Document:

NUTRACEA

     

    Warrant
To Purchase Common Stock

     

    Warrant
No.: ____________

    Date of
Issuance: May ___, 2009 (“Issuance Date”)

     

    NutraCea,
a California corporation (the “Company”), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, _________________, the registered holder hereof or its
permitted assigns (the “Holder”), is entitled, subject
to the terms set forth below, to purchase from the Company, at the Exercise
Price (as defined below) then in effect, upon exercise of this Warrant to
Purchase Common Stock (including any Warrants to Purchase Common Stock issued in
exchange, transfer or replacement hereof, the “Warrant”), at any time or
times on or after the Issuance Date, but not after 11:59 p.m., New York time, on
the Expiration Date (as defined below), ______________ (subject to adjustment as
provided herein) fully paid and nonassessable shares of Common Stock (as defined
below) (the “Warrant Shares”). Except as
otherwise defined herein, capitalized terms in this Warrant shall have the
meanings set forth in Section 16. This Warrant
was issued pursuant to Section 1 of that certain Exchange Agreement, dated as of
May ___, 2009, by and among the Company and the Holder (the “Exchange
Agreement”).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              1.

            	
              EXERCISE OF
      WARRANT.

            

    

    (a)           Mechanics of
Exercise. Subject
to the terms and conditions hereof (including, without limitation, the
limitations set forth in Section 1(f)), this Warrant may be exercised by the
Holder on any day on or after the Issuance Date, in whole or in part, by
delivery (whether via facsimile or otherwise) of a written notice, in the form
attached hereto as Exhibit
A (the “Exercise
Notice”), of the Holder’s election to exercise this
Warrant.  On the first (1st)
Trading Day following an exercise of this Warrant as aforesaid, the Holder shall
deliver payment to the Company of an amount equal to the Exercise Price in
effect on the date of such exercise multiplied by the number of Warrant Shares
as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in
cash or via wire transfer of immediately available funds if the Holder did not
notify the Company in such Exercise Notice that such exercise was pursuant to a
Cashless Exercise (as defined in Section 1(d)). The Holder shall not be required
to deliver the original of this Warrant in order to effect an exercise hereunder
until the Holder has purchased all the Warrant Shares available hereunder and
the Warrant has been exercised in full, in which case, the Holder shall
surrender this Warrant to the Company for cancellation as soon as practicable
following the delivery of the applicable Exercise Notice. Execution and delivery
of an Exercise Notice with respect to less than all of the Warrant Shares shall
have the same effect as cancellation of the original of this Warrant and
issuance of a new Warrant evidencing the right to purchase the remaining number
of Warrant Shares. Execution and delivery of an Exercise Notice for all of the
Warrant Shares shall have the same effect as cancellation of the original of
this Warrant after delivery of the Warrant Shares in accordance with the terms
hereof. On or before the second (2nd)
Trading Day following the date on which the Company has received a fully
completed Exercise Notice, the Company shall transmit by facsimile an
acknowledgment of confirmation of receipt of such Exercise Notice to the Holder
and the Company’s transfer agent (the “Transfer Agent”). On or before
the third (3rd)
Trading Day following the date on which the Company has received such Exercise
Notice (provided that the Company has also received the Aggregate Exercise Price
specified therein on or before such third (3rd)
Trading Day if such Exercise Notice specified a “Cash Exercise”), the Company
shall (X) provided that the Transfer Agent is participating in The Depository
Trust Company (“DTC”)
Fast Automated Securities Transfer Program, upon the request of the Holder,
credit such aggregate number of shares of Common Stock to which the Holder is
entitled pursuant to such exercise to the Holder’s or its designee’s balance
account with DTC through its Deposit Withdrawal Agent Commission system, or (Y)
if the Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and deliver to the Holder or, at Holder’s instruction
pursuant to the Exercise Notice, Holder’s agent or designee, in each case, sent
by reputable overnight courier to the address as specified in the Exercise
Notice, a certificate, registered in the Company’s share register in the name of
the Holder or its designee (as indicated in the Exercise Notice), for the number
of shares of Common Stock to which the Holder is entitled pursuant to such
exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for
all corporate purposes to have become the holder of record of the Warrant Shares
with respect to which this Warrant has been exercised (irrespective of the date
such Warrant Shares are credited to the Holder’s DTC account or the date of
delivery of the certificates evidencing such Warrant Shares (as the case may
be)) so long as the Company has received the Aggregate Exercise Price therefor
on or before the third (3rd)
Trading Day following such Exercise Notice if such Exercise Notice specified a
“Cash Exercise.” If this Warrant is submitted in connection with any exercise
pursuant to this Section 1(a) and the number of Warrant Shares represented
by this Warrant submitted for exercise is greater than the number of Warrant
Shares being acquired upon an exercise, then the Company shall as soon as
practicable and in no event later than three (3) Business Days after any
exercise and at its own expense, issue and deliver to the Holder (or its
designee) a new Warrant (in accordance with Section 7(d)) representing the right
to purchase the number of Warrant Shares purchasable immediately prior to such
exercise under this Warrant, less the number of Warrant Shares with respect to
which this Warrant is exercised. No fractional shares of Common Stock are to be
issued upon the exercise of this Warrant, but rather the number of shares of
Common Stock to be issued shall be rounded up to the nearest whole number. The
Company shall pay any and all transfer taxes which may be payable with respect
to the issuance and delivery of Warrant Shares upon exercise of this Warrant;
provided, however, in the event certificates for Warrant Shares are to be issued
in a name other than the name of the Holder, the applicable Exercise Notice
shall be accompanied by the Assignment Form attached hereto as Exhibit B duly executed by the
Holder, and the Company may require, as a condition thereto, the payment of a
sum sufficient to reimburse it for any transfer tax incidental
thereto.

     

    (b)           Exercise
Price. For
purposes of this Warrant, “Exercise Price” means $0.30,
subject to adjustment as provided herein.

     

    
      
         

      

      
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    (c)           Company’s Failure to Timely
Deliver Securities. If
within three (3) Trading Days after the Company’s receipt of the applicable
Exercise Notice (provided that the Company has also received the Aggregate
Exercise Price specified therein during such three (3) Trading Day period if
such Exercise Notice specified a “Cash Exercise”) the Company shall fail to
issue and deliver a certificate to the Holder and register such shares of Common
Stock on the Company’s share register or credit the Holder’s balance account
with DTC for the number of shares of Common Stock to which the Holder is
entitled upon such Holder’s exercise hereunder (as the case may be), and if on
or after such third (3rd)
Trading Day the Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Holder of
shares of Common Stock issuable upon such exercise that the Holder anticipated
receiving from the Company (a “Buy-In”), then, in addition to
all other remedies available to the Holder, the Company shall, within three (3)
Business Days after the Holder’s request and in the Holder’s discretion, either
(i) pay cash to the Holder in an amount equal to the Holder’s total purchase
price (including brokerage commissions, if any) for the shares of Common Stock
so purchased (the “Buy-In
Price”), at which point the Company’s obligation to deliver such
certificate (and to issue such shares of Common Stock) shall terminate, or (ii)
promptly honor its obligation to deliver to the Holder a certificate or
certificates representing such shares of Common Stock or credit the Holder’s
balance account with DTC for the number of shares of Common Stock to which the
Holder is entitled upon such Holder’s exercise hereunder (as the case may be)
and pay cash to the Holder in an amount equal to the excess (if any) of the
Buy-In Price over the product of (A) such number of shares of Common Stock times
(B) the Closing Sale Price of the Common Stock on the Trading Day immediately
preceding the date of the applicable Exercise Notice.

     

    (d)           Cashless
Exercise.
Notwithstanding anything contained herein to the contrary (other than
Section 1(f) below),  the Holder may, in its
sole discretion, exercise this Warrant in whole or in part and, in lieu of
making the cash payment otherwise contemplated to be made to the Company upon
such exercise in payment of the Aggregate Exercise Price, elect instead to
receive upon such exercise the “Net Number” of shares of Common Stock determined
according to the following formula (a “Cashless
Exercise”):

     

    Net Number = (A x B) - (A x
C)

     

    B

     

    For purposes of the foregoing
formula:

     

    A= the
total number of shares with respect to which this Warrant is then being
exercised.

     

    B= the
Closing Sale Price of the Common Stock on the Trading Day immediately preceding
the date of the Exercise Notice.

     

    
      C= the
Exercise Price then in effect for the applicable Warrant Shares at the time of
such exercise.

    

     

    (e)           Disputes.  In
the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the number of Warrant Shares to be issued pursuant to
the terms hereof, the Company shall promptly issue to the Holder the number of
Warrant Shares that are not disputed and resolve such dispute in accordance with
Section 13.

     

    
      
         

      

      
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    (f)           Limitations on
Exercises. Notwithstanding anything to the contrary contained in this
Warrant, this Warrant shall not be exercisable by the Holder hereof to the
extent (but only to the extent) that the Holder or any of its affiliates would
beneficially own in excess of  9.9% (the “Maximum Percentage”) of the
Common Stock. To the extent the above limitation applies, the determination
of whether this Warrant shall be exercisable (vis-à-vis other convertible,
exercisable or exchangeable securities owned by the Holder) and of which such
securities shall be exercisable (as among all such securities owned by the
Holder) shall, subject to such Maximum Percentage limitation, be determined on
the basis of the first submission to the Company for conversion, exercise or
exchange (as the case may be). No prior inability to exercise this Warrant
pursuant to this paragraph shall have any effect on the applicability of the
provisions of this paragraph with respect to any subsequent determination
of exercisability. For the purposes of this paragraph, beneficial ownership and
all determinations and calculations (including, without limitation, with respect
to calculations of percentage ownership) shall be determined in accordance with
Section 13(d) of the 1934 Act (as defined in the Exchange Agreement) and the
rules and regulations promulgated thereunder. The provisions of this paragraph
shall be implemented in a manner otherwise than in strict conformity with the
terms of this paragraph to correct this paragraph (or any portion hereof) which
may be defective or inconsistent with the intended Maximum Percentage beneficial
ownership limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such Maximum Percentage
limitation. The limitations contained in this paragraph shall apply to a
successor Holder of this Warrant. The holders of Common Stock shall be third
party beneficiaries of this paragraph and the Company may not waive this
paragraph without the consent of holders of a majority of its Common Stock. For
any reason at any time, upon the written or oral request of the Holder, the
Company shall within two (2) Business Days confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding, including by
virtue of any prior conversion or exercise of convertible or exercisable
securities into Common Stock, including, without limitation, pursuant to this
Warrant or securities issued pursuant to the Exchange Agreement and the Other
Exchange Agreements (as defined in the Exchange Agreement). Each delivery of an
Exercise Notice by the Holder will constitute a representation by the Holder
that it has evaluated the limitation set forth in this paragraph and determined
that issuance of the full number of Warrant Shares requested by the Holder in
such Exercise Notice is permitted under this paragraph.

     

    (g)           Insufficient Authorized
Shares. The
Company shall at all times keep reserved for issuance
under this Warrant a number of shares of Common Stock as shall be necessary to
satisfy the Company’s obligation to issue shares of Common Stock hereunder
(without regard to any limitation otherwise contained herein with respect to the
number of shares of Common Stock that may be acquirable upon exercise of this
Warrant). If, notwithstanding the foregoing, and not in limitation thereof, at
any time while any of the Warrants (as defined in the Certificate of
Determination) remain outstanding the Company does not have a sufficient number
of authorized and unreserved shares of Common Stock to satisfy its obligation to
reserve for issuance upon exercise of the Warrants at least a number of shares
of Common Stock equal to the number of shares of Common Stock as shall from time
to time be necessary to effect the exercise of all of the Warrants then
outstanding (the “Required
Reserve Amount”) (an “Authorized Share Failure”),
then the Company shall immediately take all action necessary to increase the
Company’s authorized shares of Common Stock to an amount sufficient to allow the
Company to reserve the Required Reserve Amount for all the Warrants then
outstanding. Without limiting the generality of the foregoing sentence, as soon
as practicable after the date of the occurrence of an Authorized Share Failure,
but in no event later than sixty (60) days after the occurrence of such
Authorized Share Failure, the Company shall hold a meeting of its stockholders
for the approval of an increase in the number of authorized shares of Common
Stock. In connection with such meeting, the Company shall provide each
stockholder with a proxy statement and shall use its best efforts to solicit its
stockholders’ approval of such increase in authorized shares of Common Stock and
to cause its board of directors to recommend to the stockholders that they
approve such proposal.

     

    
      
        
        

      

      
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    (h)           Legends. If the
Holder exercises this Warrant for cash and the issuance of the Warrant Shares
issuable to the Holder by the Company upon such exercise has not been registered
under the 1933 Act or the resale of such Warrant Shares by the Holder has not
been registered under the 1933 Act, then the certificates representing such
Warrant Shares, except as set forth below in this Section 1(h), shall bear any
legend as required by the “blue sky” laws of any state and a restrictive legend
in the following form (and a stop-transfer order may be placed against transfer
of such stock certificates):

     

    THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER
(IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE
TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED TO AN “ACCREDITED INVESTOR”IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.

     

    Certificates
evidencing Warrant Shares shall not be required to contain the legend set forth
in this Section 1(h) or any other legend (i) if a Cashless Exercise was used to
obtain such Warrant Shares, (ii) while a registration statement covering the
issuance or resale of such Warrant Shares is effective under the 1933 Act (as
defined in the Exchange Agreement), (iii) following any sale of such Warrant
Shares pursuant to Rule 144, (iv) if such Warrant Shares are eligible to be
sold, assigned or transferred under Rule 144 (provided that the Holder provides
the Company with reasonable assurances that such Warrant Shares are eligible for
sale, assignment or transfer under Rule 144, which shall not include an opinion
of counsel), (v) in connection with a sale, assignment or other transfer (other
than under Rule 144) provided that the Holder provides the Company with an
opinion of counsel to the Holder, in a generally acceptable form, to the effect
that such sale, assignment or transfer of such Warrant Shares may be made
without registration under the applicable requirements of the 1933 Act or (vi)
if such legend is not required under applicable requirements of the 1933 Act
(including, without limitation, controlling judicial interpretations and
pronouncements issued by the SEC (as defined in the Exchange
Agreement)).

     

    
      
        
        

      

      
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    2.           ADJUSTMENT
OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and number
of Warrant Shares issuable upon exercise of this Warrant are subject to
adjustment from time to time as set forth in this Section 2.

     

    (a)           Stock Dividends and
Splits.  If
the Company, at any time on or after the date of the Exchange Agreement (i) pays
a stock dividend on one or more classes of its then outstanding shares of Common
Stock or otherwise makes a distribution on any class of capital stock that is
payable in shares of Common Stock, (ii) subdivides (by any stock split, stock
dividend, recapitalization or otherwise) one or more classes of its then
outstanding shares of Common Stock into a larger number of shares or (iii)
combines (by combination, reverse stock split or otherwise) one or more classes
of its then outstanding shares of Common Stock into a smaller number of shares,
then in each such case the Exercise Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding
immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such
event.  Any adjustment made pursuant to clause (i) of this paragraph
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution, and any
adjustment pursuant to clause (ii) or (iii) of this paragraph shall become
effective immediately after the effective date of such subdivision or
combination. If any event requiring an adjustment under this paragraph occurs
during the period that an Exercise Price is calculated hereunder, then the
calculation of such Exercise Price shall be adjusted appropriately to reflect
such event.

     

    (b)           Adjustment Upon Issuance of
Shares of Common Stock. If and
whenever on or after the date of the Exchange Agreement the Company issues or
sells, or in accordance with this Section 2 is deemed to have issued or
sold, any shares of Common Stock (including the issuance or sale of shares of
Common Stock owned or held by or for the account of the Company, but excluding
any Excluded Securities (as defined in the Certificate of Determination) issued
or sold or deemed to have been issued or sold) for a consideration per share
(the “New Issuance
Price”) less than a price equal to the Exercise Price in effect
immediately prior to such issue or sale or deemed issuance or sale (such
Exercise Price then in effect is referred to as the “Applicable Price”) (the
foregoing a “Dilutive
Issuance”), then immediately after such Dilutive Issuance, the Exercise
Price then in effect shall be reduced to an amount equal to the New Issuance
Price. For purposes of determining the adjusted Exercise Price under this
Section 2(b), the following shall be applicable:

     

    (i)           Issuance of
Options.  If the Company in any manner grants or sells any
Options and the lowest price per share for which one share of Common Stock is
issuable upon the exercise of any such Option or upon conversion, exercise or
exchange of any Convertible Securities issuable upon exercise of any such Option
is less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Company at the
time of the granting or sale of such Option for such price per share. For
purposes of this Section 2(b)(i), the “lowest price per share for which one
share of Common Stock is issuable upon the exercise of any such Options or upon
conversion, exercise or exchange of any Convertible Securities issuable upon
exercise of any such Option” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to any
one share of Common Stock (a) upon the granting or sale of the Option, (b) upon
exercise of the Option and (c) upon conversion, exercise or exchange of any
Convertible Security issuable upon exercise of such Option. Except as
contemplated below, no further adjustment of the Exercise Price shall be made
upon the actual issuance of such shares of Common Stock or of such Convertible
Securities upon the exercise of such Options or upon the actual issuance of such
shares of Common Stock upon conversion, exercise or exchange of such Convertible
Securities.

