Document:

Unassociated Document

    
      

    

    Exhibit
10.5

    

    
      SEVERANCE
AND RELEASE AGREEMENT

    

    
      

    

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

    

    
      

    

    
      1.            
Recitals - Background
and Purpose.

    

    
      

    

    
      1.1          
Prior
Employment. Adelman was previously employed by NutraCea pursuant to a
written employment agreement dated January 25, 2005. That agreement and all
rights thereunder, including without limitation all unvested warrants or
options, expired January 25, 2008 and was not renewed or extended. Since that
agreement expired, Adelman has been employed on an "at will" basis. Adelman's
employment with NutraCea shall terminate as of November 11, 2008 ("Separation Date"). Adelman
shall receive her salary and all other benefits from NutraCea until her
Separation Date on the next payroll cycle.

      

      1.2         
 Prior
Payment. Adelman acknowledges that she has been paid all wages and other
benefits due and owing by NutraCea, except as expressly set forth
herein.

      

      1.3          
Sever
Employment. Adelman, for her part, and NutraCea, for its part, desire to
mutually sever their employment relationship and settle all claims between them
effective as of the Effective Date on the terms and conditions set forth
below.

      

      2.            
Consideration.

      

      2.1           Consideration to
Adelman. In consideration of the releases and agreements set forth herein
NutraCea agrees to provide Adelman with the following severance
benefits:

      

    

    
      (a)            A
consulting arrangement with NutraCea providing, for a consulting fee in the
amount of $15,827.73 per month for a term of one year. This Retainer shall
commence on November 11, 2008 and continue until November 10, 2009. The terms
and conditions of such consulting arrangement shall be as set forth as attached
hereto as Exhibit
A ("Consulting
Agreement").

      

      (b)           NutraCea
shall issue an advance of $20,000, upon the signing of this agreement as
reasonable and actual moving expenses. Adelman agrees to provide receipts to
NutraCea for all such expenses within 30 days of the date the expense is
incurred. If the total amount of the receipts do not exceed $20,000, Adelman
agrees to refund the difference between the amount actually incurred and $20,000
within 30 days from the time she submits the expense report.

      

    

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

    

    
      
        
           

        

        
          -1-

          
            

          

        

        
           

        

      

    

     

    
      2.2          
Consideration to
NutraCea. Adelman agrees to:

    

    
      

    

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

    

    
      

    

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

    

    
      

      2.3.        
 ERISA 401(k)
Plan. Adelman is entitled to the plan benefits in her account under an
ERISA plan, which vested benefits will be paid pursuant to the terms of such
ERISA plan. NutraCea specifically agrees that she shall be entitled to employer
matching contributions through the last date of her employment in the amounts
specified in such ERISA plan.

      

      2.4.         
Options and
Warrants. All warrants and all options to acquire NutraCea shares of
stock previously granted to Adelman pursuant to her employment agreements with
NutraCea that are not fully vested and exercisable as of the date of this
Agreement shall immediately expire and be of no further force or effect,
including without limitation the Stock Option Agreement dated January 8, 2008,
No. SOP08005A ("Warrant'') and any other performance vesting warrant or option.
The parties acknowledge that Adelman's vested Warrant for the Purchase of Common
Stock dated January 25, 2005, No. "WC-" for 1,000,000 shares of NutraCea Common
Stock that provides for a time based vesting period shall remain in effect for
the balance of the exercise period thereunder (through January 15, 2015)
notwithstanding this termination of her employment ("Warrant Agreement"). A copy
of Adelman's Warrant Agreement is attached hereto as Exhibit
B.

      

      3.             Release of
Claims.

      

    

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

    

    
      
        
           

        

        
          -2-

          
            

          

        

        
           

        

      

    

    

    
      3.2          
Specific Release of Statutory
Rights Claims. Title VT1 of the Civil Rights Act of 1964 as amended, the
Civil Rights Act of 1991, the Americans With Disabilities Act, the Vietnam Era
Veterans Readjustments Assistance Act of 1974, the California Family Rights Act
of 1991, the Federal Family and Medical Leave Act of 1993, and the California
Fair Employment and Housing Act, as amended, and applicable provisions of
California's Labor Code provide certain rights to Adelman's in connection with
discrimination on a number of bases, including race, ancestry, color, religion,
sex, marital status, national origin, age, status as a veteran of the Vietnam
era, request or need for family or medical leave, physical or mental disability,
medical condition, or sexual preference. The rights afforded under these federal
and state laws are being waived, and no complaint or suit shall be filed based
on any alleged violation of these federal and state laws, or any successor or
replacement federal or state laws. All rights are hereby waived to assert a
claim for relief available under these federal and state laws including, but not
limited to, back pay, attorneys' fees, damages, reinstatement, or injunctive
relief, which may otherwise be recovered based on any alleged violation of these
federal and state laws, or any successor or replacement federal or state
laws.

      

      3.3          
Older Workers Benefit
Protection Act. Pursuant to the terms of the Older Workers' Benefit
Protection Act (OWBPA), Adelman is waiving any claims she may have under the Age
Discrimination in Employment Act arising prior to the date she executes this
agreement. Adelman acknowledges that she has had twenty-one (21) days in which
to consider the terms of this waiver. Adelman acknowledges that, by the terms of
this Agreement, he/she has been advised in writing that the she should consult
with an attorney regarding the terms and conditions of this Agreement. Adelman
further acknowledges that, by the terms of this Agreement, she has been advised
that following execution of this Agreement, he/she has seven (7) days in which
she may revoke her waiver pursuant to the OWBPA and that this Agreement does not
become effective until the seventh day following execution of the Agreement. The
date, seven (7) days following the execution of the Agreement, shall be the
Effective Date of this Agreement. Adelman further acknowledges that he/she has
consulted with an attorney and is fully aware of the rights and claims
being released by his/her execution of this Agreement.

      

      3.4         
Waiver. Adelman
acknowledges that there is a risk that, subsequent to the execution of this
Agreement, she may discover, incur or suffer from claims which are currently
unknown or unanticipated and which, if known, would have materially affected
his/her decision to execute this Agreement. Adelman acknowledges that he/she is
assuming the risk of such unknown and unanticipated claims and expressly waives
the benefits of Section 1542 of the California Civil Code, which provides as
follows:

    

    
      

    

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

    

    
      
        
           

        

        
          -3-

          
            

          

        

        
           

        

      

    

    

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

      

      5.            
Resolution of
Disputes. Any disputes regarding the rights or obligations of the parties
under this Agreement shall be conclusively determined by binding arbitration.
The arbitration shall be conducted as follows:

      

      5.1          
Binding
Arbitration. Any dispute between the parties shall be submitted to, and
conclusively determined by, binding arbitration in accordance with this
paragraph. The provisions of this paragraph shall not preclude any party from
seeking injunctive or other provisional or equitable relief in order to preserve
the status quo of the parties pending resolution of the dispute, and the filing
of an action seeking injunctive or other provisional relief shall not be
construed as a waiver of that party's arbitration rights. The arbitration of any
dispute between the parties to this Agreement shall be governed by the
provisions of Arizona law.

      

    

    5.2          
Initiation of
Arbitration. In the case of any dispute between the parties to this
Agreement, either party shall have the right to initiate the binding arbitration
process provided for in this paragraph by serving upon the other party a demand
for arbitration. Notwithstanding any other provision of law, in order to be
enforceable a demand for arbitration must be served within sixty (60) days of
the date on which a party discovers, or reasonably should have discovered, facts
giving rise to a dispute as defined above.

    

    
      
        
           

        

        
          -4-

          
            

          

        

        
           

        

      

    

    

    

    
      5.3          
Selection of
Arbitrators. Within thirty (30) days of service of a demand for
arbitration by either party to this Agreement, the parties shall endeavor in
good faith to select a single arbitrator. If they fail to do so within that time
period, each party shall have an additional period of fifteen (15) days in which
to appoint an arbitrator and those arbitrators within fifteen (15) days shall
select an additional arbitrator. If any party fails to appoint an arbitrator or
if the arbitrators initially selected by the parties fail to appoint an
additional arbitrator within the time specified herein, any party may apply to
have an arbitrator appointed for the party who has failed to appoint, or to have
the additional arbitrator appointed, by a judge in Phoenix, Arizona. If the
presiding judge, acting in his or her personal capacity, is unable or unwilling
to appoint the additional arbitrator, that arbitrator shall be selected in
accordance with the rules of the Judicial Arbitration and Mediation Service
("JAMS").

      

      5.5           
Applicable Law.
The law applicable to the arbitration of any dispute shall be the law of the
State of Arizona.

      

      5.6        
  Arbitration
Procedures. Except as otherwise provided in this paragraph, the
arbitration shall be governed by the JAMS employment arbitration rules. In
addition, either party may choose, at that party's discretion, to request that
the arbitrators resolve any dispositive motions prior to the taking of evidence
on the merits of the dispute. By way of example, such dispositive motions would
include, but not be limited to, those which would entitle a party to summary
judgment or summary adjudication of issues, or resolution of a special defense.
In the event a party to the arbitration requests that the arbitrators resolve a
dispositive motion, the arbitrators shall receive and consider any written or
oral arguments regarding the dispositive motion, and shall receive and consider
any evidence specifically relating thereto, and shall render a decision thereon,
before hearing any evidence on the merits of the dispute.

      

      5.7         
 Limitation on
Scope of Arbitrators' Award or Decision. NutraCea and Adelman agree that
if the arbitrators find any disputed claim to be meritorious, the arbitrators
shall have the authority to order legal and/or equitable relief appropriate to
the claim, but that in no event shall the arbitrators have authority to award
punitive or exemplary damages.

      

      5.8          
Costs of Arbitration:
Attorneys' Fees. Each party shall bear equally the costs of the
arbitration and shall bear its own attorneys' fees. However, NutraCea and
Adelman agree that the arbitrators, in their discretion, may award to the
prevailing party the costs, including the costs of the arbitration, and
attorneys'   fees incurred by that party in participating in the
arbitration process.

      

      6.            
Adelman
Affirmations.    Adelman affirms that he/she reported
all hours worked as of the date of this Agreement and has been paid, to the
extent applicable, all compensation, including regular wages, overtime, bonuses,
commissions, vacation pay, shares, stock options, and/or other benefits to which
Adelman may have been entitled to. Adelman also affirms that she received or
will receive payment(s) pursuant to this Agreement, all leave (paid or unpaid)
for which she was entitled, and/or that she was not denied requested leave (paid
or unpaid) for which he/she was entitled to under the Family Medical Leave Act
(FMLA), Americans With Disabilities Act (ADA) any leave entitlement provided by
either California or Arizona law, or local leave statute or law. Adelman further
affirms that he/she has no known workplace injuries or occupational diseases for
which he/she has not filed a claim for workers' compensation
benefits.

    

    

    
      
        
           

        

        
          -5-

          
            

          

        

        
           

        

      

    

    

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

    

    
      8.            
Entire
Agreement. This Agreement, the Consulting Agreement and the Warrant
Agreement referred to herein constitute the entire agreement between the
parties, all oral agreements being merged herein, and supersede all prior
representations and agreements except as specifically referred to herein. There
are no representations, agreements, arrangements, or understandings, oral or
written, between or among the parties relating to the subject matter of this
Agreement that are not fully expressed herein, in the Consulting Agreement, or
in the Warrant Agreement.

      

      9.            
Waiver. Any of
the terms or conditions of this Agreement may be waived at any time by the party
entitled to the benefit thereof, but no such waiver shall affect or impair the
right of the waiving party to require observance, performance or satisfaction
either of that term or condition as it applies on a subsequent occasion or of
any other term or condition hereof.

      

      10.          
Amendment. The
provisions of this Agreement may be modified or amended at any time by agreement
of the parties. Any such amendment or modification as hereinafter may be made,
shall be ineffective to modify this Agreement in any respect unless in writing
and signed by the party or parties against whom enforcement of the modification
or amendment is sought.

