Document:

Exhibit 4.1

    
      
        

      

    

     

    Exhibit
      4.1

    WARRANT

     

    THE
      SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE U.S.
      SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER
      APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
      FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
      SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
      MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED
      OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
      UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION WHICH IS EXEMPT FROM,
      OR
      NOT SUBJECT TO, SUCH REGISTRATION. 

    

    
      	
               

              No.
                W-

               

            	
               

              October
                4, 2005

            

    

    

    Warrant
      to Purchase up to _______ shares of Common Stock of NutraCea, a California
      corporation (the “Company”).

    

    In
      consideration for the party whose signature appears on the signature page hereof
      (the “Investor”)
      agreeing to enter into that certain Securities Purchase Agreement, dated as
      of
      the date hereof, by and among the Company, the Investor and the other parties
      identified therein as “Purchasers” (the “Agreement”),
      the
      Company hereby agrees that the Investor or any other Warrant Holder (as defined
      below) is entitled, on the terms and conditions set forth below, to purchase
      from the Company at any time during the Exercise Period (as defined below)
      up to
      _________ fully paid and nonassessable shares of common stock, no par value,
      of
      the Company (the “Common
      Stock”)
      at a
      price per share equal to the Exercise Price (hereinafter defined), as the same
      may be adjusted from time to time pursuant to Section 5.1 hereof. The resale
      of
      the shares of Common Stock or other securities issuable upon exercise or
      exchange of this Warrant is subject to the provisions of this Warrant, the
      Agreement and the Registration Rights Agreement (as defined in the Agreement,
      “Registration
      Rights Agreement”).
      

    

    Section
      1.          Definitions.

    

    “Closing
      Date”
shall
      have the meaning ascribed to such term in the Agreement.

    

    “Common
      Stock Equivalent”
means
      any security or obligation which is by its terms, directly or indirectly,
      convertible into or exchangeable or exercisable for shares of Common Stock,
      including, without limitation, any option, warrant or other subscription or
      purchase right with respect to Common Stock or any Common Stock
      Equivalent.

    

    “Excluded
      Transaction”
shall
      mean the issuance of (a) shares of Common Stock or options or warrants to
      consultants, employees or proposed employees, officers or directors of the
      Company pursuant to the Company’s 2005 Equity Incentive Plan or pursuant to any
      stock or 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    pursuant
      to any stock or option plan or agreement duly adopted by a majority of the
      non-employee members of the Board of Directors of the Company or a majority
      of
      the members of a committee of non-employee directors established for such
      purpose; provided that the issuance of shares of Common Stock or options or
      warrants to consultants other than pursuant to the Company’s 2005 Equity
      Incentive Plan shall not be Excluded Transactions under this part (a) to the
      extent that the number of shares of Common Stock granted to consultants (or
      underlying options and warrants to purchase Common Stock) exceeds, in any
      calendar year, two percent (2%) of the number of outstanding shares of Common
      Stock, as measured on the last day of the applicable year; provided further,
      that Common Stock, options and warrants granted to consultants at a per share
      price (or a per share exercise price, in the case of options or warrants) that
      equals or exceeds the Exercise Price shall not be considered for purposes of
      calculating the two percent (2%) threshold, (b) securities upon the conversion
      of Preferred Stock (c) upon the exercise of or conversion of any convertible
      securities, options, warrants or rights to issue securities issued and
      outstanding on the Closing Date, including securities issuable pursuant to
      the
      Merger Transaction, provided that such securities have not been amended after
      the Closing Date to increase the number of such securities, (d) shares of Common
      Stock issued or issuable as a dividend or distribution on Preferred Stock or
      pursuant to any event for which adjustment is made pursuant to Section 5.1;
      (e)
      shares of Common Stock issued by the Company as a penalty pursuant to the
      Registration Rights Agreement, (f) warrants to purchase the Company’s securities
      to Halpern Capital in connection with the issuance of Preferred Stock, (g)
      any
      issuance of Warrant Shares, and (h) securities issued pursuant to acquisitions
      or strategic transactions, provided any such issuance shall only be to a Person
      which is, itself or through its subsidiaries, an operating company in a business
      synergistic with the business of the Company and in which the Company receives
      benefits in addition to the investment of funds, but shall not include a
      transaction in which the Company is issuing securities primarily for the purpose
      of raising capital or to an entity whose primary business is investing in
      securities.

    

    “Exercise
      Period”
shall
      mean that period beginning on the date of this Warrant and continuing until
      the
      expiration of the Five-year period thereafter.

    

    “Exercise
      Price”
as
      of
      the date hereof shall mean $0.70, subject to adjustment for the events specified
      in Section 5.1 below.

    

    “Investors”
shall
      mean the purchasers of Preferred Stock pursuant to the Agreement, including
      the
      Investor.

    

    “Merger
      Transaction”
shall
      have the meaning ascribed to such term in the Agreement.

    

    “Person”
shall
      mean an individual, a corporation, a partnership, a limited liability company,
      an association, a trust or other entity or organization, including a government
      or political subdivision or an agency or instrumentality thereof.

    

    “Preferred
      Stock”
shall
      mean the Company’s Series B Convertible Preferred Stock.

    

    “Principal
      Market”
shall
      mean
      the
      Nasdaq National Market, the Nasdaq SmallCap Market, the American Stock Exchange
      the New York Stock Exchange, the OTC Bulletin Board, 

    
      
        
        

      

      
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    or
      other
      exchange or market, whichever is at the time the principal trading exchange
      or
      market for the Common Stock.

    

    “SEC”
shall
      mean the United States Securities and Exchange Commission.

    

    “Trading
      Day”
shall
      mean
      any day
      other than a Saturday or a Sunday on which the Principal Market is open for
      trading in equity securities.

    

    “Transaction
      Warrants”
shall
      mean those warrants (including this Warrant) issued pursuant to the
      Agreement.

    

    “Transaction
      Warrant Shares”
shall
      mean those shares of Common Stock underlying the Transaction Warrants.

    

    “VWAP”
means,
      for any date, the price determined by the first of the following clauses that
      applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
      the daily volume weighted average price of the Common Stock for such date (or
      the nearest preceding date) on the Trading Market on which the Common Stock
      is
      then listed or quoted as reported by Bloomberg Financial L.P. (based on a
      Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) if
      the
      Common Stock is not then listed or quoted on a Trading Market and if prices
      for
      the Common Stock are then quoted on the OTC Bulletin Board, the volume weighted
      average price of the Common Stock for such date (or the nearest preceding date)
      on the OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted
      on the OTC Bulletin Board and if prices for the Common Stock are then reported
      in the “Pink Sheets” published by the Pink Sheets, LLC (or a similar
      organization or agency succeeding to its functions of reporting prices), the
      most recent bid price per share of the Common Stock so reported; or (c) in
      all
      other cases, the fair market value of a share of Common Stock as determined
      by
      an independent appraiser selected in good faith by the Purchasers and reasonably
      acceptable to the Company.

    

    “Warrant
      Holder”
shall
      mean the Investor or any permitted assignee or permitted transferee of all
      or
      any portion of this Warrant.

    

    “Warrant
      Shares”
shall
      mean those shares of Common Stock received upon exercise of this
      Warrant.

    

    Section
      2.          Exercise.

    

    (a)         
      Method
      of Exercise.
      This
      Warrant may be exercised in whole or in part (but not as to a fractional share
      of Common Stock), at any time and from time to time during the Exercise Period,
      by the Warrant Holder by (i) surrender of this Warrant, with the form of
      exercise attached hereto as Exhibit A completed and duly executed by the Warrant
      Holder (the “Exercise
      Notice”),
      to
      the Company at the address set forth in Section 12 hereof, accompanied by
      payment of the Exercise Price multiplied by the number of shares of Common
      Stock
      for which this Warrant is being exercised (the “Aggregate
      Exercise Price”)
      or
      (ii) telecopying an executed and completed Exercise Notice to the Company and
      delivering to the Company within five (5) business days thereafter the original
      Exercise Notice, this Warrant and the Aggregate Exercise Price. Each date on
      which an Exercise Notice is received by the Company in accordance with clause
      (i) and each date on which the Exercise Notice is telecopied to the Company
      in
      accordance with clause (ii) above shall be deemed an “Exercise
      Date.”

    

    (b)         
      Payment
      of Aggregate Exercise Price.
      Payment
      of the Aggregate Exercise Price may be made:

    
      
        
        

      

      
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    (i)         
      by wire transfer of immediately available funds to an account designated by
      the
      Company. If the amount of the payment received by the Company is less than
      the
      Aggregate Exercise Price, the Warrant Holder will be notified of the deficiency
      and shall make payment in that amount within three (3) Trading Days. In the
      event the payment exceeds the Aggregate Exercise Price, the Company will refund
      the excess to the Warrant Holder within five (5) Trading Days of receipt; or
      

    

    (ii)         
      if
      at any
      time after one year from the date of issuance of this Warrant there is no
      effective Registration Statement registering, or no current prospectus available
      for, the resale of the Warrant Shares by the Holder, then this Warrant may
      also
      be exercised at such time by means of a “cashless exercise” in which the Holder
      shall be entitled to receive a certificate for the number of Warrant Shares
      equal to the quotient obtained by dividing [(A-B) (X)] by (A),
      where:

    
       

      (A)
        = the
        VWAP on the Trading Day immediately preceding the date of such
        election;

      

      (B)
        = the
        Exercise Price of this Warrant, as adjusted; and 

      

      
        	 	
                (X)
                  = 

              	
                the
                  number of Warrant Shares issuable upon exercise of this Warrant
                  in
                  accordance with the terms of this Warrant by means of a cash exercise
                  rather than a cashless
                  exercise.

              

      

    

     

    (c)  
      Replacement
      Warrant.
      In the
      event that the Warrant is not exercised in full, the number of Warrant Shares
      shall be reduced by the number of such Warrant Shares for which this Warrant
      is
      exercised, and the Company, at its expense, shall forthwith issue and deliver
      to
      or upon the order of the Warrant Holder a new Warrant of like tenor in the
      name
      of the Warrant Holder, reflecting such adjusted number of Warrant
      Shares.

    

    Section
      3.          Delivery
      of Stock Certificates.

    

    (a)         
      Subject
      to the terms and conditions of this Warrant, as soon as practicable after the
      exercise of this Warrant in full or in part, and in any event within ten (10)
      Trading Days thereafter, the Company at its expense (including, without
      limitation, the payment by it of any applicable issue taxes) will cause to
      be
      issued in the name of and delivered to the Warrant Holder, or as the Warrant
      Holder may lawfully direct, a certificate or certificates for the number of
      validly issued, fully paid and non-assessable Warrant Shares to which the
      Warrant Holder shall be entitled on such exercise, together with any other
      stock
      or other securities or property (including cash, where applicable) to which
      the
      Warrant Holder is entitled upon such exercise in accordance with the provisions
      hereof.

    

    (b)         
      This
      Warrant may not be exercised as to fractional shares of Common Stock. In the
      event that the exercise of this Warrant, in full or in part, would result in
      the
      issuance of any fractional share of Common Stock, then in such event the Warrant
      Holder shall receive the number of shares rounded to the nearest whole
      share.

    

    Section
      4.          Representations,
      Warranties and Covenants of the Company.

    

    (a)         
      The
      Warrant Shares, when issued in accordance with the terms hereof, will be duly
      authorized and, when paid for or issued in accordance with the terms hereof,
      shall be validly issued, fully paid and non-assessable.

    
      
        
        

      

      
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    (b)         
      The
      Company shall take all reasonable actions and proceedings as may be required
      and
      permitted by applicable law, rule and regulation for the legal and valid
      issuance of this Warrant and the Warrant Shares to the Warrant
      Holder.

    

    (c)         
      The
      Company has authorized and reserved for issuance to the Warrant Holder the
      requisite number of shares of Common Stock to be issued pursuant to this
      Warrant. The Company shall at all times reserve and keep available, solely
      for
      issuance and delivery as Warrant Shares hereunder, such shares of Common Stock
      as shall from time to time be issuable as Warrant Shares.

    

    (d)         
      From
      the
      date hereof through the last date on which this Warrant is exercisable, the
      Company shall take all reasonable actions to ensure that the Common Stock
      remains listed or quoted on the Principal Market.

    

    Section
      5.1.          Adjustment
      of the Exercise Price.
      The
      Exercise Price and, accordingly, the number of Warrant Shares issuable upon
      exercise of the Warrant, shall be subject to adjustment from time to time upon
      the happening of certain events as follows:

    

    (a)         
      Reclassification,
      Consolidation, Merger, Mandatory Share Exchange, Sale or
      Transfer.
      

