PROMISSORY NOTE AND SUPPLEMENT

TO MASTER LOAN AGREEMENT

 

This Non-revolving Credit Facility Supplement (alternately, “Note” or
“Supplement”) to a Master Loan Agreement dated May 1, 2012 (“MLA”) is
established as of May 1, 2012 between the undersigned Borrower and Lender
identified herein.

 

1.          PROMISE TO PAY. For value received, the undersigned (collectively,
“Borrower”) as principals jointly and severally promise to pay to the order of
Farm Credit West, PCA (“Lender”), a corporation organized and existing under the
laws of the United States of America, with its office at 2031 Knoll Drive,
Ventura, CA 93003-7301 or at such other place as may be designated in writing by
Lender, the principal sum of $13,000,000.00 (Thirteen Million Dollars and Zero
Cents) (“Commitment”), or so much of that sum as may be advanced by Lender from
time to time, together with interest on the unpaid principal balance as
specified in Section 3 below. All defined terms used in this Supplement shall
have the same meaning as set forth in the MLA. All Indebtedness owed hereunder
shall be payable only in lawful money of the United States of America.

 

1.1       NON-REVOLVING CREDIT FACILITY. On the terms and conditions in the MLA
and this Supplement, Lender agrees to make Loan advances to Borrower during the
period set forth below in the aggregate principal amount not to exceed at any
one time outstanding the Commitment or the borrowing base or other guidelines
where applicable, whichever is less. Amounts borrowed and later repaid may not
be reborrowed.

 

1.2      TERM. The term of the Commitment shall be from the date of this
Supplement up to but not including the Maturity Date, or such later date as
Lender may in its sole discretion authorize in writing. Borrower may draw funds
only during the term of the Commitment.

 

1.3      ONGOING REQUIREMENTS AND REPRESENTATIONS. At the time of any draw
request or draw by Borrower or advance of Loan funds by Lender, Borrower shall
not be in default. Any request for or acceptance of a draw by Borrower
constitutes an ongoing representation and warranty by Borrower that Borrower
continues to comply with the conditions and requirements set forth in this
Agreement, the Security Instruments or any Loan Document in connection herewith,
and that title to the Property defined in the Security Instruments has not been
transferred without Lender’s written consent. If a default occurs, one of
Lender’s remedies includes Lender’s right to immediately terminate Borrower’s
right to make draws hereunder, with or without notice to Borrower.

 

1.4      PROCEDURE FOR DRAWING FUNDS. All draws requested hereunder shall comply
with applicable procedures established by Lender from time to time. Lender’s
records shall be conclusive evidence of draw requests. Each advance of Loan
funds hereunder may be made upon a verbal, written, or telecopied request from
Borrower to Lender. Lender may rely on any verbal request for a draw as fully as
if such request were in writing. Upon fulfillment of the applicable conditions
for making a draw, Lender shall disburse the amount of the requested draw to
Borrower in such manner as Lender and Borrower may from time to time agree.

 

2.         PAYMENTS.*

 

Seventy-One (71) Monthly interest only payments in the amount billed, beginning
on June 1, 2012. One (1) installment of interest in the amount billed and
principal to be paid on May 1, 2018.

 

*See 11.2 below for Additional Repayment Terms.

 

Payments, other than those required as specified in this Section or elsewhere
herein, may be made at any time and in any amount during the term of this Note,
unless limited or prohibited herein or unless otherwise required by Lender in
writing. This Loan is due and payable in full on May 1, 2018 (“Maturity Date”),
at which time Borrower shall pay the unpaid principal balance and all accrued
interest in full.

 

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At Lender’s option, a change in the interest rate or an advance may either
increase or decrease one or more of the following: the amount of each
installment due, the amount of the final installment (resulting in a final
installment due at the Maturity Date which may be greater than any previous
installments) or the total number of installments due.

 

3.          INTEREST.

 

3.1      INITIAL INTEREST RATE. The interest rate applicable to the Note is a
Variable Interest Rate (“Variable Interest Rate”) and shall change in accordance
with Sections 3.2 through 3.3 below. Interest shall accrue at the variable
interest rate as established by Lender for the interest rate group to which this
Note is assigned.