     

    
      
         

      

      
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    (ii)           Issuance of Convertible
Securities.  If the Company in any manner issues or sells any
Convertible Securities and the lowest price per share for which one share of
Common Stock is issuable upon the conversion, exercise or exchange thereof is
less than the Applicable Price, then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Company at the time of
the issuance or sale of such Convertible Securities for such price per
share.  For the purposes of this Section 2(b)(ii), the “lowest price
per share for which one share of Common Stock is issuable upon the conversion,
exercise or exchange thereof” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to one
share of Common Stock (a) upon the issuance or sale of the Convertible Security
and (b) upon conversion, exercise or exchange of such Convertible Security.
Except as contemplated below, no further adjustment of the Exercise Price shall
be made upon the actual issuance of such shares of Common Stock upon conversion,
exercise or exchange of such Convertible Securities, and if any such issue or
sale of such Convertible Securities is made upon exercise of any Options for
which adjustment of this Warrant has been or is to be made pursuant to other
provisions of this Section 2(b), except as contemplated below, no further
adjustment of the Exercise Price shall be made by reason of such issue or
sale.

     

    (iii)           Change in Option Price or
Rate of Conversion. If the purchase or exercise price provided for in any
Options, the additional consideration, if any, payable upon the issue,
conversion, exercise or exchange of any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or exercisable or
exchangeable for shares of Common Stock increases or decreases at any time, the
Exercise Price in effect at the time of such increase or decrease shall be
adjusted to the Exercise Price which would have been in effect at such time had
such Options or Convertible Securities provided for such increased or decreased
purchase price, additional consideration or increased or decreased conversion
rate, as the case may be, at the time initially granted, issued or sold. For
purposes of this Section 2(b)(iii), if the terms of any Option or Convertible
Security that was outstanding as of the date of issuance of this Warrant are
increased or decreased in the manner described in the immediately preceding
sentence, then such Option or Convertible Security and the shares of Common
Stock deemed issuable upon exercise, conversion or exchange thereof shall be
deemed to have been issued as of the date of such increase or decrease. No
adjustment pursuant to this Section 2(b) shall be made if such adjustment
would result in an increase of the Exercise Price then in effect.

     

    
      
         

      

      
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    (iv)           Calculation of Consideration
Received. In case any Option is issued in connection with the issue or
sale of other securities of the Company, together comprising one integrated
transaction in which no specific consideration is allocated to such Options by
the parties thereto, the Options will be deemed to have been issued for a
consideration of $0.01.  If any shares of Common Stock, Options or
Convertible Securities are issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor will be deemed to be the amount of
consideration received by the Company. If any shares of Common Stock, Options or
Convertible Securities are issued or sold for a consideration other than cash,
the amount of such consideration received by the Company will be the fair value
of such consideration, except where such consideration consists of publicly
traded securities, in which case the amount of consideration received by the
Company for such securities will be the average VWAP of such security for the
five (5) Trading Day period immediately preceding the date of receipt. If any
shares of Common Stock, Options or Convertible Securities are issued to the
owners of the non-surviving entity in connection with any merger in which the
Company is the surviving entity, the amount of consideration therefor will be
deemed to be the fair value of such portion of the net assets and business of
the non-surviving entity as is attributable to such shares of Common Stock,
Options or Convertible Securities, as the case may be. The fair value of any
consideration other than cash or publicly traded securities will be determined
jointly by the Company and the Holder. If such parties are unable to reach
agreement within ten (10) days after the occurrence of an event requiring
valuation (the “Valuation
Event”), the fair value of such consideration will be determined within
five (5) Trading Days after the tenth (10th) day
following such Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the Holder. The determination of such appraiser
shall be final and binding upon all parties absent manifest error and the fees
and expenses of such appraiser shall be borne by the Company.

     

    (v)           Record Date. If the
Company takes a record of the holders of shares of Common Stock for the purpose
of entitling them (A) to receive a dividend or other distribution payable
in shares of Common Stock, Options or in Convertible Securities or (B) to
subscribe for or purchase shares of Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase (as the case may
be).

     

    (c)           Number of Warrant
Shares.
Simultaneously with any adjustment to the Exercise Price pursuant to paragraphs
(a) or (b) of this Section 2, the number of Warrant Shares that may be purchased
upon exercise of this Warrant shall be increased or decreased proportionately,
so that after such adjustment the aggregate Exercise Price payable hereunder for
the adjusted number of Warrant Shares shall be the same as the aggregate
Exercise Price in effect immediately prior to such adjustment (without regard to
any limitations on exercise contained herein).

     

    
      
        
        

      

      
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    (d)           Other
Events. In the
event that the Company (or any direct or indirect subsidiary thereof)
shall
take any action to which the provisions hereof are not strictly applicable, or,
if applicable, would not operate to protect the Holder from dilution or if any
event occurs of the type contemplated by the provisions of this Section 2
but not expressly provided for by such provisions (including, without
limitation, the granting of stock appreciation rights, phantom stock rights or
other rights with equity features), then the Company’s Board of Directors shall
in good faith determine and implement an appropriate adjustment in the Exercise
Price and the number of Warrant Shares (if applicable) so as to protect the
rights of the Holder; provided that no such adjustment pursuant to this
Section 2(d) will increase the Exercise Price or decrease the number of
Warrant Shares as otherwise determined pursuant to this Section 2, provided
further that if the Holder does not accept such adjustments as appropriately
protecting its interests hereunder against such dilution, then the Company’s
Board of Directors and the Holder shall agree, in good faith, upon an
independent investment bank of nationally recognized standing to make such
appropriate adjustments, whose determination shall be final and binding and
whose fees and expenses shall be borne by the Company.

     

    (e)           Calculations. All
calculations under this Section 2 shall be made to the nearest cent or the
nearest 1/100th of a
share, as applicable. The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account of the
Company, and the disposition of any such shares shall be considered an issue or
sale of Common Stock.

     

    3.           RIGHTS UPON DISTRIBUTION OF
ASSETS. If the Company shall declare or make any dividend or other
distribution of its assets (or rights to acquire its assets) to all the holders
of shares of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time
after the issuance of this Warrant, then, in each such case, the Holder shall be
entitled to participate in such Distribution to the same extent that the Holder
would have participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant (without regard
to any limitations on exercise hereof, including without limitation, the Maximum
Percentage) immediately before the date on which a record is taken for such
Distribution, or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined for the participation in
such Distribution (provided, however, that to the extent that the Holder’s right
to participate in any such Distributions would result in the Holder exceeding
the Maximum Percentage, then the Holder shall not be entitled to participate in
such Distribution to such extent (or the beneficial ownership of any such shares
of Common Stock as a result of such Distribution to such extent) and such
Distribution to such extent shall be held in abeyance for the benefit of the
Holder until such time, if ever, as its right thereto would not result in the
Holder exceeding the Maximum Percentage).

     

    
      	
              4.

            	
              PURCHASE RIGHTS;
      FUNDAMENTAL TRANSACTIONS.

            

    

     

    (a)           Purchase
Rights.  In
addition to any adjustments pursuant to Section 2 above, if at any
time the
Company grants, issues or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata to all the
record holders of any class of shares of Common Stock (the “Purchase Rights”), then the
Holder will be entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which the Holder could have acquired if
the Holder had held the number of shares of Common Stock acquirable upon
complete exercise of this Warrant (without regard to any limitations on exercise
hereof, including without limitation, the Maximum Percentage) immediately before
the date on which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights (provided, however, that to the extent that the
Holder’s right to participate in any such Purchase Right would result in the
Holder exceeding the Maximum Percentage, then the Holder shall not be entitled
to participate in such Purchase Right to such extent (or beneficial ownership of
such shares of Common Stock as a result of such Purchase Right to such extent)
and such Purchase Right to such extent shall be held in abeyance for the Holder
until such time, if ever, as its right thereto would not result in the Holder
exceeding the Maximum Percentage).

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (b)           Fundamental
Transactions. The
Company shall not enter into or be party to a Fundamental
Transaction unless the Successor Entity assumes in writing all of the
obligations of the Company under this Warrant and the other Exchange Documents
(as defined in the Exchange Agreement) in accordance with the provisions of this
Section 4(b) pursuant to written agreements in form and substance
satisfactory to the Holder and approved by the Holder prior to such Fundamental
Transaction, including agreements to deliver to the Holder in exchange for this
Warrant a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Warrant, including, without
limitation, which is exercisable for a corresponding number of shares of capital
stock equivalent to the shares of Common Stock acquirable and receivable upon
exercise of this Warrant (without regard to any limitations on the exercise of
this Warrant) prior to such Fundamental Transaction, and with an exercise price
which applies the exercise price hereunder to such shares of capital stock (but
taking into account the relative value of the shares of Common Stock pursuant to
such Fundamental Transaction and the value of such shares of capital stock, such
adjustments to the number of shares of capital stock and such exercise price
being for the purpose of protecting the economic value of this Warrant
immediately prior to the consummation of such Fundamental Transaction), and
which is satisfactory in form and substance to the Holder. Upon the occurrence
of each Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of the applicable Fundamental
Transaction, the provisions of this Warrant and the other Exchange Documents
referring to the “Company” shall refer instead to the Successor Entity), and may
exercise every right and power of the Company and shall assume all of the
obligations of the Company under this Warrant and the other Exchange Documents
with the same effect as if such Successor Entity had been named as the Company
herein. Upon consummation of each such Fundamental Transaction, the Successor
Entity shall deliver to the Holder confirmation that there shall be issued upon
exercise of this Warrant at any time after the consummation of the Fundamental
Transaction, in lieu of the shares of Common Stock (or other securities, cash,
assets or other property (except such items still issuable under Sections 3
and 4(a) above, which shall continue to be receivable thereafter)) issuable
upon the exercise of this Warrant prior to such Fundamental Transaction, such
shares of publicly traded common stock (or its equivalent) of the Successor
Entity (including its Parent Entity) which the Holder would have been entitled
to receive upon the happening of such Fundamental Transaction had this Warrant
been exercised immediately prior to such Fundamental Transaction (without regard
to any limitations on the exercise of this Warrant), as adjusted in accordance
with the provisions of this Warrant. In addition to and not in substitution for
any other rights hereunder, prior to the consummation of each Fundamental
Transaction pursuant to which holders of shares of Common Stock are entitled to
receive securities or other assets with respect to or in exchange for shares of
Common Stock (a “Corporate
Event”), the Company shall make appropriate provision to insure that the
Holder will thereafter have the right to receive upon an exercise of this
Warrant at any time after the consummation of the applicable Fundamental
Transaction but prior to the Expiration Date, in lieu of the shares of the
Common Stock (or other securities, cash, assets or other property (except such
items still issuable under Sections 3 and 4(a) above, which shall continue
to be receivable thereafter)) issuable upon the exercise of the Warrant prior to
such Fundamental Transaction, such shares of stock, securities, cash, assets or
any other property whatsoever (including warrants or other purchase or
subscription rights) which the Holder would have been entitled to receive upon
the happening of such Fundamental Transaction had this Warrant been exercised
immediately prior to such Fundamental Transaction (without regard to any
limitations on the exercise of this Warrant). Provision made pursuant to the
preceding sentence shall be in a form and substance reasonably satisfactory to
the Holder.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (c)           Black Scholes
Value.
Notwithstanding the foregoing and the provisions of Section 4(b) above, in the
event of a Fundamental Transaction (other than a Fundamental Transaction
resulting solely from a merger or consolidation in which the Company is the
surviving entity, the Common Stock continues to be publicly traded on an
Eligible Market following such merger or consolidation and an amount of shares
of Common Stock which is less than 20% of the Company’s issued and outstanding
shares of Common Stock outstanding immediately prior to such merger or
consolidation are issued in connection with such merger or consolidation), at
the request of the Holder delivered before the ninetieth (90th) day
after the consummation of such Fundamental Transaction, the Company or the
Successor Entity (as the case may be) shall purchase this Warrant from the Holder by
paying to the Holder cash in an amount equal to the Black Scholes Value
of the remaining unexercised portion of this Warrant on the date of the
consummation of such Fundamental Transaction.

     

    (d)           Application. The
provisions of this Section 4 shall apply similarly and equally to
successive Fundamental Transactions and Corporate Events and shall be applied as
if this Warrant (and any such subsequent warrants) were fully exercisable and
without regard to any limitations on the exercise of this Warrant (provided that
the Holder shall continue to be entitled to the benefit of the Maximum
Percentage, applied however with respect to shares of capital stock registered
under the 1934 Act and thereafter receivable upon exercise of this Warrant (or
any such other warrant)).

     

    5.           NONCIRCUMVENTION. The
Company hereby covenants and agrees that the Company will not, by amendment of
its Articles of Incorporation (as defined in the Exchange Agreement), Bylaws (as
defined in the Exchange Agreement) or through any reorganization, transfer of
assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale
of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, and will at all
times in good faith carry out all the provisions of this Warrant and take all
action as may be required to protect the rights of the Holder. Without limiting
the generality of the foregoing, the Company (i) shall not increase the par
value of any shares of Common Stock receivable upon the exercise of this Warrant
above the Exercise Price then in effect, (ii) shall take all such actions
as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant, and (iii) shall, so long as any of the Warrants are
outstanding, take all action necessary to reserve and keep available out of its
authorized and unissued shares of Common Stock, solely for the purpose of
effecting the exercise of the Warrants, the maximum number of shares of Common
Stock as shall from time to time be necessary to effect the exercise of the
Warrants then outstanding (without regard to any limitations on
exercise).

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    6.           WARRANT HOLDER NOT DEEMED A
STOCKHOLDER. Except as otherwise specifically provided herein, the
Holder, solely in such Person’s capacity as a holder of this Warrant, shall not
be entitled to vote or receive dividends or be deemed the holder of share
capital of the Company for any purpose, nor shall anything contained in this
Warrant be construed to confer upon the Holder, solely in such Person’s capacity
as the Holder of this Warrant, any of the rights of a stockholder of the Company
or any right to vote, give or withhold consent to any corporate action (whether
any reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance to the Holder of the
Warrant Shares which such Person is then entitled to receive upon the due
exercise of this Warrant.  In addition, nothing contained in this
Warrant shall be construed as imposing any liabilities on the Holder to purchase
any securities (upon exercise of this Warrant or otherwise) or as a stockholder
of the Company, whether such liabilities are asserted by the Company or by
creditors of the Company. Notwithstanding this Section 6, the Company shall
provide the Holder with copies of the same notices and other information given
to the stockholders of the Company generally, contemporaneously with the giving
thereof to the stockholders.

     

    7.           
REISSUANCE OF
WARRANTS.

     

    (a)           Transfer of
Warrant. If this
Warrant is to be transferred, the Holder shall surrender this Warrant to the
Company together with a written assignment of this Warrant substantially in the
form attached hereto duly executed by the Holder or its agent or attorney and
funds sufficient to pay any transfer taxes payable upon the making of such
transfer, whereupon the Company will forthwith issue and deliver upon the order
of the Holder a new Warrant (in accordance with Section 7(d)), registered as the
Holder may request, representing the right to purchase the number of Warrant
Shares being transferred by the Holder and, if less than the total number of
Warrant Shares then underlying this Warrant is being transferred, a new Warrant
(in accordance with Section 7(d)) to the Holder representing the right to
purchase the number of Warrant Shares not being transferred.

     

    (b)           Lost, Stolen or Mutilated
Warrant. Upon
receipt by the Company of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of this Warrant (as to which a written
certification and the indemnification contemplated below shall suffice as such
evidence), and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary and
reasonable form and, in the case of mutilation, upon surrender and cancellation
of this Warrant, the Company shall execute and deliver to the Holder a new
Warrant (in accordance with Section 7(d)) representing the right to purchase the
Warrant Shares then underlying this Warrant.

