**Exhibit 10.67**

 

**SECOND SUPPLEMENTAL SECURITYAGREEMENT**

 

THISSECOND SUPPLEMENTAL SECURITY AGREEMENT (this “Security Agreement”), dated as ofJuly 8, 2008, is made by ML MACADAMIA ORCHARDS, L.P., a Delaware limitedpartnership, and ML RESOURCES, INC., a Hawaii corporation (“Grantor”), in favorof AMERICAN AGCREDIT, PCA as successor in interest to PACIFIC COAST FARM CREDITSERVICES, PCA, (“Lender”).

 

**RECITALS**

 

A.            Pursuantto that certain Second Amended and Restated Credit Agreement dated as of July 8,2008 (the “Second Amended Credit Agreement”) by and among Grantor, as borrower,and Lender, Lender is agreeing to extend financial accommodations to Borroweron 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, andPacific Coast Farm Credit Services, PCA, Lender extended certain financialaccommodations to Borrower conditioned upon, among other things, the executionof a Security Agreement dated as of May 1, 2000 (the “Original SecurityAgreement”).   In addition, pursuant tothat 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 Borrowerconditioned upon, among other things, the execution of a Supplemental SecurityAgreement dated as of May 1, 2004 (the “Supplemental Security Agreement”).   It is the intent of the parties hereto thatthis Security Agreement supplement both the Original Security Agreement and theSupplemental Security Agreement, both of which are to remain in full force andeffect.

 

NOW THEREFORE, for goodand valuable consideration, the receipt and sufficiency of which are herebyacknowledged, and in order to induce Lender to enter into the Second AmendedCredit Agreement, Grantor agrees, for the benefit of Lender, as follows:

 

**AGREEMENT**

 

1.             DefinedTerms.  Unless otherwise definedherein, (i) terms defined in the Second Amended Credit Agreement are usedherein 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 thefollowing meanings (such meanings being equally applicable to both the singularand 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.

 

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“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.

 

“First AmendedCredit Agreement” has the meaning assigned to it in Recital B.

 

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

 

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

 

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

 

“hereby,” “herein,”“hereof,” and “hereunder” and words of similar import refer to thisSecurity Agreement as a whole (including any amendments, attachments, andschedules hereto) and not merely to the specific section, paragraph or clausein 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.

 

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

 

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

 

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

 

“Loan” hasthe meaning assigned to it in Recital A.

 

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

 

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

 

“Patents”means all of the following in which Grantor now holds or hereafter acquires anyinterest: (i) all letters patent of the United States or any other country,all registrations and recordings thereof, and all applications for letterspatent of the United States or any other country, including registrations,recordings and applications in the United States Patent and Trademark Office orin any similar office or agency of the United States, any State or Territorythereof, 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.

 

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“Second AmendedCredit Agreement” has the meaning assigned to it in Recital A.

 

“Secured Obligations” shall mean any and all loans, advances,obligations, covenants, and duties owing to Lender by Grantor of any kind ornature, absolute or contingent, due or to become due, whether now existing orhereafter arising, whether or not evidenced by any note, guaranty, non-recourseguaranty or other instrument, agreement or writing, including, withoutlimitation, the Original Credit Agreement, the First Amended Credit Agreement,the Second Amended Credit Agreement, all interest, charges, fees, attorneys’fees, expenses, and any other sum chargeable by Lender to Grantor under this orany other agreement.

 

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

 

“TrademarkLicense” means rights under any written agreement now owned or hereafteracquired 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, othersource or business identifiers, prints and labels on which any of the foregoinghave appeared or appear, designs and general intangibles of like nature, nowexisting or hereafter adopted or acquired, all registrations and recordingsthereof, and all applications in connection therewith, including registrations,recordings and applications in the United States Patent and Trademark Office orin any similar office or agency of the United States, any State or Territorythereof, or any other country or any political subdivision thereof, and (ii) allreissues, extensions or renewals thereof.

 

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

 

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2.            Grantof Security Interest.

