Exhibit 10.70

 

THIRD SUPPLEMENTAL SECURITY AGREEMENT

 

THIS THIRD SUPPLEMENTAL SECURITY AGREEMENT (this “Security Agreement”), dated as
of June 30, 2009, is made by ML MACADAMIA ORCHARDS, L.P., a Delaware limited
partnership, and ML RESOURCES, INC., a Hawaii corporation (“Grantor”), in favor
of AMERICAN AGCREDIT, PCA as successor in interest to PACIFIC COAST FARM CREDIT
SERVICES, PCA, (“Lender”).

 

RECITALS

 

A.            Pursuant to that certain Third Amended and Restated Credit
Agreement dated as of June 30, 2009  (the “Third Amended Credit Agreement”) by
and among Grantor, as borrower, and Lender, Lender is agreeing to extend
financial accommodations to Borrower on the terms set forth therein (the
“Loan”).  Lender is willing to do so, but only upon the condition, among others,
that Grantor shall execute this Security Agreement.

 

B.            Pursuant to that certain Credit Agreement dated as of May 1, 2000
(the “Original Credit Agreement”), by and among Grantor, as borrower, and
Pacific Coast Farm Credit Services, PCA, Lender extended certain financial
accommodations to Borrower conditioned upon, among other things, the execution
of a Security Agreement dated as of May 1, 2000 (the “Original Security
Agreement”).   In addition, pursuant to that certain Amended and Restated Credit
Agreement dated as of May 1, 2004 (the “First Amended Credit Agreement”), by and
among Borrower and Lender, Lender extended certain further financial
accommodations to Borrower conditioned upon, among other things, the execution
of a Supplemental Security Agreement dated as of May 1, 2004 (the “Supplemental
Security Agreement”).  In addition, pursuant to that certain Second Amended and
Restated Credit Agreement dated as of July 8, 2008 (the “Second Amended Credit
Agreement”) by and among Borrower and Lender, Lender extended certain further
financial accommodations to Borrower conditioned upon, among other things, the
execution of a Second Supplemental Security Agreement dated as of July 8, 2008
(the “Second Supplemental Security Agreement”) It is the intent of the parties
hereto that this Security Agreement supplement both the Original Security
Agreement, the Supplemental Security Agreement and the Second Supplemental
Security Agreement, all of which are to remain in full force and effect.

 

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and in order to induce Lender to enter into
the Third Amended Credit Agreement, Grantor agrees, for the benefit of Lender,
as follows:

 

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AGREEMENT

 

1.             Defined Terms.  Unless otherwise defined herein, (i) terms
defined in the Third Amended Credit Agreement are used herein as therein defined
except that the defined terms that refer to the “Borrower” shall refer herein to
Grantor, and (ii) the following terms shall have the following meanings (such
meanings being equally applicable to both the singular and plural forms of the
terms defined):

 

“Account Debtor” means any “account debtor,” as such term is defined in the UCC.

 

“Accounts” has the meaning assigned to it in Exhibit A hereto.

 

“Chattel Paper” has the meaning assigned to it in Exhibit A hereto.

 

“Collateral” has the meaning assigned to it in Section 2 of this Security
Agreement.

 

“Contracts” has the meaning assigned to it in Exhibit A hereto.

 

“Documents” has the meaning assigned to it in Exhibit A hereto.

 

“Equipment” has the meaning assigned to it in Exhibit A hereto.

 

“Farm Products” has the meaning assigned to it in Exhibit A hereto.

 

“Fixtures” has the meaning assigned to it in Exhibit A hereto.

 

“General Intangibles” has the meaning assigned to it in Exhibit A hereto.

 

“Grantor” means ML Macadamia Orchards, L.P., a Delaware limited partnership, and
ML Resources, Inc., a Hawaii corporation.

 

“Hereby,” “herein,” “hereof,” and “hereunder” and words of similar import refer
to this Security Agreement as a whole (including any amendments, attachments,
and schedules hereto) and not merely to the specific section, paragraph or
clause in which the respective word appears.

 

“Instruments” has the meaning assigned to it in Exhibit A hereto.

 

“Inventory” has the meaning assigned to it in Exhibit A hereto.

 

“Investment Property” has the meaning assigned to it in Exhibit A hereto.

 

“Lender” has the meaning assigned to them in the preamble hereto.

 

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“License” means any Patent License, Trademark License or other license of rights
or interests now held or hereafter acquired by Grantor.

 

“Loan” has the meaning assigned to it in Recital A.

 

“Original Credit Agreement” has the meaning assigned to it in Recital B.

 

“Patent License” means rights under any written agreement now owned or hereafter
acquired by Grantor granting any right with respect to any invention on which a
Patent is in existence.

 

“Patents” means all of the following in which Grantor now holds or hereafter
acquires any interest: (i) all letters patent of the United States or any other
country, all registrations and recordings thereof, and all applications for
letters patent of the United States or any other country, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State or Territory thereof, or any other country, and (ii) all reissues,
continuations, continuations-in-part or extensions thereof.

 

“Proceeds” has the meaning assigned to it in Exhibit A hereto.

 

“Second Amended Credit Agreement” has the meaning assigned to it in Recital B.

 

“Secured Obligations” shall mean any and all loans, advances, obligations,
covenants, and duties owing to Lender by Grantor of any kind or nature, absolute
or contingent, due or to become due, whether now existing or hereafter arising,
whether or not evidenced by any note, guaranty, non-recourse guaranty or other
instrument, agreement or writing, including, without limitation, the Original
Credit Agreement, the First Amended Credit Agreement, the Second Amended Credit
Agreement, the Third Amended Credit Agreement, all interest, charges, fees,
attorneys’ fees, expenses, and any other sum chargeable by Lender to Grantor
under this or any other agreement.

 

“Security Agreement” means this Security Agreement, as the same may from time to
time be amended, modified or supplemented.

 

“Third Amended Credit Agreement” has the meaning assigned to it in Recital A.

 

“Trademark License” means rights under any written agreement now owned or
hereafter acquired by Grantor granting any right to use any Trademark or
Trademark registration.

 

“Trademarks” means all of the following now owned or hereafter acquired by
Grantor:  (i) all trademarks, trade names, corporate names, business names,
trade styles, service marks, logos, other source or business identifiers, prints
and labels on which any of the foregoing have appeared or appear, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and

 

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all applications in connection therewith, including registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State or Territory thereof,
or any other country or any political subdivision thereof, and (ii) all
reissues, extensions or renewals thereof.