     

    (c)           Exchangeable for Multiple
Warrants. This
Warrant is exchangeable, upon the surrender hereof by the Holder at the
principal office of the Company, for a new Warrant or Warrants (in accordance
with Section 7(d)) representing in the aggregate the right to purchase the
number of Warrant Shares then underlying this Warrant, and each such new Warrant
will represent the right to purchase such portion of such Warrant Shares as is
designated by the Holder at the time of such surrender; provided, however, that
no warrants for fractional shares of Common Stock shall be given.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    (d)           Issuance of New
Warrants.
Whenever the Company is required to issue a new Warrant pursuant to the terms of
this Warrant, such new Warrant (i) shall be of like tenor with this Warrant,
(ii) shall represent, as indicated on the face of such new Warrant, the right to
purchase the Warrant Shares then underlying this Warrant (or in the case of a
new Warrant being issued pursuant to Section 7(a) or Section 7(c), the
Warrant Shares designated by the Holder which, when added to the number of
shares of Common Stock underlying the other new Warrants issued in connection
with such issuance, does not exceed the number of Warrant Shares then underlying
this Warrant), (iii) shall have an issuance date, as indicated on the face of
such new Warrant which is the same as the Issuance Date, and (iv) shall have the
same rights and conditions as this Warrant.

     

    8.           NOTICES.  Whenever
notice is required to be given under this Warrant, unless otherwise provided
herein, such notice shall be given in accordance with Section 9(f) of the
Exchange Agreement. The Company shall provide the Holder (at its last address as
it shall appear upon the Warrant register of the Company) with prompt written
notice of all actions taken pursuant to this Warrant, including in reasonable
detail a description of such action and the reason therefor. Without limiting
the generality of the foregoing, the Company will give written notice to the
Holder (at its last address as it shall appear upon the Warrant register of the
Company) (i) promptly following each adjustment of the Exercise Price and the
number of Warrant Shares, setting forth in reasonable detail, and certifying,
the calculation of such adjustment(s) and (ii) at least ten (10) days prior to
the date on which the Company closes its books or takes a record (A) with
respect to any dividend or distribution upon the shares of Common Stock, (B)
with respect to any grants, issuances or sales of any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property
to all the holders of shares of Common Stock or (C) for determining rights to
vote with respect to any Fundamental Transaction, dissolution or liquidation,
provided in each case that such information shall be made known to the public
prior to or in conjunction with such notice being provided to the Holder and
(iii) at least ten (10) Trading Days prior to the consummation of any
Fundamental Transaction.  To the extent that any notice provided
hereunder constitutes, or contains, material, non-public information regarding
the Company or any of its subsidiaries, the Company shall simultaneously file
such notice with the SEC pursuant to a Current Report on Form 8-K.

     

    9.           AMENDMENT AND
WAIVER.  Except as otherwise provided herein, the provisions of
this Warrant (other than Section 1(f)) may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Holder. The Holder shall be entitled, at its option, to the benefit of any
amendment of any other similar warrant issued under the Other Exchange
Agreements. No waiver shall be effective unless it is in writing and signed by
an authorized representative of the waiving party.

     

    10.           SEVERABILITY.  If
any provision of this Warrant or the application thereof becomes or is declared
by a court of competent jurisdiction to be illegal, void or unenforceable, the
remainder of the terms of this Warrant will continue in full force and
effect.

     

    11.           GOVERNING LAW. This
Warrant shall be governed by and construed and enforced in accordance with, and
all questions concerning the construction, validity, interpretation and
performance of this Warrant shall be governed by, the internal laws of the State
of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of New York.

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    12.           CONSTRUCTION;
HEADINGS. This Warrant shall be deemed to be jointly drafted by the
Company and the Holder and shall not be construed against any Person as the
drafter hereof.  The headings of this Warrant are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Warrant. Terms used in this Warrant but defined in the other Exchange Documents
shall have the meanings ascribed to such terms on the Closing Date (as defined
in the Exchange Agreement) in such other Exchange Documents unless otherwise
consented to in writing by the Holder.

     

    13.           DISPUTE RESOLUTION.
In the case of a dispute as to the determination of the Exercise Price, the
Closing Sale Price or fair market value or the arithmetic calculation of the
Warrant Shares (as the case may be), the Company or the Holder (as the case may
be) shall submit the disputed determinations or arithmetic calculations (as the
case may be) via facsimile within five (5) Business Days of receipt of the
applicable notice giving rise to such dispute to the Company or the Holder (as
the case may be). If the Holder and the Company are unable to agree upon such
determination or calculation (as the case may be) of the Exercise Price, the
Closing Sale Price or fair market value or the number of Warrant Shares (as the
case may be) within three (3) Business Days of such disputed determination or
arithmetic calculation being submitted to the Company or the Holder (as the case
may be), then the Company shall, within ten (10) days submit via facsimile (a)
the disputed determination of the Exercise Price, the Closing Sale Price or fair
market value (as the case may be) to an independent, reputable investment bank
selected by the Company and approved by the Holder or (b) the disputed
arithmetic calculation of the Warrant Shares to the Company’s independent,
outside accountant. The Company shall cause at its expense the investment bank
or the accountant (as the case may be) to perform the determinations or
calculations (as the case may be) and notify the Company and the Holder of the
results no later than twenty (20) days from the time it receives such disputed
determinations or calculations (as the case may be). Such investment bank’s or
accountant’s determination or calculation (as the case may be) shall be binding
upon all parties absent demonstrable error.

     

    14.           REMEDIES, CHARACTERIZATION,
OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.  The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Exchange Documents, at
law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder to
pursue actual damages for any failure by the Company to comply with the terms of
this Warrant. The Company covenants to the Holder that there shall be no
characterization concerning this instrument other than as expressly provided
herein. Amounts set forth or provided for herein with respect to payments,
exercise and the like (and the computation thereof) shall be the amounts to be
received by the Holder and shall not, except as expressly provided herein, be
subject to any other obligation of the Company (or the performance thereof). The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the holder of this Warrant shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond or
other security being required. The issuance of shares and certificates for
shares as contemplated hereby upon the exercise of this Warrant shall be made
without charge to the Holder or such shares for any issuance tax or other costs
in respect thereof, provided that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than the Holder or its agent on its
behalf.

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    15.           TRANSFER. This
Warrant may be offered for sale, sold, transferred or assigned without the
consent of the Company so long as the Company receives written notice of such
sale, transfer or assignment within a reasonable amount of time thereafter that
contains the name(s) of the transferees or assignees and the rights so sold,
transferred or assigned.

     

    16.           CERTAIN
DEFINITIONS.  For purposes of this Warrant, the following terms
shall have the following meanings:

     

    (a)           “Black Scholes Value” means the
value of this Warrant based on the Black and Scholes Option Pricing Model
obtained from the “OV” function on Bloomberg determined as of the day of
consummation of the applicable Fundamental Transaction for pricing purposes and
reflecting (i) a risk-free interest rate corresponding to the U.S. Treasury rate
for a period equal to the remaining term of this Warrant as of the date of the
Holder’s request pursuant to Section 4(c), (ii) an expected volatility equal to
the greater of 100% and the 100 day volatility obtained from the HVT function on
Bloomberg as of the Trading Day immediately following the public
announcement of the applicable Fundamental Transaction and, if applicable, (iii)
the underlying price per share used in such calculation shall be the sum of the
price per share being offered in cash, if any, plus the value of any non-cash
consideration, if any, being offered in the applicable Fundamental
Transaction.

     

    (b)           “Bloomberg” means Bloomberg,
L.P.

     

    (c)           “Business Day” means any day
other than Saturday, Sunday or other day on which commercial banks in The City
of New York are authorized or required by law to remain closed.

     

    (d)           “Certificate of Determination”
has the meaning set forth in the Exchange Agreement.

     

    (e)           “Closing Sale Price” means, for
any security as of any date, the last closing trade price for such security on
the Principal Market, as reported by Bloomberg, or, if the Principal Market
begins to operate on an extended hours basis and does not designate the closing
trade price, then the last trade price of such security prior to 4:00:00 p.m.,
New York time, as reported by Bloomberg, or, if the Principal Market is not the
principal securities exchange or trading market for such security, the last
trade price of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing does not apply, the last trade price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no last trade price is reported for such security
by Bloomberg, the average of the ask prices of any market makers for such
security as reported in the “pink sheets” by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.). If the Closing Sale Price cannot be calculated
for a security on a particular date on any of the foregoing bases, the Closing
Sale Price of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such
dispute shall be resolved in accordance with the procedures in Section 13.
All such determinations shall be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during such
period.

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    (f)           “Common Stock” means
(i) the Company’s shares of common stock, no par value per share, and (ii)
any capital stock into which such common stock shall have been changed or any
share capital resulting from a reclassification of such common
stock.

     

    (g)           “Convertible Securities” means
any stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for shares of Common Stock.

     

    (h)           “Eligible Market” means The New
York Stock Exchange, Inc., the Nasdaq Global Select Market, the Nasdaq Global
Market, the Nasdaq Capital Market, the Principal Market or the “pink sheets”
over-the-counter market.

     

    (i)           “Expiration Date” means the
date that is the fifth (5th)
anniversary of the Issuance Date or, if such date falls on a day other than a
Business Day or on which trading does not take place on the Principal Market (a
“Holiday”), the next
date that is not a Holiday.

     

    (j)           “Fundamental Transaction” means
that (i) the Company shall, directly or indirectly, in one or more related
transactions, (1) consolidate or merge with or into (whether or not the Company
is the surviving corporation) another Person, or (2) sell, lease, license,
assign, transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company to another Person, or (3) allow another
Person to make a purchase, tender or exchange offer that is accepted by the
holders of more than 50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (4) consummate a stock or share purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than 50% of the
outstanding shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock or share
purchase agreement or other business combination), or (5) reorganize,
recapitalize or reclassify its Common Stock (for clarification purposes,
excluding customary stock splits and stock dividends occurring on or after the
Subscription Date (as defined in the Certificate of Determination)), or (ii) any
“person” or “group” (as these terms are used for purposes of Sections 13(d) and
14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is
or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934
Act), directly or indirectly, of 50% of the aggregate ordinary voting power
represented by issued and outstanding Common Stock.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    (k)           “Options” means any rights,
warrants or options to subscribe for or purchase shares of Common Stock or
Convertible Securities.

    (l)           “Parent Entity” of a Person
means an entity that, directly or indirectly, controls the applicable Person and
whose common stock or equivalent equity security is quoted or listed on an
Eligible Market, or, if there is more than one such Person or Parent Entity, the
Person or Parent Entity with the largest public market capitalization as of the
date of consummation of the Fundamental Transaction.

     

    (m)           “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity or a government or any
department or agency thereof.

     

    (n)           “Principal Market” means the
OTC Bulletin Board.

     

    (o)           “Successor Entity” means the
Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting
from or surviving any Fundamental Transaction or the Person (or, if so elected
by the Holder, the Parent Entity) with which such Fundamental Transaction shall
have been entered into.

     

    (p)           “Trading Day” means any day on
which the Common Stock is traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock is
then traded; provided that “Trading Day” shall not include any day on which the
Common Stock is scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market
does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York
time).

     

    (q)           “VWAP” means, for any security
as of any date, the dollar volume-weighted average price for such security on
the Principal Market (or, if the Principal Market is not the principal trading
market for such security, then on the principal securities exchange or
securities market on which such security is then traded) during the period
beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York
time, as reported by Bloomberg through its “Volume at Price” function or, if the
foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York time, and
ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no
dollar volume-weighted average price is reported for such security by Bloomberg
for such hours, the average of the highest closing bid price and the lowest
closing ask price of any of the market makers for such security as reported in
the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.). If VWAP cannot be calculated for such security on such date on any of the
foregoing bases, the VWAP of such security on such date shall be the fair market
value as mutually determined by the Company and the Holder. If the Company and
the Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved in accordance with the procedures in Section 13.
All such determinations shall be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during such
period.

     

    [signature page
follows]

     

    
      
         

      

      
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    IN WITNESS WHEREOF, the
Company has caused this Warrant to Purchase Common Stock to be duly executed as
of the Issuance Date set out above.

     

    
      
        
          
            
              
                
                  
                    
                      
                        	NUTRACEA 
	 	 
	
                                By:

                              	 
      
	Name:
      Olga
      Hernandez-Longan
	Title:  Chief
      Financial
Officer

                      

                    

                  

                

              

            

          

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
A

     

    EXERCISE
NOTICE

     

    TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

    WARRANT
TO PURCHASE COMMON STOCK

     

    NUTRACEA

     

    The
undersigned holder hereby exercises the right to purchase _________________ of
the shares of Common Stock (“Warrant Shares”) of NutraCea,
a California corporation (the “Company”), evidenced by
Warrant to Purchase Common Stock No. _______ (the “Warrant”). Capitalized terms
used herein and not otherwise defined shall have the respective meanings set
forth in the Warrant.

     

    1.           Form of Exercise
Price.  The Holder intends that payment of the Exercise Price
shall be made as:

     

    
       ____________
a
“Cash Exercise”
with respect to _________________ Warrant Shares; and/or

    

     

    
      ____________
a
“Cashless
Exercise” with respect to _______________ Warrant
Shares.

    

     

    2.           Payment of Exercise
Price.  In the event that the Holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares to be issued pursuant
hereto, the Holder shall pay the Aggregate Exercise Price in the sum of
$___________________ to the Company in accordance with the terms of the
Warrant.

     

    3.           Qualified
Institutional/Accredited Investor. If the Holder is making a Cash
Exercise, the Holder hereby represents that the Holder is a “qualified
institutional investor” as defined in Section 2(g) of the Securities Purchase
Agreement, except that if the Holder is a resident of (or, in the case of an
entity, such entity’s principal place of business is located in) the State of
Illinois and is making a Cash Exercise, the Holder hereby represents that the
Holder is an “accredited investor” as that term is defined in Rule 501 of the
rules and regulations promulgated under the Securities Act of 1933, as
amended.

     

    4.           Delivery of Warrant
Shares.  The Company shall deliver to Holder, or its designee
or agent as specified below, __________ Warrant Shares in accordance with the
terms of the Warrant.  Delivery shall be made to Holder, or for its
benefit, to the following address:

     

    _______________________

    _______________________

    _______________________

    _______________________

     

    Date:
_______________ __, ______

     

    
      
        
          
            	 
	
                    Name
      of Registered
Holder

                  

          

        

      

    

    

    
      
        
          	
                  By:

                	 
      
	 
      	
                  Name:

                
	 
      	
                  Title:

                

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ACKNOWLEDGMENT

     

    The
Company hereby acknowledges this Exercise Notice and hereby directs
______________ to issue the above indicated number of shares of Common Stock in
accordance with the Transfer Agent Instructions dated _____________, 2009 from
the Company and acknowledged and agreed to by _______________.

     

    
      
        
          
            
              
                
                  	
                          NUTRACEA

                        
	 	 
	
                          By:

                        	 
      
	Name:
	Title:

                

              

            

          

        

      

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
B

    

    ASSIGNMENT
FORM

    

    (To
assign the foregoing warrant, execute

    this form
and supply required information.

    Do not
use this form to exercise the warrant.)

     

    FOR VALUE
RECEIVED, [all of the] [_______] shares of the foregoing Warrant and all rights
evidenced thereby [with respect to such shares] are hereby assigned
to

     

    _______________________________________________
whose address is

     

    _______________________________________________________________.

     

    _______________________________________________________________

    

    Dated: ______________, _______

     

    
      
        
          
            
              
                	 
      	
                        Holder’s Signature:

                      	 
      	 
	 
      	 
      	 
      	 
	 
      	
                        Holder’s Address:

                      	 
      	 
	 
      	 
      	 
      	 
	 	 	 	 

              

            

          

        

      

    

     

    NOTE:  The
signature to this Assignment Form must correspond with the name as it appears on
the face of the Warrant, without alteration or any change
whatsoever.EXCHANGE
AGREEMENT

       

      This
EXCHANGE AGREEMENT (the
“Agreement”), dated as
of May ___, 2009, is by and among NutraCea, a California corporation with
offices located at 5090 N. 40th Street, Suite 400, Phoenix, Arizona 85018 (the
“Company”), and
_______________ (the “Holder”).

      

      RECITALS

      

      A.           The
Company, the Holder and various others entered into that certain Securities
Purchase Agreement, dated as October 16, 2008 (as amended and modified by this
Agreement and the Other Exchange Agreements (as defined below), the “Purchase
Agreement”).

       

      B.Simultaneously with the consummation
of the transactions contemplated by the Purchase Agreement, the Company issued
and sold to the Holder pursuant to the Registration Statement (as defined in the
Purchase Agreement) (i) 3,000 shares of Series D Convertible Preferred Stock
(the “Series D Preferred
Stock”) and (ii) a Series A Warrant (as defined in the Purchase
Agreement) initially exercisable for 2,727,273 shares of Common Stock (as
defined below).

      

      C.           Since
the issuance of the Series D Preferred Stock, one or more Triggering Events (as
defined in the Certificate of Determination, Preferences and Rights of Series D
Convertible Preferred Stock) may have occurred thereunder.