    

    (i)         
      Upon
      occurrence of any of the events specified in subsection (a)(ii) below (the
      “Adjustment
      Events”)
      while
      this Warrant is unexpired and not exercised in full, the Warrant Holder may
      in
      its sole discretion require the Company, or any successor or purchasing
      corporation, as the case may be, without payment of any additional consideration
      therefor, to execute and deliver to the Warrant Holder a new Warrant providing
      that the Warrant Holder shall have the right to exercise such new Warrant (upon
      terms not less favorable to the Warrant Holder than those then applicable to
      this Warrant) and to receive upon such exercise, in lieu of each share of Common
      Stock theretofore issuable upon exercise of this Warrant, the kind and amount
      of
      shares of stock, other securities, money or property receivable upon such
      Adjustment Event by the holder of one share of Common Stock issuable
      upon exercise of this Warrant had this Warrant been exercised immediately prior
      to such Adjustment Event. Such new Warrant shall provide for adjustments that
      shall be as nearly equivalent as may be practicable to the adjustments provided
      for in this Section 5.1. 

    

    (ii)         
      The
      Adjustment Events shall be (1) any reclassification or change of Common Stock
      (other than a change in par value, as a result of a subdivision or combination
      of Common Stock or in connection with an Excluded Merger or Sale), (2) any
      consolidation, merger or mandatory share exchange of the Company with or into
      another corporation (other than a merger or mandatory share exchange with
      another corporation in which the Company is a continuing corporation and which
      does not result in any reclassification or change other than a change in par
      value or as a result of a subdivision or combination of Common Stock), other
      than (each of the following referred to as an “Excluded
      Merger or Sale”)
      a
      transaction involving (A) sale of all or substantially all of the assets of
      the
      Company, (B) any merger, consolidation or similar transaction where the
      consideration payable to the shareholders of the Company by the acquiring Person
      consists substantially of cash, or where the acquiring Person does not agree
      to
      assume the obligations of the Company under outstanding warrants (including
      this
      Warrant). In the event of an Excluded Merger or Sale Transaction, if the
      surviving, successor or purchasing Person does not agree to assume the
      obligations under this Warrant, then the Company shall 

    
      
        
        

      

      
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    deliver
      a
      notice to the Warrant Holder at least ten (10) days before the consummation
      of
      such Excluded Merger or Sale, the Warrant Holder may exercise this Warrant
      at
      any time before the consummation of such Excluded Merger or Sale (and such
      exercise may be made contingent upon the consummation of such Excluded Merger
      or
      Sale), and any portion of this Warrant that has not been exercised before
      consummation of such Excluded Merger or Sale shall terminate and expire, and
      shall no longer be outstanding.

    

    (b)         
      Subdivision
      or Combination of Shares.
      The
      number and kind of securities purchasable upon the exercise of this Warrant,
      and
      the Exercise Price, shall be subject to adjustment from time to time upon the
      happening of any of the following. In case the Company shall (i) subdivide
      its
      outstanding shares of Common Stock into a greater number of shares, or (ii)
      combine its outstanding shares of Common Stock into a smaller number of shares
      of Common Stock, then the number of Warrant Shares purchasable upon exercise
      of
      this Warrant immediately prior thereto shall be adjusted so that the Warrant
      Holder shall be entitled to receive the kind and number of Warrant Shares which
      it would have owned or have been entitled to receive had such Warrant been
      exercised in advance thereof. Upon each such adjustment of the kind and number
      of Warrant Shares which are purchasable hereunder, the Warrant Holder shall
      thereafter be entitled to purchase the number of Warrant Shares resulting from
      such adjustment at an Exercise Price per Warrant Share obtained by multiplying
      the Exercise Price in effect immediately prior to such adjustment by the number
      of Warrant Shares purchasable pursuant hereto immediately prior to such
      adjustment and dividing by the number of Warrant Shares resulting from such
      adjustment. An adjustment made pursuant to this paragraph shall become effective
      immediately after the effective date of such event retroactive to the record
      date, if any, for such event.

    

    (c)         
      Stock
      Dividends.
      If the
      Company, at any time while this Warrant is unexpired and not exercised in full,
      shall pay a dividend or other distribution in shares of Common Stock to all
      holders of Common Stock, then the number of Warrant Shares purchasable upon
      exercise of this Warrant immediately prior thereto shall be adjusted so that
      the
      Warrant Holder shall be entitled to receive the kind and number of Warrant
      Shares which it would have owned or have been entitled to receive had such
      Warrant been exercised in advance thereof. Upon each such adjustment of the
      kind
      and number of Warrant Shares which are purchasable hereunder, the Warrant Holder
      shall thereafter be entitled to purchase the number of Warrant Shares resulting
      from such adjustment at an Exercise Price per Warrant Share obtained by
      multiplying the Exercise Price in effect immediately prior to such adjustment
      by
      the number of Warrant Shares purchasable pursuant hereto immediately prior
      to
      such adjustment and dividing by the number of Warrant Shares resulting from
      such
      adjustment. An adjustment made pursuant to this paragraph shall become effective
      immediately after the effective date of such event retroactive to the record
      date, if any, for such event. The provisions of this subsection (c) shall not
      apply under any of the circumstances for which an adjustment is provided in
      subsections (a) or (b).

    

    (d)         
      Liquidating
      Dividends, Etc.
      If the
      Company, at any time while this Warrant is unexpired and not exercised in full,
      makes a distribution of its assets or evidences of indebtedness to the holders
      of its Common Stock as a dividend in liquidation or by way of return of capital
      or other than as a dividend payable out of earnings or surplus legally available
      for dividends under applicable law or any distribution to such holders made
      in
      respect of the sale of 

    
      
        
        

      

      
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    all
      or
      substantially all of the Company’s assets (other than under the circumstances
      provided for in the foregoing subsections (a) through (c)), then the Warrant
      Holder shall be entitled to receive upon exercise of this Warrant in addition
      to
      the Warrant Shares receivable in connection therewith, and without payment
      of
      any consideration other than the Exercise Price, the kind and amount of such
      distribution per share of Common Stock multiplied by the number of Warrant
      Shares that, on the record date for such distribution, are issuable upon such
      exercise of the Warrant (with no further adjustment being made following any
      event which causes a subsequent adjustment in the number of Warrant Shares
      issuable), and an appropriate provision therefor shall be made a part of any
      such distribution. The value of a distribution that is paid in other than cash
      shall be determined in good faith by the Board of Directors of the Company.
      Notwithstanding the foregoing, in the event of a proposed dividend in
      liquidation or distribution to the shareholders made in respect of the sale
      of
      all or substantially all of the Company’s assets, the Company shall deliver a
      notice to the Warrant Holder at least ten (10) days before the consummation
      of
      such event, the Warrant Holder may exercise this Warrant at any time before
      the
      consummation of such event (and such exercise may be made contingent upon the
      consummation of such event), and any portion of this Warrant that has not been
      exercised before consummation of such event shall terminate and expire, and
      shall no longer be outstanding.

    

    (e)         
      Dilutive
      Issuances.
      If the
      Company shall at any time or from time to time, after the issuance of this
      Warrant but prior to the exercise hereof, issue or sell (such issuance or sale,
      a “New
      Issuance”)
      any
      shares of Common Stock or Common Stock Equivalents at a price per share of
      Common Stock (the “New
      Issue Price”)
      that
      is less than the Exercise Price then in effect as of the record date or Issue
      Date (as defined below), as the case may be (the “Relevant
      Date”)
      (treating the price per share of Common Stock, in the case of the issuance
      of
      any Common Stock Equivalent, as equal to (x) the sum of the price for such
      Common Stock Equivalent plus any additional consideration payable (without
      regard to any anti-dilution adjustments) upon the conversion, exchange or
      exercise of such Common Stock Equivalent divided by (y) the number of shares
      of
      Common Stock initially underlying such Common Stock Equivalent), other than
      (i) issuances or sales for which an adjustment is made pursuant to another
      subsection of this Section 5 and (ii) issuances in connection with an Excluded
      Transaction, then,
      and in
      each such case, (A) the Exercise Price then in effect shall be adjusted by
      multiplying
      the
      Exercise Price in effect on the day immediately prior to the Relevant Date
      by a
      fraction (I) the numerator of which shall be the sum of the number of
      shares of Common Stock outstanding on the Relevant Date plus
      the
      number of shares of Common Stock which the aggregate consideration received
      by
      the Company for the total number of such additional shares of Common Stock
      so
      issued would purchase at the Exercise Price on the Relevant Date (or, in the
      case of Common Stock Equivalents, the number of shares of Common Stock which
      the
      aggregate consideration received by the Company upon the issuance of such Common
      Stock Equivalents and receivable by the Company upon the conversion, exchange
      or
      exercise of such Common Stock Equivalents would purchase at the Exercise Price
      on the Relevant Date) and (II) the denominator of which shall be the sum of
      the number of shares of Common Stock outstanding on the Relevant Date
plus
      the
      number of additional shares of Common Stock issued or to be issued (or, in
      the
      case of Common Stock Equivalents, the maximum number of shares of Common Stock
      into which such Common Stock Equivalents initially may convert, exchange or
      be
      exercised) and (B) the Warrant Share Number shall be increased to equal the
      product of (i) the aggregate number of Warrant Shares for which this
      Warrant is exercisable immediately prior to the New Issuance multiplied by
      (ii) a fraction, the numerator of which shall be the Exercise Price

    
      
        
        

      

      
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    in
      effect
      on the day immediately prior to the Relevant Date and the denominator of which
      shall be the Exercise Price in effect immediately after such adjustment.
      Notwithstanding the foregoing, the Exercise Price shall not be reduced at such
      time if the amount of such reduction would be less than $0.01, but any such
      amount shall be carried forward, and a reduction will be made with respect
      to
      such amount at the time of, and together with, any subsequent reduction which,
      together with such amount and any other amounts so carried forward, equal $0.01
      or more in the aggregate.

    

    Such
      adjustment shall be made whenever such shares of Common Stock or Common Stock
      Equivalents are issued, and shall become effective retroactively (x) in the
      case
      of an issuance to the stockholders of the Company, as such, to a date
      immediately following the close of business on the record date for the
      determination of shareholders entitled to receive such shares of Common Stock
      or
      Common Stock Equivalents and (y) in all other cases, on the date (the
“Issue
      Date”)
      of
      such issuance; provided,
      however,
      that
      the determination as to whether an adjustment is required to be made pursuant
      to
      this Section 5.1(e) shall be made only upon the issuance of such shares of
      Common Stock or Common Stock Equivalents, and not upon the issuance of any
      security into which the Common Stock Equivalents convert, exchange or may be
      exercised.

    

    Section
      5.2          Notice
      of Adjustments.
      Whenever the Exercise Price or number of Warrant Shares shall be adjusted
      pursuant to Section 5.1 hereof, the Company shall promptly prepare a certificate
      signed by its President or Chief Financial Officer setting forth in reasonable
      detail the event requiring the adjustment, the amount of the adjustment, the
      method by which such adjustment was calculated (including a description of
      the
      basis on which the Company’s Board of Directors made any determination
      hereunder), and the Exercise Price and number of Warrant Shares purchasable
      at
      that Exercise Price after giving effect to such adjustment, and shall promptly
      cause copies of such certificate to be sent to the Warrant Holder. In the event
      the Company shall, at a time while the Warrant is unexpired and not exercised
      in
      full, take any action that pursuant to subsections (a) through (c) of Section
      5.1 may result in an adjustment of the Exercise Price, the Company shall give
      to
      the Warrant Holder at its last address known to the Company written notice
      of
      such action ten (10) days in advance of its effective date in order to afford
      to
      the Warrant Holder an opportunity to exercise the Warrant prior to such action
      becoming effective.

    

    Section
      6.          No
      Impairment.
      The
      Company will not, by amendment of its Amended and Restated Articles of
      Incorporation or By-Laws or through any reorganization, transfer of assets,
      consolidation, merger, dissolution or issue or sale of securities, avoid or
      seek
      to avoid the observance or performance of any of the terms of this Warrant,
      but
      will at all times in good faith assist in the carrying out of all such terms
      and
      in the taking of all such action as may be necessary or appropriate in order
      to
      protect the rights of the Warrant Holder against impairment. Without limiting
      the generality of the foregoing, the Company (a) will not increase the par
      value of any Warrant Shares above the amount payable therefor on such exercise,
      and (b) will take all such action as may be reasonably necessary or appropriate
      in order that the Company may validly and legally issue fully paid and
      nonassessable Warrant Shares on the exercise of this Warrant.

    

    Section
      7.          Rights
      As Stockholder.
      Except
      as set forth in Section 5 above, prior to exercise of this Warrant, the Warrant
      Holder shall not be entitled to any rights as a 

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    stockholder
      of the Company with respect to the Warrant Shares, including (without
      limitation) the right to vote such shares, receive dividends or other
      distributions thereon or be notified of stockholder meetings.

    

    Section
      8.          Replacement
      of Warrant.
      Upon
      receipt of evidence reasonably satisfactory to the Company of the loss, theft,
      destruction or mutilation of the Warrant and, in the case of any such loss,
      theft or destruction of the Warrant, upon delivery of an indemnity agreement
      or
      security reasonably satisfactory in form and amount to the Company or, in the
      case of any such mutilation, on surrender and cancellation of such Warrant,
      the
      Company at its expense will execute and deliver, in lieu thereof, a new Warrant
      of like tenor.

