              6.3

            	
              Immediate Default and
      Acceleration. Following the occurrence of an Event of Default
      described in Section 6.1(f) or (g), the Line of Credit shall immediately
      terminate and all of Company's Indebtedness shall immediately become due
      and payable without presentment, demand, protest or notice of any
      kind.

            

    

    

    
      	
              7.

            	
              MISCELLANEOUS

            

    

    

    
      	
              7.1

            	
              No Waiver; Cumulative Remedies.
      No delay or any single or partial exercise by Wells Fargo of any
      right, power or remedy under the Loan Documents, or under any other
      document or agreement described in or related to this Agreement, shall
      constitute a waiver of any other right, power or remedy under the Loan
      Documents or granted by Company to Wells Fargo under other agreements or
      documents that are unrelated to the Loan Documents. No notice to or demand
      on Company in any circumstance shall entitle Company to any additional
      notice or demand in any other circumstances. The remedies provided in the
      Loan Documents or in any other document or agreement described in or
      related to this Agreement are cumulative and not exclusive of any remedies
      provided by law. Wells Fargo may comply with applicable law in connection
      with a disposition of Collateral, and such compliance will not be
      considered to adversely affect the commercial reasonableness of any sale
      of the Collateral.

            

    

    

    
      	
              7.2

            	
              Amendments; Consents and
      Waivers; Authentication. No amendment or modification of any Loan
      Documents, or any other document or agreement described in or related to
      this Agreement, or consent to or waiver of any Event of Default, or
      consent to or waiver of the application of any covenant or representation
      set forth in any of the Loan Documents, or any other document or agreement
      described in or related to this Agreement, or any release of Wells Fargo's
      Security Interest in any Collateral, shall be effective unless it has
      been agreed to by Wells Fargo and memorialized in a Record that: (a)
      specifically states that it is intended to amend or modify specific Loan
      Documents, or any other document or agreement described in or related to
      this Agreement, or waive any Event of Default or the application of any
      covenant or representation of any terms of specific Loan Documents, or any
      other document or agreement described in or related to this Agreement, or
      is intended to release Wells Fargo's Security Interest in specific
      Collateral; and (b) is Authenticated by the signature of an authorized
      employee of both parties, or by an authorized employee of Wells Fargo with
      respect to a consent or waiver. The terms of an amendment, consent or
      waiver memorialized in any Record shall be effective only to the extent,
      and in the specific instance, and for the limited purpose to which Wells
      Fargo has agreed.

            

    

    

    
      	
              7.3

            	
              Execution in Counterparts;
      Delivery of Counterparts. This Agreement and all other Loan
      Documents, or any other document or agreement described in or related to
      this Agreement, and any amendment or modification to them may be
      Authenticated by the parties in any number of counterparts, each of which,
      once authenticated and delivered in accordance with the terms of this
      Section 7.3, will be deemed an original, and all such counterparts, taken
      together, shall constitute one and the same instrument. Delivery by fax or
      by encrypted e-mail or e-mail file attachment of any counterpart to any
      Loan Document Authenticated by an authorized signature will be deemed the
      equivalent of the delivery of the original Authenticated instrument.
      Company shall send the original Authenticated counterpart to Wells Fargo
      by first class U.S. mail or by overnight courier, but Company's failure to
      deliver a Record in this form shall not affect the validity,
      enforceability, and binding effect of this Agreement or the other Loan
      Documents, or any other document or agreement described in or related to
      this Agreement.

            

    

    

    
      
        
           

        

        
          -28-

          
            

          

        

        
           

        

      

    

    

    
      	
              7.4

            	
              Notices, Requests, and
      Communications; Confidentiality. Except as otherwise expressly
      provided in this Agreement:

            

    

    

    
      	
              (a)

            	
              Delivery of Notices,
      Requests and Communications. Any notice, request, demand, or other
      communication by either party that is required under the Loan Documents,
      or any other document or agreement described in or related to this
      Agreement, to be in the form of a Record (but excluding any Record
      containing information Company must report to Wells Fargo under Section
      5.1) may be delivered (i) in person, (ii) by first class U.S. mail, (iii)
      by overnight courier of national reputation, or (iv) by fax, or the Record
      may be sent as an Electronic Record and delivered (v) by an encrypted
      e-mail, or (vi) through Wells Fargo's Commercial Electronic Office®
      ("CEO®") portal or other secure electronic channel to which the
      parties have agreed.

            

    

    

    
      	
              (b)

            	
              Addresses for
      Delivery. Delivery of any Record under this Section 7.4 shall be made to the
      appropriate address set forth on the last page of this Agreement (which
      either party may modify by a Record sent to the other party), or through
      Wells Fargo's CEO
      portal or other secure electronic channel to which the parties have
      agreed.

            

    

    

    
      	
              (c)

            	
              Date of
      Receipt. Each Record sent pursuant to the terms of this Section
      7.4 will be deemed
      to have been received on (i) the date of delivery if delivered in person,
      (ii) two business days after the date deposited in the mail if sent by
      mail, (iii) one business day after the date delivered to the courier if
      sent by overnight courier, (iv) the date of transmission if sent by fax,
      or (v) the date of transmission, if sent as an Electronic Record by
      electronic mail or through Wells Fargo's CEO portal or similar
      secure electronic channel to which the parties have agreed; except that any
      request for an Advance or any other notice, request, demand or other
      communication from Company required under Section 1, and any request for
      an accounting under Section 9-210 of the UCC, will not be deemed to have
      been received until actual receipt by Wells Fargo on a Business Day by an
      authorized employee of Wells Fargo.

            

    

    

    
      	
              (d)

            	
              Confidentiality of
      Unencrypted E-mail. Company acknowledges that if it sends an
      Electronic Record to Wells Fargo without encryption by e-mail or as an
      e-mail file attachment, there is a risk that the Electronic Record may be
      received by unauthorized Persons, and that by so doing it will be deemed
      to have accepted this risk and the consequences of any such unauthorized
      disclosure.

            

    

    

    
      	
              7.5

            	
              Company Information Reporting;
      Confidentiality. Except as otherwise expressly provided in this
      Agreement:

            

    

    

    
      
        
           

        

        
          -29-

          
            

          

        

        
           

        

      

    

    

    
      	
              (a)

            	
              Delivery of Company
      Information Records. Any information that Company is required to
      deliver under Section 5.1 in the form of a Record may be delivered to
      Wells Fargo (i) in person, or by (ii) first class U.S. mail, (iii)
      overnight courier of national reputation, or (iv) fax, or the Record may
      be sent as an Electronic Record (v) by encrypted e-mail, or (vi) through
      the file upload service of Wells Fargo's CEO portal or other
      secure electronic channel to which the parties have
  agreed.

            

    

    

    
      	
              (b)

            	
              Addresses for
      Delivery. Delivery of any Record to Wells Fargo under this Section
      7.5 shall be made to the appropriate address set forth on the last page of
      this Agreement (which Wells Fargo may modify by a Record sent to Company),
      or through Wells Fargo's CEO portal or other
      secure electronic channel to which the parties have
  agreed.

            

    

    

    
      	
              (c)

            	
              Date of
      Receipt. Each Record sent pursuant to this Section will be deemed
      to have been received on (i) the date of delivery to an authorized
      employee of Wells Fargo, if delivered in person, or by U.S. mail,
      overnight courier, fax, or e-mail; or (ii) the date of transmission, if
      sent as an Electronic Record through Wells Fargo's CEO portal or similar
      secure electronic channel to which the parties have
  agreed.

            

    

    

    
      	
              (d)

            	
              Authentication of
      Company Information Records. Company shall Authenticate any Record
      delivered (i) in person, or by U.S. mail, overnight courier, or fax, by
      the signature of the Officer or employee of Company who prepared the
      Record; (ii) as an Electronic Record sent via encrypted e-mail, by the
      signature of the Officer or employee of Company who prepared the Record by
      any file format signature that is acceptable to Wells Fargo, or by a
      separate certification signed and sent by fax; or (iii) as an Electronic
      Record via the file upload service of Wells Fargo's CEO portal or similar
      secure electronic channel to which the parties have agreed, through such
      credentialing process as Wells Fargo and Company may agree to under the
      CEO
      agreement.

            

    

    

    
      	
              (e)

            	
              Certification of
      Company Information Records. Any Record (including any Electronic
      Record) Authenticated and delivered to Wells Fargo under this Section 7.5
      will be deemed to have been certified as materially true, correct, and
      complete by Company and each Officer or employee of Company who prepared
      and Authenticated the Record on behalf of Company, and may be legally
      relied upon by Wells Fargo without regard to method of delivery or
      transmission.

            

    

    

    
      	
              (f)

            	
              Confidentiality of
      Company Information Records Sent by Unencrypted E-mail. Company
      acknowledges that if it sends an Electronic Record to Wells Fargo without
      encryption by e-mail or as an e-mail file attachment, there is a risk that
      the Electronic Record may be received by unauthorized Persons, and that by
      so doing it will be deemed to have accepted this risk and the consequences
      of any such unauthorized disclosure. Company acknowledges that it may
      deliver Electronic Records containing Company information to Wells Fargo
      by e-mail pursuant to any encryption tool acceptable to Wells Fargo and
      Company, or through Wells Fargo's CEO portal file upload
      service without risk of unauthorized
disclosure.

            

    

    

    
      	
              7.6

            	
              Further Documents.
      Company will from time to time execute, deliver, endorse and
      authorize the filing of any instruments, documents, conveyances,
      assignments, security agreements, financing statements, control agreements
      and other agreements that Wells Fargo may reasonably request in order to
      secure, protect, perfect or enforce the Security Interest or Wells Fargo's
      rights under the Loan Documents, or any other document or agreement
      described in or related to this Agreement (but any failure to request or
      assure that Company executes, delivers, endorses or authorizes the filing
      of any such item shall not affect or impair the validity, sufficiency or
      enforceability of the Loan Documents, or any other document or agreement
      described in or related to this Agreement, and the Security Interest,
      regardless of whether any such item was or was not executed, delivered or
      endorsed in a similar context or on a prior
  occasion).

            

    

    

    
      
        
           

        

        
          -30-

          
            

          

        

        
           

        

      

    

    

    
      	
              7.7

            	
              Costs and Expenses.
      Company shall pay on demand all costs and expenses, including
      reasonable attorneys' fees, incurred by Wells Fargo in connection with the
      Indebtedness, this Agreement, the Loan Documents, or any other document or
      agreement described in or related to this Agreement, and the transactions
      contemplated by this Agreement, including all such costs, expenses and
      fees incurred in connection with the negotiation, preparation, execution,
      delivery, amendment, administration, performance, collection and
      enforcement of the Indebtedness and all such documents and agreements and
      the creation, perfection, protection, satisfaction, foreclosure or
      enforcement of the Security
Interest.

            

    

    

    
      	
              7.8

            	
              Indemnity. In addition
      to its obligation to pay Wells Fargo's expenses under the terms of this
      Agreement, Company shall indemnify, defend and hold harmless Wells Fargo,
      its parent Wells Fargo & Company, and any of its affiliates and
      successors, and all of their present and future Officers, Directors,
      employees, attorneys and agents (each an "Indemnitee") for, from and
      against any of the following (collectively, "Indemnified
      Liabilities"):

            

    

    

    
      	
              (a)

            	
              Any
      and all transfer taxes, documentary taxes, assessments or charges made by
      any governmental authority by reason of the execution and delivery of the
      Loan Documents, or any other document or agreement described in or related
      to this Agreement, or the making of the
  Advances;

            

    

    

    
      	
              (b)

            	
              Any
      claims, loss or damage to which any Indemnitee may be subjected if any
      representation or warranty contained in Exhibit D
      proves to be incorrect in any respect or as a result of any violation of
      the covenants contained in Section 5.12;
and

            

    

    

    
      	
              (c)

            	
              Any
      and all other liabilities, losses, damages, penalties, judgments, suits,
      claims, costs and expenses of any kind or nature whatsoever (including the
      reasonable fees and disbursements of counsel) in connection with this
      Agreement and any other investigative, administrative or judicial
      proceedings, whether or not such Indemnitee shall be designated a party to
      such proceedings, which may be imposed on, incurred by or asserted against
      any such Indemnitee, in any manner related to or arising out of or in
      connection with the making of the Advances and the Loan Documents, or any
      other document or agreement described in or related to this Agreement, or
      the use or intended use of the proceeds of the Advances, with the
      exception of any Indemnified Liability caused by the gross negligence or
      willful misconduct of an
Indemnitee.

            

    

    

    

    
      
        
           

        

        
          -31-

          
            

          

        

        
           

        

      

    

    

    If any
investigative, judicial or administrative proceeding described in this Section
is brought against any Indemnitee, upon the Indemnitee's request, Company, or
counsel designated by Company and satisfactory to the Indemnitee, will resist
and defend the action, suit or proceeding to the extent and in the manner
directed by the Indemnitee, at Company's sole cost and expense. Each Indemnitee
will use its best efforts to cooperate in the defense of any such action, suit
or proceeding. If this agreement to indemnify is held to be unenforceable
because it violates any law or public policy, Company shall nevertheless make
the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities to the extent permissible under applicable law.
Company's obligations under this Section shall survive the termination of this
Agreement and the discharge of Company's other obligations under this
Agreement.

    

    
      	
              7.9

            	
              Retention of Company's Records.
      Wells Fargo shall have no obligation to maintain Electronic Records
      or retain any documents, schedules, invoices, agings, or other Records
      delivered to Wells Fargo by Company in connection with the Loan Documents,
      or any other document or agreement described in or related to this
      Agreement for more than 30 days after receipt by Wells Fargo. If there is
      a special need to retain specific Records, Company must notify Wells Fargo
      of its need to retain or return such Records with particularity, which
      notice must be delivered to Wells Fargo in accordance with the terms of
      this Agreement at the time of the initial delivery of the Record to Wells
      Fargo.