 

a.             Tosecure the prompt and complete payment and performance when due (whether atstated maturity, by acceleration or otherwise) of all the Secured Obligations,and to induce Lender to enter into the Second Amended Credit Agreement and tomake the Loan in accordance with the terms thereof, Grantor hereby grants toLender, a lien on and security interest in all of the property described on Exhibit Ahereto, whether now owned by or owing to, or hereafter acquired by or arisingin favor of Grantor (including under any trade names, styles or divisionsthereof), and whether owned or consigned by, or leased to Grantor, andregardless of where located, together with any and all replacements, remedies,or accessions thereto and all proceeds and products thereof (all of which beinghereinafter collectively referred to as the “Collateral”); provided, however,that notwithstanding any provision to the contrary contained in this SecurityAgreement, Grantor does not grant, and Lender has not taken, a lien against orsecurity interest in (i) any Hazardous Materials in which Grantor may nowor hereafter acquire any interest, or which Grantor may now or hereafterpossess, manage or control, any (ii) any of Grantor’s governmentallicenses and permits that if included in the Collateral would violate anymandatory requirements of such licenses and permits or applicable lawprohibiting the creation of security interests therein.

 

b.             Inaddition, to secure the prompt and complete payment when due of the SecuredObligations and in order to induce Lender to enter into the Second AmendedCredit Agreement and to make the Loan in accordance with the terms thereof,Grantor hereby grants to Lender a security interest in all other personalproperty of Grantor, including all property of every description now orhereafter in the possession or custody of, or in transit to, Lender for anypurpose, including safekeeping, collection or pledge, for the account ofGrantor, or as to which Grantor may have any right or power.

 

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

 

a.             GrantorRemains Liable Under Contracts and Licenses.  Grantor agrees that, anything herein to thecontrary notwithstanding, Grantor shall remain liable under each of itsContracts and each of its Licenses to observe and perform all the conditionsand obligations to be observed and performed by it thereunder and Grantor shallperform all of its duties and obligations thereunder, all in accordance withand pursuant to the terms and provisions of each such Contract or License.  Lender shall not have any obligation orliability under any Contract or License by reason of or arising out of thisSecurity Agreement or the granting herein of a security interest therein or thereceipt by Lender of any payment relating to any Contract or License pursuanthereto, nor shall Lender be required or obligated in any manner to perform orfulfill any of the obligations of Grantor under or pursuant to any Contract orLicense, or to make any payment, or to make any inquiry as to the nature or thesufficiency of any payment received by it or the sufficiency of any performanceby any party under any Contract or License, or to present or file any claim, orto take any action to collect or enforce any performance or the payment of anyamounts which may have been assigned to it or to which it may be entitled atany time or times.

 

b.             Noticeof Assignment of Collateral to Lender. Lender may at any time after the occurrence and during the continuanceof an Event of Default notify Account Debtors of Grantor, parties to theContracts of Grantor, and obligors in respect of Instruments and InvestmentProperty of Grantor that the Accounts and the right, title and interest ofGrantor in and under such Contracts, Instruments, and Investment Property havebeen assigned to Lender and that payments shall be made directly toLender.  Upon the request of Lender,Grantor shall so notify such Account Debtors, parties to such Contracts, andobligors in respect of such Instruments and Investment Property.  Lender may at any time after the occurrenceand during the continuance of an Event of Default notify obligors in respect ofChattel Paper of Grantor that the right, title and interest of Grantor in andunder such Chattel Paper has been assigned to Lender and that payments shall bemade directly to Lender.

 

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c.             Verificationof Collateral.  Upon reasonable priornotice 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 testverifications of the Accounts and physical verifications and appraisals of theInventory and other Collateral in any manner and through any medium that itconsiders advisable, and Grantor agrees to furnish all such assistance andinformation as Lender may require in connection therewith.

 

4.            Representationsand Warranties.  Grantor herebyrepresents and warrants that:

 

a.             Authority;Execution.  Grantor has the right andpower and is duly authorized and empowered to enter into, execute, deliver andperform this Security Agreement, and any other agreements, documents orinstruments executed in connection herewith or therewith.  Grantor’s execution and performance of thisSecurity Agreement will not constitute, cause or result in any breach orviolation of any provision of the partnership agreement, articles ofincorporation or by-laws of Grantor, any law or any contractual obligation ofGrantor and does not conflict with, constitute a default or require any consentunder (other than consents that if not obtained would not have a materialadverse effect) or result in the creation of any Lien upon any property orassets of Grantor pursuant to any contractual obligation of Grantor.  Upon execution, this Security Agreement willconstitute a valid, binding obligation of Grantor to Lender that is enforceableaccording to its terms, except as the enforceability of this Security Agreementmay be subject to or limited by bankruptcy, insolvency, reorganization,arrangement, moratorium or other similar laws relating to or affecting therights of creditors generally and except as the availability of equitableremedies are subject to the application of equitable principles.  No further consent, ratification or approvalis required for this Security Agreement to be effective.