 

“UCC” means the Uniform Commercial Code as the same may, from time to time, be
in effect in the State of California; provided, however, in the event that, by
reason of mandatory provisions of law, any or all of the attachment, perfection
or priority of Lender’s security interest in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than the State of
California, the term “UCC” shall mean the Uniform Commercial Code as in effect
in such other jurisdiction for purposes of the provisions hereof relating to
such attachment, perfection or priority and for purposes of definitions related
to such provisions.

 

2.             Grant of Security Interest.

 

a.             To secure the prompt and complete payment and performance when
due (whether at stated maturity, by acceleration or otherwise) of all the
Secured Obligations, and to induce Lender to enter into the Third Amended Credit
Agreement and to make the Loan in accordance with the terms thereof, Grantor
hereby grants to Lender, a lien on and security interest in all of the property
described on Exhibit A hereto, whether now owned by or owing to, or hereafter
acquired by or arising in favor of Grantor (including under any trade names,
styles or divisions thereof), and whether owned or consigned by, or leased to
Grantor, and regardless of where located, together with any and all
replacements, remedies, or accessions thereto and all proceeds and products
thereof (all of which being hereinafter collectively referred to as the
“Collateral”); provided, however, that notwithstanding any provision to the
contrary contained in this Security Agreement, Grantor does not grant, and
Lender has not taken, a lien against or security interest in (i) any Hazardous
Materials in which Grantor may now or hereafter acquire any interest, or which
Grantor may now or hereafter possess, manage or control, any (ii) any of
Grantor’s governmental licenses and permits that if included in the Collateral
would violate any mandatory requirements of such licenses and permits or
applicable law prohibiting the creation of security interests therein.

 

b.             In addition, to secure the prompt and complete payment when due
of the Secured Obligations and in order to induce Lender to enter into the Third
Amended Credit Agreement and to make the Loan in accordance with the terms
thereof, Grantor hereby grants to Lender a security interest in all other
personal property of Grantor, including all property of every description now or
hereafter in the possession or custody of, or in transit to, Lender for any
purpose, including safekeeping, collection or pledge, for the account of
Grantor, or as to which Grantor may have any right or power.

 

3.             Lender’s Rights; Limitations on Lender’s Obligations.

 

a.             Grantor Remains Liable Under Contracts and Licenses.  Grantor
agrees that, anything herein to the contrary notwithstanding, Grantor shall
remain liable under each of its Contracts and each of its Licenses to observe
and perform all the conditions and obligations to be observed and performed by
it thereunder and Grantor shall perform all of its

 

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duties and obligations thereunder, all in accordance with and pursuant to the
terms and provisions of each such Contract or License.  Lender shall not have
any obligation or liability under any Contract or License by reason of or
arising out of this Security Agreement or the granting herein of a security
interest therein or the receipt by Lender of any payment relating to any
Contract or License pursuant hereto, nor shall Lender be required or obligated
in any manner to perform or fulfill any of the obligations of Grantor under or
pursuant to any Contract or License, or to make any payment, or to make any
inquiry as to the nature or the sufficiency of any payment received by it or the
sufficiency of any performance by any party under any Contract or License, or to
present or file any claim, or to take any action to collect or enforce any
performance or the payment of any amounts which may have been assigned to it or
to which it may be entitled at any time or times.

 

b.             Notice of Assignment of Collateral to Lender.  Lender may at any
time after the occurrence and during the continuance of an Event of Default
notify Account Debtors of Grantor, parties to the Contracts of Grantor, and
obligors in respect of Instruments and Investment Property of Grantor that the
Accounts and the right, title and interest of Grantor in and under such
Contracts, Instruments, and Investment Property have been assigned to Lender and
that payments shall be made directly to Lender.  Upon the request of Lender,
Grantor shall so notify such Account Debtors, parties to such Contracts, and
obligors in respect of such Instruments and Investment Property.  Lender may at
any time after the occurrence and during the continuance of an Event of Default
notify obligors in respect of Chattel Paper of Grantor that the right, title and
interest of Grantor in and under such Chattel Paper has been assigned to Lender
and that payments shall be made directly to Lender.

 

c.             Verification of Collateral.  Upon reasonable prior notice to
Grantor (unless an Event of Default has occurred and is continuing, in which
case no notice is necessary), Lender shall have the right to make test
verifications of the Accounts and physical verifications and appraisals of the
Inventory and other Collateral in any manner and through any medium that it
considers advisable, and Grantor agrees to furnish all such assistance and
information as Lender may require in connection therewith.

 

4.             Representations and Warranties.  Grantor hereby represents and
warrants that:

 

a.             Authority; Execution.  Grantor has the right and power and is
duly authorized and empowered to enter into, execute, deliver and perform this
Security Agreement, and any other agreements, documents or instruments executed
in connection herewith or therewith.  Grantor’s execution and performance of
this Security Agreement will not constitute, cause or result in any breach or
violation of any provision of the partnership agreement, articles of
incorporation or by-laws of Grantor, any law or any contractual obligation of
Grantor and does not conflict with, constitute a default or require any consent
under (other than consents that if not obtained would not have a material
adverse effect) or result in the creation of any Lien upon any property or
assets of Grantor pursuant to any contractual obligation of Grantor.  Upon
execution, this Security Agreement will constitute a valid, binding obligation
of Grantor to Lender that is enforceable according to its terms, except as the
enforceability of this Security Agreement may be subject to or limited by
bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar
laws relating to or affecting the rights of creditors generally and except as
the

 

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availability of equitable remedies are subject to the application of equitable
principles.  No further consent, ratification or approval is required for this
Security Agreement to be effective.

 

b.             Title to Collateral.  Except for the security interest granted to
Lender under this Security Agreement, Grantor is the sole owner of each item of
the Collateral in which it purports to grant a security interest hereunder,
having good and marketable title thereto free and clear of any and all liens,
security interests or other encumbrances.

 

c.             No Other Liens.  No effective security agreement, financing
statement, equivalent security or lien instrument or continuation statement
covering all or any part of the Collateral is on file or of record in any public
office, except such as may have been filed by Grantor in favor of Lender
pursuant to this Security Agreement or such as relate to protective filings with
respect to equipment leases.

 

d.             Perfection and Priority of Security Interest in the Collateral. 
The security interest granted to Lender in the Collateral under this Security
Agreement is a duly perfected security interest in favor of Lender to secure the
Secured Obligations, and is senior in priority to all other Liens against and
security interests in all or any part of the Collateral.