      

      D.           The
Company has authorized a series of preferred stock entitled the “Series E
Convertible Preferred Stock” (the “Preferred Stock”), which
Preferred Stock shall be convertible into shares of the Company’s common stock,
no par value per share (the “Common Stock”), in accordance
with the terms of the Preferred Stock.  The rights, preferences and
other terms and provisions of the Preferred Stock are set forth in the
Certificate of Determination, Preferences and Rights of Series E Convertible
Preferred Stock in the form attached hereto as Exhibit
A (the “Certificate of
Determination”). As used herein, the term “Conversion Shares” shall
include all shares of Common Stock issuable upon conversion of, or as dividends
on, the Preferred Stock in accordance with the Certificate of
Determination.

      

      E.           In
exchange for all of the Holder’s shares of Series D Preferred Stock, the Company
has authorized the issuance to the Holder of _____ shares of Preferred
Stock.

      

      F.           In
exchange for the Holder’s Series A Warrant, the Company has authorized the
issuance to the Holder of a warrant, in the form attached hereto as Exhibit
B (including all warrants issued in exchange therefor or replacement
thereof, the “Warrant”),
which Warrant shall initially be exercisable for __________ shares of Common
Stock (as exercised, the “Warrant Shares”), in
accordance with the terms thereof.

      

      G.           The
Preferred Stock, the Conversion Shares, the Warrant and the Warrant Shares are
collectively referred to herein as the “Securities.”

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      H.           The
exchange of the Holder’s Series D Preferred Stock and Series A Warrant for the
Preferred Stock and the Warrant will be made in reliance upon the exemption from
registration provided by Section 3(a)(9) of the Securities Act of 1933, as
amended (the “1933
Act”).

      

      AGREEMENT

       

      NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Holder hereby
agree as follows:

       

      
        	
                1.

              	
                EXCHANGE
      OF SERIES D PREFERRED STOCK AND SERIES A
  WARRANT.

              

      

       

      (a)           Series D Preferred Stock and
Series A Warrant. Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 6 and 7 below, the Company shall, pursuant to
Section 3(a)(9) of the 1933 Act, exchange (i) all of the Holder’s shares of
Series D Preferred Stock for ____ shares of Preferred Stock and (ii) the
Holder’s Series A Warrant for the Warrant.

       

      (b)           Closing. The closing
(the “Closing”) of the
exchange of the Holder’s Series D Preferred Stock and the Holder’s Series A
Warrant shall occur at the offices of Greenberg Traurig, LLP, 77 W. Wacker
Drive, Suite 3100, Chicago, Illinois 60601. The date and time of the Closing
(the “Closing Date”)
shall be 10:00 a.m., New York time, on the first (1st)
Business Day on which the conditions to the Closing set forth in Sections 6 and
7 below are satisfied or waived (or such later date as is mutually agreed to by
the Company and the Holder). As used herein “Business Day” means any day
other than a Saturday, Sunday or other day on which commercial banks in New
York, New York are authorized or required by law to remain closed.

       

      (c)           Delivery. On the
Closing Date, (i) the Holder shall deliver all of its shares of Series D
Preferred Stock and its Series A Warrant to the Company and (ii) the
Company shall exchange, issue and deliver to the Holder (A) _______ shares of
Preferred Stock for such shares of Series D Preferred Stock and (B) the Warrant
for such Series A Warrant, in all cases duly executed on behalf of the Company
and registered in the name of the Holder.

       

      
        	
                2.

              	
                HOLDER’S
      REPRESENTATIONS AND WARRANTIES.

              

      

       

      Holder
represents and warrants to the Company that:

       

      (a)           Organization;
Authority. The Holder is an entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization with the
requisite power and authority to enter into and to consummate the transactions
contemplated by the Exchange Documents (as defined below) to which it is a party
and otherwise to carry out its obligations hereunder and
thereunder.

       

      (b)           Validity;
Enforcement. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Holder and constitutes the legal, valid
and binding obligations of the Holder enforceable against the Holder in
accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and
remedies.

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

       

      (c)           No Conflicts. The
execution, delivery and performance by the Holder of this Agreement and the
consummation by the Holder of the transactions contemplated hereby and thereby
will not (i) result in a violation of the organizational documents of the Holder
or (ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Holder is a party, or (iii)
result in a violation of any law, rule, regulation, order,
judgment  or decree (including federal and state securities laws)
applicable to the Holder, except in the case of clauses (ii) and (iii) above,
for such conflicts, defaults, rights or violations which would not, individually
or in the aggregate, reasonably be expected to have a material adverse effect on
the ability of the Holder to perform its obligations hereunder.

       

      (d)           Residency. The Holder
is a resident of that jurisdiction specified below its address on the Schedule
of Buyers attached to the Purchase Agreement.

       

      (e)           Own Account. The
Holder is acquiring the Securities as principal for its own account and not with
a view to or for distributing or reselling such Securities or any part thereof
in violation of the 1933 Act or any applicable state securities law, has no
present intention of distributing any of such Securities in violation of the
1933 Act or any applicable state securities law, and has no direct or indirect
arrangement or understandings with any other persons to distribute or regarding
the distribution of such Securities in violation of the 1933 Act or any
applicable state securities law (this representation and warranty shall not
limit the Holder’s right to sell the Securities in compliance with applicable
federal and state securities laws); provided, however, that by
making the representations herein, the Holder does not agree, or make any
representation or warranty, to hold any of the Securities for any minimum or
other specific term and reserves the right to dispose of the Securities at any
time in compliance with applicable federal and state securities laws. The Holder
is acquiring the Securities hereunder in the ordinary course of its business.
The Holder shall notify the Company in writing of any transfers by the Holder of
any of the Preferred Stock or the Warrant and such notification shall contain
the name and address of the transferee.

       

      (f)           Experience of the
Holder. The Holder, either alone or together with its advisors and
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective acquisition of the Securities, and has so evaluated the merits
and risks of such acquisition. The Holder is able to bear the economic risk of
an acquisition of the Securities and, at the present time, is able to afford a
complete loss of such acquisition. The representations contained in this Section
2(f), however, shall not modify, amend or affect the Holder’s right to rely on
the Company’s representations and warranties contained herein or any
representations and warranties contained in any other Exchange Document or any
other document or instrument executed and/or delivered in connection with this
Agreement or the consummation of the transaction contemplated
hereby.

       

      (g)           Holder Status. At the
time the Holder was offered the Securities, it met, and as of the date hereof it
meets, the definition of “institutional investor,” “accredited investor” or
other similar term forth on Exhibit
2(g) that is applicable to it based on the state in which the Holder is
located. The Holder is not required to be registered as a broker-dealer under
Section 15 of the 1934 Act.

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

       

      (h)           Ownership. The Holder
does not as of the date hereof, and will not immediately following the Closing,
own 10% or more of the Company’s issued and outstanding shares of Common Stock
(calculated based on the assumption that all Equivalents (as defined in the
Purchase Agreement) owned by the Holder, whether or not presently exercisable or
convertible, have been fully exercised or converted (as the case may be) but
taking into account any limitations on exercise or conversion (including
“blockers”) contained therein).

       

      
        	
                3.

              	
                REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY.

              

      

       

      The
Company represents and warrants to the Holder that:

       

      (a)           Organization and
Qualification; Subsidiaries. Each of the Company and each of its “Subsidiaries” (which for
purposes of this Agreement means any Person in which the Company, directly or
indirectly, owns capital stock or holds an equity or similar interest) are
entities duly organized and validly existing and in good standing under the laws
of the jurisdiction in which they are formed, and have the requisite power and
authorization to own their properties and to carry on their business as now
being conducted and as presently proposed to be conducted. Each of the Company
and its Subsidiaries is duly qualified as a foreign entity to do business and is
in good standing in every jurisdiction in which its ownership of property or the
nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect” means
any material adverse effect on (i) the business, properties, assets,
liabilities, operations (including results thereof), condition (financial or
otherwise) or prospects of the Company or any of its Subsidiaries, taken as a
whole, (ii) the legality, validity or enforceability of the transactions
contemplated hereby or in the other Exchange Documents or (iii) the authority or
ability of the Company to perform any of its obligations under any of the
Exchange Documents. Other than the Subsidiaries, there is no Person in which the
Company, directly or indirectly, owns capital stock or holds an equity or
similar interest.  Except as set forth in Section 3(a) of the
disclosure letter delivered by the Company to the Holder concurrently with the
execution of this Agreement (the “Disclosure Letter”), the
Company has no Subsidiaries.

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      (b)           Authorization; Enforcement;
Validity. The Company has the requisite power and authority to enter into
and, except as set forth in Section 3(b) of the Disclosure Letter, perform its
obligations under this Agreement and the other Exchange Documents and to issue
the Securities in accordance with the terms hereof and thereof. The execution
and delivery of this Agreement and the other Exchange Documents by the Company,
and the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the issuance of the Preferred Stock and
the reservation for issuance and issuance of the Conversion Shares issuable upon
conversion of, or as dividends on, the Preferred Stock, the issuance of the
Warrant and the reservation for issuance and issuance of the Warrant Shares
issuable upon exercise of the Warrant) have been duly authorized by the
Company’s board of directors and no further filing, consent or authorization is
required by the Company, its board of directors or its stockholders or other
governing body or regulatory authority. This Agreement and the other Exchange
Documents to which the Company is a party have been (or upon delivery will have
been) duly executed and delivered by the Company and when delivered in
accordance with the terms hereof and thereof, will constitute the legal, valid
and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and
remedies and except as rights to indemnification and to contribution may be
limited by federal or state securities law. “Exchange Documents” means,
collectively, this Agreement, the Warrant, the Certificate of Determination, the
Irrevocable Transfer Agent Instructions (as defined below) and each of the other
agreements and instruments entered into by the parties hereto in connection with
the transactions contemplated hereby and thereby. Except as set forth in Section
3(b) of the Disclosure Letter, the Company has no reason to believe that it will
be unable to comply with any of its obligations under any of the Exchange
Documents (including, without limitation, as a result of application of Section
500 or Section 501 of the California Corporations Code).

       

      (c)           Issuance of
Securities. The issuance of the Preferred Stock and the Warrant is duly
authorized and, when issued in accordance with the terms of the Exchange
Documents, shall be validly issued, fully paid and non-assessable and free from
all taxes, liens, charges and other encumbrances imposed by the Company. As of
the Closing, the Company shall have reserved from its duly authorized capital
stock not less than 133% of the sum of (i) the maximum number of Conversion
Shares issuable upon conversion of the Preferred Stock (assuming for purposes
hereof that the Preferred Stock is convertible at the initial Conversion Price
(as defined in the Certificate of Determination) and without taking into account
any limitations on the conversion of the Preferred Stock set forth in the
Certificate of Determination) and (ii) the maximum number of Warrant Shares
issuable upon exercise of the Warrant (without regard to any limitations on the
exercise of the Warrant set forth therein). Upon (i) conversion of the Preferred
Stock in accordance with the Certificate of Determination, (ii) issuance as
dividends on the Preferred Stock in accordance with the Certificate of
Determination or (iii) exercise of the Warrant in accordance with the Warrant
(as the case may be), the Conversion Shares and the Warrant Shares, as
applicable, when issued, will be validly issued, fully paid and non-assessable
and free from all preemptive or similar rights, taxes, liens, charges and other
encumbrances imposed by the Company, with the holders being entitled to all
rights accorded to a holder of Common Stock. The offer, exchange and issuance of
the Securities is exempt from registration under the 1933 Act pursuant to the
exemption provided by Section 3(a)(9) thereof.  Upon issuance in
accordance with the terms of the Exchange Documents, the Securities will be
freely tradable without restriction.  Notwithstanding the preceding
sentence, the Warrant Shares will be freely tradable without restriction so long
as such Warrant Shares are exercised pursuant to a cashless exercise as provided
in the Warrant.

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      (d)           No Conflicts. Except
as set forth in Section 3(d) of the Disclosure Letter, the execution, delivery
and performance of the Exchange Documents by the Company and the consummation by
the Company of the transactions contemplated hereby and thereby (including,
without limitation, the issuance of the Preferred Stock, the Warrant, the
Conversion Shares and Warrant Shares and the reservation for issuance of the
Conversion Shares and Warrant Shares) will not (i) result in a violation of the
Articles of Incorporation (as defined below) or other organizational documents
of the Company or any of its Subsidiaries or Bylaws (as defined below) of the
Company, (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) subject to the making of the Required Filings
(as defined below) by the Company, result in a violation of any law, rule,
regulation, order, judgment or decree (including foreign, federal and state
securities laws and regulations and the rules and regulations of the OTC
Bulletin Board (the “Principal
Market”)) applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected except, in the case of clause (ii) or (iii) above, to the extent
such violations that could not reasonably be expected to have a Material Adverse
Effect.

       

      (e)           Consents.  The
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court, governmental agency or any
regulatory or self-regulatory agency or any other Person (as defined below)
(including, without limitation, the Financial Industry Regulatory Authority) in
order for it to execute, deliver or perform any of its obligations under or
contemplated by the Exchange Documents, in each case, in accordance with the
terms hereof or thereof, other than (i) the filing with the SEC of the 8-K
Filing (as defined below), (ii) such filings as are required to be made under
applicable state securities laws (clauses (i) and (ii) are collectively referred
to as the “Required
Filings”) and (iii) as set forth in Section 3(e) of the Disclosure
Letter. All consents, authorizations, orders, filings and registrations which
the Company is required to obtain on or before the Closing Date pursuant to the
preceding sentence have been obtained or effected on or prior to the Closing
Date, and neither the Company nor any of its Subsidiaries are aware of any facts
or circumstances which might prevent the Company from obtaining or effecting any
of the registration, application or filings pursuant to the preceding sentence.
Required Filings to be made after the Closing Date shall be made in compliance
with the terms of this Agreement and applicable federal and state securities
laws. Except as set forth in Section 3(e) of the Disclosure Letter, the Company
is not in violation of the requirements of the Principal Market and has no
knowledge of any facts or circumstances which could reasonably lead to delisting
or suspension of the Common Stock in the foreseeable future.

       

      (f)           Acknowledgment Regarding
Holder’s Exchange of Securities. The Company acknowledges and agrees that
the Holder is acting solely in the capacity of an arm’s length purchaser with
respect to the Exchange Documents and the transactions contemplated hereby and
thereby and that the Holder is not (i) an officer or director of the Company or
any of its Subsidiaries, (ii) an “affiliate” (as defined in Rule 144 promulgated
under the 1933 Act) of the Company or any of its Subsidiaries or (iii) to its
knowledge, a “beneficial owner” of more than 10% of the shares of Common Stock
(as defined for purposes of Rule 13d-3 of the Securities Exchange Act of 1934,
as amended (the “1934
Act”)). The Company further acknowledges that the Holder is not acting as
a financial advisor or fiduciary of the Company or any of its Subsidiaries (or
in any similar capacity) with respect to the Exchange Documents and the
transactions contemplated hereby and thereby, and any advice given by the Holder
or any of its representatives or agents in connection with the Exchange
Documents and the transactions contemplated hereby and thereby is merely
incidental to the Holder’s acquisition of the Securities. The Company further
represents to the Holder that the Company’s decision to enter into the Exchange
Documents has been based solely on the independent evaluation by the Company and
its representatives.

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

       

      (g)          Placement Agent’s
Fees. Neither the Company nor any of its Subsidiaries has engaged any
placement agent or other agent in connection with the transactions contemplated
by this Agreement. The Company shall be responsible for the payment of any
placement agent’s fees, financial advisory fees or broker’s commissions owed to
any Person pursuant to any other agreements entered into by the Company relating
to or arising out of the transactions contemplated hereby. The Holder shall have
no obligation with respect to any fees or with respect to any claims (other than
such fees or commissions owed by the Holder pursuant to agreements entered into
by the Holder, which fees or commissions shall be the sole responsibility of the
Holder) made by or on behalf of other Persons for fees or the type contemplated
in this Section that may be due in connection with the transactions contemplated
by the Exchange Documents.

       

      (h)          No Integrated
Offering. None of the Company, the Subsidiaries or any of their
affiliates, nor any Person acting on their behalf has, directly or indirectly,
made any offers or sales of any security or solicited any offers to buy any
security, under circumstances that would cause this offering of the Securities
(together with any other offering pursuant to the Other Exchange Agreements) to
require approval of stockholders of the Company under any applicable stockholder
approval provisions, including, without limitation, under the rules and
regulations of any exchange or automated quotation system on which any of the
securities of the Company are listed or designated. None of the Company, its
Subsidiaries, their affiliates nor any Person acting on their behalf will take
any action or steps referred to in the preceding sentence that would cause the
offering of any of the Securities to be integrated with other
offerings.

       

      (i)           Dilutive Effect. The
Company understands and acknowledges that the number of Conversion Shares and
Warrant Shares will increase in certain circumstances. The Company further
acknowledges that its obligation to issue the Conversion Shares upon conversion
of the Preferred Stock and the Warrant Shares upon exercise of the Warrant in
accordance with this Agreement, the Certificate of Determination and the Warrant
is absolute and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other stockholders of the
Company.