      

      11.          
Representation by
Counsel. This Agreement has been carefully read by the parties and the
contents hereof arc known and understood by all parties. The parties have each
had the opportunity to receive independent legal advice from attorneys of their
choice with respect to the preparation, review and advisability of executing
this Agreement. Prior to the execution of this Agreement by each party, the
parties' attorneys had the opportunity to review the Agreement, and the parties
acknowledge that they have executed this Agreement after independent
investigation and without fraud, duress or undue influence.

      

      12.          
No Admissions.
Nothing contained in this Agreement shall be deemed as an admission of any kind
by or to any other party to this Agreement.

      

      13.          
Severability.
If any provision of this Agreement is adjudicated by a court of competent
jurisdiction to be invalid or unenforceable, the remainder of the Agreement
which can be given full force and effect without the invalid provision shall
continue in full force and effect and shall in no way be impaired or
invalidated.

    

    

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

    

    
      
        
           

        

        
          -6-

          
            

          

        

        
           

        

      

    

    

    15.          
Notices. Any
notice under this Agreement shall be in writing, and any written notice or other
document shall be deemed to have been duly given (i) on the date of personal
service on the parties, (ii) on the third business day after mailing, if the
document is mailed by registered or certified mail, (iii) one day after being
sent by professional or overnight courier or messenger service guaranteeing
one-day delivery, with receipt confirmed by the courier, or (iv on the date of
transmission if sent by telegram, telex, telecopy or other means of electronic
transmission resulting in written copies, with receipt confirmed. Failure to
give notice in accordance with any of the foregoing methods shall not defeat the
effectiveness of notice actually received by the addressee.

    

    
      16.         
 Captions.
All paragraph captions are for reference only and should not be considered in
construing this Agreement.

      

      17.         
 Nonassignability.
This Agreement shall not be assigned by any party without the prior written
consent of the other parties. Any assignment contrary to the provisions of this
Agreement shall be deemed a default under the Agreement, allowing the
non-defaulting parties to exercise all remedies available under
law.

      

      18.           Counterparts. The
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one-in-the-same
document.

    

    
      

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

    

    
      

      

    

    
      	
              /s/ Margie
      Adelman

            	 
      
	
              (Margie
      Adelman)

            	 
      

    

    
      

      

      NutraCea,
a California corporation

      

      

    

    
      	
              By:

            	
              /s/
      Brad Edson

            	 
      
	
              (Brad
      Edson, Chief Executive Officer)

            	 
      

    

    

    
      
        
           

        

        
          -7-

          
            

          

        

        
           

        

      

    

    

    Exhibit
A

    

    Consulting
Agreement

    

    
      
        
           

        

        
          -8-

          
            

          

        

        
           

        

      

    

    

    

    
      Exhibit
"A"

      

      CONSULTING
AGREEMENT

    

    
      

    

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

    

    
      

      1              
BACKGROUND

      

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

      

      2.            
SERVICES
AND COMPENSATION

      

    

    
      2.1.         
Services.
Consultant agrees to perform for the Company the services ("Services") to
consult and provide assistance and advice to the Company as called for the by
Company in the areas of: (a) new business development; (b) investor relations;
and (c) public relations and subject to Consultant's Express Duties as defined
in Section   8 of this Agreement and other services as mutually
acceptable to the Parties.

      

      2.2.          
Fee. The Company agrees to pay Consultant $15,827.73 per month for the Term of
this Agreement. Company shall make payment to Consultant on the 1st and
15th days
of each month, commencing on November 15, 2008.

      

      2.3.         
 Discretionary
Bonus. Consultant shall be eligible for the award of a discretionary
bonus at such times and in such amounts as may be determined by the Company's
Compensation Committee and the CEO in their absolute discretion.

      

    

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

    

    
      
        
           

        

        
          Page 1 of
11

          
            

          

        

        
           

        

      

    

    

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

      

    

    
      3           
 CONFIDENTIALITY

    

    
      

      3.1.          Confidential
Information.    "Confidential Information"
means any Company proprietary
information, technical data, trade secrets or know-how, including, but not
limited to, research, product plans, products, services, customers, customer
lists, markets, journals, notebooks, notes, renderings, samples, data, software,
developments, inventions, processes, formulas, technology, designs, drawings,
engineering, hardware configuration information, marketing, finances or other
business information disclosed by the Company prior to or after the execution of
this Agreement, either directly or indirectly in writing, orally or by drawings
or inspection of parts or equipment.

      

      3.2.         
Limitations on
Use and Disclosure. Consultant
will not, during or subsequent to the term of this Agreement, use the Company's
Confidential Information for any purpose whatsoever other than the performance
of the Services on behalf of the Company or disclose the Company's Confidential
Information to any third party. It is understood that said Confidential
Information shall remain the sole property of the Company. Consultant further
agrees to take all reasonable precautions to prevent any unauthorized disclosure
of such Confidential Information including, but not limited to, having each
employee of Consultant, if any, with access to any Confidential Information,
execute a nondisclosure agreement containing provisions in the Company's favor
identical to Sections 2, 3 and 7 of this Agreement. Confidential Information
does not include information which (i) is known to Consultant at the time of
disclosure to Consultant by the Company as evidenced by written records of
Consultant, (ii) has become publicly known and made generally available through
no wrongful act of Consultant, or (iii) has been rightfully received by
Consultant from a third party who is authorized to make such disclosure. Without
the Company's prior written approval, Consultant will not directly or indirectly
disclose to anyone the contents of this Agreement. Confidential Information does
not include any information that is in the public domain or readily
ascertainable from publicly-available information, or disclosed to Consultant
outside the course and scope of the performance of Consultant's duties on behalf
of Company by a person or entity who has the legal right to disclose such
information.

      

    

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

    

    
      
        
           

        

        
          Page 2 of
11

          
            

          

        

        
           

        

      

    

    

    
      3.4.         
Third Party
Confidential Information. Consultant recognizes that the Company has
received and in the future will receive from third parties their confidential or
proprietary information subject to a duty on the Company's part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. Consultant agrees that Consultant owes the Company and such third
parties, during the term of this Agreement and thereafter, a duty to hold all
such confidential or proprietary information in the strictest confidence and not
to disclose it to any person, firm or corporation or to use it except as
necessary in carrying out the Services for the Company consistent with the
Company's agreement with such third party, to the extent that Consultant is
aware of such agreement.

      

      3.5.         
Legal
Compulsion. In the event that Consultant becomes legally compelled to
disclose any Confidential Information, Consultant shall give sufficient notice
to the Company to enable the Company party to prevent or minimize such
disclosure to the extent possible.

      

      3.6.         
Records.
Consultant agrees that she shall only make such notes, copies, photocopies,
backups, or other written, photographic or computer generated records relating
to the Confidential Information as are absolutely necessary. Upon termination of
this Agreement, Consultant shall return all copies of Confidential Information
the Company as arc being held, at Company's reasonable expense

      

      3.7.         
Return.
Consultant agrees that upon the termination of this Agreement Consultant will
deliver to the Company all of the Company's property or Confidential Information
that Consultant may have in Consultant's possession or control, including,
without limitation, all devices, records, data, disks, computer files, notes,
reports, proposals, lists, correspondence, specifications, drawings, blueprints,
sketches, materials, equipment, other documents or property, or reproductions of
any aforementioned items developed by Consultant pursuant to her consulting
arrangement (or her prior employment) with the Company or otherwise belonging to
the Company, its successors or assigns, at Company's reasonable
expense.

    

    
      

      4.            
OWNERSHIP;
ASSIGNMENT

      

    

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

    

    
      
        
           

        

        
          Page 3 of
11

          
            

          

        

        
           

        

      

    

    

    
      4.2.         
Protection.
Consultant agrees to assist Company, or its designee, at the Company's expense,
in every proper way to secure the Company's rights in the Inventions and any
copyrights, patents, mask work rights or other intellectual property rights
relating thereto in any and all countries, including the disclosure to the
Company of all pertinent information and data with respect thereto, the
execution of ail applications, specifications, oaths, assignments and all other
instruments which the Company shall deem necessary in order to apply for and
obtain such rights and in order to assign and convey to the Company, its
successors, assigns and nominees the sole and exclusive right, title and
interest in and to such Inventions, and any copyrights, patents, mask work
rights or other intellectual property rights relating thereto. Consultant
further agrees that Consultant's obligation to execute or cause to be executed,
when it is in Consultant's power to do so, any such instrument or papers shall
continue after the termination of this Agreement.

      

      4.3.         
License.
Consultant agrees that if in the course of performing the Services, Consultant
incorporates into any Invention developed hereunder any invention, improvement,
development, concept, discovery or other proprietary information owned by
Consultant or in which Consultant has an interest, the Company is hereby granted
and shall have a nonexclusive, royalty-free, perpetual, irrevocable, worldwide
license to make, have made, modify, use and sell such item as part of or in
connection with such Invention.

      

      4.4.         
Agents.
Consultant agrees that if the Company is unable because of Consultant's
unavailability, dissolution, mental or physical incapacity, or for any other
reason, to secure Consultant's signature to apply for or to pursue any
application for any United States or foreign patents or mask work or copyright
registrations covering the Inventions assigned to the Company above, then
Consultant hereby irrevocably designates and appoints the Company and its duly
authorized officers and agents as Consultant's agent and attorney in fact, to
act for and in Consultant's behalf and stead to execute and file any such
applications and to do all other lawfully permitted acts to further the
prosecution and issuance of patents, copyright and mask work registrations
thereon with the same legal force and effect as if executed by
Consultant.

      

      4.5.        
  Notification of Future
Employer. The Company shall have the right to notify any future employers
of Consultant of Consultant's obligations under this Agreement.

      

    

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

    

    
      
        
           

        

        
          Page 4 of
11

          
            

          

        

        
           

        

      

    

    

    
      5.            
TIME AND
EFFORT

      

    

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

    

    
      

      6.            
REPORTS

      

    

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

    

    
      

      7.            
 CONFLICTING
OBLIGATIONS

      

    

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

    

    
      
        
           

        

        
          Page 5 of
11

          
            

          

        

        
           

        

      

    

    

    
      8.             EXPRESS
DUTIES

      

    

    
      8.1.         
Duty of
Loyalty. Consultant shall, during the Term owe Company a duty of loyalty
including but not limited to the duty and obligation to work in the Company's
interest; to follow lawful direction; to put the Company's interest before her
own in the matters and business the Company is interested in, does pursue, or
may pursue.

      

      8.2.         
No Undertaking
or Enterprise with
Patty McPeak. Consultant shall not, during the Term of this agreement,
discuss, enter into, or otherwise pursue any current or prospective business
activity with Patty McPeak.

      

      8.3.         
Investor/Shareholder
Contact. Without advance written consent of the Company, during the Term
of this agreement, Consultant shall not:

    

    
      

    

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

      

      (b)          
 Contact or communicate with any of the Company's past or current
investment bankers or institutional investors.

    

    
      

    

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

      

      8.5.          Definition of Express
Duties. As used herein, the "Express Duties" means the duties of
Consultant pursuant to Sections 8.1, 8.2, 8.3, and 8.4 above.

    

    
      

      9.             NON-SOL1CITA
HON/NON-COMPETE

      

    

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

      

    

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

    

    
      
        
           

        

        
          Page 6 of
11

          
            

          

        

        
           

        

      

    

    

    

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

    

    
      

    

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

    

    
      

      10.         
 TERMINATION

      

    

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

    

    
      
        
           

        

        
          Page 7 of
11

          
            

          

        

        
           

        

      

    

    

    

    
      (a)      that
the Company shall be obliged to pay, within thirty (30) days of the effective
date of termination, all undisputed amounts owing to Consultant for Services
completed and accepted by the Company prior to the termination date and related
expenses, if any, in accordance with the provisions of Section 1 (Services and
Compensation) hereof; and

      

      (b)        Sections
2 (Confidentiality), and 3 (Ownership) shall survive termination of this
Agreement, and Section 9 (Non-Solicitation/Non-Compete) shall survive for a
period of twenty-four (24) months from the date of this Agreement first set
forth above.