 

e.             Accounts.  Subject to reasonable reserves therefore on the books
of Grantor, each Account of Grantor is, or when it comes into existence will be,
a statement of an indebtedness incurred by the obligor thereunder to Grantor in
the amount shown thereon.  All Accounts are, or will be when they come into
existence, bona fide transactions completed in accordance with the terms and
provisions contained in any documents related thereto.

 

f.              Change of Name.  Grantor did not and has not done within the
last five years business under any trade name or style other than as disclosed
on Exhibit C hereto.

 

g.             Locations of Offices and Collateral; Federal Taxpayer
Identification.  Grantor’s chief executive office, principal place of business,
corporate offices, all warehouses and premises within which Collateral is stored
or located, and the locations of all of its records concerning the Collateral
are set forth on Exhibit C hereto, and Grantor shall not change such chief
executive office, principal place of business, corporate offices, or warehouses
or Collateral premises, or remove such records unless it has taken such action
as is necessary to cause the Lien of Lender in the Collateral to continue to be
perfected.  Grantor shall not change its chief executive office, principal place
of business, corporate offices, or warehouses or Collateral premises, or the
location of its records concerning the Collateral, or its federal taxpayer
identification number, without giving thirty (30) days’ prior written notice
thereof to Lender.  Grantor’s federal taxpayer identification number is as set
forth on Exhibit C hereto.

 

h.             Registered Patents, Trademarks, and Copyrights.  Grantor does not
own or have any interest in any Patents, Trademarks, or Copyrights that have
been registered or otherwise recorded with any governmental office, except as
set forth on Exhibit C hereto.

 

i.              Farming Operations.  Grantor does not own or have any interest
in any real property other than the real property described in Exhibit B hereto.

 

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5.             Covenants.  Grantor covenants and agrees with Lender that from
and after the date of this Security Agreement and until the Secured
Obligations are fully satisfied:

 

a.             Further Assurances; Pledge of Instruments.  At any time and from
time to time, upon the written request of Lender, and at the sole expense of
Grantor, Grantor shall promptly and duly execute and deliver any and all such
further instruments and documents and take such further action as Lender may
reasonably deem desirable to obtain the full benefits of this Security Agreement
and of the rights and powers herein granted, including (i) filing any financing
or continuation statements under the UCC with respect to the liens and security
interests granted hereunder or under any other Loan Document and
(ii) transferring Collateral to Lender’s possession (if such Collateral consists
of Chattel Paper or if a security interest in such Collateral can be perfected
only by possession, or, if requested by Lender).  Grantor also hereby authorizes
Lender to file any such financing or continuation statement without the
signature of Grantor to the extent permitted by applicable law.  If any amount
payable under or in connection with any of the Collateral is or shall become
evidenced by any Instrument, such Instrument, other than checks and notes
received in the ordinary course of business, shall be duly endorsed in a manner
satisfactory to Lender and delivered to Lender immediately upon Grantor’s
receipt thereof.

 

b.             Maintenance of Records.  Grantor shall keep and maintain, at its
own cost and expense, satisfactory and complete records of the Collateral,
including a record of any and all payments received and any and all credits
granted with respect to the Collateral and all other dealings with the
Collateral.  Upon the request of Lender, Grantor shall mark its books and
records pertaining to the Collateral to evidence this Security Agreement and the
security interests granted hereby.  All Chattel Paper shall be marked with the
following legend:  “This writing and the obligations evidenced or secured hereby
are subject to the security interest of American AgCredit, PCA.”  For Lender’s
further security, Grantor agrees that Lender shall have a special property
interest in all of Grantor’s books and records pertaining to the Collateral and,
upon the occurrence and during the continuation of any Event of Default, Grantor
shall deliver and turn over any such books and records to Lender or to its
representatives at any time on demand of Lender.  Prior to the occurrence of an
Event of Default and upon reasonable notice from Lender, Grantor shall permit
any representative of Lender to inspect such books and records and shall provide
photocopies thereof to Lender as more specifically set forth in
Section 5(i) below.

 

c.             Delivery of Notes, Documents and Chattel Paper.  Grantor shall
deliver to Lender or its designee all now existing or hereafter created or
arising (i) original promissory notes payable to Grantor, assigned to Grantor,
pledged to Grantor or otherwise held by Grantor, together with all corresponding
documents including deeds of trust, security agreements and title insurance
policies, with such endorsements thereto as Lender may reasonably require,
(ii) Instruments (except for checks which are deposited in the ordinary course
of Grantor’s business), (iii) negotiable warehouse receipts, and (iv) Chattel
Paper, promptly upon the execution of this Security Agreement or Grantor’s
receipt of any such item, as the case may be.

 

d.             Further Identification of Collateral.  Grantor shall, if so
requested by Lender, furnish to Lender, as often as Lender reasonably requests,
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Lender may reasonably
request, all in reasonable detail.

 

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e.             Limitation on Liens on Collateral.  Grantor shall not create,
permit or suffer to exist, and shall defend the Collateral against and take such
other action as is necessary to remove, any Lien on the Collateral.  Grantor
shall further defend the right, title and interest of Lender in and to any of
Grantor’s rights under the Collateral, including, the Accounts, Chattel Paper,
Contracts, Documents, Equipment, Farm Products, Fixtures, General Intangibles,
Instruments, Investment Property, and Inventory and in and to the Proceeds
thereof against the claims and demands of all Persons whomsoever.

 

f.              Notices.  Grantor shall advise Lender, in reasonable detail,
promptly, within five (5) Business Days of after it becomes aware of: (i) any
material Lien, attaching to or asserted against any of the Collateral, (ii) any
material change in the composition of the Collateral (iii) any destruction of or
substantial damage to any of the Collateral in excess of $100,000 and (iv) the
occurrence of any other event which would have a Material Adverse Effect upon
the Collateral and/or Lender’s Lien.

 

g.             Limitations on Modifications of Accounts.  Subject to the terms
of the Third Amended Credit Agreement, upon the occurrence and during the
continuation of any Event of Default, Grantor shall not, without Lender’s prior
written consent, (i) grant any extension of the time of payment of any of the
Accounts, Chattel Paper, Instruments or amounts due under any Contract;
(ii) compromise or settle the same for less than the full amount thereof;
(iii) release, in whole or in part, any Person liable for the payment thereof;
or (iv) allow any credit or discount whatsoever thereon other than trade
discounts granted in the ordinary course of business of Grantor.