       

      (j)           Application of Takeover
Protections; Rights Agreement. The Company and its board of directors
have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Articles of Incorporation or other organizational documents or the
laws of the jurisdiction of its incorporation or otherwise which is or could
become applicable to the Holder as a result of the transactions contemplated by
this Agreement, including, without limitation, the Company’s issuance of the
Securities and the Holder’s ownership of the Securities. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any stockholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of shares of Common Stock or a change in
control of the Company or any of its Subsidiaries.

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      (k)           SEC Documents; Financial
Statements. Except as set forth in Section 3(k) of the Disclosure Letter,
during the two (2) years prior to the date hereof, the Company has timely filed
all reports, schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of the 1934 Act
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements, notes and schedules thereto and documents
incorporated by reference therein being referred to herein as the “SEC Documents”). The Company
has delivered to the Holder or its representatives true, correct and complete
copies of each of the SEC Documents not available on the EDGAR system. Except as
set forth in Section 3(k) of the Disclosure Letter, as of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the 1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. Except as set forth in Section 3(k) of the
Disclosure Letter, as of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto as in effect as of the time of
filing. Except as set forth in Section 3(k) of the Disclosure Letter, such
financial statements have been prepared in accordance with generally accepted
accounting principles, consistently applied, during the periods involved (except
(i) as may be otherwise indicated in such financial statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to the extent they
may exclude footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial position of the Company as of the
dates thereof and the results of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments which will not be material, either individually or in the
aggregate). No other information provided by or on behalf of the Company to the
Holder which is not included in the SEC Documents contains any untrue statement
of a material fact or omits to state any material fact necessary in order to
make the statements therein not misleading, in the light of the circumstance
under which they are or were made.

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      (l)           Absence of Certain
Changes. Since the date of the Company’s most recent audited or reviewed
financial statements contained in the Form 10-K, except as disclosed in
subsequent SEC Documents filed prior to the date hereof, there has been no
material adverse change and no material adverse development in the business,
assets, liabilities, properties, operations (including results thereof),
condition (financial or otherwise) or prospects of the Company or any of its
Subsidiaries.  Since the date of the Company’s most recent audited
financial statements contained in the Form 10-K, except as disclosed in a
subsequent SEC Documents filed prior to the date hereof, neither the Company nor
any of its Subsidiaries has (i) declared or paid any dividends other than by
Subsidiaries to the Company, (ii) sold any material assets, individually or in
the aggregate, outside of the ordinary course of business or (iii) made any
material capital expenditures, individually or in the aggregate. Neither the
Company nor any of its Subsidiaries has taken any steps to seek protection
pursuant to any law or statute relating to bankruptcy, insolvency,
reorganization, liquidation or winding up, nor does the Company or any
Subsidiary have any knowledge or reason to believe that any of their respective
creditors intend to initiate involuntary bankruptcy proceedings or any actual
knowledge of any fact which would reasonably lead a creditor to do so. The
Company and its Subsidiaries, individually and on a consolidated basis, are not
as of the date hereof, and after giving effect to the transactions contemplated
hereby to occur at the Closing, will not be Insolvent (as defined below). For
purposes of this Agreement, “Insolvent” means, on a
consolidated basis, (i) the present fair saleable value of the Company’s and its
Subsidiaries’ assets is less than the amount required to pay the Company’s and
its Subsidiaries’ total Indebtedness (as defined below), (ii) the Company and
its Subsidiaries are unable to pay their debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and
matured or (iii) the Company and its Subsidiaries intend to incur or believe
that they will incur debts that would be beyond their ability to pay as such
debts mature. Neither the Company nor any of its Subsidiaries has engaged in
business or in any transaction, and is not about to engage in business or in any
transaction, for which the Company’s or such Subsidiary’s remaining assets
constitute unreasonably small capital. For purposes of this Agreement: (x)
“Indebtedness” of any
Person means, without duplication (A) all indebtedness for borrowed money, (B)
all obligations issued, undertaken or assumed as the deferred purchase price of
property or services (including, without limitation, “capital leases” in
accordance with generally accepted accounting principles) other than trade
payables entered into in the ordinary course of business, (C) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person that
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) “Contingent
Obligation” means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any indebtedness, lease,
dividend or other obligation of another Person if the primary purpose or intent
of the Person incurring such liability, or the primary effect thereof, is to
provide assurance to the obligee of such liability that such liability will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such liability will be protected (in whole or in
part) against loss with respect thereto; and (z) “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity, a government or any
department or agency thereof.

       

      (m)           No Undisclosed Events,
Liabilities, Developments or Circumstances. No event, liability,
development or circumstance has occurred or exists, or is reasonably expected to
exist or occur with respect to the Company, any of its Subsidiaries or their
respective business, properties, liabilities, prospects, operations (including
results thereof) or condition (financial or otherwise), that would be required
to be disclosed by the Company under applicable securities laws on a
registration statement on Form S-1 filed with the SEC relating to an issuance
and sale by the Company of its Common Stock and which either (i) except as set
forth in Section 3(m) of the Disclosure Letter, has not been publicly announced
or contained in the SEC Documents or (ii) except as set forth in Section 3(m) of
the Disclosure Letter, could reasonably result in a Material Adverse Effect or a
material adverse effect on the Holder’s investment hereunder.

      
        
           

        

        
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      (n)          Conduct of Business;
Regulatory Permits. Except as set forth in Section 3(e) of the Disclosure
Letter, neither the Company nor any of its Subsidiaries is in violation of any
term of or in default under its Articles of Incorporation, any certificate of
determination of any other outstanding series of preferred stock of the Company
or any of its Subsidiaries or Bylaws or their organizational charter,
certificate of formation or certificate of incorporation or bylaws,
respectively. Neither the Company nor any of its Subsidiaries is in violation of
any judgment, decree or order or any statute, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries, and neither the Company
nor any of its Subsidiaries will conduct its business in violation of any of the
foregoing, except in all cases for possible violations which could not,
individually or in the aggregate, have a Material Adverse Effect. Without
limiting the generality of the foregoing, except as set forth in Section 3(n) of
the Disclosure Letter, the Company is not in violation of any of the rules,
regulations or requirements of the Principal Market and has no knowledge of any
facts or circumstances that could reasonably lead to delisting or suspension of
the Common Stock by the Principal Market in the foreseeable future. Except as
set forth in Section 3(n) of the Disclosure Letter, since January 1, 2006, (i)
the Common Stock has been designated for quotation on the Principal Market, (ii)
trading in the Common Stock has not been suspended by the SEC or the Principal
Market and (iii) the Company has received no communication, written or oral,
from the SEC or the Principal Market regarding the suspension or delisting of
the Common Stock from the Principal Market. The Company and each of its
Subsidiaries possess all certificates, authorizations and permits issued by the
appropriate regulatory authorities necessary to conduct their respective
businesses, except where the failure to possess such certificates,
authorizations or permits would not have, individually or in the aggregate, a
Material Adverse Effect, and neither the Company nor any such Subsidiary has
received any written notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.

       

      (o)          Foreign Corrupt
Practices.  Neither the Company nor any of the Subsidiaries nor
any director, officer, agent, employee or other Person acting on behalf of the
Company or any of its Subsidiaries has, in the course of its actions for, or on
behalf of, the Company or any of its Subsidiaries (i) used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.

       

      (p)          Sarbanes-Oxley Act.
Except as set forth in Section 3(p) of the Disclosure Letter, the Company and
each Subsidiary is in material compliance with all applicable requirements of
the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and all
applicable rules and regulations promulgated by the SEC thereunder that are
effective as of the date hereof.

      
        
           

        

        
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      (q)          Transactions With
Affiliates. Except as set forth in the SEC Documents, none of the
officers or directors of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than for services as employees,
officers or directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer or director or, to the knowledge of the Company, any entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner, in each case in excess of $120,000 other
than for (i) payment of salary or bonuses for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company, and (iii) other
employee benefits, including stock option agreements under any stock option plan
of the Company and restricted stock agreements under any restricted stock plan
of the Company.

       

      (r)           Equity
Capitalization.  The capitalization of the Company as of the
date hereof is as described in Section 3(r)(i) of the Disclosure Letter. No
shares of Common Stock are held in treasury. All of such outstanding shares are
duly authorized and have been, or upon issuance will be, validly issued and are
fully paid and nonassessable. __________ shares of the Company’s issued and
outstanding Common Stock on the date hereof are as of the date hereof owned by
Persons who are “affiliates” (as defined in Rule 405 of the 1933 Act and
calculated based on the assumption that only officers, directors and holders of
at least 10% of the Company’s issued and outstanding Common Stock are
“affiliates” without conceding that any such Persons are “affiliates” for
purposes of federal securities laws) of the Company or any of its Subsidiaries.
To the Company’s knowledge, as of the date hereof no Person owns 10% or more of
the Company’s issued and outstanding shares of Common Stock (calculated based on
the assumption that all Equivalents, whether or not presently exercisable or
convertible, have been fully exercised or converted (as the case may
be) taking account of any limitations on exercise or conversion (including
“blockers”) contained therein without conceding that such identified Person is a
10% stockholder for purposes of federal securities laws). Except as disclosed in
Section 3(r)(ii) of the Disclosure Letter: (i) none of the Company’s or any
material Subsidiary’s capital stock is subject to preemptive rights or any other
similar rights or any liens suffered or permitted by the Company or any
Subsidiary; (ii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
capital stock of the Company or any of its Subsidiaries; (iii) there are no
outstanding debt securities, notes, credit agreements, credit facilities or
other agreements, documents or instruments evidencing Indebtedness of the
Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (iv) there are no financing statements
securing obligations in any material amounts filed in connection with the
Company or any of its Subsidiaries; (v) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the
sale of any of their securities under the 1933 Act (except as contemplated by
the Purchase Areement); (vi) there are no outstanding securities or instruments
of the Company or any of its Subsidiaries which contain any redemption or
similar provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries; (vii)
there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities; (viii)
neither the Company nor any Subsidiary has any stock appreciation rights or
“phantom stock” plans or agreements or any similar plan or agreement; and (ix)
neither the Company nor any of its Subsidiaries have any liabilities or
obligations required to be disclosed in the SEC Documents which are not so
disclosed in the SEC Documents, other than those incurred in the ordinary course
of the Company’s or its Subsidiaries’ respective businesses and which,
individually or in the aggregate, do not or could not have a Material Adverse
Effect.  The Company has furnished to the Holder true, correct and
complete copies of the Company’s Articles of Incorporation, as amended and as in
effect on the date hereof, including, without limitation, any certificates of
determination contained therein or attached thereto (the “Articles of Incorporation”), and the
Company’s bylaws, as amended and as in effect on the date hereof (the “Bylaws”).

      
        
           

        

        
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      (s)          Indebtedness and Other
Contracts. Except as disclosed in the SEC Documents or in Section 3(s) of
the Disclosure Letter, neither the Company nor any of its Subsidiaries (i) has
any outstanding Indebtedness, (ii) is a party to any contract, agreement or
instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument could reasonably be
expected to result in a Material Adverse Effect, (iii) is in violation of any
term of or in default under any contract, agreement or instrument relating to
any Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (iv) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Company’s officers, has or is
expected to have a Material Adverse Effect.

       

      (t)           Absence of
Litigation. Except as disclosed in Section 3(t) of the Disclosure Letter,
there is no action, suit, proceeding, inquiry or investigation before or by the
Principal Market, any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries, the Common Stock or
any of the Company’s or its Subsidiaries’ officers or directors which
individually or in the aggregate could reasonably be expected to have a Material
Adverse Effect. Except as disclosed in Section 3(t) of the Disclosure Letter,
there has not been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the SEC involving the Company or any current
or former director or officer of the Company.  The SEC has not issued
any stop order or other order suspending the effectiveness of any registration
statement filed by the Company under the 1934 Act or the 1933 Act.

       

      (u)          Insurance. The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the Company nor
any such Subsidiary has been refused any insurance coverage sought or applied
for, and neither the Company nor any such Subsidiary has any reason to believe
that it will be unable to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not have a Material
Adverse Effect.

      
        
           

        

        
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      (v)         Employee
Relations.  Neither the Company nor any of its Subsidiaries is
a party to any collective bargaining agreement or employs any member of a union.
The Company believes that its and its Subsidiaries’ relations with their
respective employees are good. No executive officer (as defined in Rule 501(f)
promulgated under the 1933 Act) or other key employee of the Company or any of
its Subsidiaries has notified the Company or any such Subsidiary that such
officer intends to leave the Company or any such Subsidiary or otherwise
terminate such officer’s employment with the Company or any such Subsidiary. No
executive officer or other key employee of the Company or any of its
Subsidiaries is,  or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each such executive officer or other key employee (as the case may be) does
not subject the Company or any of its Subsidiaries to any liability with respect
to any of the foregoing matters.  The Company and its Subsidiaries are
in compliance with all federal, state, local and foreign laws and regulations
respecting labor, employment and employment practices and benefits, terms and
conditions of employment and wages and hours, except where failure to be in
compliance would not, either individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.

       

      (w)         Title. The Company
and its Subsidiaries have good and marketable title in fee simple to all real
property and good and marketable title to all personal property owned by them
which is material to the business of the Company and its Subsidiaries, in each
case, free and clear of all liens, encumbrances and defects except such as do
not materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Company and any of its
Subsidiaries. Any real property and facilities held under lease by the Company
or any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company or any of its Subsidiaries.

       

      (x)          Intellectual Property
Rights. The Company and its Subsidiaries own or possess adequate rights
or licenses to use all trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights, original
works, inventions, licenses, approvals, governmental authorizations, trade
secrets and other intellectual property rights and all applications and
registrations therefor (“Intellectual Property Rights”)
necessary to conduct their respective businesses as now conducted and as
presently proposed to be conducted, unless failure to own or possess such rights
or licenses would not reasonably be likely to result in a Material Adverse
Effect. None of the Company’s or its Subsidiaries’ Intellectual Property Rights
have expired, terminated or been abandoned, or are expected to expire, terminate
or be abandoned, within three years from the date of this Agreement, unless such
expiration, termination or abandonment would not reasonably be likely to result
in a Material Adverse Effect. The Company has no knowledge of any infringement
by the Company or any of its Subsidiaries of Intellectual Property Rights of
others. There is no claim, action or proceeding being made or brought, or to the
knowledge of the Company or any of its Subsidiaries, being threatened, against
the Company or any of the Subsidiaries regarding their material Intellectual
Property Rights. The Company is not aware of any facts or circumstances that
reasonably could be expected to give rise to any of the foregoing infringements
or claims, actions or proceedings. The Company and each of its Subsidiaries have
taken reasonable security measures to protect the secrecy, confidentiality and
value of all of their Intellectual Property Rights, except where failure to do
so could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

      
        
           

        

        
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      (y)         Environmental Laws.
The Company and its Subsidiaries (i) are in compliance with all Environmental
Laws (as defined below), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval where, in each of the foregoing clauses
(i), (ii) and (iii), the failure to so comply could be reasonably expected to
have, individually or in the aggregate, a Material Adverse
Effect.  The term “Environmental Laws” means all
federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous Materials”) into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved
thereunder.

       

      (z)          Subsidiary Rights.
Except as disclosed in Section 3(z) of the Disclosure Letter, the Company or one
of its Subsidiaries has the unrestricted right to vote, and (subject to
limitations imposed by applicable law) to receive dividends and distributions
on, all capital securities of its Subsidiaries as owned by the Company or such
Subsidiary.

       

      (aa)        Tax Status. Except
for matters that would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect, the Company and each of its
Subsidiaries (i) has timely made or filed all foreign, federal and state income
and all other tax returns, reports and declarations required by any jurisdiction
to which it is subject, (ii) has timely paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and (iii) has set aside on its books provision reasonably adequate
for the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. To the Company’s knowledge and except as
set forth in Section 3(aa) of the Disclosure Letter, there are no unpaid taxes
in any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company and its Subsidiaries know of no
basis for any such claim.  The Company is not operated in such a
manner as to qualify as a passive foreign investment company, as defined in
Section 1297 of the U.S. Internal Revenue Code of 1986, as
amended.