    

    
      

      11.         
 ASSIGNMENT

      

    

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

    

    
      

      12.         
INDEPENDENT
CONTRACTOR

      

      Nothing
in this Agreement shall in any way be construed to constitute Consultant as an
agent, employee or representative of the Company, but Consultant shall perform
the services hereunder as an independent contractor. Company agrees to furnish
(or reimburse the Consultant for) all tools and materials necessary to
accomplish this contract, and Company shall incur all expenses associated with
performance, except as expressly provided in this Agreement. Consultant
acknowledges and agrees that Consultant is obligated to report as income all
compensation received by Consultant pursuant to the Consulting Agreement
(including, if any, pursuant to Section 409A of the Internal Revenue Code of
1986, as amended), and Consultant agrees to and acknowledges the obligation to
pay all self-employment and other taxes thereon. Consultant further agrees to
indemnify the Company and hold it harmless to the extent of any obligation
imposed on the Company (i) to pay in withholding taxes or similar items or (ii)
resulting from Consultant's being determined not to be an independent
contractor.

      

      13.          
SUBCONTRACT

      

      The
Consultant shall not subcontract the work under this Agreement without the prior
written permission of the Company.

      

    

    14.         
 EQUITABLE
RELIEF

    

    
      
        
           

        

        
          Page 8 of
11

          
            

          

        

        
           

        

      

    

    

    

    
      Consultant
agrees that it would be impossible or inadequate to measure and calculate the
Company's damages from any breach of the covenants set forth in Sections 2 or 3
herein. Accordingly, Consultant agrees that if Consultant breaches Sections 2 or
3, the Company will have available, in addition to any other right or remedy
available, the right to obtain from any court of competent jurisdiction an
injunction restraining such breach or threatened breach and specific performance
of any such provision. Consultant further agrees that no bond or other security
shall be required in obtaining such equitable relief and Consultant hereby
consents to the issuances of such injunction and to the ordering of such
specific performance.

      

      15.          
INTENTIONALLY
OMITTED.

      

      16.          
GOVERNING
LAW AND JURISDICTION

      

      This
Agreement shall be governed and construed and enforced in accordance with the
internal, substantive laws of the State of Arizona without giving effect to the
conflict of law rules thereof, and shall be deemed to be executed in Arizona.
Any legal action or proceeding relating to this Agreement shall be instituted in
a slate or federal court in Phoenix, Arizona. The parties agree to submit to the
jurisdiction of, and agree that venue is proper in, these courts in any such
legal action or proceeding.

      

      17.          
NOTICE

      

      Any
notice under this Agreement shall be in writing, and any written notice or other
document shall be deemed to have been duly given (i) on the date of personal
service on the parties, (ii) on the third business day after mailing, if the
document is mailed by registered or certified mail, (iii) one day after being
sent by professional or overnight courier or messenger service guaranteeing
one-day delivery, with receipt confirmed by the courier, or (iv on the date of
transmission if sent by telegram, telex, telecopy or other means of electronic
transmission resulting in written copies, with receipt confirmed. Failure to
give notice in accordance with any of the foregoing methods shall not defeat the
effectiveness of notice actually received by the addressee.

      

      18.         
 ENTIRE
AGREEMENT AND AMENDMENTS

      

      This
Agreement, and the Severance Agreement between the parties dated this same date
and the Warrant Agreement constitute the entire agreement of the parties and
supersede any prior or contemporaneous agreements whether oral or written
between them with respect to the subject matter hereof or thereof. This
Agreement may be changed only if agreed to in writing by both
parties.

      

      19.          
COUNTERPARTS

      

    

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

    

    

    20.          
SEVERABILITY

    

    
      
        
           

        

        
          Page 9 of
11

          
            

          

        

        
           

        

      

    

    

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

    

    
      

      21.          
WAIVER

      

    

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

    

    
      

      22.          
SUCCESSION

      

    

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

    

    
      

      

    

    [SIGNATURE
PAGE TO FOLLOW]

    

    
      
        
           

        

        
          Page 10 of
11

          
            

          

        

        
           

        

      

    

    

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

    

    
      

    

    
      	 
      	
              COMPANY:

            
	 
      	 
      	 
      
	 
      	
              NUTRACEA

            
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/
      Bradley D. Edson

            
	 
      	 
      	 
      
	 
      	
              Name:

            	
              Bradley
      D. Edson

            
	 
      	 
      	 
      
	 
      	
              Address:

            	
              Sogo
      N. 40th
      Street, suite 400 Phoenix AZ 85018

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              CONSULTANT:

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/
      Margie Adelman

            
	 
      	 
      	
              Margie
      Adelman

            
	 
      	
              Address:

            	
              Delray
      Beach, FL 33484

            

    

    

    
      
        
           

        

        
          Page 11 of
11

          
            

          

        

        
           

        

      

    

    

    Exhibit
B

    

    Warrant

    

    
      
        
           

        

        
          -9-

          
            

          

        

        
           

        

      

    

    

    
      EXHIBIT
A-l

    

    
      

    

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

    

    
      

    

    
      THE
TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.

    

    
      

      

    

    
      NutraCea,
a California corporation

    

    
      

    

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

    

    
      

      

    

    
      	
              No.
      WC-[___]

            	
              1,000,000
      Shares

            

    

    
      Issuance
Date: January 25, 2005

      

    

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

    

    
      

    

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

    

    
      
        
           

        

        
          1

          
            

          

        

        
           

        

      

    

    

    
      2.             
Procedure for
Exercise: Effect of Exercise.

    

    
      

    

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

    

    
      

    

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

    

    
      

    

    
      
        	
              	
                X
      =

              	
                Y
      (A-B)

              

      

    

    
      A

    

    
      

    

    
      Where:

    

    
      

    

    
      
        	
              	
                X
      =

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

              

      

    

    
      

    

    
      
        	
              	
                Y
      =

              	
                the
      number of Warrant Shares identified in the Notice of Exercise as being
      applied to the subject exercise;

              

      

      

      
        	
              	
                A
      =

              	
                the
      Current Market Price on such date;
and

              

      

    

    
      

    

    
      
        	
              	
                B
      =

              	
                the
      Exercise Price

              

      

    

    
      

    

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

    

    

    
      
        
           

        

        
          2

          
            

          

        

        
           

        

      

    

    

    
      The
Company acknowledges and agrees that this Warrant was issued on the issuance
Date. Consequently, the Company acknowledges and agrees that, if the Holder
conducts a cashless exercise pursuant to this Section 2(b), the period during
which the Holder held this Warrant may, for purposes of Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Securities Act"), be
"tacked" to the period during which the Holder holds the Warrant Shares received
upon such cashless exercise.

      

      Notwithstanding
the foregoing, except in connection with a transaction described in the proviso
in the first sentence of this Section 2(b), the Holder may conduct a cashless
exercise pursuant to this Section 2(b) only after the first anniversary of the
Issuance Date.

    

    
      

    

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

    

    
      

    

    
      3.            
Registration of
Warrants.

    

    
      

    

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

    

    

    
      
        
           

        

        
          3

          
            

          

        

        
           

        

      

    

    

    
      3.2           Piggyback Registration
Rights. Subject to the cutback restrictions set forth below, if at any
time after the Issuance Date, the Company shall seek to register any shares of
its Common Stock under the Securities Act for sale to the public for its own
account or on the account of others (except with respect to registration
statements on Form S-4, S-8 or another form not available for registering the
Warrant Shares for sale to the public) the Company will promptly give written
notice thereof to the Holder. If within ten (10) days after Holder's receipt of
such notice the Holder requests the inclusion of Holder's Warrant Shares,
subject to the limitations set forth below, in such registration, the Company
will use its best efforts to effect the registration under the Securities Act of
such Warrant Shares. The number of Holder's Warrant Shares that may be included
on any such registration statement shall be subject to the following: (1) in
tine event the Company seeks to register any shares of its Common Stock at any
time after the second anniversary of the Issuance Date, Holder may be entitled
to include all or part, as determined by Holder and subject to cutbacks required
by underwriters as stated below, of Holder's Warrant Shares; and (2) in the
event the Company seeks to register any shares of its Common Stock at any time
after the Issuance Date and the Company's senior officers and directors
participate in such registration, Holder may be entitled to include the number
of vested Warrant Shares which shall be apportioned pro rata among the Holder
and senior officers and directors according to the total amount of securities
entitled to be included therein owned by Holder and senior officers and
directors of the Company taken as a single group. In the case of the
registration of shares of capital stock by the Company in connection with any
underwritten public offering, if the underwriters) determines that marketing
factors require a limitation on the number of Warrant Shares to be offered,
subject to the following sentence, the Company shall not be required to register
Warrant Shares in excess of the amount, if any, of shares of the capital stock
which the principal underwriter of such underwritten offering shall reasonably
and in good faith agree to include in such offering in addition to any amount to
be registered for the account of the Company. If any limitation of the number of
shares to be registered by holders of the Company's Common Stock or shares of
Warrant Shares to be registered by the Holder is required pursuant to this
Section 3.2, the number of shares to be excluded shall be determined by the
principal underwriter of such underwritten offering.

      

      4.            
Restrictions on
Transfer, (a) The Holder, as of the date of issuance hereof, represents
to the Company that such Holder is acquiring the Warrants for its own account
for investment purposes and not with a view to the distribution thereof or of
the Warrant Shares. Notwithstanding any provisions contained in this Warrant to
the contrary, Holder agrees that
it shall not, directly or indirectly, make any offering, sale, assignment,
transfer, pledge, encumbrance, contract to sell, grant an option to purchase or
make any other disposition of this Warrant or the Warrant Shares issued upon
exercise of the Warrant or enter into any swap or other derivative transaction
that transfer to another, in whole or in part, any of the economic benefit or
risk of ownership of such Warrant or Warrant Shares, whether any such
transaction described above is to be settled by delivery of the Warrant Shares
or other securities, in cash or otherwise for the period of Thirty-Six (36)
months after January 26, 2005 or while Holder is employed by Company, unless
prior written consent is obtained by Holder from the Company. In addition to the
foregoing, any potential transfer by Holder shall be subject to the delivery to
the Company of an opinion of the Holder's counsel or a registration of such
Warrant Shares under the Securities Act has become effective or after a sale of
such Warrant or Warrant Shares has been consummated pursuant to Rule 144 or Rule
144 A under the Securities Act. The Company may place restrictive legends on the
certificates representing the Warrant Shares issued upon exercise of the
Warrants and impose stop transfer instructions with respect to the Warrant
Shares beneficially held by Holder until the end of such
period.

    

    

    
      
        
           

        

        
          4

          
            

          

        

        
           

        

      

    

    

    

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

    

    
      

    

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

    

    
      

    

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

      

      6.           
 Adjustments. The number of
shares of Common Stock issuable upon exercise of the Warrants shall be adjusted
from time to time as follows:

    

    
      

    

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

    

    

    
      
        
           

        

        
          5

          
            

          

        

        
           

        

      

    

     

    
      (ii)            
Mo adjustment in the Exercise Price shall be required unless the adjustment
would require an increase or decrease of at least 1% in the Exercise Price then
in effect; provided, however,
that any adjustments that by reason of this Section 6(a) are not required
to be made shall be carried forward and taken into account in any subsequent
adjustment.  All calculations under this Section 6(a) shall be made to
the nearest cent or nearest 1/100th of a share.

      

      (iii)           
In the event that, at any time as a result of an adjustment made pursuant to
Sections 6(a)(1) and 6(a)(ii) above, the Holder of any Warrant thereafter
surrendered for exercise shall become entitled to receive any shares of the
Company other than shares of the Common Stock, thereafter the number of such
other shares so receivable upon exercise of any such Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
Sections 6(a)(1) and 6(a)(ii) above, and the other provisions of this Section
6(a) with respect to the Common Stock shall apply on like terms to any such
other shares.