    

    Section
      9.          Choice
      of Law.
      This
      Warrant shall be construed under the laws of the State of
      California.

    

    Section
      10.        Amendment;
      Waiver.
      

    

    Any
      term
      of this Warrant may be amended and the observance of any term of this Warrant
      waived (either generally or in a particular instance and either retroactively
      or
      prospectively), with the written consent of the Company and the holders of
      Transaction Warrants representing at least a majority of the aggregate number
      of
      Transaction Warrant Shares then issuable upon exercise of the Transaction
      Warrants (the “Majority
      Warrantholders”).
      Any
      amendment or waiver effected in accordance with this section shall be binding
      upon all “Holders” of Transaction Warrants and any future Holder of this
      Warrant, regardless of whether or not such person consents thereto. Holder
      acknowledges and agrees that the Majority Warrantholders may consent to such
      waivers and/or amendments to the Transaction Warrants as they may elect, acting
      in their sole discretion, and that such waivers and/or amendments may materially
      adversely affect the rights of Holder hereunder.

    

    Section
      11.          Restricted
      Securities.

    

    (a)         
      Registration
      or Exemption Required.
      This
      Warrant has been issued in a transaction exempt from the registration
      requirements of the Securities Act of 1933, as amended, in reliance upon the
      provisions of Section 4(2) thereof. This Warrant and the Warrant Shares issuable
      upon exercise of this Warrant may not be resold except pursuant to an effective
      registration statement or an exemption to the registration requirements of
      the
      Securities Act of 1933 and applicable state laws. In connection with any
      proposed sale or transfer of this Warrant or Warrant Shares, the Company may
      require an opinion of counsel to the Warrant Holder, in form and substance
      reasonably satisfactory to the Company, regarding compliance with applicable
      federal and state securities laws.

    

    (b)         
      Legend.
      Any
      Warrant Shares or other Company securities issued upon exercise hereof, shall
      bear the legends described in Section 4.1(b) of the Agreement.

    

    (c)         
      Assignment.
      Assuming the conditions of Section 11(a) above regarding registration or
      exemption have been satisfied, the Warrant Holder may sell, transfer, assign,
      pledge or otherwise dispose of this Warrant (each of the foregoing, a
“Transfer”),
      in
      whole or in part, but only after such transferee agrees to be bound by the
      provisions of the Agreement. The Warrant Holder shall deliver a written notice
      to Company, substantially in the form of the Assignment attached hereto as
      Exhibit B, indicating the person or persons to whom the Warrant shall be
      Transferred and the respective number of Warrant Shares issuable to the
      transferee 

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    pursuant
      to the Transfer. The Company shall effect the Transfer within fifteen (15)
      days,
      and shall deliver to the Transferee(s) designated by the Warrant Holder a
      Warrant or Warrants of like tenor and terms for the appropriate number of
      shares. In connection with and as a condition of any such proposed Transfer,
      the
      Company may request the Warrant Holder to provide an opinion of counsel to
      the
      Warrant Holder in form and substance reasonably satisfactory to the Company
      to
      the effect that the proposed Transfer complies with all applicable federal
      and
      state securities laws.

    

    (d)         
      Investor’s
      Compliance.
      Nothing
      in this Section 11 shall affect in any way the Investor’s
      obligations under any agreement to comply with all applicable securities laws
      upon resale of the Common Stock.

    

    Section
      12.          Notices.
      All
      notices, demands, requests, consents, approvals, and other communications
      required or permitted hereunder shall be in writing and shall be (i) personally
      served, (ii) deposited in the mail, registered or certified, return receipt
      requested, postage prepaid, (iii) delivered by reputable air courier service
      with charges prepaid, or (iv) transmitted by hand delivery, telegram or
      facsimile, addressed as set forth below or to such other address as such party
      shall have specified most recently by written notice. Any notice or other
      communication required or permitted to be given hereunder shall be deemed
      effective (a) upon hand delivery, (b) one business day after transmission by
      facsimile (with accurate confirmation generated by the transmitting facsimile
      machine) at the address or number designated below, or (c) on the second
      business day following the date of mailing by express courier service, fully
      prepaid, addressed to such address, or upon actual receipt of such mailing,
      whichever shall first occur. The addresses for such communications shall
      be:

     

    
      If
        to the
        Company: 

      

      NutraCea

      1261
        Hawks’ Flight Court

      El
        Dorado
        Hills, CA 95762

      Telephone:
        (916) 933-7000

      Facsimile:
        (916) 933-7001

      Attention:
        Chief Executive Officer

      

      

      with
        a
        copy (which shall not constitute notice) to: 

      

      Weintraub
        Genshlea Chediak Law Corporation

      400
        Capitol Mall, Eleventh Floor

      Sacramento,
        CA 95814

      Telephone:
        (916) 558-6000

      Facsimile:
        (916) 446-1611

      Attention:
        Chris Chediak, Esq. 

      

      if
        to the
        Investor:

      To
        the
        address and facsimile number provided in the Agreement.

    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    Either
      party hereto may from time to time change its address or facsimile number for
      notices under this Section 12 by giving at least ten (10) days prior
      written notice of such changed address or facsimile number to the other party
      hereto.

    

    Section
      13.          Miscellaneous.
      The
      headings in this Warrant are for purposes of reference only, and shall not
      limit
      or otherwise affect any of the terms hereof. The invalidity or unenforceability
      of any provision hereof shall in no way affect the validity or enforceability
      of
      any other provision.

    

    [Remainder
      of page intentionally left blank]

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, this Warrant was duly executed by the undersigned, thereunto
      duly authorized, as of the date first set forth above.

    

    

    
      	
              NUTRACEA

            	 
	 	 	 
	 	 	 
	
              By:
                

            	 	 
	 	
              Name:  Bradley
                Edson

            	 
	 	
              Title:  President

            	 
	 	 	 
	 	 	 
	
              Acknowledged
                and Accepted by

            	 
	 	 	 
	
              INVESTOR

            	 
	 	 	 
	 	 	 
	 	 	 
	
              By:
                

            	 	 
	 	
              Name:

            	 
	 	
              Title:

            	 

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A TO THE WARRANT

    

    EXERCISE
      FORM

    

    NUTRACEA

    

    The
      undersigned hereby irrevocably exercises the right to purchase
      __________________ shares of Common Stock of NutraCea, evidenced by the attached
      Warrant, and tenders herewith payment of the Aggregate Exercise Price with
      respect to such shares in full, in the amount of $________, in cash, by
      certified or official bank check or by wire transfer for the account of the
      Company. 

    

    The
      undersigned requests that stock certificates for such Warrant Shares be issued,
      and a Warrant representing any unexercised portion hereof be issued, pursuant
      to
      this Warrant, in the name of the registered Warrant Holder and delivered to
      the
      undersigned at the address set forth below. In addition, the undersigned
      represents that as of the date hereof, the undersigned is in compliance with
      Section 3.2(c) of the Agreement (as defined in the Warrant). 

    

    Dated:
      __________, 200_

    

    

    

    
      	 	 	 
	
              Signature
                of Registered Holder

            	 	 
	 	 	 
	 	 	 
	 	 	 
	
              Name
                of Registered Holder (Print)

            	 	 
	 	 	 
	 	 	 
	
              Address:

            	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      B TO THE WARRANT

    ASSIGNMENT

    

    (To
      be
      executed by the registered Warrant Holder desiring to transfer the
      Warrant)

    

    FOR
      VALUED RECEIVED, the undersigned Warrant Holder of the attached Warrant hereby
      sells, assigns and transfers unto the persons below named the right to purchase
      ______________ shares of Common Stock of NutraCea evidenced by the attached
      Warrant and does hereby irrevocably constitute and appoint the Secretary of
      the
      Company as attorney to transfer the said Warrant on the books of the Company,
      with full power of substitution in the premises.

    

    Dated:
      ________________, 200_

    

    

    
      	 	 	 
	
              Signature

            	 	 
	 	 	 
	
              Fill
                in for new Registration of Warrant:

            	 	 
	 	 	 
	 	 	 
	
              Name

            	 	 
	 	 	 
	
              Address

            	 	 
	 	 	 
	
              Please
                print name and address of assignee

            	 	 
	
              (including
                zip code number)Unassociated Document

    
      

    

    Exhibit
      10.1

    

    SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”)
      is
      dated as of September 28, 2005, by and among NutraCea, a California corporation
      (the “Company”),
      and
      the purchasers identified on the signature pages hereto (each, including its
      successors and assigns, a “Purchaser”
and
      collectively the “Purchasers”).

     

    WHEREAS,
      subject to the terms and conditions set forth in this Agreement and pursuant
      to
      Section 4(2) of the Securities Act of 1933, as amended (the “Securities
      Act”)
      and
      Rule 506 promulgated thereunder, the Company desires to issue and sell to each
      Purchaser, and each Purchaser, severally and not jointly, desires to purchase
      from the Company, securities of the Company as more fully described in this
      Agreement.

     

    NOW,
      THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
      and for other good and valuable consideration the receipt and adequacy of which
      are hereby acknowledged, the Company and each Purchaser agrees as
      follows:

     

    ARTICLE
      I

    DEFINITIONS

     

    1.1   Definitions.
      In
      addition to the terms defined elsewhere in this Agreement: (a) capitalized
      terms
      that are not otherwise defined herein have the meanings given to such terms
      in
      the Certificate of Determination (as defined herein), and (b) the following
      terms have the meanings indicated in this Section 1.1:

     

    “Action”
shall
      have the meaning ascribed to such term in Section 3.1(l).

     

    “Actual
      Minimum”
means,
      as of any date, the maximum aggregate number of shares of Common Stock then
      issued or potentially issuable in the future pursuant to the Transaction
      Documents, including any Underlying Shares issuable upon exercise or conversion
      in full of all Warrants and shares of Preferred Stock, ignoring any conversion
      or exercise limits set forth therein, and assuming that any previously
      unconverted shares of Preferred Stock are held until the fourth anniversary
      of
      the date of determination and all dividends are paid in shares of Common Stock
      until such fourth anniversary.

     

    “Affiliate”
means
      any Person that, directly or indirectly through one or more intermediaries,
      controls or is controlled by or is under common control with a Person, as such
      terms are used in and construed under Rule 144 under the Securities Act. With
      respect to a Purchaser, any investment fund or managed account that is managed
      on a discretionary basis by the same investment manager as such Purchaser will
      be deemed to be an Affiliate of such Purchaser.

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    “Certificate
      of Determination”
means
      the Certificate of Determination to be filed prior to the Closing by the Company
      with the Secretary of State of California, in the form of Exhibit
      A
      attached
      hereto.

    

    “Closing”
means
      the closing of the purchase and sale of the Securities pursuant to Section
      2.1.

     

    “Closing
      Date”
means
      the Trading Day when all of the Transaction Documents have been executed and
      delivered by the applicable parties thereto, and all conditions precedent to
      (i)
      the Purchasers’ obligations to pay the Subscription Amount and (ii) the
      Company’s obligations to deliver the Securities have been satisfied or
      waived.

     

    “Commission”
means
      the Securities and Exchange Commission.

     

    “Common
      Stock”
means
      the common stock of the Company, par value $.001 per share, and any securities
      into which such common stock shall hereinafter have been reclassified
      into.

     

    “Company
      Counsel”
means
      Weintraub Genshlea Chediak Law Corporation.

     

    “Conversion
      Price”
shall
      have the meaning ascribed to such term in the Certificate of
      Determination.

     

    “Contingent
      Obligation”
means,
      as applied to any Person, any direct or indirect liability of that Person with
      respect to any Indebtedness, lease, dividend, guaranty, letter of credit or
      other obligation, contractual or otherwise (the “primary
      obligation”)
      of
      another Person other than an Affiliate of such Person (the “primary
      obligor”),
      whether or not contingent, (a) to purchase, repurchase or otherwise acquire
      such
      primary obligations or any property constituting direct or indirect security
      therefor, (b) to advance or provide funds (i) for the payment or discharge
      of
      any such primary obligation, or (ii) to maintain working capital or equity
      capital of the primary obligor or otherwise to maintain the net worth or
      solvency or any balance sheet item, level of income or financial condition
      of
      the primary obligor, (c) to purchase property, securities or services primarily
      for the purpose of assuring the owner of any such primary obligation of the
      ability of the primary obligor to make payment of such primary obligation,
      or
      (d) otherwise to assure or hold harmless the owner of any such primary
      obligation against loss or failure or inability to perform in respect thereof.
      The amount of any Contingent Obligation shall be deemed to be an amount equal
      to
      the stated or determinable amount of the primary obligation in respect of which
      such Contingent Obligation is made or, if not stated or determinable, the
      maximum reasonably anticipated liability in respect thereof.

     

    “Disclosure
      Schedules”
shall
      have the meaning ascribed to such term in Section 3.1 hereof.

     

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended.

     

    “GAAP”
shall
      have the meaning ascribed to such term in Section 3.1(i).

