Document:

Unassociated Document

Exhibit 10.8

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED.

	
  

	
Warrant Number 2012-_____

	
Void after

______________, 2017

_____________________________

WARRANT TO PURCHASE SHARES

This Warrant is issued to ____________________________ by NutraCea, a California corporation (the “Company”), pursuant to the terms of that certain Note and Warrant Purchase Agreement (the “Note Purchase Agreement”) of even date herewith, in connection with the Company’s issuance to the holder of this Warrant of a Secured Convertible Promissory Note (the “Note”).

1.             Purchase of Shares.  Subject to the terms and conditions hereinafter set forth and set forth in the Note Purchase Agreement, the holder of this Warrant (“Holder”) is entitled, upon surrender of this Warrant at the principal office of the Company (or at such other place as the Company shall notify the holder hereof in writing), to purchase from the Company up to ___________ (as adjusted as provided herein) fully paid and nonassessable Shares (as defined below).

2.             Definitions.

(a)           Exercise Price.  The exercise price for the Shares shall be $0.12 per share (such price, as adjusted from time to time, is herein referred to as the “Exercise Price”).

(b)           Exercise Period.  Subject to Section 15 hereof, this Warrant shall be exercisable, in whole or in part, during the term commencing on January 18, 2012 (“Issuance Date”) and ending on the expiration of this Warrant pursuant to Section 12 hereof.

(c)           The Shares.  The term “Shares” shall mean shares of the Company’s Common Stock.

(d)           Exempt Issuance.  The term “Exempt Issuance” shall mean the issuance of (a) shares of Common Stock or options to consultants, employees, officers or directors of the Company pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established, (b) securities upon the exercise or exchange of or conversion of the Notes or the Warrants (each as defined in the Note Purchase Agreement) and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, (c) shares of Common Stock issued or issuable as a dividend on Common Stock, (d) shares of Common Stock issued to any broker or placement agent for services in connection with a capital raising transaction, and (e) securities issued pursuant to acquisitions or strategic transactions (including securities issuable to brokers for such transactions) approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be to an individual or entity which is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Company and in which the Company receives benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

  

 

  

(e)           Common Stock.  The term “Common Stock” shall mean the Company’s common stock.

(f)           Common Stock Equivalents.  The term “Common Stock Equivalents” shall mean any securities of the Company which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

(g)           Change of Control.  The term “Change of Control” shall mean (i) any consolidation or merger involving the Company pursuant to which the Company's shareholders immediately before the transaction own less than fifty percent (50%) of the voting securities of the surviving entity or (ii) the sale of all or substantially all of the assets of the Company.

3.             Method of Exercise.  While this Warrant remains outstanding and exercisable in accordance with Section 2 above, the holder may exercise, in whole or in part, the purchase rights evidenced hereby.  Such exercise shall be effected by:

(i)       the delivery to the Company of a duly completed and executed Notice of Exercise in the form attached hereto as Exhibit A (“Notice of Exercise”); and

(ii)      the payment to the Company of an amount equal to the aggregate Exercise Price for the number of Shares being purchased.

Within three trading days following the date this Warrant has been exercised in full, Holder shall surrender this Warrant to the Company for cancellation.  Partial exercises of this Warrant resulting in purchases of a portion of the total number of Shares issuable hereunder shall automatically reduce the outstanding number of Shares purchasable hereunder.  The Holder and the Company shall maintain records showing the number of Shares purchased hereunder and the date of such purchases. In the event of any dispute or discrepancy, the records of the Company shall be controlling and determinative in the absence of manifest error.  The Holder and any assignee, by acceptance of the warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Shares underlying this Warrant, the number of Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

  

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4.           Net Exercise.                      In lieu of cash exercising this Warrant, the holder of this Warrant may elect to receive shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to the holder hereof a number of Shares computed using the following formula:

Y (A - B)

X =          A               

 

Where

	
  

	
X --

	
The number of Shares to be issued to the holder of this Warrant.

	
  

	
Y --

	
The number of Shares purchasable under this Warrant.

	
  

	
A --

	
The fair market value of one Share.

	
  

	
B --

	
The Exercise Price (as adjusted to the date of such calculations).

For purposes of this Section 4, the fair market value of a Share shall mean the arithmetic average of the VWAP of the Common Stock on each of the twenty (20) Trading Days immediately preceding the date of determination of fair market value; provided, however, that if the Company does not make available publicly the type of information described in Rule 144(c) promulgated under the Securities Act for a period in excess of ninety (90) days, the fair market value shall be the price per Share that the Company could obtain from a willing buyer for Shares sold by the Company from authorized but unissued Shares, as such prices shall be determined in good faith by the Company’s Board of Directors.  For purposes of this Warrant, (i) “VWAP” means, for any date, the dollar volume-weighted average price of the Common Stock on the principal market (including, without limitation, the Pink Sheets if the Pink Sheets is the principal market) in which it trades during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time and (ii) “Trading Day” means any day on which the Common Stock is traded on the principal securities exchange or securities market on which the Common Stock is then tradable.

5.             Certificates for Shares.  Upon the exercise of the purchase rights evidenced by this Warrant, one or more certificates for the number of Shares so purchased shall be issued as soon as practicable thereafter, and in any event within five (5) trading days after this Warrant is exercised as provided herein; provided, however, that if the Company and its counsel determine that such Shares may be issued without restricted legends in compliance with applicable securities laws, the Company shall, at the written request of the Investor (which request shall contain any covenants reasonably requested by the Company to ensure Investor’s compliance with applicable securities laws), deliver such Shares to the Investor electronically through the Depository Trust Company or another established clearing corporation performing similar functions.

  

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6.             Issuance of Shares.  The Company covenants that the Shares, when issued pursuant to the exercise of this Warrant, will be duly and validly issued, fully paid and nonassessable and free from all taxes, liens, and charges with respect to the issuance thereof.