    

    
      

    

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

    

    
      
        
           

        

        
          6

          
            

          

        

        
           

        

      

    

    

    (c)         
  If:

     

    
      
        	
              	
                (i)

              	
                the
      Company shall take any action which would require an adjustment pursuant
      to Section 6(a); or

              

      

      

      
        	
              	
                (ii)

              	
                the
      Company shall authorize the granting to the holders of its Common Stock
      generally of rights, warrants or options to subscribe for or purchase any
      shares of any class or any other rights, warrants or options;
      or

              

      

      

      
        	
              	
                (iii)

              	
                there
      shall be any reclassification or change of the Common Stock (other than a
      subdivision or combination of its outstanding Common Stock or a change in
      par value) or any consolidation, merger or statutory share exchange to
      which the Company is a party and for which approval of any stockholders of
      the Company is required, or the sale or transfer of all or substantially
      all of the assets of the Company;
or

              

      

      

      
        	
              	
                (iv)

              	
                there
      shall be a voluntary or involuntary dissolution, liquidation or winding up
      of the Company;

              

      

    

    
      

    

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

    

    
      
        
           

        

        
          7

          
            

          

        

        
           

        

      

    

    

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

     

    
      (e)        
  In any case in which Section 6(a) provides that an adjustment shall
become effective immediately after a record date for an event and the date fixed
for such adjustment pursuant to Section 6(a) occurs after such record date but
before the occurrence of such event the Company may defer until the actual
occurrence of such event (i) issuing to the Holder of any Warrants exercised
after such record date and before the occurrence of such event the additional
shares of Common Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable upon such
exercise before giving effect to such adjustment, and (ii) paying to such holder
any amount in cash in lieu of any fraction pursuant to Section 6(g),

      

      (f)           
Upon each adjustment of the Exercise Price, this Warrant shall thereafter
evidence the right to purchase, at the adjusted Exercise Price, that number of
shares (calculated to the nearest thousandth) obtained by dividing (i) the
product obtained by multiplying the number of shares purchasable upon exercise
of this Warrant prior to adjustment of the number of shares by the Exercise
Price in effect prior to adjustment of the Exercise Price, by (ii) the Exercise
Price in effect after such adjustment of the Exercise Price,

      

      (g)           The
Company shall not be required to issue fractions of shares of Common Stock or
other capital stock of the Company upon the exercise of this Warrant. If any
fraction of a share would be issuable on the exercise of this Warrant (or
specified portions thereof), the Company shall purchase such fraction for an
amount in cash equal to
the same fraction of the Current Market Price of such share of Common
Stock on the date of exercise of this Warrant.

      

    

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

    

    
      
        
           

        

        
          8

          
            

          

        

        
           

        

      

    

    

    
      7.             Transfer Taxes. The
issuance of any shares or other securities upon the exercise of this Warrant,
and the delivery of certificates or other instruments representing such, shares
or other securities, shall be made without charge to the Holder for any tax or
other charge in respect of such issuance. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue and delivery of any certificate in a name other than that of the
Holder and the Company shall not be required to issue or deliver any such
certificate unless and until the person or persons requesting the issue thereof
shall have paid to the Company the amount of such tax or shall have established
to the satisfaction of the Company that such tax has been paid.

      

      8.           
 Loss or
Mutilation of Warrant Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction, or mutilation of any Warrant (and upon
surrender of any Warrant if mutilated), and upon reimbursement of the Company's
reasonable incidental expenses, the Company shall execute and deliver to the
Holder thereof a new Warrant of like date, tenor, and denomination.

      

      9.           
 No Rights as a
Stockholder. The Holder of any Warrant shall not have, solely on account
of such status, any rights of a stockholder of the Company, either at law or in
equity, or to any notice of meetings of stockholders or of any other proceedings
of the Company, except as provided in this Warrant.

      

      10.          
Governing Law.
This Warrant shall be construed in accordance with the laws of the State of
California applicable to contracts made and performed within such State, without
regard to principles of conflicts of law.

      

    

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

    

    
      
        
           

        

        
          9

          
            

          

        

        
           

        

      

    

    

    
      Dated:
January 25, 2005

      

      

    

    
      	 
      	
              NUTRACEA.

            
	 
      	
              a
      California corporation,

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/ Patricia
      McPeak

            
	 
      	 
      	
              Patricia
      McPeak

            
	 
      	 
      	
              Chief
      Executive Officer

            

    

     

    [Signature Page
to Warrant]

    

    
      
        
           

        

        
          10

          
            

          

        

        
           

        

      

    

    

    

    
      FORM OF
ASSIGNMENT

    

    
      

    

    
      (To be
executed by the registered holder if such holder desires to transfer the
attached Warrant.)

      

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

    

    
      

    

    
      	 
      	
              Dated:

            	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
              By:

            	 
      	 
      
	 
      	 
      	
              Signature

            

    

    
      

      

    

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

    

    

    
      
        
           

        

        
          11

          
            

          

        

        
           

        

      

    

    

    
      
        	
                To:

              	
                NutraCea

              

      

    

    
      
        	
                 
      

              	
                261 Hawks' Flight
      Court

              

      

      
        	
                 
      

              	
                El Dorado Hills. CA
      95762

              

      

      
        	
                 
      

              	
                Attention:
      Chief Executive Officer

              

      

    

    
      
 

      

    

    
      NOTICE OF
EXERCISE

    

    
      

      

    

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

    

    
      

    

    
      	 
      
	 
      
	 
      

    

    
      

    

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

    

    
      

    

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

      

    

    
      	 
      	
              Dated:

            	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
              By:

            	 
      	 
      
	 
      	 
      	
              Print
      Name

            	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
              Signature

            	 
      

    

    
      

      

    

    
      	
              Address:

            	 
	 
      	 
	 
      	 
	 
      	 
	 
      	 
	 
      	 
	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      
        	
                NTRZ.OB:
      Historical Prices for NUTRACEA - Yahoo! Finance

              	
                Page
      1 of 2

              

      

      
        

        Yahoo!   My
Yahoo!   Mail

        

      

      
        	 
      	
                Search
      the Web

              	 
      	
                Search

              	 
      

      

      
        

      

      
        		 	
                
                  Sign
      In

                  New
      User? Sign Up

                

              	 
      		 
      	
                Finance
      Home – Help

              

      

      
        

         

        Friday,
January 28, 2005, 11:55AM ET - U.S. Markets close in 4 hours and 4
minutes.

        

      

      
        To track
stocks & more, Register

         

      

      
        	
                Quotes
      & Info

              	 	
                Enter
      Symbol(s):

                e.g.
      YHOO, ^ DJI

              	 
      	
                GO

              	 
      	
                
                  Symbol
      Lookup | Finance Search

                

              

      

      

       

      
        	
                NutraCea
      (NTRZ.OB)

              	
                At
      10:47AM ET: 0.43
      ò 0.01
      (2,27%)

              

      

      
         

        

      

      
        				
	
                Get
      Free Streamer

              	
                Free
      Trades

              	
                No
      inactivity Fees!

              	
                $8
      Trades

              

      

      
        

        

      

      
        	
                Historical
      Prices

              	
                Get
      Historical Prices
      for:

              	 
      	
                GO

              	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	ADVERTISEMENT

      

      
        

        SET
DATE RANGE

        

      

      
        	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	●	
                Daily

              
	
                Start
      Date:

              	 	
                Jan

              	 	
                25

              	 	
                2005

              	 	
                Eg.
      Jan 0, 2003

              	 	m	
                Weekly

              
	
                End
      Date:

              	 	
                Jan

              	 	
                25

              	 	
                2005

              	 	 
      	 	m	
                Monthly

              
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	m	
                Dividends
      Only

              

      

      
         

        
          
            	
                    GET
      PRICES

                  

          

          
             

             

          

        

      

      
        	 
      	
                first
      | Prev | Next| Last

              

      

      
        

      

       

      
        	
                Date

              	
                Open

              	
                High

              	
                Low

              	
                Close

              	
                Volume

              	
                Adj

                Close*

              
	
                25-Jan-05

              	
                0.43

              	
                0.43

              	
                0.43

              	
                0.43

              	
                900

              	
                0.43

              

      

      
         

        * Close
price adjusted for dividends and splits.

      

      
        

      

      
        	 
      	
                First
      | Prev | Next | Last

              

      

      
        

      

      ò Download To
Spreadsheet

      

      

      1 Add to Portfolio % Set Alert * Email to
Friendcsi8k10_1.htm

 

 

 

 

 

 

COPSYNC, INC.

 

 

 

SECURITIES PURCHASE AGREEMENT

 

 

October 14, 2009

 

COPsync Series B - Stock Purchase Agmt (execution).doc

  

  

  

 

	 	 TABLE OF CONTENTS	 
	 	 	 Page
	 SECTION 1 AUTHORIZATION, SALE AND ISSUANCE OF SERIES B PREFERRED STOCK AND WARRANTS 	 1
	 1.1 	 Authorization 	 1
	 1.2	 Sale and Issuance of Shares 	 1
	 1.3	 Issuance of Warrants	 1
	 1.4	 Use of Proceeds	 1
	 	 	 
	 SECTION 2 CLOSING AND DELIVERY 	 2
	 2.1	 Closing	 2
	 2.2	 Delivery	 2
	 	 	 
	 SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 	 2
	 3.1	 Organization, Good Standing and Quallification 	 2
	 3.2	 Capitalization	 3
	 3.3	 Authorization	 4
	 3.4	 Company Fiilngs	 4
	 3.5	 Intellectual Property	 5
	 3.6	 Title to Properties and Assets; Liens	 7
	 3.7	 Compliance with Other Instruemnts	 7
	 3.8	 Litigation	 7
	 3.9	 Governmental Consent	 8
	 3.10	 Offering	 8
	 3.11	 Brokers or Finders	 8
	 3.12	 Bookd and Records	 8
	 3.13	 No Undisclosed Liabilities	 8
	 3.14	 Taxes	 9
	 3.15	 No Material Adverse Change	 9
	 3.16	 Employee Benefits	 10
	 3.17	 Compliance with Legal Requirements; Governmental Regulations	 10
	 3.18	 Contracts; No Defaults	 11
	 3.19	 Insurance	 11
	 3.20	 Relationships with Related Parties	 12
	 3.21	 Disclosure	 12
	 	 	 
	 SECTION 4  REPRESENTATIONS AND WARRANTIES OF THE INVESTORS	 13
	 4.1	 No Registration	 13
	 4.2	 Investment Intent	 13
	 4.3	 Investment Experience	 13
	 4.4	 Accredited Investor	 13
	 4.5	 Residency 	 13

 

 

 

i

 

 

 

	 	
  TABLE OF CONTENTS

(continued)
	 
	 	 	Page 
	 4.6	 Rule 144	 13
	 4.7	 Authorization	 14
	 4.8	 Brokers or Finders	 14
	 4.9	 Tax Advisors	 14
	 	 	 
	SECTION 5 CONDITIONS TO INVESTORS' OBLIGATION TO CLOSE	 15
	5.1	 Representations and Warranties	 15
	 5.2	 Covenants	 15
	 5.3	 Blue Sky 	 15
	 5.4	 Certificate of Desginations	 15
	 5.5	 Rights Agreement	 15
	 5.6	 Warrants	 15
	 5.7	 Indemnification Agreements	 15
	 5.8	 Closing Deliverables	 15
	 5.9	 Board of Directors	 15
	 	 	 
	SECTION 6 CONDITIONS TO COMPANY'S OBLIGATION TO CLOSE	 16
	 6.1	 Representations and Warranties	 16
	 6.2	 Covenants	 16
	 6.3	 Compliance with Securities Laws	 16
	 6.4	 Certificate of Designations	 16
	 6.5	 Rights Agreement	 16
	 	 	 
	 SECTION 7 MISCELLANEOUS 	16
	 7.1	 Amendment	 16
	 7.2	 Notices	 17
	 7.3	 Governing Law	 17
	 7.4	 Expenses	 17
	 7.5	 Survival	 17
	 7.6	 Successors and Assigns	 18
	 7.7	 Entire Agreement	 18
	 7.8	 Delays or Omissions	 18
	 7.9	 Severability	 18
	 7.10	 Indemnification	 18
	 7.11	 Counterparts	 19
	 7.12	 Telecopy Execution and Delivery	 19
	 7.13	 Jurisdiction; Venue	 19
	 7.14	 Further Assurance	 20
	 7.15	 Attorney's Fees	 20

 

 

 

 

 

  

ii

  

 

EXHIBITS

 

	
A
	
Schedule of Investors

 

	
B
	
Certificate of Designations

 

	
C
	
Form of Warrant

 

	
D
	
Investors’ Rights Agreement

 

	
E
	
Schedule of Exceptions

 

	
F
	
Form of Indemnification Agreement

 

	
G
	
Compliance Certificate

  

  

  

 

COPSYNC, INC.