      
        
           

        

        
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      (bb)       Internal Accounting and
Disclosure Controls. Except as set forth in the Company’s Form 10-K for
the year ended December 31, 2007 and any of the Company’s Form 10-Q’s covering
periods in 2008, the Company maintains internal control over financial reporting
(as such term is defined in Rule 13a-15(f) under the 1934 Act) that is effective
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles, including that (i) transactions
are executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset and liability accountability, (iii) access to assets or
incurrence of liabilities is permitted only in accordance with management’s
general or specific authorization and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and liabilities at
reasonable intervals and appropriate action is taken with respect to any
difference. The Company maintains disclosure controls and procedures (as such
term is defined in Rule 13a-15(e) under the 1934 Act) that are effective in
ensuring that information required to be disclosed by the Company in the reports
that it files or submits under the 1934 Act is recorded, processed, summarized
and reported, within the time periods specified in the rules and forms of the
SEC, including, without limitation, controls and procedures designed to ensure
that information required to be disclosed by the Company in the reports that it
files or submits under the 1934 Act is accumulated and communicated to the
Company’s management, including its principal executive officer or officers and
its principal financial officer or officers, as appropriate, to allow timely
decisions regarding required disclosure. Except as set forth in the Company’s
Form 10-K for the year ended December 31, 2007 and any of the Company’s Form
10-Qs covering periods in 2008, neither the Company nor any of its Subsidiaries
has received any notice or correspondence from any accountant or other Person
relating to any potential material weakness or significant deficiency in any
part of the Company’s internal control over financial reporting.

       

      (cc)        Off Balance Sheet
Arrangements. There is no transaction, arrangement, or other relationship
between the Company or any of its Subsidiaries and an unconsolidated or other
off balance sheet entity that is required to be disclosed by the Company in its
1934 Act filings and is not so disclosed or that otherwise could be reasonably
likely to have a Material Adverse Effect.

       

      (dd)       Investment Company
Status. The Company is not, and upon consummation of the issuance and
exchange of the Securities will not be, an “investment company,” an affiliate of
an “investment company,” a company controlled by an “investment company” or an
“affiliated person” of, or “promoter” or “principal underwriter” for, an
“investment company” as such terms are defined in the Investment Company Act
of  1940, as amended.

       

      (ee)        Acknowledgement Regarding
the Holder’s Trading Activity. It is understood and acknowledged by the
Company (i) the Holder has not been asked by the Company or any of its
Subsidiaries to agree, nor has the Holder agreed with the Company or any of its
Subsidiaries, to desist from purchasing or selling, long and/or short,
securities of the Company, or “derivative” securities based on securities issued
by the Company or to hold the Securities for any specified term; (ii) that the
Holder, and counter parties in “derivative” transactions to which the Holder is
a party, directly or indirectly, presently may have a “short” position in the
Common Stock, and (iii) that the Holder shall not be deemed to have any
affiliation with or control over any arm’s length counter party in any
“derivative” transaction. The Company further understands and acknowledges that
the Holder may engage in hedging and/or trading activities at various times
during the period that the Securities are outstanding, including, without
limitation, during the periods that the value of the Warrant Shares or
Conversion Shares, as applicable, deliverable with respect to the Securities are
being determined and (b) such hedging and/or trading activities, if any, can
reduce the value of the existing stockholders’ equity interest in the Company
both at and after the time the hedging and/or trading activities are being
conducted. The Company acknowledges that such aforementioned hedging and/or
trading activities do not constitute a breach of this Agreement or any other
Exchange Document or any of the documents executed in connection herewith or
therewith.

      
        
           

        

        
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      (ff)         Manipulation of
Price. Neither the Company nor any of its Subsidiaries has, and, to the
knowledge of the Company, no Person acting on their behalf has, (i) taken,
directly or indirectly, any action designed to cause or to result in the
stabilization or manipulation of the price of any security of the Company or any
of its Subsidiaries to facilitate the sale or resale of any of the Securities,
(ii) sold, bid for, purchased, or paid any compensation for soliciting purchases
of, any of the Securities, or (iii) paid or agreed to pay to any Person any
compensation for soliciting another to purchase any other securities of the
Company or any of its Subsidiaries  (other than the Placement Agent
(as defined in the Purchase Agreement) in connection with the transactions
contemplated by the Purchase Agreement).

       

      (gg)       U.S. Real Property Holding
Corporation. Neither the Company nor any of its Subsidiaries is, or has
ever been, and so long as any of the Securities are held by the Holder, shall
become, a U.S. real property holding corporation within the meaning of Section
897 of the Internal Revenue Code of 1986, as amended, and the Company and each
Subsidiary shall so certify upon the Holder’s request.

       

      (hh)       Transfer Taxes. On
the Closing Date, all stock transfer or other taxes (other than income or
similar taxes) which are required to be paid in connection with the issuance and
exchange of the Securities to be issued to the Holder hereunder will be, or will
have been, fully paid or provided for by the Company, and all laws imposing such
taxes will be or will have been complied with.

       

      (ii)          Bank Holding Company
Act.  Neither the Company nor any of its Subsidiaries is
subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by
the Board of Governors of the Federal Reserve System (the “Federal
Reserve”).  Neither the Company nor any of its Subsidiaries or
affiliates owns or controls, directly or indirectly, five percent (5%) or more
of the outstanding shares of any class of voting securities or twenty-five
percent (25%) or more of the total equity of a bank or any equity that is
subject to the BHCA and to regulation by the Federal Reserve. Neither the
Company nor any of its Subsidiaries or affiliates exercises a controlling
influence over the management or policies of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve.

       

      (jj)          Disclosure.  The
Company confirms that neither it nor any other Person acting on its behalf has
provided the Holder or its agents or counsel with any information that
constitutes or could reasonably be expected to constitute material, nonpublic
information concerning the Company or any of its Subsidiaries. The Company
understands and confirms that the Holder will rely on the foregoing
representations in effecting transactions in securities of the
Company.  All written materials provided to the Holder regarding the
Company and its Subsidiaries, their businesses and the transactions contemplated
hereby, including the Disclosure Letter and the Schedules to this Agreement,
furnished by or on behalf of the Company or any of its Subsidiaries is true and
correct and does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
Each press release issued by the Company or any of its Subsidiaries during the
twelve (12) months preceding the date of this Agreement did not at the time of
release contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading. No event or circumstance has occurred or information exists with
respect to the Company or any of its Subsidiaries or its or their business,
properties, liabilities, prospects, operations (including results thereof) or
conditions (financial or otherwise), which, under applicable law, rule or
regulation, requires public disclosure at or before the date hereof or
announcement by the Company but which has not been so publicly announced or
disclosed, other than the transactions contemplated hereby. The Company
acknowledges and agrees that the Holder does not make or has not made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 2.

      
        
           

        

        
          16

          
            

          

        

        
           

        

      

       

      (kk)        FDA. As to each
product subject to the jurisdiction of the U.S. Food and Drug Administration
(the “FDA”) under the
Federal Food, Drug and Cosmetic Act, as amended, and the regulations thereunder
(the “FDCA”) that is
manufactured, packaged, labeled, tested, distributed, sold, and/or marketed by
the Company or any of its Subsidiaries (each such product, a “Food Product”), such Food
Product is being manufactured, packaged, labeled, tested, distributed, sold
and/or marketed by the Company or such Subsidiary (as the case may be) in
compliance with all applicable requirements under FDCA and similar laws, rules
and regulations relating to registration, investigational use, premarket
clearance, licensure, or application approval, good manufacturing practices,
good laboratory practices, good clinical practices, product listing, quotas,
labeling, advertising, record keeping and filing of reports, except where the
failure to be in compliance would not have a Material Adverse
Effect.  There is no pending, completed or, to the Company’s
knowledge, threatened, action (including any lawsuit, arbitration, or legal or
administrative or regulatory proceeding, charge, complaint, or investigation)
against the Company or any of its Subsidiaries, and none of the Company or any
of its Subsidiaries has received any written notice, warning letter or other
communication from the FDA or any other governmental entity, which (i) contests
the premarket clearance, licensure, registration, or approval of, the uses of,
the distribution of, the manufacturing or packaging of, the testing of, the sale
of, or the labeling and promotion of any Food Product, (ii) withdraws its
approval of, requests the recall, suspension, or seizure of, or withdraws or
orders the withdrawal of advertising or sales promotional materials relating to,
any Food Product, (iii) imposes a clinical hold on any clinical investigation by
the Company or any of its Subsidiaries, (iv) enjoins production at any facility
of the Company or any of its Subsidiaries, (v) enters or proposes to enter into
a consent decree of permanent injunction with the Company or any of its
Subsidiaries or (vi) otherwise alleges any violation of any laws, rules or
regulations by the Company or any of its Subsidiaries, and which, either
individually or in the aggregate, would have a Material Adverse Effect. The
properties, business and operations of the Company subject to the jurisdiction
of the FDA have been and are being conducted in all material respects in
accordance with all applicable laws, rules and regulations of the FDA. The
Company has not been informed by the FDA that the FDA will prohibit the
marketing, sale, license or use in the United States of any product proposed to
be developed, produced or marketed by the Company nor has the FDA expressed any
concern as to approving or clearing for marketing any product being developed or
proposed to be developed by the Company.

       

      
        	
                4.

              	
                COVENANTS.

              

      

       

      (a)           Commercially Reasonably Best
Efforts. Each party shall use commercially reasonable best efforts timely
to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.

      
        
           

        

        
          17

          
            

          

        

        
           

        

      

       

      (b)           Securities
Compliance. The Company shall take all necessary action and proceedings
as may be required and permitted by applicable law, rule and regulation, for the
legal and valid issuance of the Securities to the Holder or subsequent holders.
The Company shall, on or before the Closing Date, take such action as the
Company shall reasonably determine is necessary in order to obtain an exemption
for, or to, qualify the Securities for issuance to the Holder at the Closing
pursuant to this Agreement under applicable securities or “Blue Sky” laws of the
states of the United States (or to obtain an exemption from such qualification),
and shall provide evidence of any such action so taken to the Holder on or prior
to the Closing Date. The Company shall make all filings and reports relating to
the offer and sale of the Securities required under applicable securities or
“Blue Sky” laws of the states of the United States following the Closing
Date.

       

      (c)           Reporting Status.
Until the date on which the Holder shall have sold all of the Securities (the
“Reporting Period”),
except as set forth in Section 4(c) of the Disclosure Letter, the Company shall
timely file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would no longer require or otherwise permit such
termination.

       

      (d)           Financial
Information. The Company agrees to send the following to the Holder
during the Reporting Period (i) unless the following are filed with the SEC
through EDGAR and are available to the public through the EDGAR system, within
one (1) Business Day after the filing thereof with the SEC, a copy of its Annual
Reports on Form 10-K and Quarterly Reports on Form 10-Q, any Current Reports on
Form 8-K and any registration statements (other than on Form S-8) or amendments
filed pursuant to the 1933 Act, and (ii) unless the following are filed with the
SEC through EDGAR and are available to the public through the EDGAR system,
copies of any notices and other information made available or given to the
shareholders of the Company generally, contemporaneously with the making
available or giving thereof to the shareholders.

       

      (e)           Listing.  The
Company shall promptly secure the listing of all of the Conversion Shares and
Warrant Shares issuable upon exercise of the Warrant upon each national
securities exchange and automated quotation system, if any, upon which the
shares of Common Stock are then listed (subject to official notice of issuance)
and shall maintain such listing of all such Securities from time to time
issuable under the terms of the Exchange Documents on such national securities
exchange or automated quotation system. The Company shall maintain the Common
Stock’s authorization for quotation on the Principal Market, the New York Stock
Exchange, the Nasdaq Global Market, the Nasdaq Global Select Market or the “pink
sheets” over-the-counter market. (each, an “Eligible Market”). The Company
shall not take any action which could be reasonably expected to result in the
delisting or suspension of the Common Stock on an Eligible Market. The Company
shall pay all fees and expenses in connection with satisfying its obligations
under this Section 4(e).

      
        
           

        

        
          18

          
            

          

        

        
           

        

      

      (f)           Fees.  The
Company shall reimburse the Holder or its designee(s) for all costs and expenses
incurred by it or its affiliates in connection with the transactions
contemplated by the Exchange Documents (including, without limitation, all legal
fees and disbursements in connection therewith, documentation and implementation
of the transactions contemplated by the Exchange Documents and due diligence in
connection therewith), which amount shall be paid by the Company by wire
transfer of immediately available funds at the Closing or paid by the Company on
demand by the Holder upon termination of this Agreement so long as such
termination did not occur as a result of a material breach by the Holder of any
of its obligations hereunder (as the case may be). The Company shall be
responsible for the payment of any placement agent’s fees, financial advisory
fees, or broker’s commissions (other than for Persons engaged by the Holder)
relating to or arising out of the transactions contemplated
hereby  incurred by the Company. The Company shall pay, and hold the
Holder harmless against, any liability, loss or expense (including, without
limitation, attorneys’ fees and out-of-pocket expenses) arising in connection
with any claim relating to any such payment.

       

      (g)           Pledge of Securities.
The Company acknowledges and agrees that the Securities may be pledged by the
Holder in connection with a bona fide margin agreement or other loan or
financing arrangement that is secured by the Securities. If the Holder effects a
pledge of Securities, the Holder shall not be required to provide the Company
with any notice thereof or otherwise make any delivery to the Company pursuant
to this Agreement or any other Exchange Document. The Company hereby agrees to
execute and deliver such documentation as a pledgee of the Securities may
reasonably request in connection with a pledge of the Securities to such pledgee
by the Holder. Notwithstanding the foregoing, if the Securities so pledged are
Preferred Stock or the Warrant, and such Securities are subsequently acquired by
the pledgee upon default, then the Holder will provide the Company with written
notice of the transfer and the names of the record holders of such Securities
within a reasonable amount of time after such Securities are transferred.
Additionally, the transferee shall agree to be bound by the provisions of the
Exchange Documents if the transferee will obtain any rights under the Exchange
Documents.

       

      (h)           Disclosure of Transactions
and Other Material Information. On or before 8:30 a.m., New York
time, on the first (1st)
Business Day following the date of this Agreement, the Company shall file a
Current Report on Form 8-K describing all the material terms of the transactions
contemplated by the Exchange Documents in the form required by the 1934 Act and
attaching this Agreement, the Certificate of Determination and the form of the
Warrant (including all attachments, the “8-K Filing”). The Company
shall not, and the Company shall cause each of its Subsidiaries and each of its
and their respective officers, directors, employees and agents not to, provide
the Holder with any material, nonpublic information regarding the Company or any
of its Subsidiaries without the express prior written consent of the Holder,
except as expressly contemplated by Section 4(n)(viii) of the Purchase
Agreement. If the Holder has, or believes it has, received any material,
nonpublic information regarding the Company or any of its Subsidiaries in breach
of the immediately preceding sentence, the Holder shall provide the Company with
written notice thereof in which case the Company shall, within one (1) Trading
Day of the receipt of such notice, make a public disclosure of all such
material, nonpublic information so provided.  In the event of a breach
of any of the foregoing covenants by the Company, any of its Subsidiaries, or
any of its or their respective officers, directors, employees and agents (as
determined in the reasonable good faith judgment of the Holder), in addition to
any other remedy provided herein or in the Exchange Documents, the Holder shall
have the right to make a public disclosure, in the form of a press release,
public advertisement or otherwise, of such material, nonpublic information
without the prior approval by the Company, any of its Subsidiaries, or any of
its or their respective officers, directors, employees or agents. The Holder
shall not have any liability to the Company, any of the Subsidiaries, or any of
its or their respective officers, directors, employees, stockholders or agents,
for any such disclosure of such information. Subject to the foregoing, neither
the Company, its Subsidiaries nor the Holder shall issue any press releases or
any other public statements with respect to the transactions contemplated
hereby; provided, however, that the
Company shall be entitled, without the prior approval of the Holder, to make any
press release or other public disclosure with respect to such transactions (i)
in substantial conformity with the 8-K Filing and contemporaneously therewith
and (ii) as is required by applicable law and regulations (provided that in the
case of clause (i) the Holder shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its
release).  Without the prior written consent of the Holder, the
Company shall not (and shall cause each of its Subsidiaries and affiliates to
not) disclose the name of the Holder in any filing (other than the 8-K Filing),
announcement, release or otherwise, except (a) as required by federal securities
law in connection with the filing of final Exchange Documents (including
signature pages thereto) with the SEC and (b) to the extent such disclosure is
required by law or Principal Market regulations, in which case the Company shall
provide the Holder with prior notice of such disclosure permitted
hereunder.

      
        
           

        

        
          19

          
            

          

        

        
           

        

      

      

      (i)           Reservation of
Shares. So long as any shares of Preferred Stock or any portion of the
Warrant remain outstanding, the Company shall take all action necessary to at
all times have authorized, and reserved for the purpose of issuance, no less
than 133% of (i) the maximum number of shares of Common Stock issuable upon
conversion of all the Preferred Stock (assuming for purposes hereof, that the
Preferred Stock is convertible at the Conversion Price (as defined in the
Certificate of Determination) and without regard to any limitations on the
conversion of the Preferred Stock set forth in the Certificate of Determination)
and (ii) the maximum number of shares of Common Stock issuable upon exercise of
all of the Warrant (without regard to any limitations on the exercise of the
Warrant set forth therein).