 

h.             Continuous Perfection.  Grantor shall not change its name,
identity or corporate structure in any manner which might make any financing or
continuation statement filed in connection herewith seriously misleading within
the meaning of section 9-402(7) of the UCC or any other then applicable
provision of the UCC unless Grantor shall have given Lender at least thirty (30)
days’ prior written notice thereof and shall have taken all action (or made
arrangements to take such action substantially simultaneously with such change
if it is impossible to take such action in advance) necessary or reasonably
requested by Lender to amend such financing statement or continuation statement
so that it is not seriously misleading.

 

i.              Right of Inspection.  Upon reasonable notice to Grantor (unless
an Event of Default has occurred and is continuing, in which case no notice is
necessary), Lender shall at all times have full and free access during normal
business hours to all the books and records and correspondence of Grantor, and
Lender or its representatives may examine the same, take extracts therefrom and
make photocopies thereof, and Grantor agrees to render to Lender, at Grantor’s
cost and expense, such clerical and other assistance as may be reasonably
requested with regard thereto.  Upon reasonable notice to Grantor (unless an
Event of Default has occurred and is continuing, in which case no notice is
necessary), Lender and its representatives shall also have the right to enter
into and upon any premises where any of the Inventory is located for the purpose
of inspecting the same, observing its use or otherwise protectings Lender’s
interests in the Collateral.

 

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j.              Indemnification.  In any suit, proceeding or action brought by
Lender relating to any Account, Chattel Paper, Contract, General Intangible,
Instrument or Document for any sum owing thereunder, or to enforce any provision
of any Account, Chattel Paper, Contract, General Intangible, Instrument, or
Document, Grantor shall save, indemnify and keep Lender harmless from and
against all expense, loss or damage suffered by reason of any defense, setoff,
counterclaim, recoupment or reduction of liability whatsoever of the obligor
thereunder arising out of a breach by Grantor of any obligation thereunder or
arising out of any other agreement, indebtedness or liability at any time owing
to, or in favor of, such obligor or its successors from Grantor, and all such
obligations of Grantor shall be and remain enforceable against, and only
against, Grantor and shall not be enforceable against Lender.

 

k.             Compliance with Terms of Accounts, etc.  In all material
respects, Grantor shall perform and comply with all obligations in respect of
(i) Accounts, (ii) material Chattel Paper, Contracts, Licenses, Instruments and
Documents, and (iii) all other material agreements to which it is a party or by
which it is bound.

 

l.              Notification Prior to Registration of Patents, Trademarks, and
Copyrights.  Grantor shall not register any interest in any Patents, Trademarks,
or Copyrights nor shall Grantor permit any in any Patents, Trademarks, or
Copyrights in which Grantor has an interest to become registered with any
governmental office, unless Grantor has provided Lender with fifteen (15) days
prior notice of Grantor’s intent to do so and Grantor shall provide Lender prior
to effecting or permitting any such registration with such additional security
documents as Lender shall request.

 

m.            Farming Operations.  Grantor shall not undertake any farming
operations on any real property other than the property listed on Exhibit B
hereto unless Grantor shall have provided Lender with thirty (30) days prior
notice of Grantor’s intent to do so, which notice shall be accompanied by a
detailed description of the real property on which the crops are grown, and
Grantor shall have provided Lender with a supplement to this Security Agreement
and such financing statement amendments and other documents as Lender shall
request.

 

6.             Lender’s Appointment as Attorney-in-Fact.

 

a.             Grantor hereby irrevocably constitutes and appoints Lender and
any officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of Grantor and in the name of Grantor or in its own name, and hereby
grants to Lender, in Lender’s discretion, the power and right, on behalf of
Grantor, without notice to or assent by Grantor, and at any time prior to or
after the occurrence of an Event of Default, to do the following:

 

(i)  to take any and all appropriate action and to execute and deliver any and
all documents and instruments which may be necessary or desirable to continue
any insurance existing pursuant to the terms of the Third Amended Credit
Agreement, and pay all or any part of the premiums therefore and the costs
thereof; and

 

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(ii)  to file any financing or continuation statements under the UCC with
respect to the Liens and security interests granted hereunder or under any other
Loan Document.

 

b.             Grantor hereby irrevocably constitutes and appoints Lender and
any officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of Grantor and in the name of Grantor or in its own name, from time to
time in Lender’s discretion, for the purpose of carrying out the terms of this
Security Agreement, to take any and all appropriate action and to execute and
deliver any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Security Agreement and, without
limiting the generality of the foregoing, hereby grants to Lender the power and
right, on behalf of Grantor, without notice to or assent by Grantor, upon the
occurrence and during the continuation of an Event of Default, to do the
following:

 

(i)  ask, demand, collect, receive and give acquittances and receipts for any
and all money due or to become due under any Collateral, and take ownership and
control of any and all lock boxes and other depository accounts by written
notice to any bank or other institution maintaining such lock boxes or other
depository accounts;

 

(ii)  in the name of Grantor, in its own name or otherwise, endorse and receive
payment of any checks, drafts, notes, acceptances, or other Instruments for the
payment of monies due under any Collateral;

 

(iii)  receive payment of any and all monies, claims, and other amounts due or
to become due at any time arising out of or in respect of any Collateral;

 

(iv)  pay or discharge taxes, liens, security interest, or other encumbrances
levied or placed on or threatened against the Collateral;

 

(v)  effect any repairs or obtain any insurance called for by the terms of this
Security Agreement and pay all or any part of the premiums therefore and costs
thereof;

 

(vi)  direct any party liable for any payment under or in respect of any of the
Collateral to make payment of any and all monies due or to become due
thereunder, directly to Lender or as Lender shall direct;

 

(vii)  sign and endorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications, and notices in connection with accounts and other documents
constituting or related to the Collateral;

 

(viii)  settle, compromise or adjust any suit, action, or proceeding described
above and, in connection therewith, give such discharges or releases as Lender
may deem appropriate;

 

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(ix)  file any claim or take or commence any other action or proceeding in any
court of law or equity or otherwise deemed appropriate by Lender for the purpose
of collecting any and all such monies due under any Collateral whenever payable;

 

(x)  commence and prosecute any suits, actions or proceedings of law or equity
in any court of competent jurisdiction to collect the Collateral or any part
thereof and to enforce any other right in respect of any Collateral;

 