 

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

 

c.             NoOther Liens.  No effective securityagreement, financing statement, equivalent security or lien instrument or continuationstatement covering all or any part of the Collateral is on file or of record inany public office, except such as may have been filed by Grantor in favor ofLender pursuant to this Security Agreement or such as relate to protectivefilings with respect to equipment leases.

 

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

 

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

 

f.              Changeof Name.  Grantor did not and has notdone within the last five years business under any trade name or style otherthan as disclosed on Exhibit C hereto.

 

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g.             Locationsof Offices and Collateral; Federal Taxpayer Identification.  Grantor’s chief executive office, principalplace of business, corporate offices, all warehouses and premises within whichCollateral is stored or located, and the locations of all of its recordsconcerning the Collateral are set forth on Exhibit C hereto, and Grantorshall not change such chief executive office, principal place of business,corporate offices, or warehouses or Collateral premises, or remove such recordsunless it has taken such action as is necessary to cause the Lien of Lender inthe Collateral to continue to be perfected. Grantor shall not change its chief executive office, principal place ofbusiness, corporate offices, or warehouses or Collateral premises, or thelocation of its records concerning the Collateral, or its federal taxpayeridentification number, without giving thirty (30) days’ prior written noticethereof to Lender.  Grantor’s federaltaxpayer identification number is****asset forth on Exhibit C hereto.

 

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

 

i.              FarmingOperations.  Grantor does not own orhave any interest in any real property other than the real property describedin Exhibit B hereto.

 

5.            Covenants.  Grantor covenants and agrees with Lender thatfrom and after the date of this Security Agreement and until the SecuredObligations are fully satisfied:

 

a.             FurtherAssurances; 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 anddeliver any and all such further instruments and documents and take suchfurther action as Lender may reasonably deem desirable to obtain the fullbenefits of this Security Agreement and of the rights and powers hereingranted, including (i) filing any financing or continuation statementsunder the UCC with respect to the liens and security interests grantedhereunder or under any other Loan Document and (ii) transferringCollateral to Lender’s possession (if such Collateral consists of Chattel Paperor if a security interest in such Collateral can be perfected only bypossession, or, if requested by Lender). Grantor also hereby authorizes Lender to file any such financing orcontinuation statement without the signature of Grantor to the extent permittedby applicable law.  If any amount payableunder or in connection with any of the Collateral is or shall become evidencedby any Instrument, such Instrument, other than checks and notes received in theordinary course of business, shall be duly endorsed in a manner satisfactory toLender and delivered to Lender immediately upon Grantor’s receipt thereof.

 

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b.             Maintenanceof Records.  Grantor shall keep andmaintain, at its own cost and expense, satisfactory and complete records of theCollateral, including a record of any and all payments received and any and allcredits granted with respect to the Collateral and all other dealings with theCollateral.  Upon the request of Lender,Grantor shall mark its books and records pertaining to the Collateral toevidence this Security Agreement and the security interests grantedhereby.  All Chattel Paper shall bemarked with the following legend:  “Thiswriting and the obligations evidenced or secured hereby are subject to thesecurity interest of American AgCredit, PCA.” For Lender’s further security, Grantor agrees that Lender shall have aspecial property interest in all of Grantor’s books and records pertaining tothe Collateral and, upon the occurrence and during the continuation of anyEvent of Default, Grantor shall deliver and turn over any such books andrecords to Lender or to its representatives at any time on demand ofLender.  Prior to the occurrence of anEvent of Default and upon reasonable notice from Lender, Grantor shall permitany representative of Lender to inspect such books and records and shallprovide photocopies thereof to Lender as more specifically set forth in Section 5(i) below.

 

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

 

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

 

e.             Limitationon Liens on Collateral.  Grantorshall not create, permit or suffer to exist, and shall defend the Collateralagainst and take such other action as is necessary to remove, any Lien on theCollateral.  Grantor shall further defendthe right, title and interest of Lender in and to any of Grantor’s rights underthe 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 againstthe claims and demands of all Persons whomsoever.

