FORBEARANCE AGREEMENT AND AMENDMENT TO CREDIT AND SECURITY AGREEMENT

A.             Obligations Owing to Lender. Borrowers are obligated to Lender pursuant to the terms and conditions of the Credit and Security Agreement dated as of December 18, 2008 (the "Credit Agreement"), which evidence the Indebtedness. Unless otherwise indicated, capitalized terms used in this Agreement will correspond to the capitalized terms used in the Credit Agreement.

B.             Security for Repayment and Satisfaction of Obligations Owing to Lender . As security for repayment and satisfaction of all Indebtedness owing from Borrower, Lender holds (among other things) valid, perfected, and enforceable first priority liens and a Security Interest in all of the Collateral described in the Credit Agreement and a first lien on a certain real property with a street address of 4502 West Monterosa, Phoenix, Arizona (the "Property").

C.             Loan Documents . The obligations set forth in Paragraph A above, and the Security Interest of Lender in the Collateral described in Paragraph B above are evidenced by (among other things) the following Loan Documents:

1.           The Credit Agreement;

2.           The Revolving Note dated December 18, 2008 in the original principal amount of $2,500,000 (the "Revolving Note");

3.           The Term Note dated December 18, 2008 in the original principal amount of $2,500,000 (the "Term Note");

4.           The Real Estate Note dated December 18, 2008 in the original principal amount of $5,000,000 (the "Real Estate Note and together with the Revolving Note and the Term Note, the "Notes");

5.           The Deed of Trust, Assignment of Rents and Leases, and Fixture Filing dated December 18, 2008, executed by NutraPhoenix, LLC, in favor of Lender and recorded December 22, 2008 as Document No. 2008-1076174 in the Official Records of Maricopa County; and

6.           Various UCC Financing Statements.

D.            Outstanding Indebtedness Under the Loan Documents . Computed as of July 24, 2009, Borrowers are indebted to Lender in the amount of at least $3,309,439.00 in unpaid principal, not including accrued and accruing interest, costs, and expenses (including attorneys' fees), and not including issued and undrawn obligations under the Letters of Credit, for which Borrowers are also indebted to Lender under the Loan Documents.

E.             Existing Defaults Under the Credit Agreement . Borrowers are presently in default of their obligations to Lender under the Credit Agreement and the Loan Documents, for inter alia (collectively, the "Existing Defaults"):

1.           Section 1.4(a) of the Credit Agreement as a result of Borrowers' failure to deposit all Proceeds of Accounts and other Collateral into the Collection Account.

2.           Section 1.4(b) of the Credit Agreement as a result of Borrowers' Letter Agreement dated May 14, 2009 with Fanners Rice Cooperative ("FCR Agreement"), which requires Borrowers to instruct its customers to make certain payments (the "FCR Payments") into a lockbox account jointly established by Farmers Rice Cooperative and NutraCea.

3.           Section 5.1(a) of the Credit Agreement as a result of Borrowers' failure to deliver audited financial statements for 2008 within 90 days of Borrowers' fiscal year end.

4.           Section 5.1(b) of the Credit Agreement as a result of Borrowers' failure to deliver quarterly financial statements for the period ending March 31, 2009 by May 10, 2009.

5.           Section 5.1(c) of the Credit Agreement as a result of Borrowers' failure to deliver their February 2009, March 2009, May 2009, and June 2009 collateral reports within 15 days of the end of the applicable month.

6.           Section 5.2(d) of the Credit Agreement as a result of Borrowers' Capital Expenditures exceeding $5,000,000.00 in the aggregate during the fourth quarter 2008.

7.           Section 5.12 of the Credit Agreement as a result of Borrowers' failure to pay real estate taxes from the Property when due.

8.           Section 5.12 of the Credit Agreement as a result of Borrowers' failure to pay all lawful claims for labor, materials and supplies.

9.           Section 5.13(b) of the Credit Agreement as a result of the filing of Notices and Claims of Mechanic's and Materialman's Liens (collectively, the " Mechanic's Liens ") on the Property.

10.           Section 4.4 of the Deed of Trust as a result of the Mechanic's Liens being filed on the Property without prior approval of Lender.

11.           Based upon the draft income statement for the twelve months ending December 31, 2008 delivered by Borrowers to Lender, Borrowers additionally appear to be in default of various financial covenants under the Credit Agreement, including without limitation Borrowers' failure to maintain a cumulative quarterly Debt Service Coverage Ratio of not less than 1.2 to 1.0, for the quarter ending March 31, 2009.