(xi)  defend any suit, action or proceeding brought against Grantor with respect
to any Collateral if Grantor does not defend such suit, action or proceeding or
if Lender believes that Grantor is not pursuing such defense in a manner that
will maximize the recovery with respect to such Collateral;

 

(xii)  license or, to the extent permitted by an applicable license, sublicense
whether general, specific or otherwise, and whether on an exclusive or
non-exclusive basis, any Patent or Trademark throughout the world for such term
or terms on such conditions and in such manner as Lender shall, in its sole
discretion, determine;

 

(xiii)  sell, transfer, pledge, make any agreement with respect to, or otherwise
deal with any of the Collateral as fully and completely as though Lender were
the absolute owner thereof for all purposes, and to do, at Lender’s option and
Grantor’s expense, at any time, or from time to time, all acts and things which
Lender reasonably deems necessary to perfect, preserve, or realize upon the
Collateral and Lender’s Lien therein in order to effect the intent of this
Security Agreement, all as fully and effectively as Grantor might do; and

 

(xiv) contact, make any agreement with, or otherwise deal with any governmental
or regulatory agency in connection with the operation of Grantor’s business or
the possession or liquidation of any or all of the Collateral.

 

c.             Grantor hereby ratifies, to the extent permitted by law, all that
said attorneys shall lawfully do or cause to be done by virtue hereof.  The
power of attorney granted pursuant to this Section 6 is a power coupled with an
interest and shall be irrevocable until the Secured Obligations are paid or
otherwise satisfied in full.

 

d.             The powers conferred on Lender hereunder are solely to protect
Lender’s interests in the Collateral and shall not impose any duty upon Lender
to exercise any such powers.  Lender shall be accountable only for amounts that
it actually receives as a result of the exercise of such powers and neither it
nor any of its officers, directors, employees, agents or representatives shall
be responsible to Grantor for any act or failure to act, except for their own
gross negligence or willful misconduct.

 

e.             Grantor also authorizes Lender to execute, in connection with the
sale provided for in Section 8 hereof, any endorsements, assignments or other
instruments of conveyance or transfer with respect to the Collateral.

 

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7.             Performance by Lender of Grantor’s Obligation.  If Grantor fails
to perform or comply with any of its agreements contained herein or in any other
Loan Document, and Lender, as provided for by the terms of this Security
Agreement, or in any other Loan Document, shall itself perform or comply, or
otherwise cause performance of or compliance with such agreement, the reasonable
expenses, including attorneys’ fees, of Lender incurred in connection with such
performance or compliance, together with interest thereon at the Base Rate then
in effect in respect of the Revolving Loan, shall be payable by Grantor to
Lender on demand and shall constitute Secured Obligations secured hereby.

 

8.             Remedies, Rights Upon Default.

 

a.             If any Event of Default shall occur and be continuing, Lender may
exercise in addition to all other rights and remedies granted to it under this
Security Agreement, the Original Credit Agreement, the First Amended Credit
Agreement, the Second Amended Credit Agreement, the Third Amended Credit
Agreement or any of the other Documents evidencing any loan obligations from
Grantor to Lender, or agreement securing, evidencing or relating to the Secured
Obligations, all rights and remedies of a secured party under the UCC.  Without
limiting the generality of the foregoing, Grantor expressly agrees that in any
such event Lender, without demand of performance or other demand, advertisement
or notice of any kind (except the notice specified below of time and place of
public or private sale) to or upon Grantor or any other Person (all and each of
which demands, advertisements and notices are hereby expressly waived to the
maximum extent permitted by the UCC and other applicable law), may forthwith
enter upon the premises of Grantor where any Collateral is located through
self-help, without judicial process, without first obtaining a final judgment or
giving Grantor notice and opportunity for a hearing on Lender’s claim or action,
and without paying rent to Grantor, and collect, receive, assemble, process,
appropriate and realize upon the Collateral, or any part thereof, and may
forthwith sell, lease, assign, give an option or options to purchase, or sell or
otherwise dispose of and deliver said Collateral (or contract to do so), or any
part thereof, in one or more parcels at public or private sale or sales, at any
exchange or broker’s board or at any of Lender’s offices or elsewhere at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk.  Lender shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase for the benefit of Lender the whole or any part of said
Collateral so sold, free of any right or equity of redemption, which equity of
redemption Grantor hereby releases.  Such sales may be adjourned and continued
from time to time with or without notice.  Lender shall have the right to
conduct such sales on Grantor’s premises or elsewhere and shall have the right
to use Grantor’s premises without charge for such sales for such time or times
as Lender deems necessary or advisable.

 

b.             Grantor further agrees, at Lender’s request, to assemble the
Collateral and make it available to Lender at places which Lender shall
reasonably select, whether at Grantor’s premises or elsewhere.  Until Lender is
able to effect a sale, lease, or other disposition of Collateral, Lender shall
have the right to use or operate Collateral on behalf of Lender, or any part
thereof, to the extent that it deems appropriate for the purpose of preserving
Collateral or its value or for any other purpose deemed appropriate by Lender. 
Lender shall have no obligation to Grantor to maintain or preserve the rights of
Grantor as against third parties with respect to Collateral while Collateral is
in the possession of Lender.  Lender may, if it so elects,

 

12

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seek the appointment of a receiver or keeper to take possession of Collateral
and to enforce any of Lender’s remedies with respect to such appointment without
prior notice or hearing.  Lender shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, as provided
in Section 8(e) hereof, such Grantor remaining liable for any deficiency
remaining unpaid after such application, and only after so paying over such net
proceeds and after the payment by Lender of any other amount required by any
provision of law, including section 9-504(1)(c) of the UCC (but only after
Lender has received what Lender considers reasonable proof of a subordinate
party’s security interest), need Lender account for the surplus, if any, to
Grantor.  To the maximum extent permitted by applicable law, Grantor waives all
claims, damages, and demands against Lender arising out of the repossession,
retention or sale of the Collateral except such as arise out of the gross
negligence or willful misconduct of such party.  Grantor agrees that five
(5) days’ prior notice by Lender of the time and place of any public sale or of
the time after which a private sale may take place is reasonable notification of
such matters.  Grantor shall remain liable for any deficiency if the proceeds of
any sale or disposition of the Collateral are insufficient to pay all amounts to
which Lender is entitled, Grantor also being liable for any attorneys’ fees
incurred by Lender to collect such deficiency.