       

      (j)           Conduct of
Business.  The business of the Company and its Subsidiaries
shall not be conducted in violation of any law, ordinance or regulation of any
governmental entity, except where such violations would not result, either
individually or in the aggregate, in a Material Adverse Effect.

       

      (k)           Variable Rate
Transaction. Until all of the shares of Preferred Stock have been
converted or redeemed in accordance with the terms of the Certificate of
Determination, the Company and each Subsidiary shall be prohibited from
effecting or entering into an agreement to effect any Subsequent Placement (as
defined in the Purchase Agreement) involving a Variable Rate Transaction. The
term “Variable Rate
Transaction” shall mean a transaction in which the Company or any
Subsidiary (i) issues or sells any Equivalents either (A) at a conversion,
exercise or exchange rate or other price that is based upon and/or varies with
the trading prices of or quotations for the shares of Common Stock at any time
after the initial issuance of such Equivalents, or (B) with a conversion,
exercise or exchange price that is subject to being reset at some future date
after the initial issuance of such Equivalents or upon the occurrence of
specified or contingent events directly or indirectly related to the business of
the Company or the market for the Common Stock, other than pursuant to a
customary price-based anti-dilution provision or (ii) enters into any agreement
(including, but not limited to, an equity line of credit) whereby the Company or
any material Subsidiary may sell securities at a future determined price (other
than standard and customary “preemptive” or “participation” rights, or in
transaction where the price of the securities is determined at the time of
closing of such transaction and such closing is subject to customary closing
conditions such as shareholder approval). The Holder shall be entitled to obtain
injunctive relief against the Company and its Subsidiaries to preclude any such
issuance, which remedy shall be in addition to any right to collect
damages.

      
        
           

        

        
          20

          
            

          

        

        
           

        

      

       

      (l)           Passive Foreign Investment
Company.  The Company shall conduct its business in such a
manner as will ensure that the Company will not be deemed to constitute a
passive foreign investment company within the meaning of Section 1297 of the
U.S. Internal Revenue Code of 1986, as amended.

       

      (m)         Restriction on Redemption
and Cash Dividends. So long as any shares of Preferred Stock are
outstanding, the Company shall not, directly or indirectly, redeem, or declare
or pay any cash dividend or distribution on, the Common Stock without the prior
express written consent of the Required Holders (as defined in the Certificate
of Determination).

       

      (n)          Amendment of Purchase
Agreement. From and after the Closing:

       

      (i)           The
second sentence of Section 4(j) of the Purchase Agreement is hereby replaced
with the following:

       

      “Notwithstanding
the foregoing, this Section 4(j) shall not apply in respect of the issuance of
(A) shares of Common Stock or standard options to purchase Common Stock issued
to directors, officers, employees or consultants of the Company in connection
with their service as directors or officers of the Company, their employment by
the Company or their retention as consultants by the Company pursuant to an
equity compensation program or other contract or arrangement approved by the
board of directors of the Company (or the compensation committee of the board of
directors of the Company), provided that all such issuances of shares of Common
Stock (including, shares of Common Stock issuable upon exercise of such standard
options) after the date hereof pursuant to this clause (A) that are not
described in clause (B) below do not, in the aggregate, exceed more than 5% of
the Common Stock issued and outstanding immediately prior to the date hereof (as
adjusted for any stock dividend, stock split, stock combination or other similar
transaction) (excluding, for purposes of the foregoing 5% calculation, shares of
Common Stock issuable upon exercise of such standard options issued after the
date hereof that have been terminated or forfeited), provided further that all
such issuances must be for consideration per share or have an exercise price (as
the case may be) (as determined pursuant to the provisions of Section 3(f)(i) of
the warrants issued in exchange for the Series A Warrants) greater than or equal
to the fair market value of the Common Stock on the date of such issuance; (B)
shares of Common Stock issued upon the conversion or exercise of Equivalents
issued prior to the date hereof, provided that such Equivalents have not been
amended since the date hereof to increase the number of shares issuable
thereunder or to lower the exercise or conversion price thereof or otherwise
materially change the terms or conditions thereof in any manner that adversely
affects any of the Buyers (it being understood that the adjustment of the
exercise or conversion price thereof pursuant to anti-dilution provisions
contained therein as of the date of this Agreement that are triggered by the
transactions contemplated hereby shall not be deemed to be an amendment; any
such adjustments, however, shall be described in Section 3(r)(ii) of the
Disclosure Letter); (C) the shares of Common Stock issuable upon conversion of
the shares of Series E Convertible Preferred Stock of the Company (the “Series E Preferred Stock”);
(D) the shares of Common Stock issuable upon exercise of the warrants issued in
exchange for the Series A Warrants; (E) shares of Common Stock issued or
issuable as a dividend on the Series E Preferred Stock; (F) up to 545,455 shares
of Common Stock issuable pursuant to warrants issued to the Placement Agent in
connection with the transactions contemplated by this Agreement; (G) shares of
Common Stock issued by the Company solely as a penalty pursuant to the
registration rights agreements entered into by the Company in connection with
the Company’s September 28, 2005, May 12, 2006 and February 15, 2007 private
placement transactions; or (H) shares of Common Stock issued in connection with
strategic transactions or acquisitions (the primary purpose of which is not to
raise capital, and which are approved in good faith by the board of directors of
the Company), provided that (i) any such issuance after the date hereof pursuant
to this clause (H) shall only be to a Person that is, itself or through its
subsidiaries, an operating company in a business synergistic with the business
of the Company; (ii) all such issuances after the date hereof pursuant to this
clause (H) do not, in the aggregate, exceed more than 10% of the shares of
Common Stock issued and outstanding immediately prior to the date hereof (as
adjusted for any stock dividend, stock split, stock combination or other similar
transaction) and (iii) all such issuances after the date hereof pursuant to this
clause (H) must have a price per share (as determined pursuant to the provisions
of Section 3(f)(i) of the warrants issued in exchange for the Series A Warrants)
greater than or equal to the fair market value of the Common Stock on the date
of such issuance (each of the foregoing in clauses (A) through (H), collectively
the “Excluded
Securities”).”

      
        
           

        

        
          21

          
            

          

        

        
           

        

      

      

      (ii)           The
last sentence of Section 4(j) of the Purchase Agreement is hereby
deleted.

       

      (iii)          The
first sentence of Section 4(n) of the Purchase Agreement is hereby replaced with
the following:

       

      “Until
all of the shares of Series E Preferred Stock have been converted or redeemed in
accordance with the terms of the Certificate of Determination, Preferences and
Rights of Series E Convertible Preferred Stock, neither the Company nor any of
its Subsidiaries shall, directly or indirectly, effect any Subsequent Placement
or any issuance of debt (excluding bona fide third-party commercial bank debt)
(such issuance of debt, a “Debt
Placement”) unless the Company shall have first complied with this
Section 4(n).”

      (iv)          Except
as otherwise expressly provided herein, (i) the Purchase Agreement and each
other Transaction Document (as defined in the Purchase Agreement) is, and shall
continue to be, in full force and effect and is hereby ratified and confirmed in
all respects, except that on and after the Closing Date (A) all references
in the Purchase Agreement to the “Purchase Agreement,” “hereto,” “hereof,” “this
Agreement,” “hereunder” or words of like import referring to the Purchase
Agreement shall mean the Purchase Agreement as amended by this Agreement and the
Other Exchange Agreements, and (B) all references in the other Transaction
Documents to the “Purchase Agreement,” “thereto,” “thereof,” “thereunder” or
words of like import referring to the Purchase Agreement shall mean the Purchase
Agreement as amended by this Agreement and the Other Exchange Agreements, and
(ii) the execution, delivery and effectiveness of this Agreement shall not
operate as an amendment of any right, power or remedy of the Holder under any
Transaction Document, nor constitute an amendment of any provision of any
Transaction Document and all of them shall continue in full force and effect, as
amended or modified by this Agreement and the Other Exchange
Agreements.

      
        
           

        

        
          22

          
            

          

        

        
           

        

      

       

      
        (o)         
 Issuance of Preferred Stock
and Other Warrants.
Effective simultaneously with the Closing, the Holder hereby consents, under
Sections 4(m) and 4(n) of the Purchase Agreement and Sections 13 and 15 of the
Certificate of Determination, Preferences and Rights of Series D Convertible
Preferred Stock, to the issuance to the Other Series D Holders under the Other
Exchange Agreements of an aggregate to all of them of (i) _______ shares of
Preferred Stock in exchange for all of their shares of Series D Preferred Stock
and (ii) warrants to purchase up to _________ shares of Common Stock in exchange
for all of their Other Series A Warrants.

      

       

      (q)           Miscellaneous
Definitions. For purposes of this Agreement, (1) “Other Series D Holders” means,
collectively, the holders (other than the Holder) of one or more shares of
Series D Preferred Stock; (2) “Other Exchange Agreements”
means, collectively, the separate exchange agreements, each dated as of May ___,
2009, entered into between the Company and each of the Other Series D Holders;
(3) “Other Warrants”
means, collectively, the warrants issued pursuant to the Other Exchange
Agreements; (4) “Other Series
A Warrants”
means, collectively, all the Series A Warrants issued pursuant to the Purchase
Agreement (other than to the Holder); and (5) “Other Exchange Documents”
means, collectively, the Other Exchange Agreements, the Other Warrants and all
other agreements, documents and instruments executed and delivered in connection
with the transactions contemplated thereby.

       

      
        	
                5.

              	
                REGISTER;
      TRANSFER AGENT INSTRUCTIONS; NO
LEGENDS.

              

      

       

      (a)           Register. The Company
shall maintain at its principal executive offices (or such other office or
agency of the Company as it may designate by notice to each holder of
Securities), a register for the Preferred Stock and the Warrant in which the
Company shall record the name and address of the Person in whose name the
Preferred Stock and the Warrant have been
issued (including the name and address of each transferee), the number of shares
of Preferred Stock held by such Person, the number of Conversion Shares issuable
upon conversion of the Preferred Stock and the number of Warrant Shares issuable
upon exercise of the Warrant held by such Person. The Company shall keep the
register open and available at all times during business hours for inspection of
the Holder or its legal representatives.

      
        
           

        

        
          23

          
            

          

        

        
           

        

      

      (b)           Transfer Agent
Instructions. The Company shall issue irrevocable instructions to its
transfer agent and any subsequent transfer agent in the form acceptable to the
Holder (the “Irrevocable
Transfer Agent Instructions”) to issue certificates (free of any
restrictive or other legends) or credit shares to the applicable balance
accounts at The Depository Trust Company (“DTC”), registered in the name
of the Holder or its respective nominee(s), for the Conversion Shares and the
Warrant Shares issuable upon exercise of the Warrant in such amounts as
specified from time to time by the Holder to the Company upon conversion of the
Preferred Stock, issuance of Common Stock as dividends on the Preferred Stock or
the exercise of the Warrant (as the case may be). The Company represents and
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5(b) will be given by the Company to
its transfer agent with respect to the Securities, and that the Securities shall
be freely transferable on the books and records of the Company. If the Holder
effects a sale, assignment or transfer of the Securities, the Company shall
permit the transfer and shall promptly instruct its transfer agent to issue one
or more certificates (free of any restrictive or other legends) or credit shares
to the applicable balance accounts at DTC in such name and in such denominations
as specified by the Holder to effect such sale, transfer or assignment. The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5(b) will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5(b), that the Holder shall be
entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required. The Company shall cause its counsel to issue the legal
opinion referred to in the Irrevocable Transfer Agent Instructions to the
Company’s transfer agent on the Closing Date and such other legal opinions as
the transfer agent may require from time to time in order to ensure that the
Securities are issued free of any restrictive or other legends. Any fees (with
respect to the transfer agent, counsel to the Company or otherwise) associated
with the issuance of such opinions shall be borne by the Company.

       

      (c)           Legends. The
certificates or other instruments representing the Securities shall not bear any
restrictive or other legends, except as otherwise expressly contemplated in the
Warrant.

       

      
        	
                6.

              	
                CONDITIONS
      TO THE COMPANY’S OBLIGATION TO EXCHANGE AND
  ISSUE.

              

      

       

      (a)           The
obligation of the Company hereunder to exchange and issue the Preferred
Stock and the
Warrant to the Holder at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that these
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in their sole discretion by providing the Holder with prior written
notice thereof:

       

      (i) 
          The Holder shall
have executed each of the Exchange Documents to which it is a party and
delivered the same to the Company.

       

      (ii)           The
Holder shall have delivered to the Company all of its shares of Series D
Preferred Stock and its Series A Warrant.

      
        
           

        

        
          24

          
            

          

        

        
           

        

      

      (iii)           Each
and every representation and warranty of the Holder shall be true and correct as
of the date when made and as of the Closing Date as though originally made at
that time (except for representations and warranties that speak as of a specific
date, which shall be true and correct as of such date), and the Holder shall
have performed, satisfied and complied with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Holder at or prior to the Closing Date.

       

      
        	
                7.

              	
                CONDITIONS
      TO THE HOLDER’S OBLIGATION TO
EXCHANGE.

              

      

       

      (a)           The
obligation of the Holder hereunder to exchange its shares of Series D Preferred
Stock and its
Series A Warrant at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for the Holder’s sole benefit and may be waived by the Holder at
any time in its sole discretion by providing the Company with prior written
notice thereof:

       

      (i)           The
Company shall have duly executed and delivered to the Holder each of the
Exchange Documents and the Company shall have duly executed and delivered to the
Holder a certificate representing __________ shares of Preferred Stock and the
Warrant.

       

      (ii)           The
Holder shall have received the opinion of (i) Weintraub Genshlea Chediak Law
Corporation, the Company’s counsel and (ii) Hogan & Hartson, LLP, the
Company’s special counsel, each dated as of the Closing Date, each in the form
reasonably acceptable to the Holder.

       

      (iii)          The
Company shall have delivered to the Holder a copy of the Irrevocable Transfer
Agent Instructions, in form acceptable to the Holder, which instructions shall
have been delivered to and acknowledged in writing by the Company’s transfer
agent.

       

      (iv)         The
Company shall have delivered to the Holder a certificate evidencing the
formation and good standing of the Company issued by the Secretary of State (or
comparable office) of the Company’s jurisdiction of formation as of a date
within ten (10) days of the Closing Date.

       

      (v)          The
Company shall have delivered to the Holder a certificate evidencing the
Company’s qualification as a foreign corporation and good standing issued by the
Secretary of State (or comparable office) of each jurisdiction in which the
Company is so qualified, as of a date within ten (10) days of the Closing
Date.

       

      (vi)         The
Company shall have delivered to the Holder a certified copy of the Articles of
Incorporation as certified by the California Secretary of State within ten (10)
days of the Closing Date.

       

      (vii)        The
Company shall have delivered to the Holder a certificate, executed by the
Secretary of the Company and dated as of the Closing Date, as to (i) the
resolutions consistent with Section 3(b) as adopted by the Company’s board of
directors in a form reasonably acceptable to the Holder, (ii) the Articles of
Incorporation, and (iii) the Bylaws, each as in effect at the Closing, and (iv)
the number of shares of Common Stock outstanding on the day immediately
preceding the Closing Date, each in the form acceptable to the
Holder.

      
        
           

        

        
          25

          
            

          

        

        
           

        

      

       

      (viii)       Each
and every representation and warranty of the Company shall be true and correct
as of the date when made and as of the Closing Date as though originally made at
that time (except for representations and warranties that speak as of a specific
date, which shall be true and correct as of such date), and the Company shall
have performed, satisfied and complied with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date. The Holder shall have
received a certificate, executed by the Chief Executive Officer of the Company,
dated as of the Closing Date, to the foregoing effect and as to such other
matters as may be reasonably requested by the Holder in the form acceptable to
the Holder.

       

      (ix)          The
Common Stock (I) shall be designated for quotation or listed on at least one
Eligible Market and (II) shall not have been suspended, as of the Closing Date,
by the SEC or such Eligible Market from trading on such Eligible Market nor,
except as set forth  in Section 7(a)(ix) of the Disclosure Letter,
shall suspension by the SEC or such Eligible Market have been threatened, as of
the Closing Date, either (A) in writing by the SEC or such Eligible Market or
(B) by falling below the minimum maintenance requirements of such Eligible
Market.

       

      (x)           The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the issuance of the Securities, including,
without limitation, those required by the Principal Market.

       

      (xi)          No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any of
the transactions contemplated by the Exchange Documents.

       

      (xii)         Since
the date of execution of this Agreement, no event or series of events shall have
occurred that reasonably would have or result in a Material Adverse
Effect.

       

      (xiii)        The
Company shall have obtained approval of the Principal Market to list the
Conversion Shares and the Warrant Shares issuable upon exercise of the Warrant
to the extent such approval is required by the Principal Market.