            

    

    

    
      	
              7.10

            	
              Binding Effect; Assignment;
      Complete Agreement. The Loan Documents, or any other document or
      agreement described in or related to this Agreement, shall be binding upon
      and inure to the benefit of Company and Wells Fargo and their respective
      successors and assigns, except that Company shall not have the right to
      assign its rights under this Agreement or any interest in this Agreement
      without Wells Fargo's prior consent, which must be confirmed in a Record
      Authenticated by Wells Fargo. To the extent permitted by law, Company
      waives and will not assert against any assignee any claims, defenses or
      set-offs which Company could assert against Wells Fargo. This Agreement
      shall also bind all Persons who become a party to this Agreement as a
      borrower. This Agreement, together with the Loan Documents, or any other
      document or agreement described in or related to this Agreement, comprises
      the complete and integrated agreement of the parties on the subject matter
      of this Agreement and supersedes all prior agreements, whether oral or
      evidenced in a Record. To the extent that any provision of this Agreement
      contradicts other provisions of the Loan Documents other than this
      Agreement, or any other document or agreement described in or related to
      this Agreement, this Agreement shall
control.

            

    

    

    
      	
              7.11

            	
              Sharing of Information.
      Wells Fargo may share any Confidential Information that it may have
      regarding Company and its Affiliates with its accountants, lawyers, and
      other advisors, and with each business unit and line of business within
      Wells Fargo and each direct and indirect subsidiary of Wells Fargo &
      Company.

            

    

    

    
      	
              7.12

            	
              Severability of Provisions.
      Any provision of this Agreement which is prohibited or
      unenforceable shall be ineffective to the extent of such prohibition or
      unenforceability without invalidating the remaining terms of this
      Agreement.

            

    

    

    
      
        
           

        

        
          -32-

          
            

          

        

        
           

        

      

    

    

    
      	
              7.13

            	
              Headings. Section and
      subsection headings in this Agreement are included for convenience of
      reference only and shall not constitute a part of this Agreement for any
      other purpose.

            

    

    

    
      	
              7.14

            	
              Governing Law; Jurisdiction,
      Venue; Waiver of Jury Trial. The Loan Documents (other than real
      estate related documents, if any) shall be governed by and construed in
      accordance with the substantive laws (other than conflict laws) of the
      State of Arizona. The parties to this Agreement (a) consent to the
      personal jurisdiction of the state and federal courts located in the State
      of Arizona in connection with any controversy related to this Agreement;
      (b) waive any argument that venue in any such forum is not convenient; (c)
      agree that any litigation initiated by Wells Fargo or Company in
      connection with this Agreement or the other Loan Documents may be venued
      in either the state or federal courts located in the City of Phoenix,
      County of Maricopa, State of Arizona; and (d) agree that a final judgment
      in any such suit, action or proceeding shall be conclusive and may be
      enforced in other jurisdictions by suit on the judgment or in any other
      manner provided by law.

            

    

    

    
      	
              COMPANY
      AND WELLS FARGO WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION AT LAW OR
      IN EQUITY OR IN ANY OTHER PROCEEDING BASED ON OR PERTAIING TO THIS
      AGREEMENT OR ANY OTHER LOAN
DOCUMENT.

            

    

    

    

    COMPANY AND WELLS FARGO have
executed this Agreement through their authorized officers as of the date set
forth above.

    

    
      	
              NutraCea, a California
      corporation

               

              By:
      /s/ Bradley D.
      Edson

              Name:
      Bradley D.
      Edson

              Its:
      CEO

            	
              Address:

               

              5090
      N. 40th
      Street, Suite 400 Phoenix, Arizona 85018 

              Attention:
      Olga
      Longan

              Fax:
      602-522-7575

              Email:
      olongan@nutracea.com

              Federal
      EIN: 87-0673375

              Org.
      ID No.

            
	
              NutraPhoenix, LLC, a
      Delaware limited liability company

               

              By:
      /s/ Bradley D.
      Edson

              Name:
      Bradley D.
      Edson

              Its:
      President

            	
              Address:

               

              5090
      N. 40th
      Street, Suite 400 Phoenix, Arizona 85018 

              Attention:
      Olga
      Longan

              Fax:
      602-522-7575

              Email:
      olongan@nutracea.com

              Federal
      EIN: 26-2233062

              Org.
      ID No.

               

            

    

    

    
      	
              With
      a copy to:

            	
              Shawn
      M. Kent, Esq.

            

    

    Weintraub
Genshelea Chediak

    400
Capitol Mall, 11th Floor

    Sacramento,
CA 95814

    Fax:
916-446-1611  Email: skent@weintraub.com

    

    
      
        
           

        

        
          -33-

          
            

          

        

        
           

        

      

    

    

     

    

    
      	
              Wells
      Fargo Bank, National Association

            	
              Address:

            
	 
      	 
      
	
              By:
      /s/ Shane
      Luke

            	
              100
      W Washington St., 15th Floor

            
	
              Name:
      Shane Luke

            	
              MAC
      S4101-158, Phoenix, Arizona 85003

            
	
              Its:
      Vice President

            	
              Attention:
      Shane Luke

            
	 
      	
              Fax:
      602-378-6215

            
	 
      	
              Email:
      lukesha@wellsfargo.com

            

    

    

    
      
        
           

        

        
          -34-

          
            

          

        

        
           

        

      

    

    

    REVOLVING
NOTE

    

    
      	
              $2,500,000.00

            	
              December 18, 2008

            

    

    

    FOR VALUE RECEIVED, the
undersigned, NutraCea, a California corporation, and NutraPhoenix, LLC, a
Delaware limited liability company, (collectively, the "Company"), hereby
promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Wells
Fargo"), acting through its WELLS FARGO BUSINESS CREDIT operating division, on
the Termination Date described in the Credit and Security Agreement dated
December 2008 (as amended from time to time, the "Agreement") and entered into
between Wells Fargo and Company, at Wells Fargo's office at 100 W. Washington
Street, 15th
Floor, Phoenix, Arizona 85003, or at any other place designated at any time by
the holder, in lawful money of the United States of America and in immediately
available funds, the principal sum of Two Million Five Hundred Thousand Dollars
($2,500,000.00) or the aggregate unpaid principal amount of all Advances under
the Line of Credit made by Wells Fargo to Company under the terms of the
Agreement, together with interest on the outstanding principal amount of all
Advances computed on the basis of actual days elapsed in a 360-day year, from
the date of this Revolving Note until this Revolving Note is fully paid at the
rate from time to time in effect under the terms of the Agreement. Principal and
interest accruing on the unpaid principal amount of all Advances under this
Revolving Note shall be due and payable as provided in the Agreement. This
Revolving Note may be prepaid only in accordance with the
Agreement.

    

    This
Revolving Note is the Revolving Note referred to in the Agreement, and is
subject to the terms of the Agreement, which provides, among other things, for
the acceleration of this Revolving Note. This Revolving Note is secured, among
other things, by the Agreement and the Security Documents as defined in the
Agreement, and by any other security agreements, mortgages, deeds of trust,
assignments or other instruments or agreements that may subsequently be given
for good and valuable consideration as security for this Revolving
Note.

    

    Company
shall pay all costs of collection, including reasonable attorneys' fees and
legal expenses if this Revolving Note is not paid when due, whether or not legal
proceedings are commenced.

    

    Presentment
or other demand for payment, notice of dishonor and protest are expressly
waived.

    

    
      	 
      	
              NUTRACEA,
      a California corporation

            
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/ Bradley D. Edson

            
	 
      	
              Name:

            	
              Bradley D Epson

            
	 
      	
              Its:

            	
              C.E.O

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              NUTRAPHOENIX,
      LLC, a Delaware limited liability company

            
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/ Bradley D. Edson

            
	 
      	
              Name:

            	
              Bradley D Epson

            
	 
      	
              Its:

            	
              CEO

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    REAL
ESTATE TERM NOTE

    

    
      	
              $5,000,000.00

            	December
      18,
      2008

    

     

    
      FOR VALUE RECEIVED,
the undersigned, NutraCea,
a California corporation, and NutraPhoenix, LLC, a Delaware limited liability
company, (collectively, the "Company"), hereby promises to pay to the order of
WELLS FARGO BANK, NATIONAL ASSOCIATION ("Wells Fargo"), acting through its WELLS
FARGO BUSINESS CREDIT operating division, on the Termination Date described in
the Credit and Security Agreement dated December 18,
2008 (as amended from time to time, the "Agreement") and entered
into between Wells Fargo and Company, at Wells Fargo's office at 100 W.
Washington Street, 15th
Floor, Phoenix, Arizona 85003, or at any other place designated at any time by
the holder, in lawful money of the United States of America and in immediately
available funds, the principal sum of Five Million Dollars ($5,000,000.00) or
the aggregate unpaid principal amount of the Real Estate Loan made by Wells
Fargo to Company under the terms of the Agreement, together with interest on the
outstanding principal amount computed on the basis of actual days elapsed in a
360-day year, from the date of this Real Estate Term Note until this Real Estate
Term Note is fully paid at the rate from time to time in effect under the terms
of the Agreement. Principal and interest accruing on the unpaid principal amount
of this Real Estate Term Note shall be due and payable as provided in the
Agreement. This Real Estate Term Note may be prepaid only in accordance with the
Agreement.

    

    

    This Real
Estate Term Note is the Real Estate Term Note referred to in the Agreement, and
is subject to the terms of the Agreement, which provides, among other things,
for the acceleration of this Real Estate Term Note. This Real Estate Term Note
is secured, among other things, by the Agreement, the Deed of Trust, and the
Security Documents as defined in the Agreement, and by any other security
agreements, mortgages, deeds of trust, assignments or other instruments or
agreements that may subsequently be given for good and valuable consideration as
security for this Real Estate Term Note.

    

    Company
shall pay all costs of collection, including reasonable attorneys' fees and
legal expenses if this Real Estate Term Note is not paid when due, whether or
not legal proceedings are commenced.

    

    Presentment
or other demand for payment, notice of dishonor and protest are expressly
waived.

    

    
      	 
      	
              NUTRACEA,
      a California corporation

            
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/
      Bradley D. Edson

            
	 
      	
              Name:

            	
              Bradley
      D. Edson

            
	 
      	
              Its:

            	
              C.E.O.

            
	 
      	 
      	 
      
	 
      	
              NUTRAPHOENIX,
      LLC, a Delaware limited liability company

            
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/
      Bradley D. Edson

            
	 
      	
              Name:

            	
              Bradley
      D. Edson

            
	 
      	
              Its:

            	
              C.E.O.

            

    

    

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

    

    TERM
NOTE

    

    
      	
              $2,500,000.00

            	
              December 18, 2008

            

    

    

    FOR VALUE RECEIVED, the
undersigned, NutraCea, a California corporation, and NutraPhoenix, LLC, a
Delaware limited liability company (collectively, the "Company"), hereby
promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Wells
Fargo"), acting through its WELLS FARGO BUSINESS CREDIT operating division, on
the Termination Date described in the Credit and Security Agreement dated
December 18, 2008 (as amended from time to time, the "Agreement") and entered
into between Wells Fargo and Company, at Wells Fargo's office at 100 W.
Washington Street, 15th
Floor, Phoenix, Arizona 8500, or at any other place designated at any time by
the holder, in lawful money of the United States of America and in immediately
available funds, the principal sum of Two Million Five Hundred Thousand Dollars
($2,500,000.00) or the aggregate unpaid principal amount of the Term Loan made
by Wells Fargo to Company under the terms of the Agreement, together with
interest on the outstanding principal amount computed on the basis of actual
days elapsed in a 360-day year, from the date of this Term Note until this Term
Note is fully paid at the rate from time to time in effect under the terms of
the Agreement. Principal and interest accruing on the unpaid principal amount of
this Term Note shall be due and payable as provided in the Agreement. This Term
Note may be prepaid only in accordance with the Agreement.

    

    This Term
Note is the Term Note referred to in the Agreement, and is subject to the terms
of the Agreement, which provides, among other things, for the acceleration of
this Term Note. This Term Note is secured, among other things, by the Agreement
and the Security Documents as defined in the Agreement, and by any other
security agreements, mortgages, deeds of trust, assignments or other instruments
or agreements that may subsequently be given for good and valuable consideration
as security for this Term Note.

    

    Company
shall pay all costs of collection, including reasonable attorneys' fees and
legal expenses if this Term Note is not paid when due, whether or not legal
proceedings are commenced.

    

    Presentment
or other demand for payment, notice of dishonor and protest are expressly
waived.

    

    
      	 	
              NUTRACEA,
      a California corporation

            
	 	 
      	 
      
	 	
              By:

            	
              /s/
      Bradley D. Edson

            
	 	
              Name:

            	
              Bradley
      D. Edson

            
	 	
              Its:

            	
              C.E.O.

            
	 	 
      	 
      
	 	
              NUTRAPHOENIX,
      LLC, a Delaware limited liability company

            
	 	 
      	 
      
	 	
              By:

            	
              /s/
      Bradley D. Edson

            
	 	
              Name:

            	
              Bradley
      D. Edson

            
	 	
              Its:

            	
              C.E.O.

            

    

    
    

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

    

    Exhibit
A to Credit and Security Agreement

     

    DEFINITIONS

    

    "Account
Funds" is defined in Section 1.4(a).

    

    "Accounts"
shall have the meaning given it under the UCC.

    

    "Advance"
and "Advances" means an advance or advances under the Line of Credit or the Term
Loan.

    

    "Affiliate"
or "Affiliates" means any Person controlled by, controlling or under common
control with Company, including any Subsidiary of Company. For purposes of this
definition, "control," when used with respect to any specified Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.

    

    "Aggregate
Face Amount" means the aggregate amount that may then be drawn under each
outstanding Letter of Credit, assuming compliance with all conditions for
drawing.

    

    "Agreement"
means this Credit and Security Agreement.

    

    "Authenticated"
means (a) to have signed; or (b) to have executed or to have otherwise adopted a
symbol, or have encrypted or similarly processed a Record in whole or in part,
with the present intent of the authenticating Person to identify the Person and
adopt or accept a Record.

    

    "Book Net
Worth" means the aggregate of the Owners' equity in Company, determined in
accordance with GAAP.

    

    "Borrowing
Base" is defined in Section 1.2(a).

    

    "Borrowing
Base Reserve" means, as of any date of determination, an amount or a percent of
a specified category or item that Wells Fargo establishes in its sole discretion
from time to time to reduce availability under the Borrowing Base (a) to reflect
events, conditions, contingencies or risks which affect the assets, business or
prospects of Company, or the Collateral or its value, or the enforceability,
perfection or priority of Wells Fargo's Security Interest in the Collateral, as
the term "Collateral" is defined in this Agreement, or (b) to reflect Wells
Fargo's judgment that any collateral report or financial information relating to
Company and furnished to Wells Fargo may be incomplete, inaccurate or misleading
in any material respect.

