ASSET PURCHASE AGREEMENT

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

1.            Sale and Purchase.

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

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

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

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

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

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

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

2.            Purchase Price and Payment .

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

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

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

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

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

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

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

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

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

  2.5            Remedies Upon an Event of Default.

  2.5.1.        Event of Default of Buyer .

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

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

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

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

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

  (e)            Cumulative Remedies . The rights, powers and remedies of Seller hereunder shall be in addition to all rights, powers and remedies given by statute or rule of law and are cumulative. The exercise of any one o