7.             Adjustment of Exercise Price and Number of Shares.  The number of and kind of securities purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as follows:

(a)           Subdivisions, Combinations and Other Issuances.  If the Company shall at any time prior to the expiration of this Warrant subdivide the Shares, by split-up or otherwise, or combine its Shares, or issue additional shares of its Shares as a dividend on Shares, the number of Shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination.  Appropriate adjustments shall also be made to the purchase price payable per share, but the aggregate purchase price payable for the total number of Shares purchasable under this Warrant (as adjusted) shall remain the same.  Any adjustment under this Section 7(a) shall become effective at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend.

(b)           Reclassification, Reorganization and Consolidation.  In case of any reclassification, capital reorganization, or change in the capital stock of the Company (other than as a result of a subdivision, combination, or stock dividend provided for in Section 7(a) above) occurring before the expiration of this Warrant, then the Company shall make appropriate provision so that the holder of this Warrant shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, reorganization, or change by a holder of the same number of Shares as were purchasable by the holder of this Warrant immediately prior to such reclassification, reorganization, or change.  In any such case appropriate provisions shall be made with respect to the rights and interest of the holder of this Warrant so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per share payable hereunder, provided the aggregate purchase price shall remain the same.

(c)           Dilutive Issuances.  If the Company shall at any time or from time to time, after the issuance of this Warrant but prior to the expiration of this Warrant, issue or sell (such issuance or sale, a “New Issuance”) any shares of Common Stock or Common Stock Equivalents at a price per share of Common Stock (the “New Issue Price”) that is less than the Exercise Price then in effect as of the record date or Issue Date (as defined below), as the case may be (the “Relevant Date”) (treating the price per share of Common Stock, in the case of the issuance of any Common Stock Equivalent, as equal to (x) the sum of the price for such Common Stock Equivalent plus any additional consideration payable (without regard to any anti-dilution adjustments) upon the conversion, exchange or exercise of such Common Stock Equivalent divided by (y) the number of shares of Common Stock initially underlying such Common Stock Equivalent), other than (i) issuances or sales for which an adjustment is made pursuant to another subsection of this Section 7, and (ii) Exempt Issuances, then, and in each such case, (A) the Exercise Price then in effect shall be adjusted to equal the New Issue Price and (B) the aggregate number of Shares for which this Warrant is exercisable immediately after the New Issuance shall be increased to equal the product of (i) the aggregate number of Shares for which this Warrant is exercisable immediately prior to the New Issuance multiplied by (ii) a fraction, the numerator of which shall be the Exercise Price in effect on the day immediately prior to the Relevant Date and the denominator of which shall be the Exercise Price in effect immediately after such adjustment.  For the avoidance of doubt, whether or not the Company provides a notice of adjustment pursuant to this Section 7(c), upon the occurrence of any New Issuance, after the date of such New Issuance the Holder is entitled to receive a number of Shares based upon the provisions of this Section 7(c) regardless of whether the Holder accurately refers to the Exercise Price in the Notice of Exercise.  Any adjustment pursuant to the preceding provisions of this Section 7(c) shall be made whenever such shares of Common Stock or Common Stock Equivalents are issued, and shall become effective on the date (the “Issue Date”) of such issuance; provided, however, that the determination as to whether an adjustment is required to be made pursuant to this Section 7(c) shall be made only upon the issuance of such shares of Common Stock or Common Stock Equivalents, and not upon the issuance of any security into which the Common Stock Equivalents convert, exchange or may be exercised.

  

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(d)           Notice of Adjustment.  The Company shall provide Holder at least ten (10) days prior written notice of any event that would cause an adjustment pursuant to Section 7(a) or 7(b). When any adjustment is required to be made in the number or kind of shares purchasable upon exercise of the Warrant, or in the Exercise Price, the Company shall promptly notify the holder of such event and of the number of Shares or other securities or property thereafter purchasable upon exercise of this Warrant and the new Exercise Price.

8.             No Fractional Shares or Scrip.  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor on the basis of the Exercise Price then in effect.

9.             Restrictive Legend.

Any certificates representing the Shares (unless registered under the Act or as otherwise provided in Section 10 below) shall be stamped or imprinted with a legend in substantially the following form:

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO A REGISTRATION STATEMENT UNDER SAID ACT OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH SHARES MAY BE SOLD OR OTHERWISE TRANSFERRED PURSUANT TO AN EXEMPTION THEREFROM UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.  COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.

  

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10.           Warrants Transferable.  By acceptance of this Warrant, Holder agrees to comply with all applicable securities laws in connection with the transfer of this Warrant or the underlying Shares. Subject to compliance with the terms and conditions of this Section 10, this Warrant and all rights hereunder are transferable, in whole or in part, without charge to the holder hereof (except for transfer taxes), upon surrender of this Warrant properly endorsed or accompanied by written instructions of transfer.  With respect to any offer, sale or other disposition of this Warrant or any Shares acquired pursuant to the exercise of this Warrant prior to registration of such Warrant or Shares, the holder hereof agrees to give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such holder's counsel, or other evidence, if requested by the Company, to the effect that such offer, sale or other disposition may be effected without registration or qualification (under the Act as then in effect or any federal or state securities law then in effect) of this Warrant or the Shares.  Upon receiving such written notice and reasonably satisfactory opinion or other evidence, if so requested, the Company, as promptly as practicable, shall notify such holder that such holder may sell or otherwise dispose of this Warrant or such Shares, all in accordance with the terms of the notice delivered to the Company.  If a determination has been made pursuant to this Section 10 that the opinion of counsel for the holder or other evidence is not reasonably satisfactory to the Company, the Company shall so notify the holder promptly with details thereof after such determination has been made.  Each certificate representing this Warrant or the Shares transferred in accordance with this Section 10 shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with such laws.  The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions.  Notwithstanding the foregoing provisions of this Section 10, if the Company, with the advice of the Company’s counsel, determines that all or any portion of the Shares that have been or that will be issued upon exercise of this Warrant may be freely transferred pursuant to Rule 144 without volume limitations or information requirements, the Company shall remove the legends from the certificates representing such Shares or permit ownership of such Shares to be represented electronically, and Holder may thereafter transfer such Shares without providing the Company with notice thereof unless otherwise agreed by the Company and Holder.

11.           Rights of Stockholders.  No holder of this Warrant shall be entitled, as a Warrant holder, to vote or receive dividends or be deemed the holder of the Shares or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein.