 

c.             Grantor agrees to pay any and all costs of Lender, including,
reasonable attorneys’ fees, incurred in connection with the enforcement of any
of its rights and remedies hereunder.

 

d.             Except as otherwise specifically provided herein, Grantor hereby
waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.

 

e.             The proceeds of any sale, disposition or other realization upon
all or any part of the Collateral shall be distributed by Lender, upon receipt,
in accordance with the provisions of the Third Amended Credit Agreement.

 

f.              From and after the occurrence and during the continuation of an
Event of Default, Lender may, at its sole discretion, contact any and all
Federal, state, or other governmental or regulatory agencies with any
jurisdiction over Grantor, with respect to the possibility that Lender may take
over the operation of any Grantor’s business, or the possibility that Lender may
take possession of or liquidate any or all of the Collateral.

 

g.             Grantor acknowledges that Lender shall be entitled to
independently, but without duplication, exercise the rights and remedies of
Lender exercisable for their benefit under this Security Agreement.

 

9.             Indemnity and Expenses.

 

a.             Grantor agrees to indemnify Lender from and against any and all
claims, losses and liabilities growing out of or resulting from this Security
Agreement (including, enforcement of this Security Agreement), except claims,
losses or liabilities resulting from such indemnified party’s gross negligence
or willful misconduct.

 

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b.             Grantor will upon demand pay to Lender the amount of any and all
reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of counsel and of any experts and agents, which Lender may incur
in connection with (i) the administration of this Security Agreement, (ii) the
custody, preservation, use or operation of, or the sale of, collection from, or
other realization upon, any of the Collateral, (iii) the exercise or enforcement
of any of the rights of Lender hereunder, or (iv) the failure by Grantor to
perform or observe any of the provisions hereof.

 

10.           Grant of License to Use Patent and Trademark Collateral.  For the
purpose of enabling Lender to exercise rights and remedies under Section 8
hereof (including, without limiting the terms of Section 8 hereof, in order to
take possession of, hold, preserve, process, assemble, prepare for sale, market
for sale, sell or otherwise dispose of Collateral) at such time as Lender shall
be lawfully entitled to exercise such rights and remedies, Grantor hereby grants
to Lender an irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to Grantor) to use, transfer, license or
sublicense any Patent, Trademark, trade secret, or copyright now owned or
hereafter acquired by Grantor, and wherever the same may be located, and
including in such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer and automatic
machinery software and programs used for the compilation or printout thereof.

 

11.           Limitation on Lender’s Duty in Respect of Collateral.  Lender
shall use reasonable care with respect to the Collateral in its possession or
under its control.  Lender shall have no other duty as to any Collateral in its
possession or control or in the possession or control of any agent or nominee of
such party, or any income thereon or as to the preservation of rights against
prior parties or any other rights pertaining thereto.

 

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12.           Reinstatement.  This Security Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against Grantor for liquidation or reorganization, should Grantor become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of Grantor’s
assets, and shall continue to be effective or be reinstated, as the case may be,
if at any time payment and performance of the Secured Obligations, or any part
thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Secured Obligations,
whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all
as though such payment or performance had not been made.  In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Secured Obligations shall be reinstated and deemed reduced only by such amount
paid and not so rescinded, reduced, restored or returned.

 

13.           Notices.  Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval,
declaration, or other communication shall or may be given or delivered to or
served upon any of the parties by another, or whenever any of the parties
desires to give or deliver or serve upon another any communication with respect
to this Security Agreement, each such notice, demand, request, consent,
approval, declaration, or other communication shall be in writing, shall be
addressed to the addresses set forth below, or such other or additional address
as the parties may notify each other of in writing, and shall be deemed to have
been sent, delivered, or given and received upon the earlier of:  (a) if by
facsimile, upon transmission if transmission occurs between 8:00 a.m. and
5:00 p.m. on any Business Day; (b) if by Federal Express or other overnight or
one-day mail or delivery service, on the next Business Day following deposit
with such delivery service; (c) if by personal delivery, upon completion of
delivery; or (d) if by mail, three (3) Business Days after deposit in the U.S.
Mail, first class, postage prepaid:

 

(a)  If to American AgCredit, at:

 

American AgCredit, PCA

5560 South Broadway

Eureka, California  95503

Attention:  Account Officer — ML Macadamia Orchards

Facsimile:  (707) 442-1268

 

American AgCredit, PCA

200 Concourse Blvd.

P.O. Box 1120

Santa Rosa, CA 95402-1120

Attn: Account Officer —ML Macadamia Orchards

Facsimile: (707) 521-6105

 

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(b)  If to Grantor, at:

 

ML Macadamia Orchards, L.P.

ML Resources, Inc.

26-238 Hawaii Belt Road

Hilo, Hawaii  96720

Attention: Mr.  Dennis J. Simonis

Facsimile: (808) 969-8152

 

or at such other address as may be substituted by notice given as herein
provided.  The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice.  Failure or delay in delivering
copies of any notice, demand, request, consent, approval, declaration, or other
communication to the persons designated above to receive copies shall in no way
adversely affect the effectiveness of such notice, demand, request, consent,
approval, declaration, or other communication.

 

14.           Severability.  Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

 

15.           No Waiver; Cumulative Remedies.  Lender shall not by any act,
delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
Lender, and then only to the extent therein set forth.  A waiver by Lender of
any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which Lender would otherwise have had on any future
occasion.  No failure to exercise nor any delay in exercising on the part of
Lender, any right, power or privilege hereunder, shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise of any other right, power or privilege.  The rights and remedies
hereunder provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law.  None of the
terms or provisions of this Security Agreement may be waived, altered, modified
or amended except by an instrument in writing, duly executed by Lender and
Grantor affected by such waiver.

 

16.           Limitation by Law.  All rights, remedies and powers provided in
this Security Agreement may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of law, and all the provisions
of this Security Agreement are intended to be subject to all applicable
mandatory provisions of law that may be controlling and to be limited to the
extent necessary so that they shall not render this Security Agreement invalid,
unenforceable, in whole or in part, or not entitled to be recorded, registered,
or filed under the provisions of any applicable law.

 

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17.           Termination of this Security Agreement.  Subject to Section 12
hereof, this Security Agreement shall terminate upon full and final payment and
performance of all of the Secured Obligations.