 

f.              Notices.  Grantor shall advise Lender, in reasonabledetail, promptly, within five (5) Business Days of after it becomes awareof: (i) any material Lien, attaching to or asserted against any of theCollateral, (ii) any material change in the composition of the Collateral (iii) anydestruction 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 aMaterial Adverse Effect upon the Collateral and/or Lender’s Lien.

 

g.             Limitationson Modifications of Accounts. Subject to the terms of the Second Amended Credit Agreement, upon theoccurrence and during the continuation of any Event of Default, Grantor shallnot, without Lender’s prior written consent, (i) grant any extension ofthe time of payment of any of the Accounts, Chattel Paper, Instruments oramounts due under any Contract; (ii) compromise or settle the same forless than the full amount thereof; (iii) release, in whole or in part, anyPerson liable for the payment thereof; or (iv) allow any credit ordiscount whatsoever thereon other than trade discounts granted in the ordinarycourse of business of Grantor.

 

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h.             ContinuousPerfection.  Grantor shall not changeits name, identity or corporate structure in any manner which might make anyfinancing or continuation statement filed in connection herewith seriouslymisleading within the meaning of section 9-402(7) of the UCC or any otherthen applicable provision of the UCC unless Grantor shall have given Lender atleast thirty (30) days’ prior written notice thereof and shall have taken allaction (or made arrangements to take such action substantially simultaneouslywith such change if it is impossible to take such action in advance) necessaryor reasonably requested by Lender to amend such financing statement orcontinuation statement so that it is not seriously misleading.

 

i.              Rightof Inspection.  Upon reasonablenotice 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 andfree access during normal business hours to all the books and records and correspondenceof Grantor, and Lender or its representatives may examine the same, takeextracts therefrom and make photocopies thereof, and Grantor agrees to renderto Lender, at Grantor’s cost and expense, such clerical and other assistance asmay be reasonably requested with regard thereto.  Upon reasonable notice to Grantor (unless anEvent of Default has occurred and is continuing, in which case no notice isnecessary), Lender and its representatives shall also have the right to enterinto and upon any premises where any of the Inventory is located for thepurpose of inspecting the same, observing its use or otherwise protectingsLender’s interests in the Collateral.

 

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

 

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

 

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

 

m.            FarmingOperations.  Grantor shall notundertake any farming operations on any real property other than the propertylisted on Exhibit B hereto unless Grantor shall have provided Lender withthirty (30) days prior notice of Grantor’s intent to do so, which notice shallbe accompanied by a detailed description of the real property on which thecrops are grown, and Grantor shall have provided Lender with a supplement tothis Security Agreement and such financing statement amendments and otherdocuments as Lender shall request.

 

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

 

a.             Grantorhereby irrevocably constitutes and appoints Lender and any officer or agentthereof, with full power of substitution, as its true and lawfulattorney-in-fact with full irrevocable power and authority in the place andstead of Grantor and in the name of Grantor or in its own name, and herebygrants to Lender, in Lender’s discretion, the power and right, on behalf ofGrantor, without notice to or assent by Grantor, and at any time prior to orafter the occurrence of an Event of Default, to do the following:

 

(i)  to takeany and all appropriate action and to execute and deliver any and all documentsand instruments which may be necessary or desirable to continue any insuranceexisting pursuant to the terms of the Second Amended Credit Agreement, and payall or any part of the premiums therefore and the costs thereof; and

 

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

 

b.             Grantorhereby irrevocably constitutes and appoints Lender and any officer or agentthereof, with full power of substitution, as its true and lawfulattorney-in-fact with full irrevocable power and authority in the place andstead of Grantor and in the name of Grantor or in its own name, from time totime in Lender’s discretion, for the purpose of carrying out the terms of thisSecurity Agreement, to take any and all appropriate action and to execute anddeliver any and all documents and instruments which may be necessary ordesirable to accomplish the purposes of this Security Agreement and, withoutlimiting the generality of the foregoing, hereby grants to Lender the power andright, on behalf of Grantor, without notice to or assent by Grantor, upon theoccurrence and during the continuation of an Event of Default, to do thefollowing:

 

(i) ask, demand, collect, receive and give acquitances and receipts for any and allmoney due or to become due under any Collateral, and take ownership and controlof any and all lock boxes and other depository accounts by written notice toany bank or other institution maintaining such lock boxes or other depositoryaccounts;

 

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

 

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

 

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

 

(v) effect any repairs or obtain any insurance called for by the terms of thisSecurity Agreement and pay all or any part of the premiums therefore and coststhereof;