 

Interest will be charged on the entire unpaid principal balance of this Note,
including payments not made when due and any other sums owing hereunder.
Interest charged hereunder, including any acceleration interest rate, all late
charges, default interest and other charges, and all other amounts charged
hereunder, shall not be limited by the laws of any state, including any state
laws relating to a legal rate or other interest rate, but shall be governed
solely by applicable federal laws.

 

Interest will be calculated on the basis of a 365-day year and the actual number
of days in each month. Interest charges will begin on the date Lender disburses
principal and continue until the Indebtedness is paid in full with interest. The
initial interest rate in effect on this date is 3.50% per annum (“Initial
Interest Rate”).

 

3.2CHANGE IN INTEREST RATE AND INTEREST RATE GROUP. The Variable Interest Rate
applicable to this Note may be adjusted automatically as of the first day of any
month to the rate then made applicable to the Note’s assigned interest rate
group under the provisions of Lender's Variable Interest Rate plan in effect at
that time.

 

In adjusting the rate, Lender considers certain standard factors set forth in
the plan, including but not limited to, changes in its costs of funds, operating
expenses, earnings requirements to meet certain capital objectives, credit risk
factors, and the competitive environment, which factors may change during the
term of the Loan.

 

Borrower understands and agrees that (a) the interest rate group to which this
Note is assigned may be changed at any time to any other interest rate group
based on Lender's evaluation of the change in Borrower's credit quality, quality
of collateral, costs of servicing the loan, and other factors which are set
forth in Lender's interest rate plan in effect at that time; and (b) the
interest rate group may be automatically adjusted to the highest interest rate
group if a default shall occur under this Note or under any other note or
agreement between Borrower and Lender.

 

3.3NOTICE. If Lender changes Borrower’s Variable Interest Rate, Lender will give
Borrower notice of such rate change to the extent required by and in accordance
with the then applicable law.

 

4.          INTEREST FOR OVERDUE PAYMENTS. Any interest or other sum owed
hereunder which is not paid when due shall be added to the outstanding principal
balance of the Loan and such combined amount shall thereafter bear interest at
the same rate as the principal portion of the Loan.

 

5.          DEFAULT AND REMEDIES. Borrower is in default on this Supplement
under the circumstances described in the MLA governing this Supplement. If a
default occurs, Lender shall have all the Remedies described in the MLA.

 

6.          SECURITY. The security given by Borrower to Lender includes, without
limitation, the following:

6.1       This Note is secured by a real estate Deed of Trust recorded on
06/01/2010, Instrument #20100601-00080212-0, in the official records of Ventura
County, State of California.

6.2       By signing below, the undersigned individually and collectively
certify that there have been NO CHANGES in the ownership, condition, or location
of any collateral previously pledged to Lender, which is also pledged as
Collateral for this Note.

 

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7.          PREPAYMENT; REAMORTIZATION; REFINANCE; INTEREST RATE CONVERSION. A
payment, in any amount, made in advance of the scheduled payment date is a
“prepayment.” If Borrower, in making a prepayment, intends the prepayment to be
applied to reduce the principal balance of the Note, Borrower must so inform
Lender in writing accompanying the prepayment. Unless agreed to in writing
otherwise, Lender may apply all prepayments in such manner as Lender, in its
sole discretion, may determine. Borrower may make a full or partial prepayment
on any business day without paying a prepayment fee.

 

Upon the making of a partial prepayment, Borrower may request to have the amount
of future installments reamortized over the remaining term of the Loan, but only
if Borrower so notifies Lender at the time Borrower makes the partial prepayment
and only if, upon Lender’s approval of the request, Borrower pays to Lender any
fees and costs that Lender may charge for such reamortization.

 

Lender may from time to time offer other loan or interest rate products for
which Borrower qualifies. Borrower acknowledges that it may not refinance or
convert this Note to another loan or interest rate product with Lender unless
Borrower qualifies for such loan or product and pays to Lender any fees and
costs that Lender may charge for such refinance or conversion.

 

8.          LEGAL ENTITY STATUS. If any Borrower is a legal entity, by signing
below, the undersigned representatives of such entity certify that there have
been NO CHANGES in: the entity’s owners, directors, officers, partners,
managers, trustees or beneficiaries; or in the entity’s lawful powers to borrow
or encumber entity assets to secure its debts; or in the authority of any person
signing below to act for and bind the entity; or in the entity’s Articles,
Bylaws, Partnership Agreement, Management or Operating Agreement, Declaration of
Trust, or other applicable legal documents creating or sustaining the entity
since the execution of the last statement to Lender.