  

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12.           Expiration of Warrant; Notice of Certain Events Terminating This Warrant.

(a)           This Warrant shall expire and shall no longer be exercisable upon the earlier to occur of:

(i)       5:00 p.m., Scottsdale, Arizona time, on January __, 2017;

(ii)      Any Change of Control.

(b)           The Company shall provide Holder at least ten (10) days prior written notice of any event set forth in Section 12(a)(ii).

13.           Notices.  All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (a) five (5) days after deposit with the U.S.  Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid or (d) one business day after the business day of facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed (i) if to the Holder, at the Holder's address as set forth on the Schedule of Investors to the Note Purchase Agreement, and (ii) if to the Company, at the address of its principal corporate offices (attention: President), with a copy to Christopher Chediak, Weintraub Genshlea Chediak Law Corporation, 400 Capitol Mall, Eleventh Floor, Sacramento, CA 95814, or at such other address as a party may designate by ten days advance written notice to the other party pursuant to the provisions above.

14.           Governing Law.  This Warrant and all actions arising out of or in connection with this Agreement shall be governed by and construed in accordance with the laws of the State of California, without regard to the conflicts of law provisions of the State of California or of any other state.

  

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15.           Holder’s Restrictions.  The Company shall not effect any exercise of this Warrant, and Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 3 or 4 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, Holder (together with Holder’s affiliates, and any other person or entity acting as a group together with Holder or any of Holder’s affiliates), as set forth on the applicable Notice of Exercise, would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by Holder and its affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by Holder or any of its affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 15, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) and the rules and regulations promulgated thereunder, it being acknowledged by Holder that the Company is not representing to Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and Holder is solely responsible for any schedules required to be filed in accordance therewith.  To the extent that the limitation contained in this Section 15 applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by Holder together with any affiliates) and of which a portion of this Warrant is exercisable shall be in the sole discretion of Holder, and the submission of a Notice of Exercise shall be deemed to be Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by Holder together with any affiliates) and of which portion of this Warrant is exercisable, in each case subject to such aggregate percentage limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination.  In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  For purposes of this Section 15, in determining the number of outstanding shares of Common Stock, Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of Holder, the Company shall within five trading days confirm orally and in writing to Holder 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, including this Warrant, by Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported.  The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant.  The provisions of this Section 15 may be waived by Holder, at the election of Holder, upon not less than 61 days prior notice to the Company; provided, however, the provisions of this Section 15 may be waived at any time by Holder, at the election of Holder, in the 60 day period prior to the expiration of this Warrant pursuant to Section 12. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

16.           Rights and Obligations Survive Exercise of Warrant.  Unless otherwise provided herein, the rights and obligations of the Company, of the holder of this Warrant and of the holder of the Shares issued upon exercise of this Warrant, shall survive the exercise of this Warrant.

Issued this ___ day of _________________, 2012.

	  	
NUTRACEA

	  	  	  
	  	  	  
	  	  	  
	  	
By:

	
Jerry Dale Belt, Chief Financial Officer

  

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EXHIBIT A

NOTICE OF EXERCISE

	
TO:

	
NUTRACEA

	
  

	_____________________

	
  

	_____________________

Attention: Chief Executive Officer

1.             The undersigned hereby elects to purchase __________ Shares of _____________ pursuant to the terms of the Warrant to Purchase Shares Number 2012-___ (“Warrant”).

2.             Method of Exercise (Please initial the applicable blank):

	
  

	
___

	
The undersigned elects to exercise the Warrant by means of a cash payment, and tenders herewith payment in full for the purchase price of the shares being purchased, together with all applicable transfer taxes, if any.

	
  

	
___

	
The undersigned elects to exercise the attached Warrant by means of the net exercise provisions of Section 4 of the Warrant.

2.             Please (i) issue a certificate or certificates representing said Shares in the name of the undersigned or in such other name as is specified below or (ii) to the extent permitted by the Company pursuant to the Warrant, issue the Shares to the following DWAC Account Number and Transaction Code Number:

	
DWAC Instructions – If Electronic Delivery:

	  	
Physical Address – If Certificate Delivery:

	  	  	  	  	  
	
Account Number:

	  	  	
Name:

	  
	  	  	  	  	  
	
Transaction Code:

	  	  	
Address:

	  
	  	  	  	  	  
	 	 	 	 	 

4.           The undersigned hereby represents and warrants that the undersigned is an “accredited investor” as defined in Rule 501 promulgated under the Securities Act of 1933, as amended, and that the aforesaid Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale, in connection with the distribution thereof, and that the undersigned has no present intention of distributing or reselling such shares.

	  	  	
 

	  	  	
(Signature)

	  	  	  
	  	  	
 

	  	  	
(Name)

	  	  	  
	
 

	  	
 

	
(Date)

	  	
(Title)

 

-1-Unassociated Document

Exhibit 10.9

 

SECURITY AGREEMENT

This Security Agreement (as amended, modified or otherwise supplemented from time to time, this “Security Agreement”), dated as of January 17, 2012, is executed by NutraCea, a California corporation (“NutraCea”), The RiceX Company, a Delaware corporation (“RiceX”), and Rice Science, LLC, a Delaware limited liability company (“Rice Science”, and together with RiceX and NutraCea, the “Company”), in favor of Collateral Agent (as herein defined) on behalf of the Investors listed on the signature pages hereof.

RECITALS

A.            NutraCea and the Investors have entered into a Note and Warrant Purchase Agreement, dated as of the date hereof (the “Purchase Agreement”), pursuant to which the Company may issue convertible promissory notes (each a “Note” and collectively, the “Notes”) in an aggregate principal amount of $7,500,000 (or $10,000,000, if increased with the consent of a Majority in Interest) in favor of the Investors.

B.            In order to induce each Investor to extend the credit evidenced by the Notes, Company has agreed to enter into this Security Agreement and to grant Collateral Agent, for the benefit of itself and the Investors, the security interest in the Collateral described below.