    

    "Business
Day" means a day on which the Federal Reserve Bank of New York is open for
business.

    

    "Capital
Expenditures" means for a period, any expenditure of money during such for the
lease, purchase or other acquisition of any capital asset, or for the lease of
any other asset whether payable currently or in the future.

    

    "CEO" is
defined in Section 7.4(a).

    

    
      
        
           

        

        
          A-1

          
            

          

        

        
           

        

      

    

    

    "Change
of Control" means the occurrence of any of the following events:

    

    
      	
              (a)

            	
              Any
      Person or "group" (as such term is used in Sections 13(d) and 14(d) of the
      Securities Exchange Act of 1934) who does not have an ownership interest
      in Company on the date of the initial Advance is or becomes the
      "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
      Securities Exchange Act of 1934, except that any such Person, entity or
      group will be deemed to have "beneficial ownership" of all securities that
      such Person, entity or group has the right to acquire, whether such right
      is exercisable immediately or only after the passage of time), directly or
      indirectly, of more than ten percent (10%) of the voting power of all
      classes of ownership of Company;

            

    

    

    
      	
              (b)

            	
              During
      any consecutive two-year period, individuals who at the beginning of such
      period constituted the board of Directors of Company (together with any
      new Directors whose election to such board of Directors, or whose
      nomination for election by the Owners of Company, was approved by a vote
      of two thirds of the Directors then still in office who were either
      Directors at the beginning of such period or whose election or nomination
      for election was previously so approved) cease for any reason to
      constitute a majority of the board of Directors of Company then in
      office.

            

    

    

    "Collateral"
means all of Company's Accounts, chattel paper and electronic chattel paper,
deposit accounts, documents, Equipment, General Intangibles, goods, instruments,
Inventory, Investment Property, letter-of-credit rights, letters of credit, all
sums on deposit in any Collection Account, and any items in any Lockbox;
together with (a) all substitutions and replacements for and products of such
property; (b) in the case of all goods, all accessions; (c) all accessories,
attachments, parts, Equipment and repairs now or subsequently attached or
affixed to or used in connection with any goods; (d) all warehouse receipts,
bills of lading and other documents of title that cover such goods now or in the
future; (e) all collateral subject to the Lien of any of the Security Documents;
(f) any money, or other assets of Company that come into the possession,
custody, or control of Wells Fargo now or in the future; (g) Proceeds of any of
the above Collateral; (h) books and records of Company, including all mail or
e-mail addressed to Company; and (i) all of the above Collateral, whether now
owned or existing or acquired now or in the future or in which Company has
rights now or in the future, but excluding, the Company's Owned Intellectual
Property identified on Exhibit
D.

    

    "Collection
Account" means "Collection Account" as defined in the Master Agreement for
Treasury Management Services and related Lockbox and Collection Account Service
Description or Collection Account Service Description, whichever is
applicable.

    

    "Compliance
Certificate" is defined in Section 5.1(a) and is in the form of Exhibit
E.

    

    "Commercial
Letter of Credit Agreement" means an agreement governing the issuance of
documentary letters of credit entered into between Company as applicant and
Wells Fargo as issuer.

    

    "Constituent
Documents" means with respect to any Person, as applicable, that Person's
certificate of incorporation, articles of incorporation, by-laws, certificate of
formation, articles of organization, limited liability company agreement,
management agreement, operating agreement, shareholder agreement, partnership
agreement or similar document or agreement governing such

    

    
      
        
           

        

        
          A-2

          
            

          

        

        
           

        

      

    

    

    Person's
existence, organization or management or concerning disposition of ownership
interests of such Person or voting rights among such Person's
owners.

    

    "Current
Maturities of Long Term Debt" means as of each fiscal quarter end, the amount of
Company's long-term debt and capitalized leases which become due during that
quarterly period.

    

    "Debt"
means of a Person as of a given date, all items of indebtedness or liability
which in accordance with GAAP would be included in determining total liabilities
as shown on the liabilities side of a balance sheet for such Person and shall
also include the aggregate payments required to be made by such Person at any
time under any lease that is considered a capitalized lease under
GAAP.

    

    "Debt
Service Coverage Ratio" means (a) the sum of (i) Funds from Operations and (ii)
Interest Expense minus (iii) Unfinanced Capital Expenditures divided by (b) the
sum of (i) Current Maturities of Long Term Debt and (ii) Interest Expense. For
its fiscal year 2009, the Company may exclude $4,500,000.00 in Unfinanced
Capital Expenditures from the calculation.

    

    "Deed of
Trust" means the Deed of Trust, Assignment of Rents and Leases, Security
Agreement an Fixture Filing, of even date herewith, executed by NutraPhoenix,
LLC, as trustor, in favor of Lender, as beneficiary.

    

    "Default
Period" is defined in Section 1.7(c).

    

    "Default
Rate" is defined in Section 1.7(c).

    

    "Director"
means a director if Company is a corporation, or a governor or manager if
Company is a limited liability company.

    

    "Earnings
Before Taxes" means pretax earnings from operations, excluding extraordinary
gains, but including extraordinary losses.

    

    "Electronic
Record" means a Record that is created, generated, sent, communicated, received,
or stored by electronic means, but does not include any
Record that is sent, communicated, or received by fax.

    

    "Eligible
Accounts" means all unpaid Accounts of Company arising from the sale or lease of
goods or the performance of services, net of any credits, but excluding any
Accounts having any of the following characteristics:

    

    
      	
              (a) 

            	
              That
      portion of Accounts unpaid 90 days or more after the invoice
      date;

            

    

    

    
      	
              (b)

            	
              That
      portion of Accounts related to goods or services with respect to which
      Company has received notice of a claim or dispute, which are subject to a
      claim of offset or a contra account, or which reflect a reasonable reserve
      for warranty claims or returns;

            

    

    

    
      	
              (c)

            	
              That
      portion of Accounts not yet earned by the final delivery of goods or that
      portion of Accounts not yet earned by the final rendition of services by
      Company to the account debtor, including with respect to both goods and
      services, progress billings, and that portion of Accounts for which an
      invoice has not been sent to the applicable account
  debtor;

            

    

    

    
      
        
           

        

        
          A-3

          
            

          

        

        
           

        

      

    

    

    
      	
              (d)

            	
              Accounts
      constituting (i) Proceeds of copyrightable material unless such
      copyrightable material shall have been registered with the United States
      Copyright Office, or (ii) Proceeds of patentable inventions unless such
      patentable inventions have been registered with the United States Patent
      and Trademark Office;

            

    

    

    
      	
              (e)

            	
              Accounts
      owed by any unit of government, whether foreign or domestic (except that
      there shall be included in Eligible Accounts that portion of Accounts owed
      by such units of government for which Company has provided evidence
      satisfactory to Wells Fargo that (i) Wells Fargo's Security Interest
      constitutes a perfected first priority Lien in such Accounts, and (ii)
      such Accounts may be enforced by Wells Fargo directly against such unit of
      government under all applicable
laws);

            

    

    

    
      	
              (f) 

            	
              Accounts
      denominated in any currency other than United States
    Dollars;

            

    

    

    
      	
              (g)

            	
              Accounts
      owed by an account debtor located outside the United States or Canada
      which are not (i) backed by a bank letter of credit naming Wells Fargo as
      beneficiary or assigned to Wells Fargo, in Wells Fargo's possession or
      control, and with respect to which a control agreement concerning the
      letter-of-credit rights is in effect, and acceptable to Wells Fargo in all
      respects, in its sole discretion, or (ii) covered by a foreign receivables
      insurance policy acceptable to Wells Fargo in its sole
      discretion;

            

    

    

    
      	
              (h)

            	
              Accounts
      owed by an account debtor who is insolvent or is the subject of bankruptcy
      proceedings or who has gone out of
business;

            

    

    

    (i)           Accounts
owed by an Owner, Subsidiary, Affiliate, Officer or employee of
Company;

    

    
      	
              (j)

            	
              Accounts
      not subject to the Security Interest or which are subject to any Lien in
      favor of any Person other than Wells
Fargo;

            

    

    

    (k)           That
portion of Accounts that has been restructured, extended, amended or
modified;

    

    
      	
              (l)

            	
              That
      portion of Accounts that constitutes advertising, finance charges, service
      charges or sales or excise taxes;

            

    

    

    
      	
              (m)

            	
              Accounts
      owed by an account debtor and its affiliates, regardless of whether
      otherwise eligible, to the extent that the aggregate balance of such
      Accounts exceeds 15% of the aggregate amount of all Eligible
      Accounts;

            

    

    

    
      	
              (n)

            	
              Accounts
      owed by an account debtor and its affiliates, regardless of whether
      otherwise eligible, if 25% or more of the total amount of Accounts due
      from such debtor is ineligible under clauses (a), (b), or (k) above;
      and

            

    

    

    
      	
              (o)

            	
              Accounts,
      or portions of Accounts, otherwise deemed ineligible by Wells Fargo in its
      sole discretion.

            

    

    

    "Eligible
Equipment" means that Equipment of Company designated by Wells Fargo as eligible
from time to time in its sole discretion, but excluding Equipment having any of
the following characteristics:

    

    (a)           Equipment
that is subject to any Lien other than in favor of Wells Fargo;

    

    
      
        
           

        

        
          A-4

          
            

          

        

        
           

        

      

    

    

    (b)           Equipment
that has not been delivered to the Premises;

    

    (c)           Equipment
in which Wells Fargo does not hold a first priority security
interest;

    

    (d)           Equipment
that is obsolete or not currently saleable;

    

    
      	
              (e)

            	
              Equipment
      that is not covered by standard "all risk" hazard insurance for an amount
      equal to its forced liquidation
value;

            

    

    

    
      	
              (f)

            	
              Equipment
      that requires proprietary software in order to operate in the manner in
      which it is intended when such software is not freely assignable to Wells
      Fargo or any potential purchaser of such
  Equipment;

            

    

    

    (g)           Equipment
consisting of computer hardware, software, tooling, or molds; and

    

    (h)           Equipment
otherwise deemed unacceptable by Wells Fargo in its sole
discretion.

    

    "Eligible
Inventory" means all Inventory of Company, valued at the lower of cost or market
in accordance with GAAP; but excluding Inventory having any of the following
characteristics:

    

    
      	
              (a)

            	
              Inventory
      that is: in-transit; located at any warehouse, job site or other premises
      not approved by Wells Fargo in an Authenticated Record delivered to
      Company; not subject to a perfected first priority Lien in Wells Fargo's
      favor; covered by any negotiable or non-negotiable warehouse receipt, bill
      of lading or other document of title; on consignment from any consignor;
      or on consignment to any consignee or subject to any bailment unless the
      consignee or bailee has executed an agreement with Wells
      Fargo;

            

    

    

    (b)           Supplies,
packaging, parts or sample Inventory, or customer supplied parts or
Inventory;

    

    (c)           Work-in-process
Inventory;

    

    
      	
              (d)

            	
              Inventory
      that is damaged, defective, obsolete, slow moving or not currently
      saleable in the normal course of Company's operations, or the amount of
      such Inventory that has been reduced by
  shrinkage;

            

    

    

    
      	
              (e)

            	
              Inventory
      that Company has returned, has attempted to return, is in the process of
      returning or intends to return to the vendor of the
    Inventory;

            

    

    

    (f)           Inventory
that is live;

    

    
      	
              (g)

            	
              Inventory
      manufactured by Company pursuant to a license unless the applicable
      licensor has agreed in a Record that has been Authenticated by licensor to
      permit Wells Fargo to exercise its rights and remedies against such
      Inventory;

            

    

    

    (h)           Inventory
that is subject to a Lien in favor of any Person other than Wells
Fargo;

    

    
      	
              (i)

            	
              Except
      as expressly agreed by Borrower and Lender, inventory stored at locations
      holding less than 10% of the aggregate value of Company's Inventory;
      and

            

    

    

    (j)           Inventory
otherwise deemed ineligible by Wells Fargo in its sole discretion.

    

    
      
        
           

        

        
          A-5

          
            

          

        

        
           

        

      

    

    

    "Environmental
Law" means any federal, state, local or other governmental statute, regulation,
law or ordinance dealing with the protection of human health and the
environment.

    

    "Equipment"
shall have the meaning given it under the Uniform Commercial Code in effect in
the state whose laws govern this Agreement.

    

    "ERISA"
means the Employee Retirement Income Security Act of 1974, as amended from time
to time.

    

    "ERISA
Affiliate" means any trade or business (whether or not incorporated) that is a
member of a group which includes Company and which is treated as a single
employer under Section 414 of the IRC.

    

    "Event of
Default" is defined in Section 6.1.

    

    "Floating
Rate" means an annual interest rate equal to (a) the Prime Rate plus 2.5% for a
Line of Credit Advance, (b) the Prime Rate plus 3.0% for the Real Estate Loan,
and (c) the Prime Rate plus 3.0% for the Term Loan Advance.

    

    "Floating
Rate Advance" is defined in Section 1.7(a).

    

    "Funds
from Operations" means for a given period, the sum of (a) Net Income, (b)
depreciation and amortization, (c) any increase (or decrease) in deferred income
taxes, (d) any increase (or decrease) in lifo reserves, and (e) other non-cash
items, each as determined for such period in accordance with GAAP.

    

    "GAAP"
means generally accepted accounting principles, applied on a basis consistent
with the accounting practices applied in the financial statements described on
Exhibit
D.

    

    "General
Intangibles" shall have the meaning given it under the UCC.

    

    "Guarantor"
means any Person now or in the future guaranteeing any Indebtedness through the
issuance of a Guaranty.

    

    "Guaranty"
means an unconditional continuing guaranty executed by a Guarantor in favor of
Wells Fargo (if more than one, the "Guaranties").

    

    "Hazardous
Substances" means pollutants, contaminants, hazardous substances, hazardous
wastes, petroleum and fractions thereof, and all other chemicals, wastes,
substances and materials listed in, regulated by or identified in any
Environmental Law.