 

18.           Successor and Assigns.  This Security Agreement and all
obligations of Grantor hereunder shall be binding upon the successors and
assigns of Grantor, and shall, together with the rights and remedies of Lender
hereunder, inure to the benefit of Lender and its successors and assigns, as
permitted pursuant to the terms of the Original Credit Agreement, the First
Amended Credit Agreement, the Second Amended Credit Agreement and the Third
Amended Credit Agreement.  No sales of participations, other sales, assignments,
transfers or other dispositions of any agreement governing or instrument
evidencing the Secured Obligations or any portion thereof or interest therein,
as permitted pursuant to the terms of the Third Amended Credit Agreement, shall
in any manner affect the security interest granted to Lender hereunder.  Grantor
may not assign, sell or otherwise transfer an interest in this Security
Agreement except as provided by the Original Credit Agreement, the First Amended
Credit Agreement, the Second Amended Credit Agreement or the Third Amended
Credit Agreement.

 

19.           Further Indemnification.  Grantor agrees to pay, and to hold
Lender harmless from, any and all liabilities with respect to, or resulting from
any delay in paying, any and all excise, sales, or other similar taxes which may
be payable or determined to be payable with respect to any of the Collateral or
in connection with any of the transactions contemplated by this Security
Agreement.

 

20.           Entire Agreement.  The execution of this Security Agreement
supersedes all the negotiations or stipulations concerning matters thereof which
preceded or accompanied the execution and delivery of this Security Agreement. 
This Security Agreement is intended by the parties hereto to be a complete and
exclusive statement of the terms and conditions hereof.

 

21.          GOVERNING LAW.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS SECURITY AGREEMENT AND THE OBLIGATIONS ARISING
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED
IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF
LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.  GRANTOR HEREBY
CONSENTS AND AGREES THAT THE SUPERIOR COURTS OF SAN FRANCISCO COUNTY,
CALIFORNIA, OR, AT LENDERS OPTION, THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF CALIFORNIA, SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR
AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN GRANTOR AND LENDER PERTAINING TO
THIS SECURITY AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS
SECURITY AGREEMENT.  GRANTOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND GRANTOR
HEREBY WAIVES ANY OBJECTION WHICH GRANTOR MAY HAVE BASED UPON LACK OF

 

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PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING FOR SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT.  GRANTOR HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT, AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO GRANTOR AT THE ADDRESS SET FORTH IN
SECTION 13 OF THIS SECURITY AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF GRANTOR’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS
AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.  NOTHING IN THIS
SECURITY AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LENDER OR GRANTOR FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION.

 

22.          MUTUAL WAIVER OF JURY TRIAL.  BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES
DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE
LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE
JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY
RIGHTS OR REMEDIES UNDER THIS SECURITY AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS.

 

23.           Amendments; etc.  No amendment to or waiver of any provision of
this Security Agreement nor consent to any departure by Grantor from any
provision of the Security Agreement, shall in any event be effective unless the
same shall be in writing and signed by Lender, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.

 

24.           Interpretation.  No provision of this Security Agreement shall be
construed against or interpreted to the disadvantage of any party hereto by any
court or other governmental or judicial authority by reason of such party’s
having or being deemed to have structured, drafted or dictated such provision.

 

25.           Section Titles.  The section titles contained in this Security
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.

 

26.           Counterparts.  This Security Agreement may be executed in any
number of identical counterparts, each of which shall be an original, but all of
which shall constitute one and the same agreement.  This Security Agreement
shall become effective when Lender shall have received all original executed
counterparts.

 

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27.           Further Assurances.  Grantor agrees, upon the written request of
Lender, to execute and deliver to Lender, from time to time, any additional
instruments or documents reasonably considered necessary by Lender to cause this
Security Agreement and the Secured Obligations to be, become, or remain valid
and effective, and to cause Lender’s security interest in the pledged Collateral
to be, become, or remain duly perfected.

 

IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer on the
date first set forth above.

 

 

ML MACADAMIA ORCHARDS, L.P., a Delaware limited partnership

 

 

 

By:

ML RESOURCES, INC., a Hawaii corporation, its managing general partner

 

 

 

 

 

By:

/s/ Dennis J. Simonis

 

 

Name:

Dennis J. Simonis

 

 

Title:

CEO and President

 

 

 

 

 

ML RESOURCES, INC., a Hawaii corporation

 

 

 

By:

/s/ Dennis J. Simonis

 

Name:

Dennis J. Simonis

 

Title:

CEO and President

 

 

ACCEPTED:

 

AMERICAN AGCREDIT, PCA

 

By:

/s/ Sean O’Day

 

Name:

Sean O’Day

Title:

Senior Vice President

 

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EXHIBIT A

 

DESCRIPTION OF COLLATERAL

 

TO

 

UNIFORM COMMERCIAL CODE FINANCING STATEMENTS

 

AND

 

SECURITY AGREEMENT

 

Debtor and Grantor:             ML Macadamia Orchards, L.P., a Delaware limited
partnership

ML Resources, Inc., a Hawaii corporation

 

Secured Party:  American AgCredit, PCA, successor in interest to Pacific Coast
Farm Credit Services, PCA

 

All of the Debtor’s and the Grantor’s now existing and hereafter arising
interest in the following collateral:

 

A.            “Accounts” — all accounts as such term is defined in the Uniform
Commercial Code including, accounts receivable, other receivables, book debts
and other forms of obligations (other than forms of obligations evidenced by
chattel paper, documents or instruments) now owned or hereafter received or
acquired by or belonging or owing to Grantor, whether arising out of goods sold
or services rendered by Grantor or from any other transaction, including,

 

(1)           All rights in, to and under all purchase orders or receipts now
owned or hereafter acquired by Grantor for goods or services;

 

(2)           All rights to any goods represented by any of the foregoing
(including, without limitation, an unpaid seller’s rights of rescission,
replevin, reclamation and stoppage in transit and rights to returned, reclaimed
or repossessed goods);

 

(3)           All monies due or to become due under all purchase orders and
contracts for the sale of goods or the performance of services or both by
Grantor or in connection with any other transaction (whether or not yet earned
by performance on the part of Grantor) now or hereafter in existence, including,
without limitation, the right to receive the proceeds of said purchase orders
and contracts; and

 

(4)           All collateral security and guaranties of any kind, now or
hereafter in existence, given by any person or entity with respect to any of the
foregoing;

 

B.            “Chattel Paper” — all chattel paper as defined in the Uniform
Commercial Code;

 

C.            “Contracts” — all contracts, undertakings, or agreements (other
than rights evidenced by chattel paper, documents or instruments) in or under
which Grantor may now or hereafter have any right, title or interest, including,
any agreement relating to the terms of payment or the terms of performance of
any account of Grantor;

 

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D.            “Documents” — all documents as defined in the Uniform Commercial
Code, including, without limitation, all bills of lading, dock warrants, dock
receipts, warehouse receipts, or other documents of title;

 

E.             “Equipment” — all equipment as defined in the Uniform Commercial
Code, including, without limitation, all machinery, equipment, furnishings,
vehicles and computers and other electronic data-processing and other office
equipment, and any and all additions, substitutions and replacements of any of
the foregoing, together with all attachments, components, parts, equipment, and
accessories installed on or affixed to any of the foregoing;

 

F.             “Farm Products” — all farm products as defined in the Uniform
Commercial Code, wherever located, including, without limitation, all crops
growing or to be grown on the real property described in Exhibit B hereto and
all other crops, including macadamia nuts and products thereof.