AGREEMENT

NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Company hereby agrees with Collateral Agent and the Investors as follows:

1.            Definitions and Interpretation. When used in this Security Agreement, the following terms have the following respective meanings:

“Collateral” means all right, title and interest of the Company in and to the following assets:

(a)            all accounts, deposit accounts, accounts receivable, contract rights, chattel paper, instruments, documents, general intangibles, including, without limitation, all forms of payment, all present and future incomes, rents, revenues, issues and profits, goodwill, licenses and license rights, bailment or leasehold interests, whether as lessor or lessee, all choses in action and recoveries for any loss in value of the real estate of Company or items of property described herein, rights in and to security agreements and other contracts or assignments providing security to Company, book debts, credits, indemnities, warranties or guarantees payable to Company upon loss or damage of property, all patents, patent rights (and applications and registrations therefor), trademarks and service marks (and applications and registrations therefor), inventions, copyrights, mask works (and applications and registrations therefor), trade names, trade styles, software and computer programs, trade secrets, methods, processes, know how, drawings, specifications, descriptions, and all memoranda, notes, and records with respect to any research and development, goodwill, license agreements, franchise agreements, blueprints, drawings, purchase orders, customer lists, route lists, infringements, claims, computer programs, computer disks, computer tapes, literature, reports, catalogs, design rights, income tax refunds, business and accounting records, including all ledger account cards, in all cases whether now owned or hereafter created or acquired by Company or in which Company may now have or may hereafter acquire an interest and whether in tangible or intangible form or contained on magnetic media readable by machine together with all such magnetic media;

  

  

  

(b)            all inventory, goods held for sale or lease or to be furnished under contracts for service, or goods so leased or furnished, raw materials, component parts, work in process and other materials used or consumed in Company's business, now or at any time hereafter owned or acquired by Company, wherever located, and all products thereof, whether in the possession of Company, any warehousemen, any bailee or any other person and whether located at Company's places of business or elsewhere;

(c)            all money and property heretofore, now or hereafter delivered to or deposited with Collateral Agent or otherwise coming into the possession, custody or control of Collateral Agent in any manner or for any purpose whatsoever during the existence of this Security Agreement and whether held in a general or special account or deposit for safekeeping or otherwise;

(d)            all right, title and interest of Company under licenses, guaranties, warranties, management agreements, marketing or sales agreements, escrow contracts, indemnity agreements, insurance policies, service agreements, maintenance agreements and other similar contracts of every kind in which Company now has or at any time hereafter shall have an interest;

(e)            all of Company's goods, tools, machinery, furnishings, furniture and other equipment and fixtures of every kind now existing or hereafter acquired, and improvements, replacements, accessions and additions thereto, whether located on any property owned or leased by Company or elsewhere, including without limitation, any of the foregoing now or at any time hereafter located at or installed on the land or in the improvements at any of the real property owned or leased by Company, and all such goods after they have been severed and removed from any of said real property; and

(f)            all of Company's investment property;

together with whatever is receivable or received when any of the foregoing or the proceeds thereof are sold, leased, collected, exchanged or otherwise disposed of, whether such disposition is voluntary or involuntary, including without limitation, all rights to payment, including returned premiums, with respect to any insurance relating to any of the foregoing, and all rights to payment with respect to any cause of action affecting or relating to any of the foregoing.

Notwithstanding anything to the contrary set forth above, the Collateral does not include NutraCea’s interest (“NutraSA Interest”) in NutraSA LLC, a Delaware limited liability company.

“Irgovel” shall mean Industria Riograndese de Oleos Vegetais Ltda, a limited liability company organized under the laws of the Federative Republic of Brazil.

  

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“Lake Charles Assets” means the buildings, improvements, equipment, machinery, tools and assets used or located at NutraCea’s facility in Lake Charles, Louisiana.

“NutraSA” means NutraSA, LLC, a Delaware limited liability company.

“NutraSA Liquidity Transaction” shall mean any of the following transactions that results in cash being paid to NutraCea in respect and as a result thereof: (i) the sale of all or substantially all the assets of Irgovel or NutraSA to a third party unaffiliated with NutraCea, (ii) the sale of all the membership interests of NutraSA or all of the equity of Irgovel to a third party unaffiliated with NutraCea or (iii) a merger or consolidation transaction involving Irgovel or NutraSA that results in NutraCea no longer holding an equity interest in the surviving entity or a parent entity of the surviving entity.

“NutraSA Proceeds” shall mean the net cash proceeds received by NutraCea from a NutraSA Liquidity Transaction, less any applicable taxes that are paid or payable by NutraCea in connection with such NutraSA Liquidity Transaction.

“Obligations” shall mean the Company’s obligations to pay principal, accrued interest and expenses to the Collateral Agent and the Investors under the Notes and the Security Agreement, and all other obligations of the Company under the Transaction Documents, including, without limitation, the obligations of NutraCea set forth in Section 10 of this Security Agreement.

“Permitted Liens” means (a) Liens for taxes not yet delinquent or Liens for taxes being contested in good faith and by appropriate proceedings for which adequate reserves have been established; (b) Liens in respect of property or assets imposed by law which were incurred in the ordinary course of business, such as carriers’, warehousemen’s, materialmen’s and mechanics’ Liens and other similar Liens arising in the ordinary course of business which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings; (c) Liens incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, and mechanic’s Liens, carrier’s Liens and other Liens to secure the performance of tenders, statutory obligations, contract bids, government contracts, performance and return of money bonds and other similar obligations, incurred in the ordinary course of business, whether pursuant to statutory requirements, common law or consensual arrangements; (d) Liens in favor of the Collateral Agent; (e) Liens upon any equipment acquired by Company or any of its Subsidiaries after the date of this Security Agreement to secure the purchase price of such equipment or indebtedness incurred solely for the purpose of financing the acquisition of such equipment, so long as such Lien extends only to the equipment financed, and any accessions, replacements, substitutions and proceeds (including insurance proceeds) thereof or thereto; (f) Liens in favor of customs and revenue authorities arising as a matter of law to secure payments of customs duties in connection with the importation of goods (g) Liens which constitute rights of setoff of a customary nature or banker’s liens, whether arising by law or by contract; (h) Liens on insurance proceeds in favor of insurance companies granted solely as security for financed premiums; (i) leases or subleases and licenses or sublicenses granted in the ordinary course of Company’s business; (j) Liens in favor of the Term Loan Lender under the Term Loan Facility; and (k) Liens in favor of First Community Financial, a division of Pacific Western Bank (“FCF”), pursuant to that certain Factoring Agreement, dated January 6, 2011, by and between NutraCea and FCF, and any amendments thereto so long as the terms of such agreement, as amended, are substantially similar to the terms of such agreement as in effect as of the date hereof; provided, however, the Factoring Limit thereunder shall not exceed $1,000,000.