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is made as of October 14, 2009, by and among COPsync, Inc., a Delaware corporation (the “Company”), and the persons and entities (each, an “Investor”
and collectively, the “Investors”) listed on the Schedule of Investors attached hereto as Exhibit A (the “Schedule of Investors”).

 

SECTION 1

 

Authorization, Sale and Issuance of Series B Preferred Stock and Warrants

1.1      Authorization

 

.  The Company will, prior to the Closing (as defined below), authorize (a) the sale and issuance of up to 375,000 shares (the “Shares”) of the Company’s Series B Preferred Stock, par value $0.0001 per share (the “Series
B Preferred”), having the rights, privileges, preferences and restrictions set forth in the Series B Convertible Preferred Stock Certificate of Designations of the Company, in the form attached hereto as Exhibit B (the “Certificate of Designations”); (b) the issuance of warrants, in the form attached hereto as Exhibit C (the “Warrants”),
for the purchase of up to 3,000,000 shares of the Company’s Common Stock, par value $0.0001 per shares (the “Common Stock”); and (c) the reservation of shares of Common Stock for issuance upon conversion of the Shares (the “Conversion Shares”) and upon exercise of the Warrants (the “Warrant Shares”).

 

1.2      Sale and Issuance of Shares

 

.  Subject to the terms and conditions of this Agreement, each Investor agrees, severally and not jointly, to purchase, and the Company agrees to sell and issue to each Investor, the number of Shares set forth in the column designated “Number of Series B Shares” opposite such Investor’s name on the Schedule of Investors,
at a cash purchase price of $4.00 per share (the “Purchase Price”).  The Company’s agreement with each Investor is a separate agreement, and the sale and issuance of the Shares to each Investor is a separate sale and issuance.

 

1.3      Issuance of Warrants

 

.  The Company shall issue to each Investor a Warrant to purchase up to the number of Warrant Shares equal to twenty percent (20%) the number of Conversion Shares issuable upon conversion of the Shares purchased by such Investor pursuant to Section 1.2 of this Agreement, rounded up to the nearest whole
number.  The Warrants shall be exercisable at a price per share equal to $0.20 per Warrant Share, subject to adjustment in accordance with the terms of the Warrants.  The Company’s agreement with each Investor is a separate agreement, and the issuance of a Warrant to each Investor is a separate issuance.

 

  

  

  

 

1.4           Use of Proceeds

 

.  The Company will use the proceeds from the sale of the Shares and Warrant Shares for ordinary and necessary expenses in the normal course of the Company’s business.

 

 

SECTION 2

 

Closing and Delivery

2.1      Closing

 

. 

 

(a)      The closing of the purchase, sale and issuance of the Shares and the Warrants (the “Closing”) shall take place at the offices of Phillips & Reiter,
PLLC, 6805 Capital of Texas Highway North, Suite 318, Austin, Texas 78731, at 4:00 p.m. local time on the date hereof, or such other location or date as the Company and Investors representing a majority of the Shares shall agree, which Closing may be implemented by the exchange of signature pages by facsimile or email.  At the Closing, the Company will issue and sell the Shares and the Warrants to the Investors and each of the Investors will purchase the number of Shares and Warrants indicated
opposite such Investors’ name on Exhibit A.

 

(b)      At the Closing, each Investor will execute this Agreement and the Investors’ Rights Agreement in substantially the form attached hereto as Exhibit D (the “Rights Agreement,” and together
with this Agreement, the “Agreements”). 

 

2.2      Delivery

 

.  At the Closing, the Company will deliver to each Investor (i) a copy of instructions to the transfer agent for the Company to issue to such Investor a certificate registered in such Investor’s name representing the number of Shares that such Investor is purchasing, and (ii) an executed Warrant to purchase up to the number of
Warrant Shares equal to twenty percent (20%) of the number of Conversion Shares issuable upon conversion of the Shares purchased by such Investor, rounded up to the nearest whole number, against payment of the purchase price therefor as set forth in the column designated “Purchase Price” opposite such Investor’s name on the Schedule of Investors, by (a) certified check payable to the Company, or (b) a confirmed wire transfer in accordance with the Company’s instructions.

 

SECTION 3

 

Representations and Warranties of the Company

  

-2-

  

 

A Schedule of Exceptions, attached hereto as Exhibit E (the “Schedule of Exceptions”) shall be delivered to the Investors in connection with each Closing.  Except as set forth on the Schedule of Exceptions delivered to the Investors
at the applicable Closing, the Company hereby represents and warrants to the Investors as of the date of the Closing as follows:

 

3.1      Organization, Good Standing and Qualification

 

.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.  The Company has all requisite corporate power and authority to own and operate its properties and assets, to carry on its business as presently conducted, to execute and deliver the Agreements, to
issue and sell the Shares, the Warrants, the Conversion Shares and the Warrant Shares and to perform its obligations pursuant to the Agreements.  The Company is presently qualified to do business as a foreign corporation in the State of Texas.

 

3.2      Capitalization

 

. 

 

(a)      Immediately prior to the Closing, the authorized capital stock of the Company will consist of 500,000,000 shares of Common Stock, of which 123,796,335 shares are issued and outstanding and 1,000,000 shares of Preferred Stock, of which 100,000 shares are designated “Series A Preferred
Stock,” all of which are issued and outstanding, and 375,000 shares of which are designated Series B Preferred, none of which are issued and outstanding.  The Common Stock, the Series A Preferred Stock and the Series B Preferred shall have the rights, preferences, privileges and restrictions set forth in the Company’s Amended and Restated Certificate of Incorporation, as amended by the Certificate of Designations (the “Certificate of
Incorporation”).  For the avoidance of doubt, no other series of Preferred Stock has any priority over the Series B Preferred with respect to dividends, liquidation distributions or any other distributions.

 

(b)      The outstanding shares (i) have been duly authorized and validly issued and are fully paid and nonassessable, and (ii) were issued in compliance with all applicable state and federal laws concerning the issuance of securities.

 

(c)      The Company has reserved and shall at all times maintain sufficient amounts of authorized stock, as applicable, for the following:

 

(i)      the Shares for issuance pursuant to this Agreement;

 

(ii)      100,000 shares of Common Stock (as may be adjusted in accordance with the provisions of the Certificate of Incorporation) for issuance upon conversion of the Series A Preferred Stock;

 

(iii)                 15,000,000 Conversion Shares (as may be adjusted in accordance with the provisions of the Certificate of Incorporation) for issuance upon conversion of the Shares; and

  

-3-

  

 

(iv)           3,000,000 Warrant Shares for issuance upon exercise of the Warrants;

 

(v)      10,000,000 shares of Common Stock authorized for issuance to employees, consultants and directors pursuant to its 2009 Long-Term Incentive Plan; and

 

(vi)                 26,001,800 shares of Common Stock reserved for issuance under all other instruments, plans, agreements or other commitments to issue stock or securities described in subsection 3.2(g) below (other than the Shares and the Common Stock
identified in subsections (ii) through (v) above).

 

(d)      The rights, preferences, privileges and restrictions of the Shares are as stated in the Certificate of Designations.

 

(e)      The Shares, when issued and delivered and paid for in compliance with the provisions of this Agreement, will be validly issued, fully paid and nonassessable.  The Conversion Shares have been duly and validly reserved and, when issued in compliance with the provisions of this Agreement, the
Certificate of Designations and applicable law, will be validly issued, fully paid and nonassessable.  The Warrant Shares have been duly and validly reserved and, when issued in compliance with the provisions of this Agreement, the Warrants and applicable law, will be validly issued, fully paid and nonassessable.

 

(f)      The Shares, the Warrants, the Warrant Shares and the Conversion Shares will be free of any liens or encumbrances, other than any liens or encumbrances created by or imposed upon the Investors; provided, however, that the Shares, the Warrants, the
Warrant Shares and the Conversion Shares are subject to restrictions on transfer under U.S. state and/or federal securities laws and as set forth herein and in the Agreements and the Warrants.  Except as set forth in the Agreements, the Shares, Warrants, the Warrant Shares and the Conversion Shares are not subject to any preemptive rights or rights of first refusal.

 

(g)      Section 3.2(g) of the Schedule of Exceptions describes each existing convertible note, debenture, warrant, stock option or stock  purchase agreement, employee stock bonus or stock award plan, executive compensation arrangement, and any other agreement or commitment under or pursuant to which
any stock or other securities of the Company will or may be issued (whether contingent or unvested and whether or not the conditions for issuance have been satisfied), and the maximum number of shares of  Common Stock that would be issued under each of such instruments, plans, agreements or other commitments.

 

3.3      Authorization

 

.  All corporate action on the part of the Company and its directors, officers and stockholders necessary for the authorization, execution and delivery of the Agreements (and any additional agreements or instruments referred to herein or contemplated hereby) by the Company, the authorization, sale, issuance and delivery of the Shares,
the Warrants, the Warrant Shares and the Conversion Shares, and the performance of all of the Company’s obligations under the Agreements

  

-4-

  

 

has been taken or will be taken prior to the Closing.  The Agreements and the Warrants, when executed and delivered by the Company, shall constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, except (i) as limited by laws of general application relating to bankruptcy, insolvency
and the relief of debtors, (ii) as limited by rules of law governing specific performance, injunctive relief or other equitable remedies and by general principles of equity, and (iii) to the extent the indemnification provisions contained in the Rights Agreement may further be limited by applicable laws and principles of public policy.

 

3.4      Company Filings

 

.  The Company’s Annual Report on Form 10-K for the year ended December 31, 2008, the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009 and all Current Reports on Form 8-K filed by the Company since December 31, 2008 (collectively, the “Company
Documents”), as of the respective dates thereof, do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.  Except for filings required as a result of the Agreements, the Company has prepared and filed with the Securities and Exchange Commission all filings and reports required by the Securities Act of 1933, as amended (the “Securities
Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”) to make the Company’s filings and reports current in all respects.

 

3.5      Intellectual Property

 

.  For purposes of this Agreement, “Intellectual Property” means all intangible property rights including, but not limited to, inventions, discoveries, trade secrets, processes, algorithms, know-how, proprietary confidential information, United States and foreign patents,
patent applications, trade names, trademarks, service marks and trade dress (together with associated goodwill), domain names and copyrights, moral rights, rights of publicity, any registrations or applications for registrations relating to any of the foregoing, any common law rights and any other proprietary rights relating to any of the foregoing.  

 

(a)      Section 3.5(a) of the Schedule of Exceptions accurately identifies and describes:  (1) all software applications or other products or services developed, owned, produced, marketed, sold, licensed or otherwise made available by the Company (each, a “Company
Product,” and collectively, the “Company Products”) to any third party; (2) all Intellectual Property owned by, licensed to or otherwise controlled by the Company or used in, developed for use in or necessary to the conduct of the Company’s business as presently conducted and as contemplated to be conducted in the future (collectively, the “Company IP”), including,
without limitation, all Intellectual Property owned or used by, licensed to or otherwise controlled by the Company in connection with, or that is included in or embodied by, any of the Company Products (collectively the “Company Product IP”); (3) all of the agreements, understandings, contracts  (whether written or oral) or any other documents, if any, pursuant to which such Intellectual Property is owned, licensed to, used or otherwise
controlled by, the Company or licensed by the Company to a third party; (4) whether any

  

-5-

  

 

license or licenses granted to the Company are exclusive or nonexclusive.  The Company is not bound by, and no Company Product is subject to, any agreement containing any covenant or other provision that materially limits or restricts the ability of the Company to use, exploit, assert, or enforce any Company IP anywhere in the world.  The
Company exclusively owns, or licenses, as the case may be, free and clear of any lien, security interest, pledge, claim, charge or encumbrance of any kind (each, a “Lien” and collectively, “Liens”) all right, title and interest to and in the Company Product IP, and all other Intellectual Property used by the Company in connection with the Company’s business.