 

G.            “Fixtures” — all fixtures as defined in the Uniform Commercial
Code, including, without limitation, all of the fixtures, systems, machinery,
apparatus, equipment and fittings of every kind and nature whatsoever and all
appurtenances and additions thereto and substitutions therefor or replacements
thereof, now or hereafter attached or affixed to or constituting a part of, or
located in or upon, real property wherever located (including, without
limitation, all heating, electrical, mechanical, lighting, lifting, plumbing,
ventilating, air-conditioning and air cooling, refrigerating, incinerating and
power, loading and unloading, signs, escalators, elevators, boilers,
communication, switchboards, sprinkler and other fire prevention and
extinguishing fixtures, systems, machinery, apparatus and equipment, and all
engines, motors, dynamos, machinery, pipes, pumps, tanks, conduits and ducts
constituting a part of any of the foregoing, together with all extensions,
improvements, betterments, renewals, substitutes, and replacements of, and all
additions and appurtenances to any of the foregoing property);

 

H.            “General Intangibles” — all general intangibles as defined in the
Uniform Commercial Code, including, without limitation, all right, title and
interest which Grantor may now or hereafter have in or under any contracts,
customer lists, trademarks, patents, service marks, trade names, business names,
corporate names, trade styles, logos and other source or business identifiers,
and all applications therefor and reissues, extensions or renewals thereof,
rights in intellectual property, interests in and rights to distributions from
partnerships, joint ventures and other business associations, licenses, permits,
copyrights, trade secrets, proprietary or confidential information, inventions
(whether or not patented or patentable), technical information, procedures,
designs, knowledge, know-how, software, data bases, data, skill, expertise,
experience, processes, models, drawings, materials and records, goodwill
(including, without limitation, the goodwill associated with any trademark,
trademark registration or trademark licensed under any trademark license), all
rights and claims in or under insurance policies (including, without limitation,
insurance for fire, damage, loss, and casualty, whether covering personal
property, real property, tangible rights or intangible rights, all liability,
life, key person, and business interruption insurance, and all unearned
premiums), uncertificated securities, choses in action, deposit accounts and
other bank accounts, rights to receive tax refunds, and other payments and
rights of indemnification;

 

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I.              “Instruments” — all instruments as defined in the Uniform
Commercial Code, including, without limitation, all certificated and
uncertificated securities, all certificates of deposit, and all notes and other
evidences of indebtedness, other than instruments that constitute, or are a part
of a group of writings that constitute, chattel paper;

 

J.             “Inventory” — all inventory as defined in the Uniform Commercial
Code, wherever located, including, without limitation, inventory, macadamia
nuts, merchandise, goods and other personal property which are held by or on
behalf of Grantor for sale or lease or are furnished or are to be furnished
under a contract of service or which constitute raw materials, work in process
or materials used or consumed or to be used or consumed in Grantor’s business or
in the processing, production, packaging, promotion, delivery or shipping of the
same, including, without limitation, all finished goods, and goods held by
Grantor on a consignment basis;

 

K.            “Money” — all money, cash or cash equivalents of Grantor;

 

L.             “Books and Records” — all books and records (including, without
limitation, customer lists, credit files, computer programs, printouts, and
other computer materials and records) of Grantor pertaining to any of the
foregoing;

 

M.           “Governmental Program Payments” — all right to receive any payment
under any government program, including, set aside, price support, deficiency,
or disaster relief payments.

 

N.            “Investment Property” — all investment property as defined in the
Uniform Commercial Code, including, without limitation, all securities, whether
certificated or uncertificated, all security entitlements, all security
accounts, all commodity contracts and all commodity accounts;

 

O.            “Other Personal Property” — all other goods and personal property
of Grantor, whether tangible or intangible and whether now or hereafter owned or
existing, leased, consigned by or to, or acquired by Grantor, and wherever
located; and

 

P.             “Proceeds” — to the extent not otherwise included, all proceeds
of the foregoing, in any form (including, without limitation, any insurance
proceeds, and all claims by Grantor against third parties for loss or damage to,
or destruction of, or otherwise relating to any or all of the foregoing) and all
accessions to, substitutions and replacements for, and rents, profits and
products of, each of the foregoing.

 

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EXHIBIT B

 

TO

 

SECURITY AGREEMENT

 

Debtor and Grantor:             ML Macadamia Orchards, L.P., a Delaware limited
partnership

ML Resources, Inc., a Hawaii corporation

 

Secured Party:  American AgCredit, PCA, successor in interest to Pacific Coast
Farm Credit Services, PCA

 

See attached for property description.

 

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EXHIBIT C

 

TO

 

SECURITY AGREEMENT

 

Debtor and Grantor:             ML Macadamia Orchards, L.P., a Delaware limited
partnership

ML Resources, Inc., a Hawaii corporation

 

Secured Party:  American AgCredit, PCA, successor in interest to Pacific Coast
Farm Credit Services, PCA

 

(1)           List of Any Names Under Which Grantor Has Done Business During
Last Five Years.

 

Mauna Loa Macadamia Partners, L.P.

 

(2)           Locations.

 

(a)           Chief executive office:

 

26-238 Hawaii Belt Road

Hilo, Hawaii   96720

 

(b)           Principal place of business:

 

Kau, HA

 

(c)           Other locations where Collateral located:

 

Keaau and Mauna Kea, HA

 

(3)           Grantor’s federal taxpayer identification number.

 

99-0248088

 

(4)           List of Registered Patents, Trademarks, and Copyrights.

 

None.

 

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