    

    "Indebtedness"
is used in its most comprehensive sense and means any debts, obligations and
liabilities of Company to Wells Fargo, whether incurred in the past, present or
future, whether voluntary or involuntary, and however arising, and whether due
or not due, absolute or contingent, liquidated or unliquidated, determined or
undetermined, and including without limitation all obligations arising under any
swap, derivative, foreign exchange, hedge, deposit, treasury management or
similar transaction or arrangement however described or defined that Company may
enter into at any time with Wells Fargo or with Wells Fargo Merchant Services,
L.L.C., whether or not Company may be liable individually or jointly with
others, or whether recovery upon such Indebtedness may subsequently become
unenforceable.

    

    
      
        
           

        

        
          A-6

          
            

          

        

        
           

        

      

    

    

    "Indemnified
Liabilities" is defined in Section 7.8.

    

    "Indemnitee"
is defined in Section 7.8.

    

    "Infringement"
or "Infringing" when used with respect to Intellectual Property Rights means any
infringement or other violation of Intellectual Property Rights.

    

    "Intellectual
Property Rights" means all actual or prospective rights arising in connection
with any intellectual property or other proprietary rights, including all rights
arising in connection with copyrights, patents, service marks, trade dress,
trade secrets, trademarks, trade names or mask works.

    

    "Interest
Expense" means for a fiscal year-to-date period, Company's total gross interest
expense during such period (excluding interest income), and shall in any event
include (a) interest expensed (whether or not paid) on all Debt, (b) the
amortization of debt discounts, (c) the amortization of all fees payable in
connection with the incurrence of Debt to the extent included in interest
expense, and (d) the portion of any capitalized lease obligation allocable to
interest expense.

    

    "Interest
Payment Date" is defined in Section 1.9(a). "Inventory" shall have the meaning
given it under the UCC. "Investment Property" shall have the meaning given it
under the UCC.

    

    "L/C
Amount" means the sum of (a) the Aggregate Face Amount of any outstanding
Letters of Credit, plus (b) the amount of each Obligation of Reimbursement that
either remains unreimbursed or has not been paid through an Advance on the Line
of Credit.

    

    "L/C
Application" means an application for the issuance of standby or documentary
Letters of Credit pursuant to the terms of a Standby Letter of Credit Agreement
or Commercial Letter of Credit Agreement, in form acceptable to Wells
Fargo.

    

    "Letter
of Credit" and "Letters of Credit" are each defined in Section 1.11(a).
"Licensed Intellectual Property" is defined in Exhibit
D.

    

    "Lien"
means any security interest, mortgage, deed of trust, pledge, lien, charge,
encumbrance, title retention agreement or analogous instrument or device,
including the interest of each lessor under any capitalized lease and the
interest of any bondsman under any payment or performance bond, in, of or on any
assets or properties of a Person, whether now owned or subsequently acquired and
whether arising by agreement or operation of law.

    

    "Line of
Credit" is defined in the Recitals.

    

    "Loan
Documents" means this Agreement, the Revolving Note, the Real Estate Term Note,
the Term Note, the Deed of Trust, the Master Agreement for Treasury Management
Services, each Subordination Agreement, each Standby Letter of Credit Agreement,
each Commercial Letter of Credit Agreement, any L/C Applications, and the
Security Documents, together with every other agreement, note, document,
contract or instrument to which Company now or in the future may be a party and
which may be required by Wells Fargo in connection with, or as a condition to,
the execution of this Agreement. Any documents or other agreements entered into
between Company and Wells Fargo that relate to any swap, derivative, foreign
exchange, hedge, or similar product or transaction, or which are entered into
with an operating division of Wells Fargo other than Wells Fargo Business
Credit, shall not be included in this definition.

    

    
      
        
           

        

        
          A-7

          
            

          

        

        
           

        

      

    

    

    "Loan
Manager" means the treasury management service defined in the Master Agreement
for Treasury Management Services and related Loan Manager Service
Description.

    

    "Lockbox"
means "Lockbox" as defined in the Master Agreement for Treasury Management
Services and related Lockbox and Collection Account Service
Description.

    

    "Master
Agreement for Treasury Management Services" means the Master Agreement for
Treasury Management Services, the related Acceptance of Services, and the
Service Description governing each treasury management service used by
Company.

    

    "Material
Adverse Effect" means any of the following:

    

    
      	
              (a)

            	
              A
      material adverse effect on the business, operations, results of
      operations, prospects, assets, liabilities or financial condition of
      Company;

            

    

    

    
      	
              (b)

            	
              A
      material adverse effect on the ability of Company to perform its
      obligations under the Loan Documents, or any other document or agreement
      related to this Agreement;

            

    

    

    
      	
              (c)

            	
              A
      material adverse effect on the ability of Wells Fargo to enforce the
      Indebtedness or to realize the intended benefits of the Security
      Documents, including a material adverse effect on the validity or
      enforceability of any Loan Document or of any rights against any
      Guarantor, or on the status, existence, perfection, priority (subject to
      Permitted Liens) or enforceability of any Lien securing payment or
      performance of the Indebtedness; or

            

    

    

    
      	
              (d)

            	
              Any
      claim against Company or threat of litigation which if determined
      adversely to Company would result in the occurrence of an event described
      in clauses (a), (b) and (c) above.

            

    

    

    "Maturity
Date" is defined in Section 1.1(b). 

     

    "Maximum
Line Amount" is defined in Section 1.1(a). 

     

    "Minimum
Interest Charge" is defined in Section 1.7(b).

    

    "Multiemployer
Plan" means a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) to
which Company or any ERISA Affiliate contributes or is obligated to
contribute.

    

    "Net Cash
Proceeds" means the cash proceeds of any asset sale (including cash proceeds
received as deferred payments pursuant to a note, installment receivable or
otherwise, but only upon actual receipt) net of (a) attorney, accountant, and
investment banking fees, (b) brokerage commissions, (c) amounts required to be
applied to the repayment of debt secured by a Lien not prohibited by this
Agreement on the asset being sold, and (c) taxes paid or reasonably estimated to
be payable as a result of such asset sale.

    

    
      
        
           

        

        
          A-8

          
            

          

        

        
           

        

      

    

    

    "Net
Forced Liquidation Value" means a professional opinion of the probable Net Cash
Proceeds that could be realized at a properly advertised and professionally
managed forced sale public auction conducted without reserve under economic
trends current within 60 days of the appraisal, which opinion may consider
physical location, difficulty of removal, adaptability, specialization,
marketability, physical condition, overall appearance and psychological
appeal.

    

    "Net
Income" means fiscal year-to-date after-tax net income from continuing
operations, including extraordinary losses but excluding extraordinary gains,
all as determined in accordance with GAAP.

    

    "Net
Loss" means fiscal year-to-date after-tax net loss from continuing operations
including extraordinary losses but excluding extraordinary gains, as determined
in accordance with GAAP.

    

    "Net
Orderly Liquidation Value" means a professional opinion of the probable Net Cash
Proceeds that could be realized at a properly advertised and professionally
conducted liquidation sale, conducted under orderly sale conditions for an
extended period of time (usually six to nine months), under the economic trends
existing at the time of the appraisal.

    

    "Obligation
of Reimbursement" is defined in Section 1.11(b).

    

    "OFAC" is
defined in Section 5.11(b).

    

    "Officer"
means with respect to Company, an officer if Company is a corporation, a manager
if Company is a limited liability company, or a partner if Company is a
partnership.

    

    "Operating
Account" is defined in Section 1.3(a), and maintained in accordance with the
terms of Wells Fargo's Commercial Account Agreement in effect for demand deposit
accounts.

    

    "Overadvance"
means the amount, if any, by which the unpaid principal amount of the Revolving
Note, plus the L/C Amount, is in excess of the then-existing Borrowing
Base.

    

    "Owned
Intellectual Property" is defined in Exhibit
D.

    

    "Owner"
means with respect to Company, each Person having legal or beneficial title to
an ownership interest in Company or a right to acquire such an
interest.

    

    "Pension
Plan" means a pension plan (as defined in Section 3(2) of ERISA) maintained for
employees of Company or any ERISA Affiliate and covered by Title IV of
ERISA.

    

    "Permitted
Lien" and "Permitted Liens" are defined in Section 5.3(a).

    

    "Person"
means any individual, corporation, partnership, joint venture, limited liability
company, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision of a governmental
entity.

    

    "Plan"
means an employee benefit plan (as defined in Section 3(3) of ERISA) maintained
for employees of Company or any ERISA Affiliate.

    

    "Premises"
is defined in Section 2.4(a).

    

    
      
        
           

        

        
          A-9

          
            

          

        

        
           

        

      

    

    

    "Prime
Rate" means at any time the rate of interest most recently announced by Wells
Fargo at its principal office as its Prime Rate, with the understanding that the
Prime Rate is one of Wells Fargo's base rates, and serves as the basis upon
which effective rates of interest are calculated for those loans making
reference to it, and is evidenced by its recording in such internal publication
or publications as Wells Fargo may designate. In no event, shall the Prime Rate
be less than 4.0%. Each change in the rate of interest shall become effective on
the date each Prime Rate change is announced by Wells Fargo.

    

    "Proceeds"
shall have the meaning given it under the UCC.

    

    "Real
Estate" means the real property located at 4502 W. Monterosa Street, Phoenix,
Arizona and more particularly described on in the Deed of Trust.

    

    "Real
Estate Term Note" is defined in Section 1.5(b).

    

    "Record"
means information that is inscribed on a tangible medium or that is stored in an
electronic or other medium and is retrievable in perceivable form, and includes
all information that is required to be reported by Company to Wells Fargo
pursuant to Section 5.1.

    

    "Reportable
Event" means a reportable event (as defined in Section 4043 of ERISA), other
than an event for which the 30-day notice requirement under ERISA has been
waived in regulations issued by the Pension Benefit Guaranty
Corporation.

    

    "Revolving
Note" is defined in Section 1.1(d).

    

    "Security
Documents" means this Agreement, the Deed of Trust, and any other document
delivered to Wells Fargo from time to time to secure the
Indebtedness.

    

    "Security
Interest" is defined in Section 2.1.

    

    "Special
Account" means a specified cash collateral account maintained with Wells Fargo
or another financial institution acceptable to Wells Fargo in connection with
each undrawn Letter of Credit issued by Wells Fargo, as more fully described in
Section 1.12.

    

    "Standby
Letter of Credit Agreement" means an agreement governing the issuance of standby
letters of credit by Wells Fargo entered into between Company as applicant and
Wells Fargo as issuer.

    

    "Subordinated
Creditor" means any Person now or in the future subordinating indebtedness of
Company held by that Person to the payment of the Indebtedness.

    

    "Subordinated
Debt" means indebtedness due to Company that has been subordinated to Wells
Fargo by a Subordinated Creditor pursuant to a Subordination
Agreement.

    

    "Subordination
Agreement" means a subordination agreement executed by a Subordinated Creditor
in favor of Wells Fargo (if more than one, the "Subordination
Agreements").

    

    "Subsidiary"
means any Person of which more than 50% of the outstanding ownership interests
having general voting power under ordinary circumstances to elect a majority of
the board of directors or the equivalent of such Person, irrespective of whether
or not at the time ownership interests of any other class or classes shall have
or might have voting power by reason of the happening of any contingency, is at
the time directly or indirectly owned by Company, by Company and one or more
other Subsidiaries, or by one or more other Subsidiaries.

    

    
      
        
           

        

        
          A-10

          
            

          

        

        
           

        

      

    

    

    "Termination
Date" is defined in Section 1.1(b).

    

    "Term
Loan" is defined in the Recitals.

    

    "Term
Note" is defined in Section 1.6(b).

    

    "UCC"
means the Uniform Commercial Code in effect in the state designated in this
Agreement as the state whose laws shall govern this Agreement, or in any other
state whose laws are held to govern this Agreement or any portion of this
Agreement.

    

    "Unfinanced
Capital Expenditures" means for a period, any expenditure of money during such
period for the purchase or construction of assets, or for improvements or
additions to such assets, which are not financed with borrowed funds and are not
capitalized on Company's balance sheet.

    

    "Unused
Amount" is defined in Section 1.8(b).

    

    "Wells
Fargo" means Wells Fargo Bank, National Association in its broadest and most
comprehensive sense as a legal entity, and is not limited in its meaning to the
Wells Fargo Business Credit operating division, or to any other operating
division of Wells Fargo.

    

    
      
        
           

        

        
          A-11

          
            

          

        

        
           

        

      

    

    

    Exhibit
B to Credit and Security Agreement 

     

    PREMISES

    

    The
Premises referred to in the Credit and Security Agreement have the following
addresses:

    

    NutraCea,
Corporate Offices

    5090
North 40th
Street, Suite

    400
Phoenix, AZ 85018

    

    NutraCea,
Phoenix Plant

    4502 W.
Monterosa

    Phoenix,
AZ 85031

    

    ADM
Arbuckle, CA 1603

    Old
Highway 99 West

    Arbuckle,
CA 95912

    

    NutraCea,
TX Office

    200 West
2nd,
Suite

    205
Freeport,TX 77541

    

    NutraCea,
TX Plant 505

    Port
Road, Building 2B

    Freeport,
TX 77541

    

    NutraCea,
Paradise Warehouse

    820
County Road 229

    Freeport,
TX 77541

    

    Delta
Western Indianola,

    MS 1842
Highway 82 West

    Indianola,
MS 38751

    

    NutraCea,
Lake Charles

    Plant
6029 Joe Spears Road

    Iowa, LA
70647

    

    NutraCea,
Mermentau LA

    Plant 170
S. 13th
Street

    Mermentau,
LA 70556

    NutraCea
(RiceX Nutrients)

    MT
Plant

    3512 East
Bench Road

    Dillon,
MT 59725

    

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

    

    NutraCea,
West Sacramento Warehouse Facility

    2928
Ramco, Suite 120

    West
Sacramento, 95691

    

    MWD
Sacramento, CA

    4840 Lang
Avenue

    McClennan,
CA 95652

    

    NutraCea,
Idaho office

    1901
Conant Avenue

    Burley,ID
83318

    

    PT
Panganmas Inti Nusantara

    Kantor
Taman E 3.3, No. D8, JI.

    Mega
Kuningan Log 8.6-7

    Kawasan
Mega Kuningan Jakarta

    Indonesia

    

    Irgovel -
Industria Riograndense De oleos Vegetais Ltda.