 

(b)      Each person or entity who is or was an employee or an independent contractor of the Company and who is or was involved in the creation or development of any Company Product or Company Product IP has signed a valid and enforceable agreement containing an irrevocable assignment of all Intellectual Property
rights to the Company and confidentiality provisions protecting the Company Product IP.  No funding, facilities or personnel of any governmental agency or body were used, directly or indirectly, to develop or create, in whole or in part, any Company Product IP or any other owned Company IP.  The Company has taken reasonable steps to maintain the confidentiality of and otherwise protect and enforce its rights in all trade secrets, know-how and other proprietary information held by the Company.  The
Company has not assigned or otherwise transferred ownership of, or agreed to assign or otherwise transfer ownership of, any Company Product IP or any other owned Company IP to any third party.  The Company IP constitutes all of the Intellectual Property used in and necessary for the conduct of the business conducted by the Company as currently conducted and as contemplated to be conducted in the future.  No application for a patent or for a copyright or trademark registration has been filed
by or on behalf of the Company or has been abandoned, allowed to lapse or rejected.  There is no basis for a claim that any Company Product IP or any other owned Company IP is invalid or unenforceable.

 

(c)      To the knowledge of the Company or its founders, officers or other representatives, no third party has infringed, misappropriated, or otherwise violated, or is currently infringing, misappropriating or otherwise violating, any Company Product IP or any other Company IP.  Neither the Company
nor any of the Company Product infringes, misappropriates, or otherwise violates (directly, contributorily, by inducement or otherwise), or has in the past infringed, misappropriated or otherwise violated any Intellectual Property of any third party.  No infringement, misappropriation or similar claim or legal proceeding is pending or has been threatened against the Company or against any third party who may be entitled to be indemnified, defended, held harmless or reimbursed by the Company with respect
to such claim or legal proceeding in connection with the Company Product IP.  The Company is not bound by any agreement to indemnify, defend, hold harmless or reimburse any third party with respect to any Intellectual Property infringement, misappropriation or similar claim.

 

(d)      None of the Company Products contain any bug, defect or error that materially affects the use, functionality or performance of such Company Products or any product or system containing or used in conjunction with such Company Products or materially fail to comply with any applicable warranty or other
contractual commitment relating to the use, functionality or

  

-6-

  

 

performance of such Company Products.  Other that as set forth on Section 13(d) of the Schedule of Exceptions, none of the Company Products include any open source code components or are subject to any “copyleft” or other obligation or condition (including any obligation or condition under any “open source”
license such as without limitation the GNU Public License, Lesser GNU Public License or Mozilla Public License) that could or does require, or could or does condition the use or distribution of such Company Product on, the disclosure, licensing or distribution of any source code for any portion of such Company Product or could or does otherwise impose any limitation, restriction or condition on the right or ability of the Company to use or distribute any Company Product.  No source code for any Company
Product has been delivered, licensed or made available to any escrow agent or other third party, and the Company has no duty or obligation (whether present, contingent or otherwise) to deliver, license or make available the source code for any Company Product to any escrow agent or other third party.  The Company has not received notification of any kind alleging that the Company has not complied with applicable data protection or privacy laws.

 

(e)      Section 3.5(e) of the Schedule of Exceptions identifies and lists the features and functionalities of the Company’s current primary Company Product.  The Company began development of such Company Product in May 2005 and said Company Product is currently being used in the following three
separate user environments: (i) confidential Quality Assurance (QA)/Development Testing, which was established in May 2006 and is used for in-house testing of software; (ii) confidential Sales/Internal Staff Demo Application, which took place by August 2007 with limited functionality, with basic graphical user interface (GUI); and (iii) Production/End-User full production software release of such Company Product was released on December 8, 2008, and can only be accessed by officers sponsored and employed by a
law enforcement agency that is a customer of the Company.  Except as otherwise specifically disclosed in Section 3.5(e) of the Schedule of Exceptions, none of the features and functionalities of such Company Product have been described in a printed publication in the United States or any foreign country for the purpose of marketing such Company Product, or have been in public use or on sale in the United States or any foreign country, prior to December 8, 2008.

 

3.6      Title to Properties and Assets; Liens

 

.  The Company owns all the properties and assets (whether real, personal, or mixed and whether tangible or intangible) that its purport to own in the books and records of the Company, including all of the properties and assets reflected on the balance sheet presented in the Company’s quarterly report on Form 10-Q for the quarter
ended June 30, 2009 (the “Most Recent Balance Sheet”) and all of the properties and assets purchased or otherwise acquired by the Company since the date thereof.  The Company has good and marketable title to its tangible property and assets, and has good title to all of its leasehold interests, in each case subject to no material Lien, other than (i) Liens for current taxes not yet delinquent, (ii) Liens imposed by law and incurred
in the ordinary course of business for obligations not past due and that do not materially impair the Company’s ownership or use of such property or assets, (iii) Liens in respect of pledges or deposits under workers’ compensation laws or similar legislation or (iv) Liens resulting in minor defects in title,

  

-7-

  

 

none of which, individually or in the aggregate, materially interferes with the ownership or use of such property.  With respect to the tangible property and assets it leases, the Company is in compliance with such leases and, to its knowledge, holds a valid leasehold interest free of any liens, claims, or encumbrances, subject
to clauses (i)-(iv) above.

 

3.7      Compliance with Other Instruments

 

.  The Company is not in violation or default in any material respect of any provision of its Certificate of Incorporation or Bylaws, each as amended to date.  The execution and delivery of the Agreements by the Company, the performance by the Company of its obligations pursuant to the Agreements, and the issuance of the
Shares, the Warrants and the Warrant Shares, and the Conversion Shares, will not result in any material violation of, or materially conflict with, or constitute a material default under, the Company’s Certificate of Incorporation or Bylaws, each as amended to date, or any preemptive rights agreements, options, debentures, promissory notes, agreements, judicial or administrative orders, internal controls,  policies or guidelines, plans or contracts or commitments to which the Company is a party
or with respect to which  its business or properties is subject.

 

3.8      Litigation

 

.  There are no claims, actions, suits, proceedings, arbitrations or, to the Company’s knowledge, investigations pending against the Company, the Company’s properties or, to the Company’s knowledge, any officer or key employee of the Company (nor has the Company received written notice of any threat thereof) before
any court or governmental agency, including without limitation any claim or proceeding  that challenges, or that may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the transactions contemplated by the Agreements.  The Company is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality.  There is no action, suit or proceeding initiated by the Company
currently pending.

 

3.9      Governmental Consent

 

.  No consent, approval or authorization of or designation, declaration or filing with any governmental authority on the part of the Company is required in connection with the valid execution and delivery of the Agreements, or the offer, sale or issuance of the Shares, the Warrants, the Warrant Shares and the Conversion Shares, or the
consummation of any other transaction contemplated by this Agreement, except (i) filing of the Certificate of Designations with the office of the Secretary of State of the State of Delaware, (ii) the filing of such notices as may be required under the Securities Act and (iii) such filings as may be required under applicable state securities laws, which will be timely filed within the applicable periods therefor.

 

3.10           Offering

  

-8-

  

 

.  Subject to the accuracy of the Investors’ representations and warranties in Section 4, the offer, sale and issuance of the Shares and the Warrants to be issued in conformity with the terms of this Agreement, the issuance of the Warrant Shares to be issued upon exercise of the Warrants and the
issuance of the Conversion Shares upon conversion of the Shares, constitute transactions exempt from the registration requirements of Section 5 of the Securities Act and from the registration or qualification requirements of applicable state securities laws, and neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemption.

 

3.11           Brokers or Finders

 

.  The Company has not incurred, and will not incur, directly or indirectly, as a result of any action taken by the Company, any liability for brokerage or finders’ fees or agents’ commissions or any similar charges in connection with this Agreement or any of the transactions contemplated hereby.

 

3.12           Books and Records

 

.  The books of account, minute books, stock record books, and other records of the Company are complete and correct and have been maintained in accordance with sound business practices and the requirements of Section 13(b)(2) of the Exchange Act, including the maintenance of an adequate system of internal controls.  The minute
books of the Company contains accurate and complete records of all meetings held of, and corporate action taken by, the stockholders, the Board of Directors, and committees of the Boards of Directors of the Company, and no meeting of any such stockholders, Board of Directors, or committee has been held for which minutes have not been prepared and are not contained in such minute books.  At the Closing, all of those books and records will be in the possession or control of the Company.

 

3.13           No Undisclosed Liabilities

 

.  Except as reflected on or reserved against in the Most Recent Balance Sheet, the Company has no material liabilities or obligations of any nature (whether known or unknown and whether absolute, accrued, contingent, or otherwise) except for (i) liabilities and obligations incurred in the ordinary course of business subsequent
to June 30, 2009, (ii) obligations under contracts and commitments incurred in the ordinary course of business and (iii) liabilities and obligations of a type or nature not required under generally accepted accounting principles to be reflected on the Balance Sheet, which, in all such cases, individually and in the aggregate would not have a material adverse effect on the Company or its business.

 

3.14           Taxes

 

.  For purposes of this Agreement,  (i) “Tax” means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise,
profits,

  

-9-

  

 

withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not; and (ii) “Tax
Return” means any return (including any information return), report, statement, schedule, notice, form, or other document or information filed with or submitted to, or required to be filed with or submitted to, the Internal Revenue Service, state or local tax or revenue agency or any other governmental body in connection with the determination, assessment, collection, or payment of any Tax or in connection with the administration, implementation, or enforcement of or compliance with any law or regulations
relating to any Tax.

 

(a)      The Company has filed or caused to be filed on a timely basis all Tax Returns that are or were required to be filed by or with respect to it, its employees, properties or business.  The Company has paid, or made provision for the payment of, all Taxes that have or may have become due pursuant
to those Tax Returns or otherwise, or pursuant to any assessment received by Company.

 

(b)      The Company has not been advised in writing (i) that any of its United States federal and state income Tax Returns have been or are being audited as of the date hereof, or (ii) of any deficiency in assessment or proposed judgment with respect to its federal, state or local Taxes.  The
Company has not given or been requested to give waivers or extensions (or is or would be subject to a waiver or extension given by any other person) of any statute of limitations relating to the payment of its Taxes.

 

(c)      The charges, accruals, and reserves with respect to Taxes on the Most Recent Balance Sheet and respective books of the Company are adequate (determined in accordance with generally accepted accounting principles) and are at least equal to the Company’s liability for Taxes. There exists no proposed
tax assessment against any the Company except as disclosed on the Most Recent Balance Sheet.  All Taxes that the Company is or was required by applicable federal (including FICA), state and local tax authorities to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the Internal Revenue Service or other proper governmental agency.

 

(d)      All Tax Returns filed by the Company are true, correct, and complete.  The Company was not at any time during the five-year period preceding the Closing an “S” corporation for federal income tax purposes.

 

3.15           No Material Adverse Change

 

. Since the date of the Most Recent Balance Sheet, there has not been any material adverse change in the business, operations, properties, prospects, assets, or condition of the Company, and no event has occurred or circumstance exists that may result in such a material adverse change.

 

3.16           Employee Benefits

  

-10-

  

 

.  The Company does not have any Employee Benefit Plan, as defined in the Employee Retirement Income Security Act of 1974, as amended.

 

3.17           Compliance with Legal Requirements; Governmental Regulations

 

.  For purposes of this Section 3.17, (i) “Governmental Authorization” means any approval, consent, license, permit, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any governmental body or pursuant
to any Legal Requirement, and (ii) “Legal Requirement” means any federal, state, local, municipal, foreign, international, multinational, or other administrative order, constitution, law, ordinance, principle of common law, regulation, statute, or treaty.