  

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“Releasable Assets” shall mean the real property used by NutraCea in Dillon, Montana, Mermentau, Louisiana, and Lake Charles, Louisiana, the improvements thereon and the equipment, machinery, tools and assets used and located at such properties.

“SRB Business” shall mean NutraCea’s stabilized rice bran business, which does not include (i) NutraCea’s business operated through Nutra SA, LLC, a Delaware limited liability company, Industria Riograndese de Oleos Vegetais Ltda, a limited liability company organized under the laws of the Federative Republic of Brazil (“Irgovel Business”), (ii) NutraCea’s rice bran oil business (“Non-Irgovel RBO Business”) and (iii) NutraCea’s business operated through RiceRx, LLC and RiceScience, LLC (“NFF Business”).

“Term Loan Facility” shall mean the loan facility (note to exceed $600,000) between NutraCea and the Term Loan Lender of even date herewith.

“Term Loan Lender” shall mean Maxim Commercial Capital, LLC.

“Transaction Documents” means this Security Agreement, the Notes, the Warrants, and the Purchase Agreement.

“UCC” means the Uniform Commercial Code as in effect in the State of California from time to time.

All capitalized terms not otherwise defined herein shall have the respective meanings given in the Notes. Unless otherwise defined herein, all terms defined in the UCC have the respective meanings given to those terms in the UCC.

2.            Grant of Security Interest. As security for the Obligations, Company hereby pledges to Collateral Agent and grants to Collateral Agent a security interest in the Collateral, whether now existing or hereafter from time to time acquired; provided however, that such pledge and security interest shall be subject to any bona fide intellectual property licenses granted by the Company in the ordinary course of business, and Collateral Agent (when exercising Collateral Agent’s rights and duties hereunder) and any successor to the Company with respect to such bona fide licenses shall be bound by the terms and conditions of such licenses.

3.            Subordination. The Collateral Agent and the Investors understand that the security interests granted herein are junior to the security interests of the Term Loan Lender under the Term Loan Facility. The Investors understand and agree that NutraCea and a Majority in Interest of the Investors may amend the terms of this Security Agreement in the future, and that such amendments could provide that loans incurred by the Company in the future (“Future Loans”) and the security interests in the Collateral and the Mortgages (as defined in the Purchase Agreement) that may be granted under such future loans (collectively, “Future Security Interests”) be senior to the obligations under the Notes and the security interests granted hereunder and under the Mortgages. If NutraCea and a Majority in Interest of the Investors agree to so amend this Security Agreement to effect such Future Loan transactions, each Investor agrees to enter into such agreements as are reasonably requested by NutraCea and a Majority in Interest to subordinate the Obligations and the security interests granted hereunder and under the Mortgages to the obligations and Future Security Interests arising under the Future Loans.

  

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4.            Release of Releasable Assets. If a Majority in Interest of the Investors provide their prior written consent to the sale, which consent may not be withheld unreasonably, the Collateral Agent shall take all actions reasonably required to release and terminate the Collateral Agent’s Lien and Mortgage (as defined in the Purchase Agreement) on any Releasable Assets that have been sold by NutraCea or the SRB Holding Company (as defined below) or for which NutraCea or the SRB Holding Company has entered into an agreement to sell such assets. Such release and termination shall be effective immediately upon such sale. So long as no Event of Default is then continuing and a Majority in Interest of the Investors provide their written consent, which consent may not be withheld unreasonably, if NutraCea establishes an operating facility outside of the United States using the Lake Charles Assets, enters into a joint venture using the Lake Charles Assets or enters into an agreement to do the same, Collateral Agent’s Lien on such Lake Charles Assets shall immediately and automatically terminate. NutraCea may take all necessary actions to reflect the foregoing, including without limitation the filing of any termination statements and the recording of any modification to a Mortgage. The Collateral Agent and the Investors shall cooperate with NutraCea and execute any documents reasonably requested by NutraCea to effect the foregoing. If any of the Releasable Assets are sold by NutraCea or the SRB Holding Company, the Collateral Agent may require NutraCea to prepay any portion of the Notes from the net proceeds actually received by NutraCea or the SRB Holding Company in such transaction, but only after application of the portion of such proceeds required to satisfy tax obligations or obligations under mechanics’ liens.

5.            General Representations and Warranties. Company represents and warrants to Collateral Agent and the Investors that (a) Company is the owner of the Collateral (or, in the case of after-acquired Collateral, at the time Company acquires rights in the Collateral, will be the owner thereof) and that no other Person has (or, in the case of after-acquired Collateral, at the time Company acquires rights therein, will have) any right, title, claim or interest (by way of Lien or otherwise) in, against or to the Collateral, other than Permitted Liens; and (b) upon the filing of UCC-1 financing statements (“Financing Statement”) with the Secretaries of State of the State of California and the State of Delaware, Collateral Agent has (or in the case of after-acquired Collateral, at the time Company acquires rights therein, will have) a first priority perfected security interest in the Collateral to the extent that a security interest in the Collateral can be perfected by such filing, except for Permitted Liens. The filing of the Financing Statement’s as described above shall perfect Collateral Agent’s Lien on the Company’s issued patents and the Company’s registered trademarks. Company hereby advises Collateral Agent that a bona fide purchaser for value who has recorded an assignment with the United States Patent and Trademark Office (“USPTO”) may defeat the earlier security interest of a secured party in an issued patent or a registered trademark that only files a UCC-1 in the appropriate offices and that does not record such Lien with the USPTO. Company hereby advises Collateral agent that a security interest in money and a security interest in a deposit account may only be perfected by control, and not by the filing of a Financing Statement. The filing of the Financing Statements as provided above will perfect Collateral Agent’s security interests in the stock and membership interests of NutraCea’s subsidiaries organized in any State in the United States.