       

      (xiv)        All
Other Series D Holders shall have (i) executed the Other Exchange
Agreements, (ii) satisfied or waived all conditions to the closings
contemplated by such agreements and (iii) surrendered all their shares of
Series D Preferred Stock and all their Other Series A Warrants being exchanged
by it pursuant thereto.

       

      
        	
                8.

              	
                TERMINATION.

              

      

       

      In the
event that the Closing shall not have occurred on or before ten (10) days from
the date hereof due to the Company’s or the Holder’s failure to satisfy the
conditions set forth in Sections 6 and 7 above (and a non-breaching party’s
failure to waive such unsatisfied condition(s)), any such non-breaching party at
any time shall have the right to terminate its obligations under this Agreement
with respect to such breaching party on or after the close of business on such
date without liability of such non-breaching party to any other party; provided, however,
notwithstanding any such termination the Company shall remain obligated to
reimburse the Holder for the expenses described in Section 4(f) above. Nothing
contained in this Section 8 shall be deemed to release any party from any
liability for any breach by such party of the terms and provisions of this
Agreement or the other Exchange Documents or to impair the right of any party to
compel specific performance by any other party of its obligations under this
Agreement or the other Exchange Documents.

      
        
           

        

        
          26

          
            

          

        

        
           

        

      

       

      
        	
                9.

              	
                MISCELLANEOUS.

              

      

       

      (a)           Governing Law; Jurisdiction;
Jury Trial. All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of
New York. Each party hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in The City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.

       

      (b)           Counterparts. This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party. In
the event that any signature is delivered by facsimile transmission or by an
e-mail which contains a portable document format (.pdf) file of an executed
signature page, such signature page shall create a valid and binding obligation
of the party executing (or on whose behalf such signature is executed) with the
same force and effect as if such signature page were an original
thereof.

       

      (c)           Headings; Gender. The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement. Unless the context
clearly indicates otherwise, each pronoun herein shall be deemed to include the
masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of
like import shall be construed broadly as if followed by the words “without
limitation.”  The terms “herein,” “hereunder,” “hereof” and words of
like import refer to this entire Agreement instead of just the provision in
which they are found.

      
        
           

        

        
          27

          
            

          

        

        
           

        

      

      (d)           Severability.  If
any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.

       

      (e)           Entire Agreement;
Amendments. This
Agreement, the other Exchange Documents and the schedules and exhibits attached
hereto and thereto and the instruments referenced herein and therein supersede
all other prior oral or written agreements between the Holder, the Company,
their affiliates and Persons acting on their behalf with respect to the matters
contained herein and therein (provided that, except as expressly contemplated
elsewhere in this Agreement, the foregoing shall not have any effect on any
agreements the Holder has entered into with the Company or any of its
Subsidiaries prior to the date hereof with respect to any prior investment made
by the Holder in the Company, including, without limitation, the Purchase
Agreement), and this Agreement, the other Exchange Documents, the schedules and
exhibits attached hereto and thereto and the instruments referenced herein and
therein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Holder makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be amended or waived other than by an instrument in writing
signed by the Company and the Holder, provided that any
party may give a waiver in writing as to itself. No consideration shall be
offered or paid to any Person to amend or consent to a waiver or modification of
any provision of any of the Other Exchange Documents unless the same
consideration also is offered to the Holder. The Company has not, directly or
indirectly, made any agreements with any other Person relating to the terms or
conditions of the transactions contemplated by the Other Exchange Documents
which differs in any respect from the terms and conditions set forth in the
Exchange Documents. Without limiting the foregoing, the Company confirms that
the Holder has not made any commitment or promise or has any other obligation to
provide any financing to the Company, any Subsidiary or otherwise.

       

      (f)           Notices. Any notices,
consents, waivers or other communications required or permitted to be given
under the terms of this Agreement must be in writing and will be deemed to have
been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt,
when sent by facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or (iii) one
(1) Business Day after deposit with an overnight courier service with next day
delivery specified, in each case, properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall
be:

       

      If to the
Company:

       

      NutraCea

      5090 N.
40th Street , Suite 400

      Phoenix,
AZ 85018

      Telephone:  (602)
522-3000

      Facsimile:  (602)
522-3001

      Attention:  Chief
Executive Officer

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

       

      With a
copy (for informational purposes only) to:

       

      Weintraub
Genshlea Chediak Law Corporation

      400
Capitol Mall

      Sacramento,
CA 95814

      Telephone:  (916)
558-6164

      Facsimile:  (916)
446-1611

      Attention:  Christopher
Chediak, Esq.

      Michael DeAngelis, Esq.

      

      If to the
Transfer Agent:

       

      American
Stock Transfer & Trust 

      59 Maiden
Lane, Plaza Level - Lobby 

      New York,
NY  10038 

      Telephone:
 718 921 8143

      Facsimile:
718-921-8116

      Attention: 
Joe Wolf, Vice President

      

      If to the
Holder, to its address and facsimile number set forth on the Schedule of Buyers
attached to the Purchase Agreement, with copies (for informational purposes
only) to:

       

      Greenberg
Traurig, LLP

      77 W.
Wacker Drive, Suite 3100

      Chicago,
Illinois 60601

      Telephone:  (312)
456-8400

      Facsimile:  (312)
456-8435

      Attention:  Peter
H. Lieberman, Esq.

      Todd A.
Mazur, Esq.

       

      or to
such other address and/or facsimile number and/or to the attention of such other
Person as the recipient party has specified by written notice given to each
other party ten (10) days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated by
the sender’s facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided by an
overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from an overnight courier service in accordance
with clause (i), (ii) or (iii) above, respectively.

       

      (g)          Successors and
Assigns. This
Agreement shall be binding upon and inure to the benefit
of the parties and their respective successors and assigns, including any
purchasers of any of the Securities. The Company shall not assign this Agreement
or any rights or obligations hereunder without the prior written consent of the
holders of all of the aggregate number of shares of Common Stock (or securities
issued in exchange for Common Stock) issued and issuable under the Exchange
Documents, including, without limitation, by way of a Fundamental Transaction
(as defined in the Certificate of Determination) (unless the Company is in
compliance with the applicable provisions governing Fundamental Transactions set
forth in the Certificate of Determination and the Warrant). The Holder may
assign some or all of its rights hereunder in connection with a transfer of any
of its Securities without the consent of the Company, provided the Company
receives written notice of the rights assigned and the name of such assignee
within a reasonable amount of time after such assignment and such transferee
agrees in writing to be bound, with respect to the transferred Securities, by
the provisions of the Exchange Documents that apply to the “Holder.” After such
assignment, the assignee shall be deemed to be a Holder hereunder with respect
to such assigned rights.

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

       

      (h)          No Third Party
Beneficiaries. This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, other than the Indemnitees
referred to in Section 9(k).

       

      (i)           Survival. The
representations, warranties, agreements and covenants shall survive the Closing;
provided that the survival period for the representations and warranties of the
Company shall continue only for forty-eight (48) months following the Closing
Date.

       

      (j)           Further
Assurances. Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.

       

      (k)          Indemnification.

       

      (i)           In
consideration of the Holder’s execution and delivery of the Exchange Documents
and acquiring the Securities thereunder and in addition to all of the Company’s
other obligations under the Exchange Documents, the Company shall defend,
protect, indemnify and hold harmless the Holder and each holder of any
Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons’ agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Indemnitees”) from and against
any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys’ fees
and disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in any of the Exchange Documents, (b) any breach of any covenant,
agreement or obligation of the Company contained in any of the Exchange
Documents or (c) any cause of action, suit or claim brought or made against such
Indemnitee by a third party (including for these purposes a derivative action
brought on behalf of the Company) and arising out of or resulting from (i) the
execution, delivery, performance or enforcement of any of the Exchange
Documents, (ii) any transaction financed or to be financed in whole or in part,
directly or indirectly, with any proceeds of the exercise of any of the
Securities, (iii) any disclosure properly made by the Holder pursuant to Section
4(h), or (iv) the status of the Holder or holder of the Securities as an
investor in the Company pursuant to the transactions contemplated by the
Exchange Documents, except, with respect to clause (c), to the extent such
Indemnified Liability arises solely from an Indemnitee’s gross negligence or
willful misconduct. The Company shall reimburse the Indemnitees, promptly as
such expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Indemnified Liabilities. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable
law.

      
        
           

        

        
          30

          
            

          

        

        
           

        

      

       

      (ii)           Promptly
after receipt by an Indemnitee under this Section 9(k) of notice of the
commencement of any action or proceeding (including any governmental action or
proceeding) involving an Indemnified Liability, such Indemnitee shall, if a
claim in respect thereof is to be made against the Company under this Section
9(k), deliver to the Company a written notice of the commencement thereof, and
the Company shall have the right to participate in, and, to the extent the
Company so desires, to assume control of the defense thereof with counsel
mutually satisfactory to the Company and the Indemnitee; provided, however, that
an Indemnitee shall have the right to retain its own counsel with the fees and
expenses of such counsel to be paid by the Company if: (i) the Company has
agreed in writing to pay such fees and expenses; (ii) the Company shall have
failed promptly to assume the defense of such Indemnified Liability and to
employ counsel reasonably satisfactory to such Indemnitee in any such
Indemnified Liability; or (iii) the named parties to any such Indemnified
Liability (including any impleaded parties) include both such Indemnitee and the
Company, and such Indemnitee shall have been advised by counsel that a conflict
of interest is likely to exist if the same counsel were to represent such
Indemnitee and the Company (in which case, if such Indemnitee notifies the
Company in writing that it elects to employ separate counsel at the expense of
the Company, then the Company shall not have the right to assume the defense
thereof and such counsel shall be at the expense of the Company), provided
further, that in the case of clause (iii) above the Company shall not be
responsible for the reasonable fees and expenses of more than one (1) separate
legal counsel for such Indemnitee. The Indemnitee shall reasonably cooperate
with the Company in connection with any negotiation or defense of any such
action or Indemnified Liability by the Company and shall furnish to the Company
all information reasonably available to the Indemnitee which relates to such
action or Indemnified Liability. The Company shall keep the Indemnitee
reasonably apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. The Company shall not be liable
for any settlement of any action, claim or proceeding effected without its prior
written consent, provided, however, that the Company shall not unreasonably
withhold, delay or condition its consent. The Company shall not, without the
prior written consent of the Indemnitee, consent to entry of any judgment or
enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnitee of a release from all liability in respect to such Indemnified
Liability or litigation, and such settlement shall not include any admission as
to fault on the part of the Indemnitee. Following indemnification as provided
for hereunder, the Company shall be subrogated to all rights of the Indemnitee
with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made. The failure to deliver written notice
to the Company within a reasonable time of the commencement of any such action
shall not relieve the Company of any liability to the Indemnitee under this
Section 9(k), except to the extent that the Company is materially and adversely
prejudiced in its ability to defend such action.

      
        
           

        

        
          31

          
            

          

        

        
           

        

      

       

      (iii)           The
indemnification required by this Section 9(k) shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as and
when bills are received or Indemnified Liabilities are incurred.

       

      (iv)           The
indemnity agreement contained herein shall be in addition to (A) any cause of
action or similar right of the Indemnitee against the Company or others, and (B)
any liabilities the Company may be subject to pursuant to the law.

       

      (l)           Construction. The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict construction will
be applied against any party. For clarification purposes, the Recitals are part
of this Agreement and are hereby incorporated by reference.

       

      (m)           Remedies.  The
Holder and each holder of any Securities shall have all rights and remedies set
forth in the Exchange Documents and all rights and remedies which such holders
have been granted at any time under any other agreement or contract and all of
the rights which such holders have under any law. Any Person having any rights
under any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law. Furthermore, the Company recognizes that in the
event that it fails to perform, observe, or discharge any or all of its
obligations under the Exchange Documents, any remedy at law may prove to be
inadequate relief to the Holder. The Company therefore agrees that the Holder
shall be entitled to seek specific performance and/or temporary, preliminary and
permanent injunctive or other equitable relief from any court of competent
jurisdiction in any such case without the necessity of proving actual damages
and without posting a bond or other security.

       

      (n)           Withdrawal
Right.
Notwithstanding anything to the contrary contained in (and without limiting any
similar provisions of) the Exchange Documents, whenever the Holder exercises a
right, election, demand or option under an Exchange Document and the Company
does not timely perform its related obligations within the periods therein
provided, then the Holder may rescind or withdraw, in its sole discretion from
time to time upon written notice to the Company, any relevant notice, demand or
election in whole or in part without prejudice to its future actions and
rights

       

      (o)           Payment Set
Aside. To the
extent that the Company makes a payment or payments
to the Holder hereunder or pursuant to any of the other Exchange Documents or
the Holder enforces or exercises its rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, foreign, state
or federal law, common law or equitable cause of action), then, to the extent of
any such restoration, the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not
occurred.

       

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      

       

      (p)           Independent Nature of the
Holder’s Obligations and Rights.  The
obligations of the Holder under the Exchange Documents are several and not joint
with the obligations of any Other Series D Holder under the Other Exchange
Documents, and the Holder shall not be responsible in any way for the
performance of the obligations of any Other Series D Holder under any Other
Exchange Documents. Nothing contained herein or in any other Exchange Document,
and no action taken by the Holder pursuant hereto or any Other Series D Holder
pursuant to any Other Exchange Documents, shall be deemed to constitute the
Holder or any Other Series D Holder as, and the Company acknowledges that the
Holder and the Other Series D Holders do not so constitute, a partnership, an
association, a joint venture or any other kind of group or entity, or create a
presumption that the Holder and any Other Series D Holder are in any way acting
in concert or as a group or entity with respect to such obligations or the
transactions contemplated by the Exchange Documents, the Other Exchange
Documents or any matters, and the Company acknowledges that the Holder and the
Other Series D Holders are not acting in concert or as a group or entity, and
the Company shall not assert any such claim, with respect to such obligations or
the transactions contemplated by the Exchange Documents and the Other Exchange
Documents. The decision of the Holder to acquire the Securities pursuant to the
Exchange Documents has been made by the Holder independently of any Other Series
D Holder. The Holder acknowledges that no Other Series D Holder has acted as
agent for the Holder in connection with the Holder making its acquisition
hereunder and that no Other Series D Holder will be acting as agent of the
Holder in connection with monitoring the Holder’s Securities or enforcing its
rights under the Exchange Documents. The Company and the Holder confirms that
the Holder has independently participated with the Company in the negotiation of
the transaction contemplated hereby with the advice of its own counsel and
advisors. The Holder shall be entitled to independently protect and enforce its
rights, including, without limitation, the rights arising out of this Agreement
or out of any of the other Exchange Documents, and it shall not be necessary for
any Other Series D Holder to be joined as an additional party in any proceeding
for such purpose. To the extent that any of the Other Series D Holders and the
Company enter into the same or similar documents, all such matters are solely in
the control of the Company, not the action or decision of the Holder, and would
be solely for the convenience of the Company and not because it was required or
requested to do so by the Holder or any Other Series D Holder. For clarification
purposes only and without implication that the contrary would otherwise be true,
the transactions contemplated by the Exchange Documents include only the
transaction between the Company and the Holder and do not include any other
transaction between the Company and any Other Series D Holder.

       

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

      

       

      (q)           Most Favored Nation.
The Company hereby represents and warrants as of the date hereof and covenants
and agrees from and after the date hereof that none of the terms offered to any
Person with respect to any amendment, settlement or waiver (each a “Settlement Document”) relating
to the terms, conditions and transactions contemplated by any Exchange Document
or any Other Exchange Document, is or will be more favorable to such Person than
those of the Holder and this Agreement and the other Exchange Documents shall
be, at the election of the Holder, without any further action by the Holder or
the Company, deemed amended and modified in an economically and legally
equivalent manner such that the Holder shall receive the benefit of the more
favorable terms contained in such Settlement Document. Notwithstanding the
foregoing, the Company agrees, at its expense, to take such other actions (such
as entering into amendments to the Exchange Documents and the Transaction
Documents) as the Holder may reasonably request to further effectuate the
foregoing.

       

      [signature pages
follow]

      
        
           

        

        
          34

          
            

          

        

        
           

        

      

      IN WITNESS WHEREOF, the Holder
and the Company have caused their respective signature page to this Agreement to
be duly executed as of the date first written above.

      

      
        
          
            
              
                
                  	
                          COMPANY:

                        
	 
	
                          NUTRACEA

                        
	 
	
                          By:

                        	 
      
	 
      	
                          Name:  Olga
      Hernandez-Longan

                          Title:  Chief
      Financial
Officer

                        

                

              

            

          

        

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      IN WITNESS WHEREOF, the Holder
and the Company have caused their respective signature page to this Agreement to
be duly executed as of the date first written above.

      

      
        
          	 
      	
                  HOLDER:

                   

                
	 
      	 
      

        

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      EXHIBITS

       

      Exhibit
A            Form of
Certificate of Determination

      Exhibit
B             Form
of Warrant

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