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    “Indebtedness”
means,
      as to any Person, (a) all obligations of such Person for borrowed money
      (including, without limitation, reimbursement and all other obligations with
      respect to surety bonds, letters of credit and bankers’ acceptances, whether or
      not matured), (b) all obligations of such Person to pay the deferred purchase
      price of property or services, except trade accounts payable and accrued
      commercial or trade liabilities arising in the ordinary course of business
      (provided that to the extent that such accounts payable and liabilities are
      overdue, the interest and penalties incurred as a result of such overdue amounts
      shall be considered Indebtedness), (c) all interest rate and currency swaps,
      caps, collars and similar agreements or hedging devices under which payments
      are
      obligated to be made by such Person, whether periodically or upon the happening
      of a contingency, (d) all indebtedness created or arising under any conditional
      sale or other title retention agreement with respect to property acquired by
      such Person (even though the rights and remedies of the seller or lender under
      such agreement in the event of default are limited to repossession or sale
      of
      such property), (e) all obligations of such Person under leases which have
      been
      or should be, in accordance with GAAP, recorded as capital leases, (f) all
      indebtedness secured by any Lien (other than Liens in favor of lessors under
      leases other than leases included in clause (e)) on any property or asset owned
      or held by that Person regardless of whether the indebtedness secured thereby
      shall have been assumed by that Person or is non-recourse to the credit of
      that
      Person, and (g) any Contingent Obligation of such Person.

     

    “Liens”
means
      a
      lien, charge, security interest, encumbrance, right of first refusal, preemptive
      right or other restriction.

     

    “Material
      Adverse Effect”
means
      any of (i) a material adverse effect on the legality, validity or enforceability
      of any Transaction Document, (ii) a material adverse effect on the results
      of
      operations, assets, business, or financial condition of the Company and the
      Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
      Company’s ability to perform in any material respect on a timely basis its
      obligations under any Transaction Document. Changes in the market price of
      the
      common stock of the Company or The RiceX Company shall not, in and of itself,
      constitute a Material Adverse Effect. 

     

    “Material
      Permits”
shall
      have the meaning ascribed to such term in Section 3.1(o).

     

    “Merger
      Transaction”
means
      the proposed business combination of the Company and The RiceX Company, as
      described in the Company’s definitive proxy statement filed with the
      SEC.

     

    “Person”
means
      an individual or corporation, partnership, trust, incorporated or unincorporated
      association, joint venture, limited liability company, joint stock company,
      government (or an agency or subdivision thereof) or other entity of any
      kind.

     

    “Preferred
      Stock”
means
      the up to 25,000 shares of the Company’s Series B Convertible Preferred Stock
      issued hereunder having the rights, preferences and privileges set forth in
      the
      Certificate of Determination.

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    “Proceeding”
means
      an action, claim, suit, investigation or proceeding (including, without
      limitation, an investigation or partial proceeding, such as a deposition),
      whether commenced or threatened in writing.

     

    “Registration
      Rights Agreement”
means
      the Registration Rights Agreement, dated the date hereof, among the Company
      and
      the Purchasers, in the form of Exhibit
      B
      attached
      hereto.

     

    “Registration
      Statement”
means
      a
      registration statement meeting the requirements set forth in the Registration
      Rights Agreement and covering the resale of the Underlying Shares by each
      Purchaser as provided for in the Registration Rights Agreement.

     

    “Required
      Approvals”
shall
      have the meaning ascribed to such term in Section 3.1(e).

     

    “Rule
      144”
means
      Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.

     

    “SEC
      Reports”
shall
      have the meaning ascribed to such term in Section 3.1(i).

     

    “Secured
      Debt”
shall
      have the meaning ascribed to such term in Section 4.9.

     

    “Securities”
means
      the Preferred Stock, the Warrants and the Underlying Shares.

     

    “Securities
      Act”
means
      the Securities Act of 1933, as amended.

     

    “Stated
      Value”
means
      $1,000 per share of Preferred Stock.

     

    “Subscription
      Amount”
shall
      mean, as to each Purchaser, the amount to be paid for the Preferred Stock
      purchased hereunder as specified below such Purchaser's name on the signature
      page of this Agreement and next to the heading “Subscription Amount”, in United
      States Dollars and in immediately available funds.

     

    “Subsidiary”
means
      any subsidiary of the Company as set forth on Schedule
      3.1(a).

     

    “Trading
      Day”
means
      a
      day on which the Common Stock is traded on a Trading Market.

     

    “Trading
      Market”
means
      the following markets or exchanges on which the Common Stock is listed or quoted
      for trading on the date in question: the Over-The-Counter Bulletin Board, the
      Nasdaq SmallCap Market, the American Stock Exchange, the New York Stock Exchange
      or the Nasdaq National Market.

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    “Transaction
      Documents”
means
      this Agreement, the Certificate of Determination, the Warrants, the Registration
      Rights Agreement and any other documents or agreements executed in connection
      with the transactions contemplated hereunder.

     

    “Underlying
      Shares”
means
      the shares of Common Stock issuable upon conversion of the Preferred Stock,
      upon
      exercise of the Warrants and issued and issuable in lieu of the cash payment
      of
      dividends on the Preferred Stock.

     

    “Warrants”
means
      collectively the Common Stock purchase warrants, in the form of Exhibit C
      delivered to the Purchasers at the Closing in accordance with Section 2.2(a)
      hereof, which Warrants shall be exercisable immediately and have a term of
      exercise equal to five years.

     

    “Warrant
      Shares”
means
      the shares of Common Stock issuable upon exercise of the Warrants.

     

    ARTICLE
      II

    PURCHASE
      AND SALE

     

    2.1   Closing.
      On the
      Closing Date, upon the terms and subject to the conditions set forth herein,
      concurrent with the execution and delivery of this Agreement by the parties
      hereto, the Company agrees to sell, and each Purchaser agrees to purchase in
      the
      aggregate, severally and not jointly, up to $25,000,000 of shares of Preferred
      Stock with an aggregated Stated Value equal to such Purchaser’s Subscription
      Amount and Warrants as determined pursuant to Section 2.2(a)(viii). The
      aggregate number of shares of Preferred Stock sold hereunder shall be up to
      25,000. Each
      Purchaser shall deliver to the Company via wire transfer or a certified check
      immediately available funds equal to their Subscription Amount and the Company
      shall deliver to each Purchaser their respective shares of Preferred Stock
      and
      Warrants as determined pursuant to Section 2.2(a) and the other items set forth
      in Section 2.2 issuable at the Closing. Upon satisfaction of the conditions
      set
      forth in Section 2.2, the Closing shall occur at the offices of Company Counsel,
      or such other location as the parties shall mutually agree.

     

    
      	 	
              2.2

            	
              Deliveries.

            

    

     

    
      	 	
              a)

            	
              On
                the Closing Date, the Company shall deliver or cause to be delivered
                to
                each Purchaser the following:

            

    

     

    
      	 	
              (i)

            	
              a
                certificate evidencing a number of shares of Preferred Stock equal
                to such
                Purchaser’s Subscription Amount divided by the Stated Value, registered in
                the name of such Purchaser;

            

    

     

    
      	 	
              (ii)

            	
              the
                Registration Rights Agreement duly executed by the Company;
                

            

    

     

    
      
        	 	
                (iii)

              	
                a
                  legal opinion of Company Counsel, in the form of Exhibit
                  D
                  attached hereto; 

              

      

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

    

     

    
      	 	
              (vi)

            	
              a
                certificate evidencing the incorporation and good standing of the
                Company
                and each Subsidiary in such entity’s state or other jurisdiction of
                incorporation or organization issued by the Secretary of State (or
                other
                applicable authority) of such state or jurisdiction of incorporation
                or
                organization as of a date within ten (10) days of the Closing Date;
                

            

    

     

    
      	 	
              (vii)

            	
              a
                secretary’s certificate, dated as of the Closing Date, certifying as to
                (A) the Resolutions, (B) the Articles of the Corporation, certified
                as of
                a date within ten (10) days of the Closing Date, and (C) the Bylaws,
                each
                as in effect as of the Closing Date, (D) the organizational documents
                of
                each subsidiary, certified as of a date within ten (10) days of the
                Closing Date by the applicable governmental authority of the applicable
                jurisdiction, and (E) the by laws, limited partnership agreement
                or
                limited liability company agreement of each Subsidiary, as the case
                may
                be; such Purchaser such other documents relating to the transactions
                contemplated by this Agreement as such Purchaser or its counsel may
                reasonably request; and

            

    

     

    
      	 	
              (viii)

            	
              a
                Warrant registered in the name of such Purchaser to purchase up to
                a
                number of shares of Common Stock equal to 50% of such Purchaser’s
                Subscription Amount divided by $0.50, with a per share exercise price
                equal to $0.70,
                subject to adjustment therein.

            

    

     

    
      	 	
              (ix)

            	
              such
                other documents relating to the transactions contemplated by this
                Agreement as such Purchaser or its counsel may reasonably
                request.

            

    

     

    

    
      	 	
              b)

            	
              On
                or prior to the Closing Date, each Purchaser shall deliver or cause
                to be
                delivered to the Company (or Company Counsel acting on behalf of
                the
                Company) the following: 

            

    

     

    
      	 	
              (i)

            	
              such
                Purchaser’s Subscription Amount by wire transfer to the account as
                specified in writing by the Company;
                and

            

    

     

    
      	 	
              (ii)

            	
              the
                Registration Rights Agreement duly executed by such
                Purchaser.

            

    

     

    
      	 	
              2.3

            	
              Closing
                Conditions.

            

    

     

    
      	 	
              a)

            	
              The
                obligations of the Company hereunder in connection with the Closing
                are
                subject to the following conditions being
                met:

            

    

     

    
      	 	
              (i)

            	
              the
                accuracy in all material respects when made and on the Closing Date
                of the
                representations and warranties of the Purchasers contained
                herein;

            

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    
      	 	
              (ii)

            	
              the
                aggregate value of Preferred Shares to be sold hereunder shall be
                no less
                than $6,000,000;

            

    

     

    
      	 	
              (iii)

            	
              the
                Purchasers shall have performed in all material respects with all
                obligations, covenants and agreements of the Purchasers required
                to be
                performed by them at or prior to the Closing Date;
                and

            

    

     

    
      	 	
              (iv)

            	
              the
                delivery by the Purchasers of the items set forth in Section 2.2(b)
                of
                this Agreement.

            

    

     

    
      	 	
              b)

            	
              The
                respective obligations of the Purchasers hereunder in connection
                with the
                Closing are subject to the following conditions being
                met:

            

    

     

    
      	 	
              (i)

            	
              the
                accuracy in all material respects on the Closing Date of the
                representations and warranties of the Company contained
                herein;

            

    

     

    
      	 	
              (ii)

            	
              the
                Company shall have performed in all material respects with all
                obligations, covenants and agreements of the Company required to
                be
                performed by it at or prior to the Closing Date;
                

            

    

     

    
      	 	
              (iii)

            	
              the
                delivery by the Company of the items set forth in Section 2.2(a)
                of this
                Agreement; 

            

    

     

    
      	 	
              (iv)

            	
              the
                shareholders of the Company and the stockholders of The RiceX Company
                shall have approved the Merger Transaction and the Merger Transaction
                shall have been simultaneously
                consummated;

            

    

     

    
      	 	
              (v)

            	
              from
                the date hereof to the Closing Date, trading in the Common Stock
                shall not
                have been suspended by the Commission or the Trading Market (except
                for
                any suspension of trading of limited duration agreed to by the Company,
                which suspension shall be terminated prior to the Closing);
                and

            

    

     

    
      	 	
              (vi)

            	
              the
                aggregate value of Preferred Shares to be sold hereunder shall be
                no less
                than $6,000,000.

            

    

     

    ARTICLE
      III

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1   Representations
      and Warranties of the Company.
      Except
      as set forth in the disclosure schedules separately delivered to the Purchasers
      concurrently herewith (the “Disclosure
      Schedules”),
      the
      Company hereby makes the representations and warranties set forth below to
      each
      Purchaser.

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    (a)   Subsidiaries.
      All of
      the direct and indirect subsidiaries of the Company are set forth on
Schedule
      3.1(a).
      Except
      as set forth on Schedule
      3.1(a),
      the
      Company owns, directly or indirectly, all of the capital stock or other equity
      interests of each Subsidiary free and clear of any Liens, and all the issued
      and
      outstanding shares of capital stock of each Subsidiary are validly issued and
      are fully paid, non-assessable and free of preemptive and similar rights to
      subscribe for or purchase securities. If the Company has no subsidiaries, then
      references in the Transaction Documents to the Subsidiaries will be
      disregarded.