  

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6.            Covenants Relating to Collateral. Company hereby agrees (a) to perform all acts that may be necessary to maintain, preserve, protect and perfect the Collateral, the Lien granted to Collateral Agent therein and the perfection and first priority of such Lien, except for Permitted Liens; (b) not to use or permit any Collateral to be used (i) in violation in any material respect of any applicable law, rule or regulation, or (ii) in violation of any policy of insurance covering the Collateral; (c) to pay promptly when due all taxes and other governmental charges, all Liens and all other charges now or hereafter imposed upon or affecting any Collateral; (d) without 30 days’ written notice to Collateral Agent, (i) not to change Company’s name or place of business (or, if Company has more than one place of business, its chief executive office), or the office in which Company’s records relating to accounts receivable and payment intangibles are kept, and (ii) not to change Company’s state of incorporation, and (e) to procure, execute and deliver from time to time any endorsements, assignments, financing statements and other writings reasonably deemed necessary or appropriate by Collateral Agent to perfect, maintain and protect its Lien hereunder and the priority thereof.

7.            Authorized Action by Collateral Agent. Company hereby irrevocably appoints Collateral Agent as its attorney-in-fact (which appointment is coupled with an interest) and agrees that Collateral Agent may, except as otherwise provided herein, perform (but Collateral Agent shall not be obligated to and shall incur no liability to Company or any third party for failure so to do) any act which Company is obligated by this Security Agreement to perform, and to exercise such rights and powers as Company might exercise with respect to the Collateral, including the right to (a) collect by legal proceedings or otherwise and endorse, receive and receipt for all dividends, interest, payments, proceeds and other sums and property now or hereafter payable on or on account of the Collateral; (b) make any compromise or settlement, and take any action it deems advisable, with respect to the Collateral; (c) insure, process and preserve the Collateral; (d) pay any indebtedness of Company relating to the Collateral; and (e) execute UCC financing statements and other documents, instruments and agreements required hereunder; provided, however, that Collateral Agent shall not exercise any such powers granted pursuant to subsections (a) through (d) prior to the occurrence of an Event of Default and shall only exercise such powers during the continuance of an Event of Default. Company agrees to reimburse Collateral Agent upon demand for any reasonable costs and expenses, including attorneys’ fees, Collateral Agent may incur while acting as Company’s attorney-in-fact hereunder, all of which costs and expenses are included in the Obligations. It is further agreed and understood between the parties hereto that such care as Collateral Agent gives to the safekeeping of its own property of like kind shall constitute reasonable care of the Collateral when in Collateral Agent’s possession; provided, however, that Collateral Agent shall not be required to make any presentment, demand or protest, or give any notice and need not take any action to preserve any rights against any prior party or any other person in connection with the Obligations or with respect to the Collateral.

8.            Default and Remedies.

(a)            Default. Company shall be deemed in default under this Security Agreement upon the occurrence and during the continuance of an Event of Default (as defined in the Notes).

(b)            Remedies. Upon the occurrence and during the continuance of any such Event of Default, Collateral Agent shall, except as otherwise provided herein, have the rights of a secured creditor under the UCC, all rights granted by this Security Agreement and by law. Company hereby agrees that ten (10) days’ notice of any intended sale or disposition of any Collateral is reasonable.

  

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(c)            Application of Collateral Proceeds. The proceeds and/or avails of the Collateral or the Real Property (as defined below), or any part thereof, and the proceeds and the avails of any remedy hereunder and under the Mortgages (as well as any other amounts of any kind held by Collateral Agent at the time of, or received by Collateral Agent after, the occurrence of an Event of Default) shall be paid to and applied as follows:

(i)            First, to the payment of reasonable costs and expenses, including all amounts expended to preserve the value of the Collateral and the Real Property, of foreclosure or suit, if any, and of such sale and the exercise of any other rights or remedies, and of all proper fees, expenses, liability and advances, including reasonable legal expenses and attorneys’ fees, incurred or made hereunder by Collateral Agent;

(ii)            Second, to the payment to each Investor of the amount then owing or unpaid on such Investor’s Note, and in case such proceeds shall be insufficient to pay in full the whole amount so due, owing or unpaid upon such Note, then its Pro Rata Share of the amount remaining to be distributed (to be applied first to accrued interest and second to outstanding principal);

(iii)            Third, to the payment of other amounts then payable to each Investor under any of the Transaction Documents, and in case such proceeds shall be insufficient to pay in full the whole amount so due, owing or unpaid under such Transaction Documents, then its Pro Rata Share of the amount remaining to be distributed; and

(iv)            Fourth, to the payment of the surplus, if any, to NutraCea, its successors and assigns, or to whomsoever may be lawfully entitled to receive the same.

For purposes of this Security Agreement, the term “Pro Rata Share” shall mean, when calculating an Investor’s portion of any distribution or amount, that distribution or amount (expressed as a percentage) equal to a fraction (i) the numerator of which is the original outstanding principal amount of such Investor’s Note and (ii) the denominator of which is the original aggregate outstanding principal amount of all Notes issued under the Purchase Agreement. In the event that an Investor receives payments or distributions in excess of its Pro Rata Share, then such Investor shall hold in trust all such excess payments or distributions for the benefit of the other Investors and shall pay such amounts held in trust to such other Investors upon demand by such Investors.