F.             Acknowledgement of Lender's Rights and Remedies . Based on the Existing Defaults, Borrowers acknowledge and confirm that Lender has (among other things) the unconditional right to exercise all of its remedies under the Loan Documents, including but not limited to, the right to declare the Indebtedness immediately due and payable and to proceed immediately with collection and liquidation of its Collateral and its Security Interest.

G.             Request for Forbearance and Other Modifications of Loan Documents . Borrowers have requested that Lender forbear from exercising its rights and remedies with respect to all Existing Defaults from the date of this Agreement through January 31, 2010 (the "Forbearance Period"). Borrowers also have requested certain modifications to the Loan Documents. Although it is under no obligation to do so, Lender agrees to accommodate Borrowers' request for certain modifications to the Loan Documents, and Lender agrees to forbear from exercising its rights and remedies with respect to the Existing Defaults, so long as Borrowers satisfy all of the conditions set forth in Section II below, and provided that Borrowers comply with all other obligations under the Credit Agreement and Loan Documents (as modified by this Agreement).

For present and fair consideration, the receipt and sufficiency of which are hereby acknowledged, Borrowers and Lender hereby agree as follows:

1.            INCORPORATION OF RECITALS . The foregoing Recitals are incorporated into these Operative Provisions without any difference or distinction between the two (2) segments of this Agreement. Borrowers acknowledge and confirm that each of the foregoing Recitals is true and correct.

2.1            Conditions to Forbearance and Loan Modifications . Lender's forbearance with respect to Existing Defaults and the modification of the Loan Documents pursuant to this Agreement are expressly conditioned upon the satisfaction of the following conditions:

(a)          Delivery of this Agreement . Borrowers shall have delivered to Lender a fully-executed original of this Agreement.

(b)          No New Defaults . No new default or Event of Default shall occur under the Loan Documents, as amended by this Agreement. Notwithstanding the foregoing, Lender will not be deemed to have waived any rights or remedies arising as a result of any new default or Event of Default by Borrowers under the Loan Documents.

(c)          Reimbursement of Lender's Costs and Expenses . Borrowers will reimburse Lender for all of its costs and expenses (including attorneys' fees) incurred in relation to this Agreement and the transactions contemplated by this Agreement.

(d)          Dillon Property Deed of Trust . Borrowers will deliver to Lender a fully-executed Deed of Trust (the "Dillon Deed of Trust") in a form acceptable to Lender in its sole and absolute discretion, granting Lender a first priority lien on certain real property located at 3512 E. Bench   Dillon, Montana (the "Dillon Property"). In addition, if Lender requires, Borrowers, at Borrowers' expense, will provide a Lender's policy or other title policy in a form acceptable to Lender. Borrowers anticipate negotiating the sale of the Dillon Property prior to the expiration of the Forbearance Period. In the event Borrowers seek to sell the Dillon Property, such sale is subject to Lender's review and approval of the purchase and sale agreement, in Lender's sole and absolute discretion. Subject to Lender's review and approval of the purchase agreement, in the event there are no additional defaults or Events of Default, and provided there is no material adverse change in Borrowers' financial condition, Lender will release the Dillon Deed of Trust in connection with such sale upon Lender's receipt of $1,000,000.00 of the proceeds of such sale.

(e)          Master Agreement for Treasury Management Services . Borrowers shall deliver to Lender a fully-executed Master Agreement for Treasury Management Services, and Lockbox and Collection Account Service Agreement Description and Acceptance of Services.

(f)           Certificate of Officer; Certificates of Good Standing . Borrowers shall deliver to Lender Certificates of Officers (in form and substance acceptable to Lender) certifying as to the authority of an Officer of each Borrower to execute and deliver this Agreement and such other matters as Lender may require, along with a certificate of good standing for each Borrower issued by the governmental authorities in each of the states in which Borrowers conduct their business activities, each dated no earlier than the date that is 30 days prior to the date of this Agreement evidencing Borrowers' good standing in such states.

(g)          Resolutions and Authorizations . Borrowers shall deliver to Lender resolutions and authorizations (in form and substance acceptable to Lender), together with such additional documentation as Lender may require, authorizing Borrowers to enter into this Agreement and to perform their respective duties and obligations hereunder.

(h)          No Material Adverse Change . No material adverse change (to be determined in Lender's sole judgment) shall have occurred relative to or affecting Borrowers, Borrowers' business activities, operations and projections, the Collateral, the Premises, the Security Interest or the liens, security interests, and rights of Lender.

(i)            Miscellaneous . Borrowers shall perform or cause to be performed such additional conditions and shall deliver or cause to be delivered to Lender such additional documentation as Lender may require in Lender's sole and absolute discretion.