     

    (b)   Organization
      and Qualification.
      Each of
      the Company and the Subsidiaries is an entity duly incorporated or otherwise
      organized, validly existing and in good standing under the laws of the
      jurisdiction of its incorporation or organization (as applicable), with the
      requisite power and authority to own and use its properties and assets and
      to
      carry on its business as currently conducted. Neither the Company nor any
      Subsidiary is in violation or default of any of the provisions of its respective
      certificate or articles of incorporation, bylaws or other organizational or
      charter documents. Each of the Company and the Subsidiaries is duly qualified
      to
      conduct business and is in good standing as a foreign corporation or other
      entity in each jurisdiction in which the nature of the business conducted or
      property owned by it makes such qualification necessary, except where the
      failure to be so qualified or in good standing, as the case may be, could not
      have or reasonably be expected to result in a Material Adverse Effect, and
      no
      Proceeding has been instituted in any such jurisdiction revoking, limiting
      or
      curtailing or seeking to revoke, limit or curtail such power and authority
      or
      qualification.

     

    (c)   Authorization;
      Enforcement.
      The
      Company has the requisite corporate power and authority to enter into and to
      consummate the transactions contemplated by each of the Transaction Documents
      and otherwise to carry out its obligations thereunder. The execution and
      delivery of each of the Transaction Documents by the Company and the
      consummation by it of the transactions contemplated thereby have been duly
      authorized by all necessary action on the part of the Company and no further
      action is required by the Company in connection therewith other than in
      connection with the Required Approvals. Each Transaction Document has been
      (or
      upon delivery will have been) duly executed by the Company and, when delivered
      in accordance with the terms hereof, will constitute the valid and binding
      obligation of the Company enforceable against the Company in accordance with
      its
      terms except (i) as limited by applicable bankruptcy, insolvency,
      reorganization, moratorium and other laws of general application affecting
      enforcement of creditors’ rights generally and (ii) as limited by laws relating
      to the availability of specific performance, injunctive relief or other
      equitable remedies.

     

    (d)   No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company
      and the consummation by the Company of the other transactions contemplated
      thereby do not and will not: (i) conflict with or violate any provision of
      the
      Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws
      or other organizational or charter documents, or (ii) conflict with, or
      constitute a default (or an event that with notice or lapse of time or both
      would become a default) under, result in the creation of any material Lien
      upon
      any of the properties or assets of

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    the
      Company or any Subsidiary, or give to others any rights of termination,
      amendment, acceleration or cancellation (with or without notice, lapse of time
      or both) of, any agreement, credit facility, debt or other instrument
      (evidencing a Company or Subsidiary debt or otherwise) or other understanding
      to
      which the Company or any Subsidiary is a party or by which any property or
      asset
      of the Company or any Subsidiary is bound or affected, or (iii) subject to
      the
      Required Approvals, conflict with or result in a violation of any law, rule,
      regulation, order, judgment, injunction, decree or other restriction of any
      court or governmental authority to which the Company or a Subsidiary is subject
      (including federal and state securities laws and regulations), or by which
      any
      property or asset of the Company or a Subsidiary is bound or affected; except
      in
      the case of each of clauses (ii) and (iii), such as could not have or reasonably
      be expected to result in a Material Adverse Effect.

     

    (e)   Filings,
      Consents and Approvals.
      The
      Company is not required to obtain any consent, waiver, authorization or order
      of, give any notice to, or make any filing or registration with, any court
      or
      other federal, state, local or other governmental authority in connection with
      the execution, delivery and performance by the Company of the Transaction
      Documents, other than (i) filings required pursuant to Section 4.6, (ii) filing
      required by the Exchange Act, (iii) the filing with the Commission of the
      Registration Statement, (iv) the notice and/or application(s) to each applicable
      Trading Market for the issuance and sale of the Preferred Stock and Warrants
      and
      the listing of the Underlying Shares for trading thereon in the time and manner
      required thereby, (v) the filing of Form D with the Commission and such filings
      as are required to be made under applicable state securities laws and (vi)
      the
      approvals set forth on Schedule
      3.1(e)
      (collectively, the “Required
      Approvals”).

     

    (f)   Issuance
      of the Securities.
      The
      Securities are duly authorized and, when issued and paid for in accordance
      with
      the applicable Transaction Documents, will be duly and validly issued, fully
      paid and nonassessable, free and clear of all Liens imposed by the Company
      other
      than restrictions on transfer provided for in the Transaction Documents. The
      Underlying Shares, when issued in accordance with the terms of the Transaction
      Documents, will be validly issued, fully paid and nonassessable, free and clear
      of all Liens imposed by the Company. The Company has reserved from its duly
      authorized capital stock a number of shares of Common Stock for issuance of
      the
      Underlying Shares at least equal to the Actual Minimum on the date hereof.
      The
      Company has not, and to the knowledge of the Company, no Affiliate of the
      Company has sold, offered for sale or solicited offers to buy or otherwise
      negotiated in respect of any security (as defined in Section 2 of the Securities
      Act) that would be integrated with the offer or sale of the Securities in a
      manner that would require the registration under the Securities Act of the
      sale
      of the Securities to the Purchasers, or that would be integrated with the offer
      or sale of the Securities for purposes of the rules and regulations of any
      Trading Market.

     

    (g)   Capitalization.
      The
      capitalization of the Company is as described in the SEC Reports and the
      company’s definitive proxy statement filed with the SEC on August 30, 2005
      (“Proxy
      Statement”).
      Except as specified in the SEC Reports and the Proxy

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    Statement,
      no Person has any right of first refusal, preemptive right, right of
      participation, or any similar right to participate in the transactions
      contemplated by the Transaction Documents which shall not have been waived
      prior
      to Closing. Except as disclosed in the Company’s reports filed with the
      Commission, issued pursuant to the Company’s stock incentive plan or as a result
      of the purchase and sale of the Securities, there are no outstanding options,
      warrants, script rights to subscribe to, calls or commitments of any character
      whatsoever relating to, or securities, rights or obligations convertible into
      or
      exchangeable for, or giving any Person any right to subscribe for or acquire,
      any shares of Common Stock, or contracts, commitments, understandings or
      arrangements by which the Company or any Subsidiary is or may become bound
      to
      issue additional shares of Common Stock, or securities or rights convertible
      or
      exchangeable into shares of Common Stock. The issuance and sale of the
      Securities will not obligate the Company to issue shares of Common Stock or
      other securities to any Person (other than the Purchasers) and will not result
      in a right of any holder of Company securities to adjust the exercise,
      conversion, exchange or reset price under such securities. All of the
      outstanding shares of capital stock of the Company are validly issued, fully
      paid and nonassessable, have been issued in compliance with all federal and
      state securities laws, and none of such outstanding shares was issued in
      violation of any preemptive rights or similar rights to subscribe for or
      purchase securities, except as set forth on Schedule
      3.1(g).
      No
      further approval or authorization of any stockholder, the Board of Directors
      of
      the Company or others is required for the issuance and sale of the shares of
      Preferred Stock. 

     

    (h)   Indebtedness.
      Except
      as set forth in the SEC Reports or on Schedule
      3.1(h),
      the
      Company has not incurred or guaranteed, suffered to exist or is otherwise liable
      for any Indebtedness.

     

    (i)    SEC
      Reports; Financial Statements.
      The
      Company has filed all reports required to be filed by it under the Securities
      Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
      for the twelve months preceding the date hereof (or such shorter period as
      the
      Company was required by law to file such material) (the foregoing materials,
      including the exhibits thereto, being collectively referred to herein as the
      “SEC
      Reports”)
      on a
      timely basis or has received a valid extension of such time of filing and has
      filed any such SEC Reports prior to the expiration of any such extension. As
      of
      their respective dates, the SEC Reports complied in all material respects with
      the requirements of the Securities Act and the Exchange Act and the rules and
      regulations of the Commission promulgated thereunder, and none of the SEC
      Reports, when filed, 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 light of the circumstances under which
      they were made, not misleading. The financial statements of the Company included
      in the SEC Reports comply in all material respects with applicable accounting
      requirements and the rules and regulations of the Commission with respect
      thereto as in effect at the time of filing. Such financial statements have
      been
      prepared in accordance with United States generally accepted accounting
      principles applied on a consistent basis during the periods involved
      (“GAAP”),
      except as may be otherwise specified in such financial statements or the notes
      thereto and except that unaudited financial statements may not contain all
      footnotes required by GAAP, and

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    fairly
      present in all material respects the financial position of the Company and
      its
      consolidated subsidiaries as of and for the dates thereof and the results of
      operations and cash flows for the periods then ended, subject, in the case
      of
      unaudited statements, to normal, immaterial, year-end audit adjustments.

     

    (j)    No
      Undisclosed Events, Liabilities or Developments.
      Except
      for the issuance of the Preferred Shares and Underlying Shares contemplated
      by
      this Agreement or as set forth on Schedule
      3(j),
      no
      event, liability or development has occurred or exists with respect to the
      Company or its Subsidiaries or their respective business, properties, operations
      or financial condition, that would be required to be disclosed by the Company
      under applicable securities laws at the time this representation is made that
      has not been publicly disclosed one (1) Trading Day prior to the date that
      this
      representation is made.

     

    (k)   Material
      Changes.
      Since
      the date of the latest audited financial statements included within the SEC
      Reports, except as specifically disclosed in the SEC Reports, (i) there has
      been no event, occurrence or development that has had or that could reasonably
      be expected to result in a Material Adverse Effect, (ii) the Company has not
      incurred any liabilities (contingent or otherwise) other than (A) trade payables
      and accrued expenses incurred in the ordinary course of business consistent
      with
      past practice and (B) liabilities not required to be reflected in the Company's
      financial statements pursuant to GAAP or required to be disclosed in filings
      made with the Commission, (iii) the Company has not altered its method of
      accounting or the identity of its auditors, (iv) the Company has not declared
      or
      made any dividend or distribution of cash or other property to its stockholders
      or purchased, redeemed or made any agreements to purchase or redeem any shares
      of its capital stock and (v) the Company has not issued any equity securities
      to
      any officer, director or Affiliate, except pursuant to existing Company stock
      option plan or restricted stock plan or as otherwise described on Schedule
      3(k).
      The
      Company does not have pending before the Commission any request for confidential
      treatment of information.

     

    (l)    Litigation.
      Except
      as set forth in SEC Reports, there is no action, suit, inquiry, notice of
      violation, proceeding or investigation pending or, to the knowledge of the
      Company, threatened in writing against or affecting the Company, any Subsidiary
      or any of their respective properties before or by any court, arbitrator,
      governmental or administrative agency or regulatory authority (federal, state,
      county, local or foreign) (collectively, an “Action”)
      which
      (i) adversely affects or challenges the legality, validity or enforceability
      of
      any of the Transaction Documents or the Securities or (ii) could, if there
      were
      an unfavorable decision, have or reasonably be expected to result in a Material
      Adverse Effect. Neither the Company nor any Subsidiary, nor, to the Company’s
      knowledge, any director or officer thereof (in his or her capacity as such),
      is
      or has been the subject of any Action involving a claim of violation of or
      liability under federal or state securities laws or a claim of breach of
      fiduciary duty. There has not been, and to the knowledge of the Company, there
      is not pending, any investigation by the Commission involving the Company or
      any
      current or former director or officer of the Company (in his or her capacity
      as
      such). The Commission has not issued any stop order or other order suspending
      the effectiveness of any registration statement filed by the Company or any
      Subsidiary under the Exchange Act or the Securities Act.

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    (m)   Labor
      Relations.
      No
      material labor dispute exists or, to the knowledge of the Company, is imminent
      with respect to any of the employees of the Company which could reasonably
      be
      expected to result in a Material Adverse Effect. None of the Company’s or its
      Subsidiaries’ employees is a member of a union that relates to such employee’s
      relationship with the Company, and neither the Company nor any of its
      Subsidiaries is a party to a collective bargaining agreement, and the Company
      and its Subsidiaries believe that their relationships with their employees
      are
      good. No executive officer, to the knowledge of the Company, is, or is now
      expected to be, in violation of any material term of any employment contract,
      confidentiality, disclosure or proprietary information agreement or
      non-competition agreement, or any other contract or agreement or any restrictive
      covenant, and the continued employment of each such executive officer 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 U.S. federal, state, local and foreign laws and regulations relating
      to
      employment and employment practices, terms and conditions of employment and
      wages and hours, except where the failure to be in compliance could not,
      individually or in the aggregate, reasonably be expected to have a Material
      Adverse Effect.

     

    (n)   Compliance.
      Except
      as set forth in the SEC Reports, neither the Company nor any Subsidiary (i)
      is
      in default under or in violation of (and no event has occurred that has not
      been
      waived that, with notice or lapse of time or both, would result in a default
      by
      the Company or any Subsidiary under), nor has the Company or any Subsidiary
      received notice of a claim that it is in default under or that it is in
      violation of, any material indenture, loan or credit agreement or any other
      material agreement or instrument to which it is a party or by which it or any
      of
      its material properties is bound (whether or not such default or violation
      has
      been waived), (ii) is in violation of any order of any court, arbitrator or
      governmental body, or (iii)  is or has been in violation of any statute,
      rule or regulation of any governmental authority, including without limitation
      all foreign, federal, state and local laws applicable to its business and all
      such laws that affect the environment, except in each case as could not have
      a
      Material Adverse Effect. 