9.            Collateral Agent.

(a)            Appointment and Removal. The Investors hereby appoint Baruch Halpern and Greg Vislocky as collateral agents for the Investors under this Security Agreement (in such capacities, and any successors thereto, collectively, the “Collateral Agent”) and as agents for the Investors with respect to the Mortgages, to serve from the date hereof until the termination of the Security Agreement and the Mortgages or until one or both of such individuals serving as the Collateral Agent resigns or is removed as provided in this Section 9(a). A Majority in Interest of Investors may remove a new Collateral Agent or replace a Collateral Agent. If for any reason there is less than two individuals serving as Collateral Agent, a Majority in Interest of the Investors shall promptly appoint a new individual to serve as Collateral Agent. The Collateral Agent may only act if the action is an affirmative action of all individuals serving collectively as the Collateral Agent; provided, however, that if both individuals serving as the Collateral Agent are unable to agree upon an action to be taken by the Collateral Agent, either individual may deliver to the other individual a written notice of such disagreement, stating in reasonably detail the substance of the disagreement(s) (the “Disputed Items” and such notice, the “Notice of Dispute”). Upon delivery of the Notice of Dispute, the two individuals shall discuss such Disputed Items in good faith. If the individuals cannot resolve such Disputed Items on or prior to 10 Business Days after delivery of the Notice of Dispute (an “Unresolved Dispute Item”), then the individuals shall use commercially reasonable efforts to cause a mutually agreeable third party workout specialist (the “Referee”) to determine, within 20 Business Days following such date of hire, the Unresolved Dispute Items. If the individuals can’t agree on a Referee on or prior to 20 Business Days after delivery of the Notice of Dispute, the individual that did not deliver the Notice of Dispute will prepare a list of three third party workout specialists, the other individual will eliminate two of the names, and the remaining name on the list will be the Referee. The individuals each shall provide the Referee with all necessary documents. The Referee shall determine only those Unresolved Dispute Items. After the 20 Business Days period following hire, the Referee shall render its opinion as to the Unresolved Dispute Items and shall submit to both individuals a written determination of such Unresolved Dispute Items. The determination of the Referee shall, with respect to such Unresolved Dispute Items, be final, conclusive, binding and non-appealable. Either individual serving as Collateral Agent may take action in accordance with the determination of the Referee without the approval of the other individual serving as Collateral Agent.

  

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(b)            Powers and Duties of Collateral Agent, Indemnity by Investors.

(i)            Each Investor hereby irrevocably authorizes the Collateral Agent to take such action and to exercise such powers hereunder as provided herein or as requested in writing by the Investors of a Majority in Interest in accordance with the terms hereof, together with such powers as are reasonably incidental thereto. Collateral Agent may execute any of its duties hereunder and under the Mortgages by or through agents or employees and shall be entitled to request and act in reliance upon the advice of counsel concerning all matters pertaining to its duties hereunder and thereunder and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance therewith.

(ii)            Neither the Collateral Agent nor any of its directors, officers or employees shall be liable or responsible to any Investor or to Company for any action taken or omitted to be taken by Collateral Agent or any other such person hereunder, under the Mortgages or under any related agreement, instrument or document, except in the case of gross negligence or willful misconduct on the part of the Collateral Agent, nor shall the Collateral Agent or any of its directors, officers or employees be liable or responsible for (i) the validity, effectiveness, sufficiency, enforceability or enforcement of the Notes, this Security Agreement, the Mortgages or any instrument or document delivered hereunder or relating hereto; (ii) the title of Company to any of the Collateral or the real property and fixtures securing the Obligations under the Mortgages (collectively, the “Real Property”) or the freedom of any of the Collateral or Real Property from any prior or other liens or security interests; (iii) the determination, verification or enforcement of Company’s compliance with any of the terms and conditions of this Security Agreement or the Mortgages; (iv) the failure by Company to deliver any instrument or document required to be delivered pursuant to the terms hereof or the Mortgages; or (v) the receipt, disbursement, waiver, extension or other handling of payments or proceeds made or received with respect to the Collateral or the Real Property, the servicing of the Collateral or the Real Property or the enforcement or the collection of any amounts owing with respect to the Collateral or the Real Property.

  

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(iii)            In the case of this Security Agreement and the transactions contemplated hereby and the Mortgages and any related document relating to any of the Collateral or the Real Property, each of the Investors agrees to pay to the Collateral Agent, on demand, its Pro Rata Share of all reasonable fees and all reasonable expenses incurred in connection with the operation and enforcement of this Security Agreement, the Mortgages, the Notes or any related agreement to the extent that such fees or expenses have not been paid by Company. In the case of this Security Agreement and each instrument and document relating to any of the Collateral or the Real Property, each of the Investors and the Company hereby agrees to hold the Collateral Agent harmless, and to indemnify the Collateral Agent from and against any and all loss, damage, expense or liability which may be incurred by the Collateral Agent under this Security Agreement, the Mortgages and the transactions contemplated hereby and any related agreement or other instrument or document, as the case may be, unless such liability shall be caused by the willful misconduct or gross negligence of the Collateral Agent.

10.            NutraSA.

(a)            Negative Pledge. So long as any Obligations are outstanding, NutraCea shall not sell, transfer, assign, pledge, or grant a security interest in any of the membership interests held by NutraCea in NutraSA.

(b)            Prepayment. If a NutraSA Liquidity Transaction is completed, the Collateral Agent may require NutraCea to prepay any portion of the Notes from the NutraSA Proceeds.

11.            Miscellaneous.

(a)            Notices. Except as otherwise provided herein, all notices, requests, demands, consents, instructions or other communications to or upon Company or Collateral Agent under this Security Agreement shall be in writing and faxed, mailed or delivered to each party to the facsimile number or its address set forth below (or to such other facsimile number or address as the recipient of any notice shall have notified the other in writing). All such notices and communications shall be effective (a) when sent by Federal Express or other overnight service of recognized standing, on the business day following the deposit with such service; (b) when mailed, by registered or certified mail, first class postage prepaid and addressed as aforesaid through the United States Postal Service, upon receipt; (c) when delivered by hand, upon delivery; and (d) when faxed, upon confirmation of receipt.

  

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Collateral Agent:

Gregory J. Vislocky

7700 NE Parkway Dr. Suite 300

Vancouver, WA 98662

Telephone: (360) 735-7155, Ext. 257

Facsimile:______________

Email: gvislocky@prestigecare.com

And:

Baruch Halpern

______________________

______________________

Telephone:_____________

Facsimile:______________

Email:_________________

Any Company:

NutraCea

6720 N. Scottsdale Road, Suite 390

Scottsdale, AZ 85253

Attention: W. John Short, CEO

Telephone:_____________

Facsimile:______________

with a copy to:

Weintraub Genshlea Chediak Tobin & Tobin

400 Capitol Mall, 11th Floor

Sacramento, CA 95814

Attention: Chris Chediak, Esq.