    Avenida
Presidente Joao Goulart

    7351,
Distrito Industrial,

    CEP
96-040-000

    Pelotas,
Rio Grande do Sul

    Federative
Republic of Brazil

    

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

    

    Exhibit
C to Credit and Security Agreement

    

    CONDITIONS
PRECEDENT

    

    Wells
Fargo's obligation to make an initial Advance shall be subject to the condition
that Wells Fargo shall have received the following, executed and in form and
content satisfactory to Wells Fargo. The following descriptions are limited
descriptions for reference purposes only and should not be construed as limiting
in any way the subject matter that Wells Fargo requires each document to
address.

    

    
      	
              A. 

            	
              Loan
      Documents to be Executed by
Company:

            

    

    

    
      	
              (1) 

            	
              The
      Revolving Note, the Real Estate Term Note, and the Term
    Note.

            

    

    

    
      	
              (2) 

            	
              The
      Credit and Security Agreement.

            

    

    

    
      	
              (3)

            	
              The
      Master Agreement for Treasury Management Services, the Acceptance of
      Services, and the related Service Description for each deposit or treasury
      management related product or service that Company will subscribe to,
      including without limitation the Collection Account Service
      Description.

            

    

    

    
      	
              (4) 

            	
              The
      Deed of Trust.

            

    

    

    
      	
              (5)

            	
              A
      Standby Letter of Credit Agreement and the Commercial Letter of Credit
      Agreement, and a separate L/C Application for each Letter of Credit that
      Company has requested that Wells Fargo
issue.

            

    

    

    
      	
              B. 

            	
              Loan
      Documents to be Executed by Third
Parties:

            

    

    

    
      	
              (1)

            	
              A
      Subordination Agreement, if applicable, pursuant to which each
      Subordinated Creditor shall unconditionally subordinate payment of any
      indebtedness of Company held by the Subordinated Creditor to the full and
      prompt payment of all Company's Indebtedness, and subordinates any Lien in
      favor of Subordinated Creditor to the Lien of Wells
  Fargo.

            

    

    

    
      	
              (2)

            	
              An
      Acknowledgement of Warehouseman from each warehouse where Company stores
      Inventory, pursuant to which the warehouseman waives its Lien in the
      Inventory.

            

    

    

    
      	
              (3)

            	
              An
      Acknowledgement of Subcontractor from each subcontractor or consignee of
      Company's Inventory, pursuant to which the subcontractor waives its Lien
      in the Inventory.

            

    

    

    
      	
              (4)

            	
              A
      copy of each Notice of
      Ownership of Goods sent to each Person to whom tangible Collateral
      has been delivered but who will not be taking ownership of such property,
      notifying each such Person of the continued ownership interest of Company
      in such property and the Lien being retained by Wells Fargo in such
      Collateral.

            

    

    

    
      	
              (5)

            	
              A
      Waiver of Setoff Rights
      from each account debtor to Company pursuant to which the account
      debtor waives its rights to exercise its rights to setoff against such
      Account any amounts owed by Company to the account
  debtor.

            

    

    

    
      
        
           

        

        
          C-1

          
            

          

        

        
           

        

      

    

    

    
      	
              (6)

            	
              A
      Landlord's Disclaimer and
      Consent to each lease entered into by Company and that Landlord
      with respect to the Premises, pursuant to which the Landlord waives its
      Lien in any goods or other Inventory of Company located on the
      Premises.

            

    

    

    
      	
              (7)

            	
              Certificates Insurance
      required under this Agreement, with all hazard insurance containing
      a lender's interest endorsement in Wells Fargo's favor and with all
      liability insurance naming Wells Fargo as additional
    insured.

            

    

    

    
      	
              C. 

            	
              Documents
      Related to the Premises

            

    

    

    
      	
              (1) 

            	
              Any
      leases pursuant to which Company is leasing the Premises from a
      lessor.

            

    

    

    
      	
              (2)

            	
              Any
      mortgages or deeds of trust pursuant to which Company or the landlord to
      Company has encumbered the
Premises.

            

    

    

    
      	
              (3)

            	
              Every
      bailment or consignment pursuant to which any property of Company is in
      the possession of a third Person such as a consignee or subcontractor,
      together with, in the case of any goods held by such Person for resale,
      UCC financing statements sufficient to protect Company's and Wells Fargo's
      interests in such goods.

            

    

    

    
      	
              D. 

            	
              Federal
      Tax, State Tax, Judgment, UCC and Intellectual Property Lien
      Searches

            

    

    

    
      	
              (1)

            	
              Current
      searches of Company in appropriate filing offices showing that (i) no
      Liens have been filed and remain in effect against Company and Collateral
      except Permitted Liens or Liens held by Persons who have agreed in an
      Authenticated Record that upon receipt of proceeds of the initial
      Advances, they will satisfy, release or terminate such Liens in a manner
      satisfactory to Wells Fargo, and (ii) Wells Fargo has filed all UCC
      financing statements necessary to perfect the Security Interest, to the
      extent the Security Interest is capable of being perfected by
      filing.

            

    

    

    
      	
              (2)

            	
              Current
      searches of Third Persons in appropriate filing offices with respect to
      any of the Collateral that is in the possession of a Person other than
      Company that is held for resale, showing that (i) UCC financing statements
      sufficient to protect Company's and Wells Fargo's interests in such
      Collateral have been filed, and (ii) no other secured party has filed a
      financing statement against such Person and covering property similar to
      Company's, other than Company, or if there exists any such secured party,
      evidence that each such party has received notice from Company and Wells
      Fargo sufficient to protect Company's and Wells Fargo's interests in
      Company's goods from any claim by such secured
  party.

            

    

    

    
      	
              E. 

            	
              Constituent
      Documents:

            

    

    

    
      	
              (1)

            	
              The
      Certificate of Authority of Company, which shall include as part of the
      Certificate or as exhibits to the Certificate, (i) the Resolution of
      Company's Directors and, if required, Owners, authorizing the execution,
      delivery and performance of those Loan Documents and other documents or
      agreements described in or related to this Agreement to which Company is a
      party, (ii) an Incumbency Certificate containing the signatures of
      Company's Officers or agents authorized to execute and deliver those
      instruments, agreements and certificates referenced in (i) above, as well
      as Advance requests, on

            

    

    

    
      
        
           

        

        
          C-2

          
            

          

        

        
           

        

      

    

    

    Company's
behalf, (iii) Company's Constituent Documents, (iv) a current Certificate of
Good Standing or Certificate of Status issued by the secretary of state or other
appropriate authority for Company's state of organization, certifying that
Company is in good standing and in compliance with all applicable organizational
requirements of the state of organization, and (v) a Secretary's Certificate of
Company's secretary or assistant secretary certifying that the Certificate of
Authority of Company is true, correct and complete.

    

    
      	
              (2)

            	
              Evidence
      that Company is licensed or qualified to transact business in all
      jurisdictions where the character of the property owned or leased or the
      nature of the business transacted by it makes such licensing or
      qualification necessary.

            

    

    

    
      	
              (3)

            	
              An
      Officer's Certificate of an appropriate Officer of Company confirming, in
      his or her personal capacity, the representations and warranties set forth
      in this Agreement.

            

    

    

    
      	
              (4)

            	
              A
      Customer Identification Information Form and such other forms and
      verification as Wells Fargo may need to comply with the U.S.A. Patriot
      Act.

            

    

    

    
      	
              F.

            	
              Real
      Estate Related Documents:

            

    

    

    With
respect to the Real Estate that is encumbered by the Deed of Trust given by
Company to Wells Fargo:

    

    
      	
              (1)

            	
              An
      appraisal ordered by Wells Fargo or its agent of said real property and
      all improvements thereon, conforming to Uniform Standards of Professional
      Appraisal Practice.

            

    

    

    
      	
              (2)

            	
              An
      American Land Title Association policy of title insurance, with such
      endorsements as Wells Fargo may require, issued by an insurer in such
      amounts as Wells Fargo may require, insuring Wells Fargo's first priority
      lien on said real estate, subject only to such exceptions as Wells Fargo
      in its discretion may approve, together with such evidence relating to the
      payment of liens or potential liens as Wells Fargo may
      require.

            

    

    

    
      	
              (3)

            	
              An
      American Land Title Association survey certified to Wells Fargo and to the
      title company.

            

    

    

    
      	
              (4)

            	
              A
      current environmental site assessment indicating that the real property is
      subject to no "recognized environmental conditions", as that term is
      defined by the American Society for Testing and Materials, in its
      standards for environmental due diligence, and is not in need of remedial
      action to avoid subjecting its owner to any present or future liability or
      contingent liability with respect to the release of toxic or hazardous
      wastes or substances.

            

    

    

    
      	
              (5)

            	
              A
      flood hazard determination form, confirming whether or not the parcel is
      in a flood hazard area and whether or not flood insurance must be
      obtained, and, if the real estate is located in a flood hazard area, a
      policy of flood insurance.

            

    

    

    
      	
              (6)

            	
              Copies
      of management services and maintenance contracts, fire, health and safety
      reports, certificates of occupancy, leases and rent
  rolls.

            

    

    

    
      
        
           

        

        
          C-3

          
            

          

        

        
           

        

      

    

    

    
      	
              G.

            	
              Miscellaneous
      Matters or Documents:

            

    

    

    
      	
              (1)

            	
              Payment
      of fees and reimbursable costs and expenses due under this Agreement
      through the date of initial Advance or issuance of a Letter of Credit,
      including all legal expenses incurred through the date of the closing of
      this Agreement.

            

    

    

    
      	
              (2)

            	
              Evidence
      that after making the initial Advance, satisfying all obligations owed to
      Company's prior lender, paying all trade payables older than 60 days from
      invoice date, and paying all book overdrafts and closing costs,
      availability under the Line of Credit is not less than
      $8,000,000.00.

            

    

    

    
      	
              (3)

            	
              Any
      documents or other agreements entered into by Company and Wells Fargo that
      relate to any swap, derivative, foreign exchange, hedge, deposit, treasury
      management or similar product or transaction extended to Company by Wells
      Fargo not already provided pursuant to the requirements of (A)-(F)
      above.

            

    

    

    
      	
              (4) 

            	
              Such
      other documents as Wells Fargo in its sole discretion may
      require.

            

    

    

    
      
        
           

        

        
          C-4

          
            

          

        

        
           

        

      

    

    

    Exhibit
D to Credit and Security Agreement

    

    REPRESENTATIONS AND
WARRANTIES

    

    Company
represents and warrants to Wells Fargo as follows:

    

    
      	
              (a)

            	
              Existence and Power;
      Name: Chief Executive Office: Inventory and Equipment Locations; Federal
      Employer Identification Number and Organizational Identification
      Number. NutraCea is a corporation organized, validly existing and
      in good standing under the laws of the State of California, and
      NutraPhoenix, LLC is a limited liability company organized, validly
      existing and in good standing under the laws of the State of Delaware, and
      each entity is licensed or qualified to transact business in all
      jurisdictions where the character of the property owned or leased or the
      nature of the business transacted by it makes such licensing or
      qualification necessary. Company has all requisite power and authority to
      conduct its business, to own its properties and to execute and deliver,
      and to perform all of its obligations under, those Loan Documents and any
      other documents or agreements that it has entered into with Wells Fargo
      related to this Agreement. During its existence, Company has done business
      solely under the names set forth below in addition to its correct legal
      name. Company's chief executive office and principal place of business is
      located at the address set forth below, and all of Company's records
      relating to its business or the Collateral are kept at that location. All
      Inventory and Equipment is located at that location or at one of the other
      locations set forth below. Company's name, Federal Employer Identification
      Number and Organization Identification Number are correctly set forth at
      the end of the Agreement next to Company's
  signature.

            

    

    

    
      	
              Trade
      Names

            
	 
      
	
              None.

            
	 
      
	 
	
              Chief
      Executive Office / Principal Place of Business

            
	 
      
	
               

              5090
      N. 40th
      Street, Suite 400

              Phoenix, Arizona 85018

            
	 
      
	
              Other
      Inventory and Equipment Locations

            
	 
      
	
              NutraCea,
      Corporate Offices

              5090
      North 40th
      Street, Suite 400

              Phoenix,
      AZ 85018

            
	 
      
	
              NutraCea,
      Phoenix Plant

              4502
      W. Monterosa

              Phoenix,
      AZ 85031

            
	 
      
	
              ADM
      Arbuckle, CA

              1603 Old Highway 99
  West

            

    

    

    
      
        
           

        

        
          D-1

          
            

          

        

        
           

        

      

    

    

    
      	
              Arbuckle,
      CA 95912

            
	 
      
	
              NutraCea,
      TX Office

              200
      West 2nd,
      Suite 205

              Freeport,
      TX 77541

            
	 
      
	
              NutraCea,
      TX Plant

              505
      Port Road, Building 2B

              Freeport,
      TX 77541

            
	 
      
	
              NutraCea,
      Paradise Warehouse

              820
      County Road 229

              Freeport,
      TX 77541

            
	 
      
	
              Delta
      Western Indianola, MS

              1842
      Highway 82 West

              Indianola,
      MS 38751

            
	 
      
	
              NutraCea,
      Lake Charles Plant

              6029
      Joe Spears Road

              Iowa,
      LA 70647

            
	 
      
	
              NutraCea,
      Mermentau

              LA
      Plant

              170
      S. 13th
      Street

              Mermentau,
      LA 70556

              NutraCea
      (RiceX Nutrients)

              MT
      Plant

              3512
      East Bench Road

              Dillon,
      MT 59725

            
	 
      
	
              NutraCea,
      West Sacramento Warehouse Facility

              2928
      Ramco, Suite 120

              West
      Sacramento, 95691

            
	 
      
	
              MWD
      Sacramento, CA

              4840
      Lang Avenue

              McClennan,
      CA 95652

            
	 
      
	
              NutraCea,
      Idaho office

              1901
      Conant Avenue

              Burley,ID
      83318

            
	 
      
	
              PT
      Panganmas Inti Nusantara

              Kantor
      Taman E 3.3, No. D8,

              JI.
      Mega Kuningan Log 8.6-7

              Kawasan
      Mega Kuningan Jakarta

              Indonesia

            

    

    

    
      
        
           

        

        
          D-2

          
            

          

        

        
           

        

      

    

    

    
      	
              Irgovel
      - Industria Riograndense De oleos Vegetais Ltda.