     

    (o)   Regulatory
      Permits.
      The
      Company and the Subsidiaries possess all certificates, authorizations and
      permits issued by the appropriate federal, state, local or foreign regulatory
      authorities necessary to conduct their respective businesses as described in
      the
      SEC Reports, except where the failure to possess such permits could not have
      or
      reasonably be expected to result in a Material Adverse Effect (“Material
      Permits”),
      and
      neither the Company nor any Subsidiary has received any notice of proceedings
      relating to the revocation or modification of any Material Permit.

     

    (p)   Title
      to Assets.
      Except
      as set forth on Schedule
      3.1(p),
      the
      Company and the Subsidiaries have good and marketable title in fee simple to
      all
      real property owned by them that is material to the business of the Company
      and
      the Subsidiaries and good and marketable title in all personal property owned
      by
      them that is material to the

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    business
      of the Company and the Subsidiaries, in each case free and clear of all Liens,
      except for Liens as do not materially affect the value of such property and
      do
      not materially interfere with the use made and proposed to be made of such
      property by the Company and the Subsidiaries and Liens for the payment of
      federal, state or other taxes, the payment of which is neither delinquent nor
      subject to penalties. Any real property and facilities held under lease by
      the
      Company and the Subsidiaries are held by them under valid, subsisting and
      enforceable leases of which the Company and the Subsidiaries are in
      compliance.

     

    (q)   Intellectual
      Property Rights.
      Other
      than as set forth in the SEC Reports, the Company and the Subsidiaries have,
      or
      have rights to use, all patents, patent applications, trademarks, trademark
      applications, service marks, trade names, trade secrets, inventory, copyrights,
      licenses and other similar intellectual property rights that are necessary
      for
      use in connection with their respective businesses and which the failure to
      so
      have could have a Material Adverse Effect (collectively, the “Intellectual
      Property Rights”).
      Except as set forth in the SEC Reports, neither the Company nor any Subsidiary
      has received a written notice that the Intellectual Property Rights used by
      the
      Company or any Subsidiary violates or infringes upon the rights of any Person.
      Except as set forth in the SEC Reports, to the knowledge of the Company, all
      such Intellectual Property Rights are enforceable and there is no existing
      material infringement by another Person of any of the Intellectual Property
      Rights. The Company and its Subsidiaries have taken reasonable security measures
      to protect the secrecy, confidentiality and value of all of their intellectual
      properties, except where failure to do so could not, individually or in the
      aggregate, reasonably be expected to have a Material Adverse
      Effect.

     

    (r)   Insurance.
      The
      Company and the Subsidiaries are insured by insurers of recognized financial
      responsibility against such losses and risks and in such amounts as are prudent
      and customary in the businesses in which the Company and the Subsidiaries are
      engaged. To the best of Company’s knowledge, such insurance contracts and
      policies are accurate and complete. Neither the Company nor any Subsidiary
      has
      any reason to believe that it will not be able 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 without a
      significant increase in cost.

     

    (s)   Transactions
      With Affiliates and Employees.
      Except
      as set forth in the SEC Reports, none of the officers or directors of the
      Company and, to the knowledge of the Company, none of the employees of the
      Company is presently a party to any transaction with the Company or any
      Subsidiary (other than for services as employees, officers and 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,
      director or such employee 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 $60,000
      other than (i) for payment of salary or consulting fees for services rendered,
      (ii) reimbursement for expenses incurred on behalf of the Company and (iii)
      for
      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.

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    (t)   Sarbanes-Oxley;
      Internal Accounting Controls.
      Except
      as set forth in the SEC Reports, the Company is in material compliance with
      all
      provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it as
      of
      the Closing Date. The
      Company and the Subsidiaries maintain a system of internal accounting controls
      sufficient in the judgment of the Company’s management to provide reasonable
      assurance 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
      GAAP and to maintain asset accountability, (iii) access to assets is
      permitted only in accordance with management's general or specific
      authorization, and (iv) the recorded accountability for assets is compared
      with
      the existing assets at reasonable intervals and appropriate action is taken
      with
      respect to any differences. 

     

    (u)   Certain
      Fees.
      No
      brokerage or finder’s fees or commissions are or will be payable by the Company
      to any broker, financial advisor or consultant, finder, placement agent,
      investment banker, bank or other Person with respect to the transactions
      contemplated by this Agreement, except as set forth on Schedule
      3.1(s).
      The
      Purchasers shall have no personal obligation with respect to any fees or with
      respect to any claims (other than such fees or commissions owed by a Purchaser
      pursuant to agreements entered into by such Purchaser, which fees or commissions
      shall be the sole responsibility of such Purchaser) made by or on behalf of
      other Persons for fees of a type contemplated in this Section that may be due
      in
      connection with the transactions contemplated by this Agreement due to an
      arrangement or agreement made by the Company.

     

    (v)   Private
      Placement.
      Assuming the accuracy of the Purchasers representations and warranties set
      forth
      in Section 3.2, no registration under the Securities Act is required for the
      offer and sale of the Securities by the Company to the Purchasers as
      contemplated hereby. The issuance and sale of the Securities hereunder does
      not
      contravene the rules and regulations of the Trading Market.

     

    (w)   Investment
      Company.
      The
      Company is not, and is not an Affiliate of, and immediately after receipt of
      payment for the shares of Preferred Stock, will not be or be an Affiliate of,
      an
“investment company” within the meaning of the Investment Company Act of 1940,
      as amended. The Company shall conduct its business in a manner so that it will
      not become subject to the Investment Company Act.

     

    (x)    Listing
      and Maintenance Requirements.
      The
      Company’s Common Stock is registered pursuant to Section 15(d) of the Exchange
      Act, and the Company has taken no action designed to, or which to its knowledge
      is likely to have the effect of, terminating the registration of the Common
      Stock under the Exchange Act nor has the Company received any notification
      that
      the Commission is contemplating terminating such registration. The Company
      has
      not, in the 12 months preceding the date hereof, received notice from any
      Trading Market on which the Common Stock is or has been

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    listed
      or
      quoted to the effect that the Company is not in compliance with the listing
      or
      maintenance requirements of such Trading Market. The Company is, and has no
      reason to believe that it will not in the foreseeable future continue to be,
      in
      compliance with all such listing and maintenance requirements.

     

    (y)    Application
      of Takeover Protections.
      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 Company's Articles of
      Incorporation (or similar charter documents) or the laws of its state of
      incorporation that is or could become applicable to the Purchasers as a result
      of the Purchasers and the Company fulfilling their obligations or exercising
      their rights under the Transaction Documents, including without limitation
      the
      Company's issuance of the Securities and the Purchasers’ ownership of the
      Securities.

     

    (z)    Disclosure.
      The
      Company confirms that neither it nor any other Person acting on its behalf
      has
      provided any of the Purchasers or their agents or counsel with any information
      that the Company believes constitutes material, nonpublic information except
      insofar as the existence and terms of the proposed transactions hereunder may
      constitute such information. The Company understands and confirms that the
      Purchasers will rely on the foregoing representations and covenants in effecting
      transactions in securities of the Company. All written materials provided to
      the
      Purchasers regarding the Company, its business and the transactions contemplated
      hereby, including the Disclosure Schedules to this Agreement, furnished by
      or on
      behalf of the Company with respect to the representations and warranties made
      herein are true and correct with respect to such representations and warranties
      and do 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 light
      of the circumstances under which they were made, not misleading. The
      Company acknowledges and agrees that no Purchaser makes or has made any
      representations or warranties with respect to the transactions contemplated
      hereby other than those specifically set forth in Section 3.2
      hereof.

     

    (aa)   Tax
      Status.
      Except
      for matters that would not, individually or in the aggregate, have or reasonably
      be expected to result in a Material Adverse Effect, the Company and each
      Subsidiary has filed all necessary federal, state and foreign income and
      franchise tax returns and has paid or accrued all taxes shown as due thereon,
      and the Company has no knowledge of a tax deficiency which has been asserted
      or
      threatened in writing against the Company or any Subsidiary.

     

    (bb)   Foreign
      Corrupt Practices.
      Neither
      the Company, nor to the knowledge of the Company, any agent or other person
      acting on behalf of the Company, has (i) directly or indirectly, used any
      corrupt funds for unlawful contributions, gifts, entertainment or other unlawful
      expenses related to foreign or domestic political activity, (ii) made any
      unlawful payment to foreign or domestic government officials or employees or
      to
      any foreign or domestic political parties or campaigns from corporate funds,
      (iii) failed to disclose fully any contribution made by the Company (or made
      by
      any person acting on

    
      
        
        

      

      
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    its
      behalf of which the Company is aware) which is in violation of law, or (iv)
      violated in any material respect any provision of the Foreign Corrupt Practices
      Act of 1977, as amended

     

    (cc)   No
      Disagreements with Accountants and Lawyers.
      There
      are no disagreements of any kind presently existing, or reasonably anticipated
      by the Company to arise, between the accountants and lawyers formerly or
      presently employed by the Company and the Company is current with respect to
      any
      fees owed to its accountants and lawyers.

     

    (dd)   Acknowledgment
      Regarding Purchasers’ Purchase of Securities.
      The
      Company acknowledges and agrees that each of the Purchasers is acting solely
      in
      the capacity of an arm's length purchaser with respect to the Transaction
      Documents and the transactions contemplated hereby. The Company further
      acknowledges that no Purchaser is acting as a financial advisor or fiduciary
      of
      the Company (or in any similar capacity) with respect to this Agreement and
      the
      transactions contemplated hereby and any advice given by any Purchaser or any
      of
      their respective representatives or agents in connection with this Agreement
      and
      the transactions contemplated hereby is merely incidental to the Purchasers’
purchase of the Securities. The Company further represents to each Purchaser
      that the Company’s decision to enter into this Agreement has been based solely
      on the independent evaluation of the transactions contemplated hereby by the
      Company and its representatives.

     

    3.2   Representations
      and Warranties of the Purchasers.
      Each
      Purchaser hereby, for itself and for no other Purchaser, represents and warrants
      as of the date hereof and as of the Closing Date to the Company as
      follows:

     

    (a)   Organization;
      Authority.
      Such
      Purchaser is an entity duly organized, validly existing and in good standing
      under the laws of the jurisdiction of its organization with full right,
      corporate or partnership power and authority to enter into and to consummate
      the
      transactions contemplated by the Transaction Documents and otherwise to carry
      out its obligations thereunder. The execution, delivery and performance by
      such
      Purchaser of the transactions contemplated by this Agreement have been duly
      authorized by all necessary corporate or similar action on the part of such
      Purchaser. Each Transaction Document to which it is a party has been duly
      executed by such Purchaser, and when delivered by such Purchaser in accordance
      with the terms hereof, will constitute the valid and legally binding obligation
      of such Purchaser, enforceable against it in accordance with its terms, except
      (i) as limited by general equitable principles and applicable bankruptcy,
      insolvency, reorganization, moratorium and other laws of general application
      affecting enforcement of creditors’ rights generally, (ii) as limited by laws
      relating to the availability of specific performance, injunctive relief or
      other
      equitable remedies and (iii) insofar as indemnification and contribution
      provisions may be limited by applicable law.

    
      
        
        

      

      
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    (b)   Purchaser
      Representation.
      Such
      Purchaser understands that the Securities are “restricted securities” and have
      not been registered under the Securities Act or any applicable state securities
      law and 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, has no present intention of distributing any of such Securities and
      has
      no arrangement or understanding with any other persons regarding the
      distribution of such Securities (this representation and warranty not limiting
      such Purchaser’s right to sell the Securities pursuant to the Registration
      Statement or otherwise in compliance with applicable federal and state
      securities laws). Such Purchaser is acquiring the Securities hereunder in the
      ordinary course of its business. Such Purchaser does not have any agreement
      or
      understanding, directly or indirectly, with any Person to distribute any of
      the
      Securities.

     

    (c)   Purchaser
      Status.
      At the
      time such Purchaser was offered the Securities, it was, and at the date hereof
      it is, and on each date on which it exercises any Warrants, it will be either:
      (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3),
      (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional
      buyer” as defined in Rule 144A(a) under the Securities Act. Such Purchaser is
      not required to be registered as a broker-dealer under Section 15 of the
      Exchange Act.

     

    (d)   Experience
      of Such Purchaser.
      Such
      Purchaser, either alone or together with its 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 investment
      in the Securities, and has so evaluated the merits and risks of such investment.
      Such Purchaser is able to bear the economic risk of an investment in the
      Securities and, at the present time, is able to afford a complete loss of such
      investment.

     

    (e)   General
      Solicitation.
      Such
      Purchaser is not purchasing the Securities as a result of any advertisement,
      article, notice or other communication regarding the Securities published in
      any
      newspaper, magazine or similar media or broadcast over television or radio
      or
      presented at any seminar or any other general solicitation or general
      advertisement.

     

    (f)   Short
      Sales.
      Each
      Purchaser represents that from January 1, 2005 through 9:00 a.m. ET on the
      Trading Day immediately following the date of execution of this Agreement,
      neither it nor any Person over which the Purchaser has direct control, have
      made
      any purchases or sales of, or granted any option for the purchase of or entered
      into any hedging or similar transaction with the same economic effect as a
      net
      short sale, of the Common Stock.