Telephone: (916) 558-6016

Facsimile: (916) 446-1611

Email: cchediak@weintraub.com

(b)            Nonwaiver. No failure or delay on Collateral Agent’s part in exercising any right hereunder shall operate as a waiver thereof or of any other right nor shall any single or partial exercise of any such right preclude any other further exercise thereof or of any other right.

(c)            Amendments and Waivers. Except as expressly provided herein, this Security Agreement may not be amended or modified, nor may any of its terms be waived, except by written instruments signed by NutraCea and a Majority in Interest of the Investors; provided, however, that Investors purchasing Notes in a Closing after the Initial Closing (each as defined in the Purchase Agreement) may become Investors under this Security Agreement, by executing a counterpart of this Security Agreement without any amendment of this Security Agreement pursuant to this paragraph or any consent or approval of a Majority in Interest of the Investors. Each waiver or consent under any provision hereof shall be effective only in the specific instances for the purpose for which given.

  

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(d)            Assignments. This Security Agreement shall be binding upon and inure to the benefit of Collateral Agent and Company and their respective successors and assigns; provided, however, that Company may not sell, assign or delegate rights and obligations hereunder without the prior written consent of Collateral Agent.

(e)            Cumulative Rights, etc. The rights, powers and remedies of Collateral Agent under this Security Agreement shall be in addition to all rights, powers and remedies given to Collateral Agent by virtue of any applicable law, rule or regulation of any governmental authority, any Transaction Document or any other agreement, all of which rights, powers, and remedies shall be cumulative and may be exercised successively or concurrently without impairing Collateral Agent’s rights hereunder. Company waives any right to require Collateral Agent to proceed against any person or entity or to exhaust any Collateral or to pursue any remedy in Collateral Agent’s power.

(f)            Payments Free of Taxes, Etc. All payments made by Company under the Transaction Documents shall be made by Company free and clear of and without deduction for any and all present and future taxes, levies, charges, deductions and withholdings. In addition, Company shall pay upon demand any stamp or other taxes, levies or charges of any jurisdiction with respect to the execution, delivery, registration, performance and enforcement of this Security Agreement. Upon request by Collateral Agent, Company shall furnish evidence satisfactory to Collateral Agent that all requisite authorizations and approvals by, and notices to and filings with, governmental authorities and regulatory bodies have been obtained and made and that all requisite taxes, levies and charges have been paid.

(g)            Partial Invalidity. If at any time any provision of this Security Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions of this Security Agreement nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby.

(h)            Construction. Each of this Security Agreement and the other Transaction Documents is the result of negotiations among, and has been reviewed by, Company, Investors, Collateral Agent and their respective counsel. Accordingly, this Security Agreement and the other Transaction Documents shall be deemed to be the product of all parties hereto, and no ambiguity shall be construed in favor of or against Company, Investors or Collateral Agent.

(i)            Entire Agreement. This Security Agreement taken together with the other Transaction Documents constitute and contain the entire agreement of Company, Investors and Collateral Agent and supersede any and all prior agreements, negotiations, correspondence, understandings and communications among the parties, whether written or oral, respecting the subject matter hereof.

  

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(j)            Other Interpretive Provisions. References in this Security Agreement and each of the other Transaction Documents to any document, instrument or agreement (a) includes all exhibits, schedules and other attachments thereto, (b) includes all documents, instruments or agreements issued or executed in replacement thereof, and (c) means such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified and supplemented from time to time and in effect at any given time. The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Security Agreement or any other Transaction Document refer to this Security Agreement or such other Transaction Document, as the case may be, as a whole and not to any particular provision of this Security Agreement or such other Transaction Document, as the case may be. The words “include” and “including” and words of similar import when used in this Security Agreement or any other Transaction Document shall not be construed to be limiting or exclusive.

(k)            Governing Law. This Security Agreement shall be governed by and construed in accordance with the laws of the State of California without reference to conflicts of law rules (except to the extent governed by the UCC).

(l)            SRB Holding Company. Within forty five (45) days following the Initial Closing (as defined in the Purchase Agreement), NutraCea shall (i) establish a separate entity and transfer and assign to such entity, the assets of NutraCea comprising NutraCea’s SRB Business (such entity after receipt of such assets, “SRB Holding Company”), which assets include without limitation NutraCea’s stage 1 and stage 2 manufacturing facilities located in the United States, the licenses necessary to use the intellection property to operate the SRB Business and the customer lists associated with such SRB Business, (ii) grant to the Collateral Agent on behalf of the Investors a security interest in the equity interests of the SRB Holding Company and (iii) take such actions as are required to cause (A) the Collateral that is contributed to the SRB Holding Company to continue to be encumbered by the security interests granted hereunder to the extent that they are required to be encumbered hereunder (including with respect to priority) and (B) the real property assets that will be encumbered pursuant to the Mortgages to continue to be so encumbered.

(m)            Counterparts. This Security Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall be deemed to constitute one instrument.

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IN WITNESS WHEREOF, Company has caused this Security Agreement to be executed as of the day and year first above written.

	  	
NUTRACEA

	  	  	  	  
	  	
By:

	  	  
	  	  	
Jerry Dale Belt, Chief Financial Officer

	  	  	  	  
	  	
THE RICEX COMPANY

	  	
a Delaware corporation

	  	  	  	  
	  	
By:

	  	  
	  	  	
_____________, _______________

	  	  	  	  
	  	
RICE SCIENCE, LLC

	  	
a Delaware limited liability company

	  	  	  	  
	  	
By: NutraCea, its member

	  	  	  	  
	  	  	
By:

	  
	  	  	  	
Jerry Dale Belt, Chief Financial Officer

	
AGREED:

	  
	  	  	  
	
{Collateral Agent},

	  
	
As Collateral Agent

	  
	  	  	  
	
By:

	  	  
	
Name:

	  	  
	
Title:

	  	  
	  	  	  
	
Investors:

	  
	  	  	  
	
{Name}

	  
	  	  	  
	
By:

	  	  
	
Name:

	  	  
	
Title:

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