              Avenida
      Presidente Joao Goulart

              7351,
      Distrito Industrial,

              CEP
      96-040-000

              Pelotas,
      Rio Grande do Sul

              Federative
      Republic of Brazil

            

    

    

    
      	
              (b)

            	
              Capitalization.
      The Capitalization Chart below constitutes a correct and complete list of
      all ownership interests of Company and all rights to acquire ownership
      interests, including the record holder, number of interests and percentage
      interests on a fully diluted basis, and the Organizational Chart below
      shows the ownership structure of all Subsidiaries of
    Company.

            

    

    

    

    
      	
              Capitalization
      Chart

               

            	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              NutraCea,
      Inc

              Equity
      Schedule

              December
      10, 2008

            	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	 	
              Number
      of Shares

            	 	 	
              Par
      Value

            	 	 	
              Warrants
      and Options

            	 	 	
              Combined
      Beneficial

            	 	 	
              Percentage
      Ownership Fully Diluted

            	 
	
              Preferred
      Stock (1)

            	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Series
      D - (8% dividend, quarterly beginning 1/1/09)

            	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Midsummer
      Investments

            	 	 	1,945	 	 	 	1,945,000	 	 	 	2,000	 	 	 	 	 	 	 
	
              Cranshire

            	 	 	3,000	 	 	 	3,000,000	 	 	 	3,000	 	 	 	 	 	 	 
	
              Total
      preferred stock outstanding

            	 	 	4,945	 	 	 	4,945,000	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Warrants
      to purchase Preferred Stock outstanding

            	 	 	 	 	 	 	 	 	 	 	5,000	 	 	 	 	 	 	 
	
              Common
      Stock

            	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              5%
      or greater holders (2)

            	 	 	0	 	 	 	 	 	 	 	0	 	 	 	0	 	 	 	0.00	%
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Board
      of directors and officers

            	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Officers

            	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Brad
      Edson

            	 	 	255,000	 	 	 	 	 	 	 	7,000,000	 	 	 	7,255,000	 	 	 	3.18	%
	
              Olga
      Hernandez-Longan

            	 	 	0	 	 	 	 	 	 	 	600,000	 	 	 	600,000	 	 	 	0.26	%
	
              Leo
      Gingras

            	 	 	53,000	 	 	 	 	 	 	 	600,000	 	 	 	653,000	 	 	 	0.29	%
	
              Todd
      Crow

            	 	 	9,700	 	 	 	 	 	 	 	1,662,942	 	 	 	1,672,642	 	 	 	0.73	%
	
              Kody
      Newland

            	 	 	26,700	 	 	 	 	 	 	 	600,000	 	 	 	626,700	 	 	 	0.27	%
	
              Board
      of directors

            	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              David
      Bensol

            	 	 	52,500	 	 	 	 	 	 	 	205,000	 	 	 	257,500	 	 	 	0.11	%
	
              James
      Lintzenich

            	 	 	1,396,411	 	 	 	 	 	 	 	1,691,608	 	 	 	3,088,019	 	 	 	1.35	%
	
              Edward
      McMillan

            	 	 	17,740	 	 	 	 	 	 	 	281,798	 	 	 	299,538	 	 	 	0.13	%
	
              Kenneth
      Shropshire

            	 	 	0	 	 	 	 	 	 	 	205,000	 	 	 	205,000	 	 	 	0.09	%
	
              Steven
      Saunders

            	 	 	1,368,802	 	 	 	 	 	 	 	612,192	 	 	 	1,980,994	 	 	 	0.87	%
	
              Wesley
      Clark

            	 	 	0	 	 	 	 	 	 	 	170,000	 	 	 	170,000	 	 	 	0.07	%
	
              Total
      board of directors and officers

            	 	 	3,179,853	 	 	 	 	 	 	 	13,628,540	 	 	 	16,808,393	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Other
      shares outstanding

            	 	 	164,944,701	 	 	 	 	 	 	 	 	 	 	 	164,944,701	 	 	 	72.30	%
	
              Total
      common stock outstanding

            	 	 	168,124,554	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

    

    

    
      
        
           

        

        
          D-3

          
            

          

        

        
           

        

      

    

    

    
      	
              Other
      options and warrants to purchase common stock

            	 	 	46,389,994	 	 	 	46,389,994	 	 	 	20.33	%
	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Options
      and warrants to purchase common stock

            	 	 	60,018,534	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Fully
      diluted

            	 	 	228,143,088	 	 	 	228,143,088	 	 	 	100.00	%

    

    

    
      	
              (1)

            	
              Preferred
      stock is not included in the fully diluted calculation as the conversion
      ratio is subject
      to current stock price (and other factors) at the time of
      conversion

            

    

    

    
      	
              (2)

            	
              5%
      or greater amounts would be 8,406,227 shares basic or 11,407,154 on a fully diluted
      basis

            

    

    

    
      	
              Organizational
      Chart

            
	 
      
	
              See
      attached organizational chart.

               

            

    

    

    
      	
              (c)

            	
              Authorization of
      Borrowing; No Conflict as to Law or Agreements. The execution,
      delivery and performance by Company of the Loan Documents and any other
      documents or agreements described in or related to this Agreement, and all
      borrowing under the Line of Credit have been authorized and do not (i)
      require the consent or approval of Company's Owners; (ii) require the
      authorization, consent or approval by, or registration, declaration or
      filing with, or notice to, any governmental agency or instrumentality,
      whether domestic or foreign, or any other Person, except to the extent
      obtained, accomplished or given prior to the date of this Agreement; (iii)
      violate any provision of any law, rule or regulation (including Regulation
      X of the Board of Governors of the Federal Reserve System) or of any
      order, writ, injunction or decree presently in effect having applicability
      to Company or of Company's Constituent Documents; (iv) result in a breach
      of or constitute a default or event of default under any indenture or loan
      or credit agreement or any other material agreement, lease or instrument
      to which Company is a party or by which it or its properties may be bound
      or affected; or (v) result in, or require, the creation or imposition of
      any Lien (other than the Security Interest) upon or with respect to any of
      the properties now owned or subsequently acquired by
    Company.

            

    

    

    
      	
              (d)

            	
              Legal
      Agreements. This Agreement, the other Loan Documents, and any other
      document or agreement described in or related to this Agreement, will
      constitute the legal, valid and binding obligations of Company,
      enforceable against Company in accordance with their respective
      terms.

            

    

    

    
      	
              (e) 

            	
              Subsidiaries.
      Except as disclosed below, Company has no
  Subsidiaries.

            

    

     

    
      
        	
                Subsidiaries

                 

              
	NutraCea (Tax ID Number 87-0673375) List of
      Subsidiaries:
	 
      	 
      
	
                1.

              	
                NutraGlo
      Incorporated, a Nevada corporation wholly owned by NutraStar Technologies
      Incorporated. April 5, 2000
(43-1960638)

              

      

       

    

    
      
        
           

        

        
          D-4

          
            

          

        

        
           

        

      

    

     

    
      	
              2.

            	
              NutraStar
      Technologies Incorporated, a Nevada corporation wholly owned by NutraCea,
      February 4, 2000 (68-0445761)

            
	 	 
	
              3.

            	
              NutraStarSport,
      Inc., a Nevada corporation, owned by NutraStar Technologies Incorporated
      and Chris Basio, April 26, 2001

            
	 	 
	
              4.

            	
              The
      RiceX Company, a Delaware corporation wholly owned by NutraCea, August 4,
      1998 (68-0412200)

            
	 	 
	
              5.

            	
              RiceX
      Nutrients, Inc., a Montana corporation wholly owned by The RiceX Company,
      August 9, 2004 (68-0397535)

            
	 	 
	
              6.

            	
              Global
      Nutra, Inc., a Nevada corporation wholly-owned by NutraCea, December 13,
      2006

            
	 	 
	
              7.

            	
              Nutramercials,
      Inc., a Nevada corporation wholly-owned by NutraCea, December 13, 2006
      (26-0888871)

            
	 	 
	
              8.

            	
              Infomaxx,
      LLC, a Delaware limited liability company, owned by Nutramercials,
      December 12, 2006 (20-8083718)

            
	 	 
	
              9.

            	
              NutraCea
      Brazil Ltda., a Brazilian corporation and subsidiary of
      NutraCea

            
	 	 
	
              10.

            	
              Grain
      Enhancement LLC, a Delaware limited liability company, owned by NutraCea
      and Pacific Advisors Holdings Limited, June 30, 2007

            
	 	 
	
              11.

            	
              Medan,
      LLC, a Delaware limited liability company, owned by NutraCea, January 23,
      2008 (26-1809684)

            
	 	 
	
              12.

            	
              Rice
      Rx, LLC, a Delaware limited liability company, owned by NutraCea and
      HerbalScience Singapore Pte. Ltd., December 26, 2007
      (26-1644643)

            
	 	 
	
              13.

            	
              Rice
      Science, LLC, a Delaware limited liability company, owned by NutraCea and
      HerbalScience Singapore Pte. Ltd., December 26, 2007
      (26-1644685)

            
	 	 
	
              14.

            	
              NutraPhoenix,
      LLC, a Delaware limited liability company owned by NutraCea, January 15,
      2008 (26-2233062)

            
	 	 
	
              15.

            	
              NutraSA,
      LLC, a Delaware limited liability company owned by NutraCea, January 11,
      2008 (26-3258449)

            
	 	 
	
              16.

            	
              Irgovel
      - Industria Riograndens De Oleos Vegetais Ltda., a limited liability
      company organized under the laws of the Federative Republic of Brazil
      owned by NutraSA, LLC

            
	 	 
	
              17.

            	
              PT
      Panganmas Inti Nusantara, an Indonesian company owned by Medan, LLC (51%)
      and Fortune BVI

            
	 	 
	
              18.

            	
              NutraCea/Cura,
      LLC, a Delaware limited liability company owned by NutraCea (90%) and Cura
      Pharamceutical Co., Inc. (10%), August 15, 2007
    (26-0851100)

            

    

    

    
      
        
           

        

        
          D-5

          
            

          

        

        
           

        

      

    

     

    
      	
              19.

            	
              NutraCea
      Offshore LTD., an exempted company organized under the laws of the Cayman
      Islands owned by NutraCea

            
	 
      	 
      
	
              20.

            	
              Global
      Nutra Solutions LLC, a Delaware limited liability company owned by
      NutraCea, December 12, 2006

            
	 
      	 
      
	
              21.

            	
              Grainovation,
      Inc., a Tennessee corporation, Incorporated January 22, 1988 (acquired
      5/1/2007) (62-1340914)

            

    

    

    
      	
              (f)

            	
              Financial Condition;
      No Adverse Change. Company has furnished to Wells Fargo its audited
      financial statements for its fiscal year ended December 31, 2007 and
      unaudited financial statements for the fiscal-year-to-date period ended
      September 30, 2008, and those statements fairly present Company's
      financial condition as of those dates and the results of Company's
      operations and cash flows for the periods then ended and were prepared in
      accordance with GAAP. Since the date of the most recent financial
      statements, there has been no Material Adverse Effect in Company's
      business, properties or condition (financial or otherwise). The Company
      has disclosed to Wells Fargo that in connection with the standard three
      year review of filings by the Securities Exchange Commission ("SEC"), the
      SEC provided a comment letter and requested that the Company elaborate on
      its accounting for certain transactions during the three year period
      ending December 31, 2007. Based on its review, the SEC may require the
      Company to make revisions to the financial statements under review.
      However, the Company believes that the requested revisions, if any, will
      not materially effect the Company's balance sheet or financial condition s
      of September 30, 2008.

            

    

    

    
      	
              (g)

            	
              Litigation.
      There are no actions, suits or proceedings pending or, to Company's
      knowledge, threatened against or affecting Company or any of its
      Affiliates or the properties of Company or any of its Affiliates before
      any court or governmental department, commission, board, bureau, agency or
      instrumentality, domestic or foreign, which, if determined adversely to
      Company or any of its Affiliates, would result in a final judgment or
      judgments against Company or any of its Affiliates in an amount in excess
      of $10,000, apart from those matters specifically disclosed
      below.

            

    

    

    
      	
              Litigation
      Matters in Excess of $10,000

               

            
	
              NutraCea v. Vital Living

               

            
	
              On
      September 3, 2008, NutraCea filed a complaint in Arizona State Superior
      Court, County of Maricopa, against Vital Living, Inc. ("Vital Living")
      seeking to enforce certain notes secured by a Security Agreement pledging
      all of the assets of Vital Living as collateral for the notes. In its
      complaint, NutraCea alleges causes of action for breach of contract,
      common counts, money lent, foreclosure on collateral, specific performance
      and permanent injunctive relief. The complaint was served upon Vital
      Living in Palm Beach County, Florida on September 10, 2008. Vital Living has yet to appear in the
      lawsuit.

            

    

    

    
      
        
           

        

        
          D-6

          
            

          

        

        
           

        

      

    

     

    
      	
              NutraCea
      v. Dennis Ledesma

            
	 
      
	
              NutraCea
      has filed a lawsuit against former employee Dennis Ledesma for defamation
      and breach of contract, etc. alleging that Mr. Ledesma made false
      statements about NutraCea causing damages to NutraCea and its business.
      Mr. Ledesma failed to respond to the complaint and the Court entered
      default against him. We are now in the process of moving the Court for a
      default judgment against Mr. Ledesma based on the harm to NutraCea's
      business and reputation.

            
	 
      
	
              Litigation involving
  Irgovel

            
	 
      
	
              On
      January 31, 2008, NutraCea entered into a Quotas Purchase and Sale
      Agreement (the "Irgovel Agreement") with all the owners ("Sellers") of
      Irgovel -Industria Riograndens De Oleos Vegetais Ltda., a limited
      liability company organized under the laws of the Federative Republic of
      Brazil. Pursuant to the agreement, NutraCea deposited into an escrow
      account approximately $2,000,000 to cover contingent liabilities owed by
      Irgovel as described on Schedule H and I of the Irgovel Agreement. Some of
      the contingent liabilities listed on Schedule H and I are for lawsuits
      filed against Irgovel. The estimated costs and expenses for these lawsuits
      were included in the amounts set aside in the escrow account to cover
      these contingencies.