2.2            Continued Effect of Loan Documents . Except as otherwise provided herein, the Loan Documents and all other documents and agreements between Lender and Borrowers shall remain in full force and effect.

2.3            No Accommodations Without Satisfaction of All Conditions . Unless all of the conditions set forth above are satisfied, Lender will be free to exercise all of its rights and remedies under the Loan Documents.   So long as all of the conditions set forth above are satisfied, and provided that the Borrowers comply with all of their respective obligations under the Loan Documents as modified by this Agreement, Lender will forbear during the Forbearance Period from exercising its rights and remedies with respect to the Existing Defaults, and Lender will agree to modify the Loan Documents as provided below.

3.1            Modification of Borrowing Base . Section 1.2(a) of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

(i)            75% or such lesser percentage of Eligible Accounts as Wells Fargo in its sole discretion may deem appropriate, or $1,500,000.00, which ever is less, less

(ii)            the Borrowing Base Reserve, less

(iii)           Indebtedness that Company owes Wells Fargo that has not been advanced on the Revolving Note, less

(iv)           Indebtedness that is not otherwise described in Section 1, including Indebtedness that Wells Fargo in its sole discretion finds on the date of determination to be equal to Wells Fargo's net credit exposure with respect to any swap, derivative, foreign exchange, hedge, deposit, treasury management or similar transaction or arrangement extended to Company by Wells Fargo and any Indebtedness owed by Company to Wells Fargo Merchant Services, L.L.C.

Notwithstanding the foregoing, Borrowers acknowledge that until the expiration of the FCR Agreement and the termination of the lockbox account jointly established between Farmers Rice Cooperative and NutraCea, the FCR Payments shall not be deemed Eligible Accounts.

3.2            Lockbox . Pursuant to Section 1.4 of the Credit Agreement, Borrowers shall immediately direct all of Borrowers' account debtors to make all payments to the Lockbox or to Lender directly by wire transfer or other immediately available funds.

3.3            Interest Rates Applicable to Line of Credit and Real Estate Loan . Section 1.7(a) of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

"Except as otherwise provided in this Agreement, the unpaid principal amount of each Line of Credit Advance evidenced by the Revolving Note and the Real Estate Loan Advance evidenced by the Real Estate Term Note, shall accrue interest at an annual interest rate calculated as follows:

Floating Rate:

Line of Credit Advances = the Prime Rate plus five and one half percent (5.5%);

Real Estate Loan Advance = the Prime Rate plus six percent (6.0%);

which interest rate shall change whenever the Prime Rate changes (the "Floating Rate"). Notwithstanding the foregoing, as an accommodation to Borrowers, Lender will defer three percentage points of each of the Floating Rates set forth above until the earlier of: (i) termination of the Credit Facility; or (ii) January 31, 2010, at which time all such deferred interest shall be due and payable.

3.4            Line of Credit Advances . Notwithstanding the Section 3.1 herein or any other provisions in the Credit Agreement or the Loan Documents, during the Forbearance Period, Lender shall make to Borrowers the following advances under the Line of Credit:

(a)         $250,000.00 for settlement of all claims arising out of or in connection with that certain complaint filed by W.D. Manor Mechanical Contractors, Inc., Maricopa County Superior Court Case No. CV2009-013957 (the "Complaint"), which may be made in increments upon receipt of all requirements set forth in Section 3.12 of this Agreement and further subject to the terms and conditions set forth herein; and

(b)         $85,000.00 for payment of past due taxes, assessments and governmental charges levied or imposed upon the Property;

(c)         Such other and future advances as Lender may agree to in its sole and absolute discretion;

The unpaid principal amount of the Line of Credit Advances shall be due and payable in equal monthly installments of $10,000.00, beginning on October 1, 2009, and on the first day of each month thereafter until the earlier of: (i) termination of the Credit Facility; or (ii) January 31, 2010, when the entire balance of unpaid principal of the Line of Credit Advances shall be due and payable in full;

So long as any amounts funded under the Line of Credit remains outstanding, Borrowers shall deliver to Lender on Wednesday for the prior week, a weekly detailed aging of the Company's accounts receivable and accounts payable, in a form satisfactory to Lender in its sole and absolute discretion.

3.5            Real Estate Loan . Lender has applied the Cash Collateral to reduce the Indebtedness of Borrowers to Lender. Accordingly, the principal balance outstanding under the Real Estate Loan has been reduced $3,249,439. Notwithstanding any other provision of the Loan Documents to the contrary, Lender shall have no obligations to make any furth