 

(a)      Except as set forth in Section 3.17(a) of the Schedule of Exceptions, (i) the Company is in full compliance with each Legal Requirement that is or was applicable to it or to the conduct or operation of its business or the ownership or use of any of its assets; (ii) no event has occurred or circumstance
exists that (with or without notice or lapse of time) (A) may constitute or result in a violation by the Company of, or a failure on the part of the Company to comply with, any Legal Requirement, or (B) may give rise to any obligation on the part of the Company to undertake, or to bear all or any portion of the cost of, any remedial action of any nature; and (iii) the Company has not received any notice or other communication (whether oral or written) from any governmental body or any other person regarding (A)
any actual, alleged, possible, or potential violation of, or failure to comply with, any Legal Requirement, or (B) any actual, alleged, possible, or potential obligation on the part of the Company to undertake, or to bear all or any portion of the cost of, any remedial action of any nature.

 

(b)      Section 3.17(b) of the Schedule of Exceptions contains a complete and accurate list of each Governmental Authorization that is held by the Company or that otherwise relates to the business of, or to any of the assets owned or used by, the Company.  Each Governmental Authorization listed or
required to be listed in Section 3.17(b) of the Schedule of Exceptions is valid and in full force and effect.  Except as set forth in Section 3.17(b) of the Schedule of Exceptions, (i) the Company is in full compliance with all of the terms and requirements of each Governmental Authorization identified or required to be identified in Section 3.17(b) of the Schedule of Exceptions;  (ii) no event has occurred or circumstance exists that may (with or without notice or lapse of time) (A) constitute
or result directly or indirectly in a violation of or a failure to comply with any term or requirement of any Governmental Authorization listed or required to be listed in Section 3.17(b) of the Schedule of Exceptions, or (B) result directly or indirectly in the revocation, withdrawal, suspension, cancellation, or termination of, or any modification to, any Governmental Authorization listed or required to be listed in Section 3.17(b) of the Schedule of Exceptions; (iii) the Company has not  received
any notice or other communication (whether oral or written) from any Governmental Body or any other person regarding (A) any actual, alleged, possible, or potential violation of or failure to comply with any term or requirement of any Governmental Authorization, or (B) any actual, proposed, possible, or potential revocation, withdrawal, suspension, cancellation, termination of, or modification to any Governmental Authorization; and (iv) all applications required

  

-11-

  

 

to have been filed for the renewal of the Governmental Authorizations listed or required to be listed in Section 3.17(b) of the Schedule of Exceptions have been duly filed on a timely basis with the appropriate governmental bodies, and all other filings required to have been made with respect to such Governmental Authorizations have been
duly made on a timely basis with the appropriate governmental bodies.  The Governmental Authorizations listed in Section 3.17(b) of the Schedule of Exceptions constitute all of the Governmental Authorizations necessary to permit the Company to lawfully conduct and operate its businesses, both currently and as contemplated under any existing business plans.

 

3.18           Contracts; No Defaults

 

.  Section 3.18 of the Schedule of Exceptions contains a complete and accurate list of the following contracts and other commitments (and sets forth reasonably complete details concerning the same, including the parties thereto, the amount of the remaining commitment of the Company thereunder):  (i) each employment agreement,
consulting or other services agreement that involves performance of services or delivery of goods or materials by the Company of an amount or value in excess of $100,000 annually, or with respect to which the person providing services is related to a director or officer of the Company; (ii) each joint venture, partnership, limited liability company or operating agreement and any other contract involving a sharing of profits, losses, costs, or liabilities by the Company with any other person; and (iii) each contract
containing any covenants that in any way purports to restrict the business activity of the Company or limit the freedom of the Company to engage in any line of business or to compete with any person.

 

3.19           Insurance

 

.

 

(a)      Section 3.19(a) of the Schedule of Exceptions describes: (i) any self-insurance arrangement by or affecting the Company, including any reserves established thereunder; (ii) any contract or arrangement, other than a policy of insurance, for the transfer or sharing of any risk by the Company; and (iii)
all obligations of the Company to third parties with respect to providing insurance (including such obligations under leases and service agreements) and identifies the policy under which such coverage is provided; (iv) a description of each insurance policy owned by the Company, by insurer, type of insurance, and period of coverage; and (v) a summary of the loss experience, if any, under each of such self-insurance arrangements and each insurance policy.

 

(b)      Except as set forth in Section 3.19(b) of the Schedule of Exceptions: (i) all insurance policies to which the Company is a party or that provide coverage to the Company, or any director or officer of the Company: (A) are valid, outstanding, and enforceable; (B) are issued by an insurer that is financially
sound and reputable; (C) taken together, provide adequate insurance coverage for the assets and the operations of the Company for all risks normally insured against by a person carrying on the same business or businesses as the Company, and for all risks to which the Company are normally exposed; and (D) are sufficient for compliance with all Legal Requirements

  

-12-

  

 

and contracts to which the Company is a party or by which it, or its business or assets is bound; (ii) the Company has not received (A) any refusal of coverage or any notice that a defense will be afforded with reservation of rights, or (B) any notice of cancellation or any other indication that any insurance policy is no longer in full force
or effect or will not be renewed or that the issuer of any policy is not willing or able to perform its obligations thereunder; and (iii) the Company has paid all premiums due, and has otherwise performed its obligations, under each insurance policy to which the Company is a party or that provides coverage to any director or officer thereof, and given notice to the insurer of all claims that may be insured thereby.

 

3.20           Relationships with Related Parties

 

.

 

(a)      Except as set forth in Section 3.20(a) of the Schedule of Exceptions, no employee, officer, director or, to the Company’s knowledge, stockholder of the Company, or any person related to any such person (including any individual who is a family member or other blood relative, or spouse, of such
individual) or any entity in which any of such persons has any ownership, equity, profit or other financial interest (each, a “Related Person”) has any interest in any property (whether real, personal, or mixed and whether tangible or intangible), used in or pertaining to the Company’s businesses.  To the Company’s knowledge, no Related Person has any ownership, equity, profit or other financial interest in, except in connection
with the ownership of stock in publicly-traded companies, a person that has (i) had business dealings or a material financial interest in any transaction with the Company or (ii) engaged in competition with the Company with respect to any line of the products or services of the Company in any market presently served by the Company.

 

(b)      No director, officer or employee the Company is a party to, or is otherwise bound by, any agreement or arrangement, including any confidentiality, noncompetition, or proprietary rights agreement, between such employee or director and any other person that in any way adversely affects or will affect (i)
the performance of his or her duties as an employee, officer or director of the Company, or (ii) the ability of the Company to conduct its business.  To the Company’s knowledge, no director, officer, or other key employee of the Company intends to terminate his or her employment with the Company.

 

(c)      Except as described in Section 3.20(c) of the Schedule of Exceptions, other than written employment agreements with the Company, no leases, licenses, contracts, agreements, advances, debts, services or product supply arrangements, or any other economic arrangements benefiting one party or the other,
exist between the Company and any of its directors, officers or employees (or persons who are Related Persons with respect to such persons).

 

3.21           Disclosure

 

.  No representation or warranty of the Company in this Agreement, nor any statement or other information in the schedules for the representations and warranties contained in this Section 3, contains or will contain any untrue statement of a material fact, or omits or will omit the statement of

  

-13-

  

 

any material fact necessary to render the same not misleading, either at the date hereof or at the Closing.  There is no fact known to the Company other than general economic or industry conditions that materially adversely affects the assets, business, prospects, financial condition, or results of operations of the Company that
has not been set forth in the Company Documents, this Agreement or the schedules for the representations contained in this Section 3.

 

SECTION 4

 

Representations and Warranties of the Investors

Each Investor hereby, severally and not jointly, represents and warrants to the Company as follows:

 

4.1      No Registration

 

.  Such Investor understands that the Shares, the Warrants, the Warrant Shares and the Conversion Shares, have not been, and will not be, registered under the Securities Act by reason of a specific exemption from the registration provisions of the Securities Act, the availability of which depends upon, among other things, the bona fide
nature of the investment intent and the accuracy of such Investor’s representations as expressed herein or otherwise made pursuant hereto.

 

4.2      Investment Intent

 

.  Such Investor is acquiring the Shares, the Warrants, the Warrant Shares and the Conversion Shares, for investment for its own account, not as a nominee or agent, and not with the view to, or for resale in connection with, any distribution thereof, and that such Investor has no present intention of selling, granting any participation
in, or otherwise distributing the same.  Such Investor further represents that it does not have any contract, undertaking, agreement or arrangement with any person or entity to sell, transfer or grant participation to such person or entity or to any third person or entity with respect to any of the Shares, the Warrants, the Warrant Shares or the Conversion Shares.

 

4.3      Investment Experience

 

.  Such Investor has substantial experience in evaluating and investing in private placement transactions of securities in companies similar to the Company and acknowledges that such Investor, can protect his, her or its own interests.  Such Investor has such knowledge and experience in financial and business matters so that
such Investor is capable of evaluating the merits and risks of its investment in the Company.

 

4.4      Accredited Investor

 

.  Such Investor is an “accredited investor” within the meaning of Regulation D, Rule 501(a), promulgated by the Securities and Exchange Commission under the Securities Act and shall submit

  

-14-

  

 

to the Company such further assurances of such status as may be reasonably requested by the Company.

 

4.5      Residency

 

.  If the Investor is an individual, then the Investor resides in the state or province identified in the address of the Investor set forth on the Schedule of Investors; if the Investor is a partnership, corporation, limited liability company or other entity, then the office or offices of the Investor in which its principal place of
business is identified in the address or addresses of the Investor set forth on the Schedule of Investors.

 

4.6      Rule 144

 

.  Such Investor acknowledges that the Shares, the Warrants, the Warrant Shares and the Conversion Shares must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available.  Such Investor is aware of the provisions of Rule 144 promulgated under the Securities
Act which permit limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, including among other things, the existence of a public market for the shares, the availability of certain current public information about the Company, the resale occurring not less than six months after a party has purchased and paid for the security to be sold, the sale being effected through a “broker’s transaction” or in transactions directly with a “market
maker” and the number of shares being sold during any three-month period not exceeding specified limitations.

 

4.7      Authorization

 

. 

 

(a)      Such Investor has all requisite power and authority to execute and deliver the Agreements to which it is a party, to purchase the Shares and the Warrants hereunder and to carry out and perform its obligations under the
terms of the Agreements.  All action on the part of such Investor necessary for the authorization, execution, delivery and performance of the Agreements, and the performance of all of the Investor’s obligations under the Agreements, has been taken or will be taken prior to the Closing.

 

(b)      The Agreements, when executed and delivered by such Investor, will constitute valid and legally binding obligations of such Investor, enforceable in accordance with their terms except: (i) to the extent that the indemnification provisions contained in the Rights Agreement may be limited by applicable
law and principles of public policy, (ii) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, and (iii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies or by general principles of equity.

  

-15-

  

 

(c)           No consent, approval, authorization, order, filing, registration or qualification of or with any court, governmental authority or third person is required to be obtained by the Investor in connection with the execution and delivery of the Agreements by the Investor or the
performance of the Investor’s obligations hereunder or thereunder.

 

4.8      Brokers or Finders

 

.  Such Investor has not engaged any brokers, finders or agents, and neither the Company nor any other Investor has, nor will, incur, directly or indirectly, as a result of any action taken by such Investor, any liability for brokerage or finders’ fees or agents’ commissions or any similar charges in connection with the Agreements.

 

4.9      Tax Advisors

 

.  Such Investor has reviewed with its own tax advisors the U.S. federal, state, local and foreign tax consequences of this investment and the transactions contemplated by the Agreements.  With respect to such matters, such Investor relies solely on such advisors and not on any statements or representations of the Company or
any of its agents, written or oral.  Such Investor understands that it (and not the Company) shall be responsible for its own tax liability that may arise as a result of this investment or the transactions contemplated by the Agreements.