     

    The
      Company acknowledges and agrees that each Purchaser 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 this Section
      3.2.

     

    
      ARTICLE
        IV

      OTHER
        AGREEMENTS OF THE PARTIES

       

      
        	 	
                4.1

              	
                Transfer
                  Restrictions.

              

      

       

    

    
      
        
        

      

      
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    (a)   The
      Securities may only be disposed of in compliance with state and federal
      securities laws. In connection with any transfer of Securities other than
      pursuant to an effective registration statement, the Company may require the
      transferor thereof to provide to the Company an opinion of counsel selected
      by
      the transferor and reasonably acceptable to the Company, the form and substance
      of which opinion shall be reasonably satisfactory to the Company, to the effect
      that such transfer does not require registration of such transferred Securities
      under the Securities Act. As a condition of transfer, any such transferee shall
      agree in writing to be bound by the terms of this Agreement and shall have
      the
      rights of a Purchaser under this Agreement and the Registration Rights
      Agreement.

     

    (b)   The
      Purchasers agree to the imprinting, so long as is required by this Section,
      of a
      legend on any of the Securities in the following form: 

     

    NEITHER
      THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE
      OR CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
      OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
      REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
      EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
      AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
      TO
      SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
      COMPANY. 

     

    (c)   Certificates
      evidencing the Underlying Shares shall not contain any legend (including the
      legend set forth in Section 4.1(b) hereof): (i) following a sale or transfer
      of
      such Underlying Shares pursuant to, and in compliance with, an effective
      registration statement, or (ii) following any sale of such Underlying Shares
      pursuant to Rule 144 (assuming the transferor is not an Affiliate of the
      Company), or (iii) if such Underlying Shares are eligible for sale under Rule
      144(k). If all or any shares of Preferred Stock or any portion of a Warrant
      is
      converted or exercised (as applicable) into the Underlying Shares and such
      Underlying Shares may be sold under Rule 144(k), then such Underlying Shares
      shall be issued free of all legends. The Company agrees that at such time as
      such legend is no longer required under this Section 4.1(c), it will, no later
      than five Trading Days following the receipt by the Company of, or the receipt
      by the Company of notice that the Transfer Agent has received, a certificate
      representing Underlying Shares, as applicable, issued with a restrictive legend,
      deliver or cause to be delivered to such Purchaser a certificate representing
      such shares that is free from all such restrictive and other legends. The
      Company may not make any notation on its records or give instructions to any
      transfer agent of the Company that enlarge the restrictions on transfer set
      forth in this Section.

    
      
        
        

      

      
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    4.2   Acknowledgment
      of Dilution.
      The
      Company acknowledges that the issuance of the Securities may result in dilution
      of the outstanding shares of Common Stock, which dilution may be substantial
      under certain market conditions. The Company further acknowledges that its
      obligations under the Transaction Documents, including without limitation its
      obligation to issue the Underlying Shares pursuant to the Transaction Documents,
      are unconditional and absolute and not subject to any right of set off,
      counterclaim, delay or reduction, regardless of the effect of any such dilution
      or any claim the Company may have against any Purchaser and regardless of the
      dilutive effect that such issuance may have on the ownership of the other
      stockholders of the Company.

     

    4.3   Furnishing
      of Information.
      For a
      period ending upon the earlier to occur of (i) the date in which no Purchaser
      owns the Securities and (ii) two (2) years following the Closing Date, the
      Company covenants to timely file (or obtain extensions in respect thereof and
      file within the applicable grace period) all reports required to be filed by
      the
      Company after the date hereof pursuant to the Exchange Act. The Company further
      covenants that it will take such further action as any holder of Securities
      may
      reasonably request, all to the extent required from time to time to enable
      such
      Person to sell such Securities without registration under the Securities Act
      within the limitation of the exemptions provided by Rule 144.

     

    4.4   Integration.
      The
      Company shall not sell, offer for sale or solicit offers to buy or otherwise
      negotiate in respect of any security (as defined in Section 2 of the Securities
      Act) that would be integrated with the offer or sale of the Securities in a
      manner that would require the registration under the Securities Act of the
      sale
      of the Securities to the Purchasers or that would be integrated with the offer
      or sale of the Securities for purposes of the rules and regulations of any
      Trading Market.

     

    4.5   Conversion
      and Exercise Procedures.
      The
      form of Notice of Exercise included in the Warrants and the Notice of Conversion
      included in the Certificate of Determination set forth the totality of the
      procedures required of the Purchasers in order to exercise the Warrants or
      convert the Preferred Stock. No additional legal opinion or other information
      or
      instructions shall be required of the Purchasers to convert their Preferred
      Stock or exercise their Warrants. The Company shall honor exercises of the
      Warrants and conversions of the Preferred Stock and shall deliver Underlying
      Shares in accordance with the terms, conditions and time periods set forth
      in
      the Transaction Documents.

     

    4.6   Securities
      Laws Disclosure;
      Publicity.
      The
      Company shall, by 9:00 a.m. Eastern time on the fourth Trading Day following
      the
      date hereof, file a Current Report on Form 8-K, reasonably acceptable to counsel
      to the Purchasers disclosing the material terms of the transactions contemplated
      hereby, and shall attach this Agreement, the Registration Rights Agreement
      and
      the Certificate of Determination thereto. The Company shall not publicly
      disclose the name of any Purchaser other than the Placement Agent, if
      applicable, when issuing any press releases, without the prior written consent
      of such Purchaser, except to the extent such disclosure is required by law
      or
      Trading Market regulations. If the Company fails to file the Form 8-K as
      required in this Section, in addition to any other remedy provided herein or
      in
      the Transaction Documents, a Purchaser shall have the right to make, public
      disclosure in the form

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    of
      a
      press release, public advertisement or otherwise, of such material nonpublic
      information without the prior approval by the Company, its Subsidiaries, or
      any
      of its or their respective officers, directors, employees or agents, provided
      that such Purchaser gives the Company at least two (2) Business Days’ notice of
      its intention to make such public disclosure and provides such intended
      disclosure to the Company. No Purchaser shall have any liability to the Company,
      its Subsidiaries, or any of its or their respective officers, directors,
      employees, shareholders or agents for any such disclosure so long as the
      nonpublic information disclosed by such Purchaser is accurate and not
      misleading.

     

    4.7   Form
      D; Blue Sky Filings.
      The
      Company agrees to timely file a Form D with respect to the Securities as
      required under Regulation D and to provide a copy thereof to each Purchaser
      promptly after such filing. 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, sale to the
      Purchasers at the Closing and issuance to the Purchasers on the Delivery Date
      pursuant to this Agreement under applicable securities or “Blue Sky” laws of the
      states of the United States, and shall provide evidence of any such action
      to
      counsel for AG on or prior to the Closing Dates. 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 Dates. 

     

    4.8   Non-Public
      Information.
      The
      Company covenants and agrees that it and its employees, officers and directors
      will not, and it will not authorize any other Person acting on its behalf to
      provide any Purchaser or its agents or counsel with any information that the
      Company believes constitutes material non-public information, unless prior
      thereto such Purchaser shall have executed a written agreement regarding the
      confidentiality and use of such information. The Company understands and
      confirms that each Purchaser shall be relying on the foregoing representations
      in effecting transactions in securities of the Company.

     

    4.9   Use
      of
      Proceeds.
      Except
      for payment of (i) principal and accrued but unpaid interest with respect to
      the
      Company’s December 22, 2004 secured debt financing (the “Secured
      Debt”),
      (ii)
      attorney’s fees and (iii) fees incurred in connection with the Merger
      Transaction and the transactions contemplated by this Agreement, the Company
      shall use the net proceeds from the sale of the Securities hereunder for working
      capital purposes.

     

    4.10        
      Indemnification
      of Purchasers.
      Subject
      to the provisions of this Section 4.10, the Company will indemnify and hold
      the
      Purchasers and their directors, officers, shareholders, partners, employees
      and
      agents (each, a “Purchaser
      Party”)
      harmless from any and all losses, liabilities, obligations, claims,
      contingencies, damages, costs and expenses, including all judgments, amounts
      paid in settlements, court costs and reasonable attorneys’ fees and costs of
      investigation that any such Purchaser Party may suffer or incur as a result
      of
      or relating to any material breach of any of the representations, warranties,
      covenants or agreements made by the Company in this Agreement or in the other
      Transaction Documents. If any action shall be brought against any Purchaser
      Party in respect of which indemnity may be sought pursuant to this Agreement,
      such Purchaser Party shall promptly notify the Company in writing, and the
      Company shall have the right to assume the defense thereof with counsel of
      its
      own choosing. Any Purchaser Party shall have the right to employ separate
      counsel in any such action and

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    participate
      in the defense thereof, but the fees and expenses of such counsel shall be
      at
      the expense of such Purchaser Party except to the extent that (i) the employment
      thereof has been specifically authorized by the Company in writing, (ii) the
      Company has failed after a reasonable period of time to assume such defense
      and
      to employ counsel or (iii) the named parties to any such Proceeding (including
      any impleaded parties) include both such Purchaser Party and the Company, and
      such Purchaser Party shall reasonably believe that a material conflict of
      interest is likely to exist if the same counsel were to represent such Purchaser
      Party and the Company (in which case, if such Purchaser Party notifies the
      Company in writing that it elects to employ separate counsel at the expense
      of
      the Company, the reasonable fees and expenses of one separate counsel shall
      be
      at the expense of the Company). The Company shall not be liable for any
      settlement of any such Proceeding effected without its written consent, which
      consent shall not be unreasonably withheld. The Company will not be liable
      to
      any Purchaser Party under this Agreement (i) for any settlement by a Purchaser
      Party effected without the Company’s prior written consent, which shall not be
      unreasonably withheld or delayed; or (ii) to the extent, but only to the extent
      that a loss, claim, damage or liability is primarily attributable to any
      Purchaser Party’s breach of any of the representations, warranties, covenants or
      agreements made by the Purchasers in this Agreement or in the other Transaction
      Documents. The Company shall not, without the prior written consent of the
      Purchaser Party (which consent shall not be unreasonably withheld or delayed),
      effect any settlement of any pending proceeding in respect of which any
      Purchaser Party is a party, unless such settlement includes an unconditional
      release of such Purchaser Party from all liability on claims that are the
      subject matter of such proceeding.

     

    4.11        
      Reservation
      and Listing of Securities.

     

    (a)   The
      Company shall maintain a reserve from its duly authorized shares of Common
      Stock
      for issuance pursuant to the Transaction Documents in such amount as may be
      required to fulfill its obligations in full under the Transaction Documents.
      

     

    (b)   The
      Company shall, if applicable: (i) in the time and manner required by the Trading
      Market, prepare and file with such Trading Market an additional shares listing
      application (if required by such Trading Market) covering a number of shares
      of
      Common Stock at least equal to the Actual Minimum on the date of such
      application, (ii) take all steps necessary to cause such shares of Common Stock
      to be approved for listing on the Trading Market as soon as possible thereafter,
      and (iii) maintain the listing of such Common Stock on any date at least equal
      to the Actual Minimum on such date on such Trading Market or another Trading
      Market. 

     

    4.12       
      Equal
      Treatment of Purchasers.
      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 Transaction Documents
      unless the same consideration is also offered to all of the parties to the
      Transaction Documents. For clarification purposes, this provision constitutes
      a
      separate right granted to each Purchaser by the Company and negotiated
      separately by each Purchaser, and is intended to treat for the Company the
      Purchasers as a class and shall not in any way be construed as the Purchasers
      acting in concert or as a group with respect to the purchase, disposition or
      voting of Securities or otherwise.

    
      
        
        

      

      
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    4.13       
      Limitation
      on Additional Indebtedness.
      As long
      as at least 5,000 shares of Preferred Stock remain outstanding, without the
      prior written consent of the holders of a majority of the shares of Preferred
      Stock then outstanding, the Company shall not, and shall not permit any of
      its
      Subsidiaries to, directly or indirectly, incur, assume or suffer to exist
      (including through acquisitions) any new Indebtedness other than Indebtedness
      (i) up to an aggregate of $1,000,000 in addition to all Indebtedness pursuant
      to
      (ii), (iii) and (iv) below, (ii) that is secured solely by the accounts
      receivable of the Corporation and that does not exceed the aggregate amount
      of
      all outstanding accounts receivable of the Corporation, (iii) incurred to
      finance or refinance the construction or improvement of existing or new
      manufacturing and production plant, facilities or equipment for the
      Corporation’s products provided that such Indebtedness is secured solely by the
      property and assets so financed, constructed or improved, (iv) incurred as
      a
      result of Persons exercising dissenters’ rights in the Merger Transaction and
      (v) in connection with the renewal, extension, or replacement (on substantially
      similar terms) of any Indebtedness outstanding as of the Closing
      Date.

     

    4.14       
      Release
      of Secured Debt.
      The
      Company shall cause the security interests securing the Secured Debt to be
      released within three (3) days after the Closing Date.