            
	 
      
	
              On
      October 7, 2008, Irgovel was served with notice of a suit filed by David
      Zigart Resyng against Irgovel and Osmar Brito (a "Seller" in the January
      31, 2008 transaction between NutraCea and the Sellers of Irgovel) claiming
      that (i) Osmar Brito and Irgovel, represented by Osmar Brito, willfully
      misled David Zigart Resyng into executing a settlement with regard to his
      ownership of Irgovel with the other Sellers and (ii) that due to this
      settlement and the subsequent sale of Irgovel to NutraCea, David Zigart
      Resyng has suffered financial damages. An injunction has been granted to
      cease any distributions of assets in the escrow account established in
      connection with the transaction.

            

    

    

    (h)           Intellectual
Property Rights.

    

    (i)           
Owned Intellectual
Property. Set forth below is a complete list of all patents, applications
for patents, trademarks, applications to register trademarks, service marks,
applications to register service marks, mask works, trade dress and copyrights
for which Company is the owner of record (the "Owned Intellectual Property").
Except as set forth below, (A) Company owns the Owned Intellectual Property free
and clear of all restrictions (including covenants not to sue any Person), court
orders, injunctions, decrees, writs or Liens, whether by agreement memorialized
in a Record Authenticated by Company or otherwise, (B) no Person other than
Company owns or has been granted any right in the Owned Intellectual Property,
(C) all Owned Intellectual Property is valid, subsisting and enforceable, and
(D) Company has taken all commercially reasonable action necessary to maintain
and protect the Owned Intellectual Property.

    

    
      
        
           

        

        
          D-7

          
            

          

        

        
           

        

      

    

    

    (ii)           Agreements with Employees
and Contractors. Company has entered into a legally enforceable agreement
with each Person that is an employee or subcontractor obligating that Person to
assign to Company, without additional compensation, any Intellectual Property
Rights created, discovered or invented by that Person in the course of that
Person's employment or engagement with Company (except to the extent prohibited
by law), and further obligating that Person to cooperate with Company, without
additional compensation, to secure and enforce the Intellectual Property Rights
on behalf of Company, unless the job description of the Person is such that it
is not reasonably foreseeable that the employee or subcontractor will create,
discover, or invent Intellectual Property Rights.

    

    (iii)          Intellectual Property Rights
Licensed from Others. Set forth below is a complete list of all
agreements under which Company has licensed Intellectual Property Rights from
another Person ("Licensed Intellectual Property") other than readily available,
non- negotiated licenses of computer software and other intellectual property
used solely for performing accounting, word processing and similar
administrative tasks ("Off-the-shelf Software") and a summary of any ongoing
payments Company is obligated to make with respect thereto. Except as set forth
below or in any other Record, copies of which have been given to Wells Fargo,
Company's licenses to use the Licensed Intellectual Property are free and clear
of all restrictions, Liens, court orders, injunctions, decrees, or writs,
whether by agreed to in a Record Authenticated by Company or otherwise. Except
as disclosed below, Company is not contractually obligated to make royalty
payments of a material nature, or pay fees to any owner of, licensor of, or
other claimant to, any Intellectual Property Rights.

    

    (iv)          Other Intellectual Property
Needed for Business. Except for Off-the-shelf Software and as disclosed
below, the Owned Intellectual Property and the Licensed Intellectual Property
constitute all Intellectual Property Rights used or necessary to conduct
Company's business as it is presently conducted or as Company reasonably
foresees conducting it.

    

    (v)           Infringement. Except
as disclosed below, Company has no knowledge of, and has not received notice
either orally or in a Record alleging, any Infringement of another Person's
Intellectual Property Rights (including any claim set forth in a Record that
Company must license or refrain from using the Intellectual Property Rights of
any Person) nor, to Company's knowledge, is there any threatened claim or any
reasonable basis for any such claim.

    

    
      	
              Intellectual Property
      Disclosures

               

            
	 
      
	
              See
      trademark and patent schedules on subsequent pages.

               

            

    

    

    
      
        
           

        

        
          D-8

          
            

          

        

        
           

        

      

    

    

    TRADEMARKS

    

    
      	
              Title

            	
              Type

            	
              Application

              /

              Registration
      No.

            	
              Issue/Reg.
      Date

            	
              Filing
      Date

            	
              Name
      of Registrant

              /

              Applicant

            
	
              FIBERICE

            	
              Registered
      Trademark

            	
              Assigned
      by Farmers Rice to
      NutraCea

            	
              12/1/2008

            	 
      	 
      
	
              RISOLUBLES

            	
              Registered
      Trademark

            	
              2,461,604

            	
              6/19/2001

            	
              5/10/2000

            	
              NutraCea

            
	
              MISCELLANEOUS
      DESIGN ("Caduceus")

            	
              Registered
      Trademark

            	
              2,461,745

            	
              6/19/2001

            	
              6/15/2000

            	
              NutraCea

            
	
              CEA
      100

            	
              Registered
      Trademark

            	
              2,979,145

            	
              7/26/2005

            	
              8/18/2003

            	
              NutraCea,
      Inc

            
	
              NUTRACEA

            	
              Registered
      Trademark

            	
              2,658,784

            	
              12/10/2002

            	
              9/17/2001

            	
              NutraCea

            
	
              LIVERBOOST

            	
              Registered
      Trademark

            	
              2,512,728

            	
              11/27/2001

            	
              4/5/2001

            	
              NutraCea

            
	
              RICEMUCIL

            	
              Registered
      Trademark

            	
              2,537,997

            	
              2/12/2002

            	
              11/13/2000

            	
              NutraCea

            
	
              RICE
      PATTY

            	
              Registered
      Trademark

            	
              3,171,168

            	
              11/14/2006

            	
              11/28/2005

            	
              NutraCea,
      Inc

            
	
              EQUINE
      SHINE (& design)

            	
              Registered
      Trademark

            	
              2,659,543

            	
              12/10/2002

            	
              7/24/2001

            	
              NutraCea

            
	
              THE
      RICEPATTY COLLECTION

            	
              Registered
      Trademark

            	
              3,229,286

            	
              4/17/2007

            	
              12/20/2005

            	
              NutraCea,
      Inc

            
	
              MAX-E-BRAN
      SRB

            	
              Registered
      Trademark

            	
              3,375,242

            	
              1/29/2008

            	
              5/22/2007

            	
              NutraCea

            
	
              SERVING
      MANKIND

            	
              Registered
      Trademark

            	
              3,410,639

            	
              4/8/2008

            	
              1/13/2006

            	
              NutraCea,
      Inc

            
	
              RICE
      X

            	
              Registered
      Trademark

            	
              3,317,370

            	
              10/23/2007

            	
              12/8/2005

            	
              NutraCea

            
	
              SATIN
      FINISH

            	
              Registered
      Trademark

            	
              1,803,034

            	
              11/9/1993

            	
              12/10/1992

            	
              NutraCea

            
	
              NATURAL
      GLO

            	
              Registered
      Trademark

            	
              3,501,738

            	
              9/16/2008

            	
              2/25/2008

            	
              NutraCea

            
	
              NATURAL
      GLO (& design)

            	
              Registered
      Trademark

            	
              1,927,481

            	
              10/17/1995

            	
              6/8/1994

            	
              NutraCea

            

    

    

    
      
        
           

        

        
          D-9

          
            

          

        

        
           

        

      

    

     

    
      	
              NUTRACEA
      (& design)

            	
              Registered
      Trademark

            	
              3,501,581

            	
              tab

            	
              9/16/2008

            	
              NutraCea

            
	
              RISPORT

            	
              Trademark
      Application

            	
              77/484,373

            	
              tba

            	
              5/27/2008

            	
              NutraCea

            
	
              RITRAINER

            	
              Trademark
      Application

            	
              77/484,375

            	
              tba

            	
              5/27/2008

            	
              NutraCea

            
	
              RIBUILDER

            	
              Trademark
      Application

            	
              77/484.384

            	
              tba

            	
              5/27/2008

            	
              NutraCea

            
	
              IRGOVEL

            	
              Trademark
      Application

            	
              77/555,244

            	
              tba

            	
              8/25/2008

            	
              \NutraCea

            
	
              PELOTAS

            	
              Trademark
      Application

            	
              77/597,273

            	
              tba

            	
              10/21/2008

            	
              NutraCea

            
	
              GASTROBIOTICS

            	
              Trademark
      Application

            	
              78/799,457

            	
              tba

            	
              1/25/2006

            	
              NutraCea

            
	
              RIBALANCE

            	
              Trademark
      Application

            	
              77/383.574

            	
              tba

            	
              1/29/2008

            	
              NutraCea

            
	
              LIVING
      VITAMINS

            	
              Trademark
      Application (ITU)

            	
              77/155,596

            	
              tba

            	
              4/12/2007

            	
              NutraCea

            

    

     

    

    
      	NutraCea Issued Patents To
      Date	Issue
      Date	Patent
      No	Country
	 	 	 	 
	US Patents	 	 	 
	 	 	 	 
	
              1.
      "Production of Beta-Glucan and Beta-Glucan Product"

            	
              05.12.1994

            	
              5512287

            	
              US

            
	 
      	 
      	 
      	 
      
	
              2.
      "Process for Obtaining Micronutrient Enriched Rice Bran
    Oil"

            	
              11.16.1999

            	
              5985344

            	
              US

            
	 
      	 
      	 
      	 
      
	
              3."Method
      for Treating Hypercholesterolemia, Hyperlipidemia, and
      Atherosclerosis"

            	
              10.03.2000

            	
              6126943

            	
              US

            
	 
      	 
      	 
      	 
      
	
              4.
      "Supportive Therapy for Diabetes, Hyperglycemia and
      Hypoglycemia"

            	
              10.16.2001

            	
              02.26.2002

            	
              US

            
	 
      	 
      	 
      	 
      
	
              5.
      "Method for Controlling Serum Glucose"

            	
              6303586

            	
              6350473

            	
              US

            
	 
      	 
      	 
      	 
      
	
              6.
      "Method for Treating Hypercholesterolemia, Hyperlipidemia, and
      Atherosclerosis"

            	
              05.06.2003

            	
              6558714

            	
              US

            
	 
      	 
      	 
      	 
      
	
              7.
      "Method for Treating Hypercholesterolemia, Hyperlipidemia, and
      Atherosclerosis"

            	
              05.11.2004

            	
              6733799

            	
              US

            
	 	 	 	 
	
              8.
      "Method for Treating Joint Inflammation, Pain, and Loss of
      Mobility"

            	
              06.07.2005

            	
              6902739

            	
              US

            

    

    

    
      
        
           

        

        
          D-10

          
            

          

        

        
           

        

      

    

     

    
      	
              International
      Patents

            	 
      	 
      	 
      
	 	 	 	 
	
              1.
      Supportive Therapy for Diabetes, Hyperglycemia and
      Hypoglycemia

            	
              03.28.2002

            	
              71377

            	
              Singapore

            
	 	 	 	 
	
              2.
      Supportive Therapy for Diabetes, Hyperglycemia and
      Hypoglycemia

            	
              12.05.2002

            	
              751704

            	
              Australia

            
	 	 	 	 
	
              3.
      Supportive Therapy for Diabetes, Hyperglycemia and
      Hypoglycemia

            	
              02.03.2003

            	
              503648

            	
              New
      Zealand

            
	 	 	 	 
	
              4.
      Supportive Therapy for Diabetes, Hyperglycemia and
      Hypoglycemia

            	
              07.16.2003

            	
              98810675.2

            	
              Canada

            
	 	 	 	 
	
              5.
      "Process for Obtaining Micronutrient Enriched Rice Bran
    Oil"

            	
              10.22.2004

            	
              15162B1

            	
              Argentina

            
	 	 	 	 
	
              6.
      Supportive Therapy for Diabetes, Hyperglycemia and
      Hypoglycemia

            	
              12.06.2005

            	
              232655

            	
              Mexico

            
	 	 	 	 
	
              7.
      A Method for Treating Diabetes, Hyperglycemia and
    Hypoglycemia

            	
              05.18.2006

            	
              583211

            	
              Korea

            
	 	 	 	 
	
              8.
      "Method for Treating Joint Inflammation, Pain, and Loss of
      Mobility"

            	
              10.18.2007

            	
              2002315558

            	
              Australia

            
	 	 	 	 
	
              9.
      "Diabetic Food Kit Comprising Enzyme Treated Stabilized Rice Bran
      Derivative"

            	
              06.23.2008

            	
              221444

            	
              India

            

    

    

    

    
      	
              (i)

            	
              Taxes.
      Company and its Affiliates have paid or caused to be paid to the proper
      authorities when due all federal, state and local taxes required to be
      withheld by each of them. Company and its Affiliates have filed all
      federal, state and local tax returns which to the knowledge of the
      Officers of Company or any Affiliate, as the case may be, are required to
      be filed, and Company and its Affiliates have paid or caused to be paid to
      the respective taxing authorities all taxes as shown on these returns or
      on any assessment received by any of them to the extent such taxes have
      become due.

            

    

    

    
      	
              (j)

            	
              Titles and
      Liens. Company has good and absolute title to all Collateral free
      and clear of all Liens other than Permitted Liens. No financing statement
      naming Company as debtor is on file in any office except to perfect only
      Permitted Liens.

            

    

    

    
      	
              (k)

            	
              No Defaults.
      Company is in compliance with all provisions of all agreements,
      instruments, decrees and orders to which it is a party or by which it or
      its property is bound or affected, the breach or default of which could
      have a Material Adverse Effect on Company's financial condition,
      properties or operations.

            

    

     

    
      
        
        

      

      
        D-11

        
          

        

      

      
        
        

      

    

     

    
      	
              (l)

            	
              Submissions to Wells
      Fargo. All financial and other information provided to Wells Fargo
      by or on behalf of Company in connection with Company's request for the
      credit facilities contemplated hereby is (i) true, correct and complete in
      all material respects, (ii) does not omit any material fact that would
      cause such information to be misleading, and (iii) as to projections,
      valuations or proforma financial statements, present a good faith opinion
      as to such projections, valuations and proforma condition and
      results.