 

9.          REIMBURSEMENT OF CHARGES. If any farm credit bank or any other
provider of financing or funding to Lender shall assess against Lender any fee,
cost, charge, or other amount with respect to the Indebtedness, Borrower shall
reimburse Lender on demand for the amount thereof, regardless of whether such
assessment arose from actions taken by Borrower.

 

10.         REAL ESTATE SECURED NOTE. This Note is secured by a Security
Instrument which describes how and under what conditions all amounts owed under
this Note may become immediately due and payable. One of those conditions
relates to any transfer of the property covered by the Security Instrument and
to certain other transfers. Refer to each Security Instrument for the specific
conditions and requirements. When the Security Instrument is a Deed of Trust,
the Deed of Trust provides as follows:

 

DUE ON SALE OR TRANSFER. In the event the herein-described Property, (including
any existing or subsequently acquired or created Water Asset), or any part
thereof, or any interest therein, is transferred or agreed to be transferred,
without Beneficiary's prior written consent, all Indebtedness, irrespective of
the maturity dates, at the option of the holder hereof, and without demand or
notice, shall immediately become due and payable. As used herein, “transferred”
means sold, conveyed, alienated, exchanged, transferred by gift, further
encumbered, pledged, hypothecated, made subject to an option to purchase, or
otherwise disposed of, directly or indirectly, or in trust, voluntarily or
involuntarily, by Trustor or by operation of law or otherwise. Failure to
exercise such option shall not constitute a waiver of the right to exercise this
option in the event of subsequent transfer or subsequent agreement to transfer.

 

If Trustor is an entity other than a natural person (such as a corporation or
other organization), then all Indebtedness, irrespective of the maturity date,
at the option of Beneficiary, and without demand or notice, shall become
immediately due and payable if: (a) a beneficial interest in Trustor is
transferred; (b) there is a withdrawal or removal of a general partner of a
partnership or a manager of a limited liability company; (c) there is a transfer
in the aggregate of more than 25% of the voting stock of Trustor, if Trustor is
a corporation, or there is a transfer in the aggregate of more than 25% of the
partnership interests or membership interests, if Trustor is a partnership,
limited liability company or similar entity; or (d) Trustor is dissolved or its
existence as a legal entity is terminated

 

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11.         SPECIAL REPRESENTATIONS, WARRANTIES, CONDITIONS AND COVENANTS.

 

11.1         DISBURSMENT INSTRUCTIONS. Initial disbursement of funds to pay-off
Farm Credit West, PCA Loan #8309256-101, indexed under Windfall Investors, LLC,
balance of funds, if any, to be disbursed as requested.

 

11.2         ADDITIONAL REPAYMENT TERMS. Borrower understands and agrees that,
in addition to the required payments detailed in item 2 of this Note, as sole
member of Windfall Investors, LLC, Borrower is required to remit to Lender a
minimum $175,000.00 per lot sold on the real property located at the Northeast
corner of Creston Road and Camp 8 Road in Creston, San Luis Obispo County,
California and bearing APN numbers 035-361-002 and 003, and 035-381-002 and 011
and owned by Windfall Investors LLC . Upon receipt, Lender shall apply any such
proceeds as a special principal payment on the Commitment.

 

REPRESENTATIVES OF LENDER ARE NOT AUTHORIZED TO MAKE ANY ORAL AGREEMENTS OR
ASSURANCES. DO NOT SIGN THIS AGREEMENT IF YOU BELIEVE THAT THERE ARE ANY
AGREEMENTS OR UNDERSTANDINGS BETWEEN YOU AND LENDER THAT ARE NOT SET FORTH IN
WRITING IN THIS AGREEMENT OR IN OTHER LOAN DOCUMENTS PERTAINING TO THIS LOAN.

 

Signature(s):           Limoneira Company, a Delaware Corporation           By:
/s/ Harold S. Edwards   By: /s/ Joseph D. Rumley   Harold S. Edwards, President 
    Joseph D. Rumley, Secretary 

  

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