 

SECTION 5

 

Conditions to Investors’ Obligations to Close

Each Investor’s obligation to purchase the Shares and Warrants at the Closing is subject to the fulfillment on or before the Closing of each of the following conditions, unless waived by the applicable Investor purchasing the Shares and Warrants in such Closing (unless otherwise specified):

 

5.1      Representations and Warranties

 

.  The representations and warranties made by the Company in Section 3 shall be true and correct as of the date of the Closing.

 

5.2      Covenants

 

.  All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to the Closing shall have been performed or complied with.

 

5.3      Blue Sky

 

.  The Company shall have complied with all necessary Blue Sky law qualifications, or have the availability of exemptions therefrom, required by any state for the offer and sale of the Shares, the Warrants, the Warrant Shares and the Conversion Shares.

  

-16-

  

 

5.4           Certificate of Designations

 

.  The Certificate of Designations shall have been duly authorized, executed and filed with and accepted by the Secretary of State of the State of Delaware.

 

5.5      Rights Agreement

 

.  The Company and the Investors shall have executed and delivered the Rights Agreement.

 

5.6      Warrants

 

.  The Company shall have executed and delivered to the Investors the Warrants.

 

5.7      Indemnification Agreements

 

.  The Company and each of the members of the Company’s Board of Directors have executed and delivered an Indemnification Agreement, in substantially the form attached hereto as Exhibit F.

 

5.8      Closing Deliverables

 

.  At the Closing, the Company shall have delivered to counsel to the Investors the following:

 

(a)      a certificate executed by the Chief Executive Officer or President of the Company on behalf of the Company, in substantially the form attached hereto as Exhibit G, certifying the satisfaction of the conditions to closing listed in Sections 5.1 and 5.2;
and

 

(b)      a certificate of the Secretary of State of the State of Delaware, dated as of a date within seven (7) days prior to the date of such Closing, with respect to the good standing of the Company.

 

5.9      Board of Directors

 

.  Effective upon the Closing, the Company’s Board of Directors will include an individual designated by the Investors purchasing a majority of the Shares.

 

SECTION 6

 

Conditions to Company’s Obligation to Close

The Company’s obligation to sell and issue the Shares and the Warrants at each Closing is subject to the fulfillment on or before such Closing of the following conditions, unless waived by the Company:

 

6.1      Representations and Warranties

  

-17-

  

 

.  The representations and warranties made by the Investors in such Closing in Section 4 shall be true and correct in all material respects when made and shall be true and correct in all material respects as of the date of such Closing.

 

6.2      Covenants

 

.  All covenants, agreements and conditions contained in the Agreements to be performed by Investors on or prior to the date of such Closing shall have been performed or complied with in all material respects as of the date of such Closing.

 

6.3      Compliance with Securities Laws

 

.  The Company shall be satisfied that the offer and sale of the Shares, the Warrants, the Warrant Shares and the Conversion Shares shall be qualified or exempt from registration or qualification under all applicable federal and state securities laws.

 

6.4      Certificate of Designations

 

.  The Certificate of Designations shall have been duly authorized, executed and filed with and accepted by the Secretary of State of the State of Delaware.

 

6.5      Rights Agreement

 

.  The Company and the Investors (each as defined in the Rights Agreement) shall have executed and delivered the Rights Agreement.

 

SECTION 7

 

Miscellaneous

7.1      Amendment

 

.  Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument referencing this Agreement and signed by the Company and the Investors holding a majority of the Common Stock issued or issuable upon conversion of the Shares issued pursuant
to this Agreement (excluding any of such shares that have been sold to the public or pursuant to Rule 144).  Any such amendment, waiver, discharge or termination effected in accordance with this paragraph shall be binding upon each holder of any securities purchased under this Agreement at the time outstanding (including securities into which such securities have been converted or exchanged or for which such securities have been exercised) and each future holder of all such securities.  Each
Investor acknowledges that by the operation of this paragraph, the holders of a majority of the Common Stock issued or issuable upon conversion of the Shares issued pursuant to this Agreement (excluding any of such shares that

  

-18-

  

 

have been sold to the public or pursuant to Rule 144) will have the right and power to diminish or eliminate all rights of such Investor under this Agreement.

 

7.2      Notices

 

.  All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, sent by facsimile or electronic mail or otherwise delivered by hand or by messenger addressed:

 

(a)      if to an Investor, at the Investor’s address, facsimile number or electronic mail address as shown in the Company’s records, as may be updated in accordance with the provisions hereof;

 

(b)      if to any other holder of any Shares, Warrants or Warrant Shares or Conversion Shares, at such address, facsimile number or electronic mail address as shown in the Company’s records, or, until any such holder so furnishes an address, facsimile number or electronic mail address to the Company, then
to and at the address, facsimile number or electronic mail address of the last holder of such Shares, Warrants or Warrants Shares or Conversion Shares for which the Company has contact information in its records; or

 

(c)      if to the Company, one copy should be sent to 2010 FM 2673, Canyon Lake, Texas 78133, facsimile: (830) 964-3873, Attn: Chief Executive Officer, or to such other address as the Company shall have furnished to the Investors, with a copy to J. William Wilson, Phillips & Reiter, PLLC, 6805 Capital of
Texas Highway North, Suite 318, Austin, Texas 78731.

 

With respect to any notice given by the Company under any provision of the Delaware General Corporation Law or the Company’s charter or bylaws, each Investor agrees that such notice may be given by facsimile or by electronic mail.

 

Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered personally, or, if sent by mail, at the earlier of its receipt or seventy-two (72) hours after the same has been deposited in a regularly maintained receptacle for the deposit of the
United States mail, addressed and mailed as aforesaid or, if sent by facsimile, upon confirmation of facsimile transfer or, if sent by electronic mail, upon confirmation of delivery when directed to the electronic mail address set forth on the Schedule of Investors. In the event of any conflict between the Company’s books and records and this Agreement or any notice delivered hereunder, the Company’s books and records will control absent fraud or error.

 

7.3      Governing Law

 

.  This Agreement shall be governed in all respects by the internal laws of the State of Delaware as applied to agreements entered into among Delaware residents to be performed entirely within Delaware, without regard to principles of conflicts of law.

  

-19-

  

 

7.4           Expenses

 

.  The Company and the Investors shall each pay their own expenses in connection with the transactions contemplated by this Agreement.

 

7.5      Survival

 

.  The representations, warranties, covenants and agreements made or undertaken in this Agreement or in any document or instrument executed and delivered pursuant this Agreement are material, have been relied upon by the other parties hereto, shall survive any investigation made by any party hereto and the Closing hereunder and shall
not merge in the performance of any obligation by any party hereto.  Any examination, inspection or audit of the properties, financial condition or other matters of the Company conducted by the Investors shall in no way limit, affect or impair the ability of the Investors to rely upon the representations, warranties, covenants and obligations of the Company set forth herein.

 

7.6      Successors and Assigns

 

.  This Agreement, and any and all rights, duties and obligations hereunder, shall not be assigned, transferred, delegated or sublicensed by any Investor without the prior written consent of the Company.  Any attempt by an Investor without such permission to assign, transfer, delegate or sublicense any rights, duties or obligations
that arise under this Agreement shall be void.  Subject to the foregoing and except as otherwise provided herein, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.

 

7.7      Entire Agreement

 

.  This Agreement, including the exhibits attached hereto, constitute the full and entire understanding and agreement among the parties with regard to the subjects hereof and thereof.  No party shall be liable or bound to any other party in any manner with regard to the subjects hereof or thereof by any warranties, representations
or covenants except as specifically set forth herein or therein.

 

7.8      Delays or Omissions

 

.  Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to any party to this Agreement upon any breach or default of any other party under this Agreement shall impair any such right, power or remedy of such non-defaulting party, nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.  Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions

  

-20-

  

 

of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing.  All remedies, either under this Agreement or by law or otherwise afforded to any party to this Agreement, shall be cumulative and not alternative.

 

7.9      Severability

 

.  If any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this Agreement, and such court will replace such illegal, void or unenforceable provision
of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the same economic, business and other purposes of the illegal, void or unenforceable provision.  The balance of this Agreement shall be enforceable in accordance with its terms.

 

7.10           Indemnification

 

.  The Company agrees to and shall indemnify and hold harmless each Investor, and its successors and assigns, at all times after the date of this Agreement from and against and in respect of, any liability, claim, deficiency, loss, damage, or injury and all reasonable costs and expenses (including reasonable counsel fees and costs
of any suit related thereto) suffered or incurred by such Investor (collectively referred to as "Loss") arising from (a) any misrepresentation by, or breach of any covenant or warranty of the Company contained in this Agreement or any exhibit, certificate, or other instrument furnished or to be furnished by the Company hereunder; or (b) any non-fulfillment of any agreement on the part of the Company under this Agreement, the Rights Agreement, the Certificate
of Designations or the Warrants, or any or from any misrepresentation in or omission from, any certificate or other instrument furnished or to be furnished to the Investors under this Agreement or such other instruments, other than (a) Losses resulting that are finally determined in such action or proceeding to be primarily and directly a result of (1) the gross negligence of such Investor, (2) a breach of a fiduciary duty, if any, owed by such Investor to the Company, (3) the intentional misconduct or a knowing
violation of applicable law by such Investor, or (4) a transaction from which such Investor received an improper personal benefit, or (b) Losses that are the subject of the indemnification agreement entered into by the Company and such Investor pursuant to this Agreement, as to which Losses such indemnification agreement, rather than this Section 7.10, shall apply.  Notwithstanding the foregoing, (i) the Company will have no obligation to indemnify the Investors in respect of Losses unless the aggregate
amount of all such Losses incurred or suffered by the Investors exceeds fifteen thousand dollars ($15,000), at which time the Company will indemnify the Investors for the entire amount of the Losses (not only for the amount by which such Losses exceed such $15,000 amount), and (ii) the Company’ aggregate liability in respect of claims for indemnification for Losses relating solely to breaches of representations and warranties in Section 3 of this Agreement shall not exceed the Purchase Price plus the amount
of the Investors’ reasonable attorneys fees and costs related to the transactions described herein and reasonable attorneys fee and costs incurred by the Investors in enforcing their rights and remedies hereunder.  For the avoidance of doubt, the limitations in the preceding sentence shall not apply to any

  

-21-

  

 

indemnity claim by the Investors relating to the Rights Agreement, the Certificate of Designations or the Warrants.

 

7.11           Counterparts

 

.  This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument.

 

7.12           Telecopy Execution and Delivery

 

.  A facsimile, telecopy or other reproduction of this Agreement may be executed by one or more parties hereto and delivered by such party by facsimile or any similar electronic transmission device pursuant to which the signature of or on behalf of such party can be seen.  Such execution and delivery shall be considered valid,
binding and effective for all purposes.  At the request of any party hereto, all parties hereto agree to execute and deliver an original of this Agreement as well as any facsimile, telecopy or other reproduction hereof.

 

7.13           Jurisdiction; Venue

 

.  Any action, suit or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall only be brought in any federal court or state court located in the State of Texas, and each party consents to the exclusive jurisdiction and venue
of such courts (and of the appropriate appellate courts therefrom) in any such action, suit or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such, action, suit or proceeding in any such court or that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.  Process in any such action, suit or proceeding may be served on any party anywhere in the
world, whether within or without the jurisdiction of any such court.

 

7.14           Further Assurances

 

.  Each party hereto agrees to execute and deliver, by the proper exercise of its corporate, limited liability company, partnership or other powers, all such other and additional instruments and documents and do all such other acts and things as may be necessary to more fully effectuate this Agreement.

 

7.15           Attorney’s Fees

 

.  In the event that any suit or action is instituted to enforce any provisions in this Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.

  

-22-

  

 

(The remainder of this page is intentionally left blank)

  

-23-

  

 

IN WITNESS WHEREOF, this Agreement is executed as of the date first written above.

 

“COMPANY”

 

COPSYNC, INC.

a Delaware corporation

 

By:                                                                    

  Russell D. Chaney,

  Chief Executive Officer

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00164-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00164-of-00352.parquet"}]]