            

    

    

    
      	
              (m)

            	
              Financing
      Statements. Company has previously authorized the filing of
      financing statements sufficient when filed to perfect the Security
      Interest and other Liens created by the Security Documents. When such
      financing statements are filed, Wells Fargo will have a valid and
      perfected security interest in all Collateral capable of being perfected
      by the filing of financing statements. None of the Collateral is or will
      become a fixture on real estate, unless a sufficient fixture filing has
      been filed with respect to such
Collateral.

            

    

    

    
      	
              (n)

            	
              Rights to
      Payment. Each right to payment and each instrument, document,
      chattel paper and other agreement constituting or evidencing Collateral is
      (or, in the case of all future Collateral, will be when arising or issued)
      the valid, genuine and legally enforceable obligation, subject to no
      defense, setoff or counterclaim of the account debtor or other obligor
      named in that instrument.

            

    

    

    
      	
              (o) 

            	
              Employee Benefit
      Plans.

            

    

    

    (i)           Maintenance and
Contributions to Plans. Except as disclosed below, neither Company nor
any ERISA Affiliate (A) maintains or has maintained any Pension Plan, (B)
contributes or has contributed to any Multiemployer Plan, or (C) provides or has
provided post-retirement medical or insurance benefits to employees or former
employees (other than benefits required under Section 601 of ERISA, Section
4980B of the IRC, or applicable state law).

    

    (ii)           Knowledge of Plan
Noncompliance with Applicable Law. Except as disclosed below, neither
Company nor any ERISA Affiliate has (A) knowledge that Company or the ERISA
Affiliate is not in full compliance with the requirements of ERISA, the IRC, or
applicable state law with respect to any Plan, (B) knowledge that a Reportable
Event occurred or continues to exist in connection with any Pension Plan, or (C)
sponsored a Plan that it intends to maintain as qualified under the IRC that is
not so qualified, and no fact or circumstance exists which may have an adverse
effect on such Plan's tax-qualified status.

    

    (iii)           Funding Deficiencies and
Other Liabilities. Neither Company nor any ERISA Affiliate has liability
for any (A) accumulated funding deficiency (as defined in Section 302 of ERISA
and Section 412 of the IRC) under any Plan, whether or not waived, (B)
withdrawal, partial withdrawal, reorganization or other event under any
Multiemployer Plan under Section 4201 or 4243 of ERISA, or (C) event or
circumstance which could result in financial obligation to the Pension Benefit
Guaranty Corporation, the Internal Revenue Service, the Department of Labor or
any participant in connection with any Plan (other than routine claims for
benefits under the Plan).

    

    
      
        
           

        

        
          D-12

          
            

          

        

        
           

        

      

    

     

    
      	
              Employee
      Benefit Plans

            
	 
      
	
               

              See
      subsequent page.

               

            

    

     

    
      
        
           

        

        
          D-13

          
            

          

        

        
           

        

      

    

     

    Current NutraCea Employee
Benefits

     

    
      	
              BENEFIT

            	 	
              DESCRIPTION

            	 	
              EFF.
      DATE

            
	 	 	 	 	 
	
              Aetna
      PPO Plan

            	 	
              Employee
      health insurance - all locations except Montana

              Basic
      80/20 plan with $500/$ 1000 deductible for in network;

              Out
      of network is 60/40 with $1000/$2000 deductibles

            	 	
              6/1/2007

            
	 	 	 	 	 
	
              Aetna
      Traditional Choice Plan

            	 	
              Employee
      health insurance - Montana only

              Pays
      80% for basic services; $500/$ 1000 deductible

            	 	
              6/1/2007

            
	 	 	 	 	 
	
              MetLife
      Dental Plan

            	 	
              Dental
      plan

            	 	
              6/1/2006

            
	 	 	 	 	 
	
              Lincoln
      National

            	 	
              Life
      Insurance Plan

              Class
      1 - management - lx base salary up to $150,000 max

              Class
      2 - all other employees - $50,000

              Benefits
      also include $2000 per child benefit to age 19 and

              $10,000
      spouse

              benefit

            	 	
              6/1/2007

            
	 	 	 	 	 
	
              Lincoln
      National

            	 	
              Long
      Term Disability Plan

              Pays
      60% of basic monthly income up to $1 Ok/month, after a

              90
      day waiting period

            	 	
              6/1/2008

            
	 	 	 	 	 
	
              Health
      Reimbursement Plan

            	 	
              For
      employees with 1+ year of service

              Co.
      funds $1500 for single medical coverage/$3000 for

              family
      coverage/yr

            	 	
              1/1/2006

            
	 	 	 	 	 
	
              401(k)
      and Profit Sharing Plan

            	 	
              Safe
      harbor plan - co. contributes 3% of base comp to plan Annual discretionary
      match or profit sharing at year end

            	 	
              4/1/2006

            
	 	 	 	 	 
	
              Product
      Discounts

            	 	
              30%
      off cost OR whatever special is running (whichever is lowest
      price)

            	 	 
      

    

    

    
      
        
           

        

        
          D-14

          
            

          

        

        
           

        

      

    

    

    
      	
              (p) 

            	
              Environmental
      Matters.

            

    

    

    (i)           Hazardous Substances on
Premises. Except as disclosed below, to Company's knowledge, there are
not present in, on or under the Premises any Hazardous Substances in such form
or quantity as to create any material liability or obligation for either Company
or Wells Fargo under the common law of any jurisdiction or under any
Environmental Law, and no Hazardous Substances have ever been stored, buried,
spilled, leaked, discharged, emitted or released in, on or under the Premises in
such a way as to create a material liability.

    

    (ii)           Disposal of Hazardous
Substances. Except as disclosed below, Company has not disposed of
Hazardous Substances in such a manner as to create any material liability under
any Environmental Law.

    

    (iii)           Claims and Proceedings with
Respect to Environmental Law Compliance. Except as disclosed below, to
Company's knowledge, there have not existed in the past, nor are there any
threatened or impending requests, claims, notices, investigations, demands,
administrative proceedings, hearings or litigation relating in any way to the
Premises or Company, alleging material liability under, violation of, or
noncompliance with any Environmental Law or any license, permit or other
authorization issued pursuant thereto.

    

    (iv)           Compliance with
Environmental Law; Permits and Authorizations. Except as disclosed below,
Company (A) conducts its business at all times in compliance with applicable
Environmental Law, (B) possesses valid licenses, permits and other
authorizations required under applicable Environmental Law for the lawful and
efficient operation of its business, none of which are scheduled to expire, or
withdrawal, or material limitation within the next 12 months, and (C) has not
been denied insurance on grounds related to potential environmental
liability.

    

    (v)           Status of Premises.
Except as disclosed below, the Premises are not and never have been listed on
the National Priorities List, the Comprehensive Environmental Response,
Compensation and Liability Information System or any similar federal, state or
local list, schedule, log, inventory or database.

    

    (vi)           Environmental Audits,
Reports, Permits and Licenses. Company has delivered to Wells Fargo all
environmental assessments, audits, reports, permits, licenses and other
documents describing or relating in any way to the Premises or Company's
businesses.

    

    
      	
              Environmental
      Matters

            
	 
      
	
              None
      known.

               

            

    

    

    
      
        
           

        

        
          D-15

          
            

          

        

        
           

        

      

    

    

    Exhibit
E to Credit and Security Agreement

    

    COMPLIANCE
CERTIFICATE

    

    
      	
              To:

            	
              Wells
      Fargo Bank, National Association

            

    

    
      	
              Date:

            	
              [________,
      200_]

            

    

    
      	
              Subject:

            	
              Financial
      Statements

            

    

    

    In
accordance with our Credit and Security Agreement dated December __, 2008 (as
amended
from time to time, the "Credit Agreement"), attached are the financial
statements of NutraCea, a California corporation, and NutraPhoenix, LLC, a
Delaware limited liability company
(collectively, the "Company") dated [________,200_] (the "Reporting Date")
and the year-to-date period then ended (the "Current Financials"). All terms
used in this certificate have the meanings given in the Credit
Agreement.

    

    A.           
Preparation and Accuracy of
Financial Statements. I certify that the Current Financials have been
prepared in accordance with GAAP, subject to year-end audit adjustments, and
fairly present Company's financial condition as of the Reporting
Date.

    

    B.           
Name of Company; Merger and
Consolidation. I certify that:

     

    (Check
one)

    

    
      	
               
      

            	
              o

            	
              Company
      has not, since the date of the Credit Agreement, changed its name or
      jurisdiction of organization, nor has it consolidated or merged with
      another Person.

            

    

    

    
      	
               
      

            	
              o

            	
              Company
      has, since the date of the Credit Agreement, either changed its name or
      jurisdiction of organization, or both, or has consolidated or merged with
      another Person, which change, consolidation or merger: o was consented to
      in advance by Wells Fargo in an Authenticated Record, and/or o is more fully
      described in the statement of facts attached to this
      Certificate.

            

    

    

    C.           Events of Default. I certify
that: 

     

    (Check
one)

    

    
      	
               
      

            	
              o

            	
              I
      have no knowledge of the occurrence of an Event of Default under the
      Credit Agreement, except as previously reported to Wells Fargo in a
      Record.

            

    

     

    
      	
               
      

            	
              o

            	
              I
      have knowledge of an Event of Default under the Credit Agreement not
      previously reported to Wells Fargo in a Record, as more fully described in
      the statement of facts attached to this Certificate, and further, I
      acknowledge that Wells Fargo may under the terms of the Credit Agreement
      impose the Default Rate at any time during the resulting Default
      Period.

            

    

    

    
      	
               
      

            	
              D.

            	
              Litigation Matters. I
      certify that:

            

    

    

    (Check
one)

    

    
      
        
           

        

        
          E-1

          
            

          

        

        
           

        

      

    

    

    
      	
               
      

            	
              o

            	
              I
      have no knowledge of any material adverse change to the litigation
      exposure of Company or any of its Affiliates or of any
      Guarantor.

            

    

    

    
      	
               
      

            	
              o

            	
              I
      have knowledge of material adverse changes to the litigation exposure of
      Company or any of its Affiliates or of any Guarantor not previously
      disclosed in Exhibit D, as
      more fully described in the statement of facts attached to this
      Certificate.

            

    

    

    
      	
               
      

            	
              E.

            	
              Financial Covenants. I
      further certify that:

            

    

    

    (Check
and complete each of the following)

    

    1.           Minimum Quarterly Net
Income.   Pursuant to Section 5.2(a) of the Credit
Agreement, as of the Reporting Date, Company's Net Income was [_$__________],
which o satisfies
o does not satisfy the
requirement that such amount be not less than the amount set forth for each such
period (numbers appearing between "< >" are negative):

    

    
      	
              Quarter Ending

            	
              Minimum Net Income

            
	 
      	 
      
	
              December
      31, 2008

            	
              <$3,000,000.00>

            

    

    

    2.           Minimum Cumulative Quarterly Net
Income. Pursuant to Section 5.2(b) of the Credit Agreement, as of the
Reporting Date, the Company's year-to-date consolidated aggregate Net Income,
minus the Company's year-to-date consolidated aggregate Net Income, as of
December 31st of
the preceding year (as set forth in the Company's audited financial statements)
was
[_$_________], which o satisfies o does not satisfy the
requirement that such Net Income be
not less than the amount set forth in the table below for each such period
(numbers appearing between "< >" are negative):

     

    
      	
              Ouarter
      Ending

            	
              Minimum
      Quarterly Cumulative

            
	 
      	
              Net
      Income Step Up

            
	
              Each
      March 31, 2009

            	
              <$1,000,000.00>

            
	
              Each
      June 30, 2009

            	
              <$500,000.00>

            
	
              Each
      September 30, 2009

            	
              $750,000.00

            
	
              Each
      December 31, 2009

            	
              $2,000,000.00

            

    

    

    3.           Minimum Debt Service Coverage Ratio.
Pursuant to Section 5.2(c) of the Credit Agreement, as of the Reporting
Date, Company's Debt Service Coverage Ratio was [_______]
to 1.00, which o satisfies o does not satisfy the
requirement that such ratio be not less than
1.2 to 1.00 on the Reporting Date for each quarter, beginning the quarter ending
March 31, 2009.

    

    4.           Capital Expenditures. Pursuant
to Section 5.2(d) of the Credit Agreement, for the year-to-date period ending on
the Reporting Date, Company has expended or contracted to expend during the
o four quarter 2008 o 2009 fiscal year to date
for Capital Expenditures, [_$___________]
in the aggregate, which o satisfies o does not satisfy the
requirement that such
expenditures not exceed $5,000,000.00 in the aggregate if the reporting period
is fourth quarter 2008, or $4,500,000.00 in the aggregate for 2009 plus up to
$2,500,000.00 carried over from fourth quarter 2008.

    

    
      
        
           

        

        
          E-2

          
            

          

        

        
           

        

      

    

    

    5.           Salaries. Company has not paid
excessive or unreasonable salaries, bonuses, commissions, consultant fees or
other compensation, or increased the salary, commissions, consultant fees or
other compensation of any Director, Officer or consultant, or any member of
their families, by more than twenty percent (20%) as of the Reporting Date over
the amount paid in Company's previous fiscal year (other than existing
board-approved contracts at the time of the Credit Agreement), either
individually or for all such persons in the aggregate, and has not paid any
increase from any source other than profits earned in the year of payment, and
as a consequence Company o is o is not in compliance
with Section 5.8 of the Credit Agreement.

    

    Attached
are statements of all relevant facts and computations in reasonable detail
sufficient to evidence Company's compliance with the financial covenants
referred to above, which computations were made in accordance with
GAAP.

    

    
      	 
      	
              NUTRACEA,
      a California corporation

            
	 
      	 
      	 
      
	 
      	
              By:

            	 
      
	 
      	 
      	
              Its
      Chief Financial Officer

            
	 
      	 
      	 
      
	 
      	
              NUTRAPHOENIX,
      LLC, a Delaware limited liability company

            
	 
      	 
      	 
      
	 
      	
              By:

            	 
      
	 
      	 
      	
              Its
      Chief Financial Officer

            

    

    

    
      
        
           

        

        
          E-3

          
            

          

        

        
           

        

      

    

    

    Exhibit
F to Credit and Security Agreement

    

    EXISTING LIENS PURSUANT TO
5.3(a)(ii)

    

    None.

    

    INDEBTEDNESS

    

    None.

    

    GUARANTIES

    

    None.

    

    
      
        
           

        

        
          F-1

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