     

    4.15       
      Most
      Favored Nations.
      From
      the date hereof until the first anniversary of the Closing Date, the Company
      shall not offer to enter into or enter into any contract, agreement or
      understanding for a equity or convertible debt financing of any type (including,
      but not limited to, common stock issuances, preferred stock issuances,
      convertible debt offerings, rights offerings or debt financing with warrant
      coverage), or consummate any transaction contemplated by any such contract,
      agreement or understanding with any Person that contains terms and provisions
      (including fees, dividend or interest provisions or rates, ranking, redemption,
      conversion price, warrant coverage, expense reimbursement or otherwise) that
      are
      more favorable individually or in the aggregate than the terms and provisions
      contained in this Agreement or any of the other Transaction Documents, without
      first entering into amendments to the Transaction Documents with the Purchasers
      to provide for the same more favorable terms and provisions.

    

    4.16       
      Repurchase
      of Securities. 
In
      the event that any Purchaser shall deliver written notice to the Company of
      its
      election to seek redemption pursuant to this Section 4.16 at any time, the
      Company agrees that it will, within 20 days of receipt of such written notice,
      repurchase all the securities of the Company then held by such Purchaser for
      an
      aggregate repurchase price of $1.00 in cash.

     

    ARTICLE
      V

    MISCELLANEOUS

     

    5.1   Termination.
      This
      Agreement may be terminated by any Purchaser prior to the Closing, by written
      notice to the other parties, if (a) the Closing has not been consummated on
      or
      before October 15, 2005 or (b) at the election of any Purchaser, with respect
      to
      such Purchaser, if there has been a material breach of any representation,
      warranty, covenant or agreement on the part of the Company contained in this
      Agreement, which breach has not been cured within ten (10) business days notice
      to the Company of such breach; provided that no such termination will affect
      the
      right of any party to sue for any breach by the other party (or
      parties).

    
      
        
        

      

      
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    5.2   Fees
      and Expenses.
      At the
      Closing, the Company has agreed to reimburse Angelo Gordon (“AG”)
      the
      non-accountable sum of $25,000, for its actual, reasonable, out-of-pocket legal
      fees and expenses. Accordingly, in lieu of the foregoing payments, the aggregate
      amount that AG is to pay for the Securities at the Closing shall be reduced
      by
      $25,000 in lieu thereof. Except as expressly set forth in the Transaction
      Documents to the contrary, each party shall pay the fees and expenses of its
      advisers, counsel, accountants and other experts, if any, and all other expenses
      incurred by such party incident to the negotiation, preparation, execution,
      delivery and performance of this Agreement. The Company shall pay all transfer
      agent fees, stamp taxes and other taxes and duties levied in connection with
      the
      issuance of any Securities other than income taxes of the Purchasers that may
      be
      incurred in connection with the transactions contemplated hereby.

     

    5.3   Entire
      Agreement.
      The
      Transaction Documents, together with the exhibits and schedules thereto, contain
      the entire understanding of the parties with respect to the subject matter
      hereof and supersede all prior agreements and understandings, oral or written,
      with respect to such matters, which the parties acknowledge have been merged
      into such documents, exhibits and schedules.

     

    5.4   Notices.
      Any and
      all notices or other communications or deliveries required or permitted to
      be
      provided hereunder shall be in writing and shall be deemed given and effective
      on the earliest of (a) the date of transmission, if such notice or communication
      is delivered via facsimile at the facsimile number set forth on the signature
      pages attached hereto prior to 5:30 p.m. (New York City time) on a Trading
      Day,
      (b) the next Trading Day after the date of transmission, if such notice or
      communication is delivered via facsimile at the facsimile number set forth
      on
      the signature pages attached hereto on a day that is not a Trading Day or later
      than 5:30 p.m. (New York City time) on any Trading Day, (c) the second Trading
      Day following the date of mailing, if sent by U.S. nationally recognized
      overnight courier service, (d) upon actual receipt by the party to whom such
      notice is required to be given or (e) four (4) days after being placed in the
      mail, if mailed. The address for such notices and communications shall be as
      set
      forth on the signature pages attached hereto.

     

    5.5   Amendments;
      Waivers.
      No
      provision of this Agreement may be waived, modified, supplemented or amended
      except in a written instrument signed by the Company and the Purchasers holding
      a majority of the shares of Preferred Stock issued hereby. No waiver of any
      default with respect to any provision, condition or requirement of this
      Agreement shall be deemed to be a continuing waiver in the future or a waiver
      of
      any subsequent default or a waiver of any other provision, condition or
      requirement hereof, nor shall any delay or omission of either party to exercise
      any right hereunder in any manner impair the exercise of any such
      right.

     

    5.6   Construction.
      The
      headings herein are for convenience only, do not constitute a part of this
      Agreement and shall not be deemed to limit or affect any of the provisions
      hereof. 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.

    
      
        
        

      

      
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    5.7   Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their successors and permitted assigns. The Company may not assign this
      Agreement or any rights or obligations hereunder without the prior written
      consent of each Purchaser; provided, however, that the Company may assign its
      rights and delegate its duties hereunder to any surviving, acquiring or
      successor corporation in connection with a merger or consolidation of the
      Company with another corporation, or a sale, transfer or other disposition
      of
      all or substantially all of the Company’s assets to another corporation, or
      other similar transaction, without the prior written consent of the Purchasers,
      after notice duly given by the Company to the Purchasers. Any Purchaser may
      assign any or all of its rights under this Agreement to any Person to whom
      such
      Purchaser assigns or transfers any Securities, provided such transferee agrees
      in writing to be bound, with respect to the transferred Securities, by the
      provisions hereof that apply to the “Purchasers”.

     

    5.8   No
      Third-Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      successors and permitted assigns and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person, except as otherwise set
      forth
      in Section 4.9.

     

    5.9   Governing
      Law.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of the Transaction Documents shall be governed by and construed and enforced
      in
      accordance with the internal laws of the State of New York, without regard
      to
      the principles of conflicts of law thereof. Each party agrees that all legal
      proceedings concerning the interpretations, enforcement and defense of the
      transactions contemplated by this Agreement and any other Transaction Documents
      (whether brought against a party hereto or its respective affiliates, directors,
      officers, shareholders, employees or agents) shall be commenced exclusively
      in
      the state and federal courts sitting in the City 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 (including with respect
      to
      the enforcement of any of the Transaction Documents), 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 improper or inconvenient venue for such
      proceeding. 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 via registered or certified mail or overnight delivery
      (with evidence of delivery) to such party at the address in effect for 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. The parties hereby waive all rights to a trial by jury. If
      either party shall commence an action or proceeding to enforce any provisions
      of
      the Transaction Documents, then the prevailing party in such action or
      proceeding shall be reimbursed by the other party for its attorneys’ fees and
      other costs and expenses incurred with the investigation, preparation and
      prosecution of such action or proceeding.

     

    5.10       
      Survival.
      The
      representations, warranties, covenants and other agreements contained herein
      shall survive the Closing and the delivery, exercise and/or conversion of the
      Securities; provided that the survival period for the representations and
      warranties shall be eighteen (18) months following the Closing
      Date.

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    5.11       
      Execution.
      This
      Agreement may be executed in two or more counterparts, all of which when taken
      together 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, it being understood that both parties need not sign the same
      counterpart. In the event that any signature is delivered by facsimile
      transmission, such signature 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 facsimile signature page were an original
      thereof.

     

    5.12       
      Severability.
      If any
      provision of this Agreement is held to be invalid or unenforceable in any
      respect, the validity and enforceability of the remaining terms and provisions
      of this Agreement shall not in any way be affected or impaired thereby and
      the
      parties will attempt to agree upon a valid and enforceable provision that is
      a
      reasonable substitute therefor, and upon so agreeing, shall incorporate such
      substitute provision in this Agreement.

     

    5.13       
      Replacement
      of Securities.
      If any
      certificate or instrument evidencing any Securities is mutilated, lost, stolen
      or destroyed, the Company shall issue or cause to be issued in exchange and
      substitution for and upon cancellation thereof, or in lieu of and substitution
      therefor, a new certificate or instrument, but only upon receipt of evidence
      reasonably satisfactory to the Company of such loss, theft or destruction and
      customary and reasonable indemnity, if requested. The applicants for a new
      certificate or instrument under such circumstances shall also pay any reasonable
      third-party costs associated with the issuance of such replacement
      Securities.

     

    5.14       
      Remedies.
      In
      addition to being entitled to exercise all rights provided herein or granted
      by
      law, including recovery of damages, each of the Purchasers and the Company
      will
      be entitled to specific performance under the Transaction Documents. The parties
      agree that monetary damages may not be adequate compensation for any loss
      incurred by reason of any breach of obligations described in the foregoing
      sentence and hereby agrees to waive in any action for specific performance
      of
      any such obligation the defense that a remedy at law would be
      adequate.

     

    5.15       
      Independent
      Nature of Purchasers’ Obligations and Rights.
      The
      obligations of each Purchaser under any Transaction Document are several and
      not
      joint with the obligations of any other Purchaser, and no Purchaser shall be
      responsible in any way for the performance of the obligations of any other
      Purchaser under any Transaction Document. Nothing contained herein or in any
      Transaction Document, and no action taken by any Purchaser pursuant thereto,
      shall be deemed to constitute the Purchasers as a partnership, an association,
      a
      joint venture or any other kind of entity, or create a presumption that the
      Purchasers are in any way acting in concert or as a group with respect to such
      obligations or the transactions contemplated by the Transaction Document. Each
      Purchaser shall be entitled to independently protect and enforce its rights,
      including without limitation, the rights arising out of this Agreement or out
      of
      the other Transaction Documents, and it shall not be necessary for any other
      Purchaser to be joined as an additional party in any proceeding for such
      purpose. Each Purchaser has been represented by its

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    own
      separate legal counsel in their review and negotiation of the Transaction
      Documents. The Company has elected to provide all Purchasers with the same
      terms
      and Transaction Documents for the convenience of the Company and not because
      it
      was required or requested to do so by the Purchasers.

     

     

    [SIGNATURE
      PAGE FOLLOWS]

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
      Agreement to be duly executed by their respective authorized signatories as
      of
      the date first indicated above.

     

    

    
      	
              NUTRACEA

            	 	
              Address
                for Notice:

            
	 	 	 	 
	
              By:

            	
                

            	 	
              1261
                Hawks’ Flight Court

            
	 	
              Name:
                Bradley Edson

            	 	
              El
                Dorado Hills, CA 95762

            
	 	
              Title:
                President

            	 	
              Facsimile:

            	
              (916)
                933-7001

            
	 	 	 	
              Attention:

            	
              Chief
                Executive Officer

            

    

    With
      a
      copy to (which shall not constitute notice):

    

    Weintraub
      Genshlea Chediak law corporation

    400
      Capitol Mall

    Sacramento,
      CA 95814

    Facsimile:
      (916) 446-1611

    Attn.:
      Christopher Chediak, Esq.

    

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGE FOR PURCHASERS FOLLOWS]

     

    
      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

    

    

    [PURCHASER
      SIGNATURE PAGES TO NUTRACEA SECURITIES PURCHASE AGREEMENT]

    [ENTITY
      INVESTOR]

    

    IN
      WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
      to be duly executed by their respective authorized signatories as of the date
      first indicated above.

     

    Name
      of
      Investing Entity: __________________________

    Signature
      of Authorized Signatory of Investing Entity:
      __________________________

    Name
      of
      Authorized Signatory: _________________________

    Title
      of
      Authorized Signatory: __________________________

    Email
      Address of Authorized Signatory:________________________________

    Tax
      ID
      number of Investing Entity:__________________________________

    

    Physical
      Address for Notice of Investing Entity:

    

    

    

    

    Facsimile
      Address for Notice of Investing Entity: _________________________

    

    

    Address
      for Delivery of Securities for Investing Entity (if not same as
      above):

    

    

    

    

    Subscription
      Amount:

    Shares
      of
      Preferred Stock:

    

    

    [SIGNATURE
      PAGES CONTINUE]

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    [PURCHASER
      SIGNATURE PAGES TO NUTRACEA SECURITIES PURCHASE AGREEMENT]

    [INDIVIDUAL
      INVESTOR]

    

    IN
      WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
      to be duly executed by their respective authorized signatories as of the date
      first indicated above.

     

    Name
      of
      Investing Individual: __________________________

    

    Signature
      of Investing Individual:
      __________________________

    Email
      Address of Investing Individual:________________________________

    Tax
      ID
      number of Investing Individual:__________________________________

    

    Physical
      Address for Notice to Investing Individual:

    

    

    

    

    Facsimile
      Address for Notice to Investing Individual:
      _________________________

    

    

    Address
      for Delivery of Securities for Investing Individual (if not same as
      above):

    

    

    

    

    Subscription
      Amount:

    Shares
      of
      Preferred Stock:

    Warrant
      Shares: 

    

    

    [SIGNATURE
      PAGES CONTINUE]

     

    
29

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