 

(vi)          directany party liable for any payment under or in respect of any of the Collateralto make payment of any and all monies due or to become due thereunder, directlyto 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 documentsconstituting or related to the Collateral;

 

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

 

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

 

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

 

(xi)  defend any suit, action or proceeding broughtagainst Grantor with respect to any Collateral if Grantor does not defend suchsuit, action or proceeding or if Lender believes that Grantor is not pursuingsuch defense in a manner that will maximize the recovery with respect to suchCollateral;

 

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

 

(xiii)  sell, transfer, pledge, make any agreementwith respect to, or otherwise deal with any of the Collateral as fully andcompletely 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 timeto time, all acts and things which Lender reasonably deems necessary toperfect, preserve, or realize upon the Collateral and Lender’s Lien therein inorder to effect the intent of this Security Agreement, all as fully andeffectively as Grantor might do; and

 

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

 

c.             Grantorhereby ratifies, to the extent permitted by law, all that said attorneys shalllawfully do or cause to be done by virtue hereof.  The power of attorney granted pursuant tothis Section 6 is a power coupled with an interest and shall beirrevocable until the Secured Obligations are paid or otherwise satisfied infull.

 

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

 

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

 

7.             Performance by Lender of Grantor’s Obligation. If Grantor fails to perform or comply with any of its agreementscontained herein or in any other Loan Document, and Lender, as provided for bythe terms of this Security Agreement, or in any other Loan Document, shallitself perform or comply, or otherwise cause performance of or compliance withsuch agreement, the reasonable expenses, including attorneys’ fees, of Lenderincurred in connection with such performance or compliance, together withinterest thereon at the Base Rate then in effect in respect of the RevolvingLoan, shall be payable by Grantor to Lender on demand and shall constituteSecured Obligations secured hereby.

 

8.             Remedies, Rights Upon Default.

 

a.             Ifany Event of Default shall occur and be continuing, Lender may exercise inaddition to all other rights and remedies granted to it under this SecurityAgreement, the Original Credit Agreement, the First Amended Credit Agreement,the Second Amended Credit Agreement, or any of the other Documents evidencingany loan obligations from Grantor to Lender, or agreement securing, evidencingor relating to the Secured Obligations, all rights and remedies of a securedparty under the UCC.  Without limitingthe generality of the foregoing, Grantor expressly agrees that in any suchevent Lender, without demand of performance or other demand, advertisement ornotice of any kind (except the notice specified below of time and place ofpublic or private sale) to or upon Grantor or any other Person (all and each ofwhich demands, advertisements and notices are hereby expressly waived to themaximum extent permitted by the UCC and other applicable law), may forthwithenter upon the premises of Grantor where any Collateral is located throughself-help, without judicial process, without first obtaining a final judgmentor giving Grantor notice and opportunity for a hearing on Lender’s claim oraction, and without paying rent to Grantor, and collect, receive, assemble,process, appropriate and realize upon the Collateral, or any part thereof, andmay forthwith sell, lease, assign, give an option or options to purchase, orsell or otherwise dispose of and deliver said Collateral (or contract to doso), or any part thereof, in one or more parcels at public or private sale orsales, at any exchange or broker’s board or at any of Lender’s offices orelsewhere at such prices as it may deem best, for cash or on credit or forfuture delivery without assumption of any credit risk.  Lender shall have the right upon any suchpublic sale or sales, and, to the extent permitted by law, upon any suchprivate sale or sales, to purchase for the benefit of Lender the whole or anypart 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 

 

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and continued from timeto time with or without notice.  Lendershall have the right to conduct such sales on Grantor’s premises or elsewhereand shall have the right to use Grantor’s premises without charge for suchsales for such time or times as Lender deems necessary or advisable.

 

b.             Grantorfurther agrees, at Lender’s request, to assemble the Collateral and make itavailable to Lender at places which Lender shall reasonably select, whether atGrantor’s premises or elsewhere.  UntilLender 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 ofpreserving Collateral or its value or for any other purpose deemed appropriateby Lender.  Lender shall have noobligation to Grantor to maintain or preserve the rights of Grantor as againstthird parties with respect to Collateral while Collateral is in the possessionof Lender.  Lender may, if it so elects,seek the appointment of a receiver or keeper to take possession of Collateraland to enforce any of Lender’s remedies with respect to such appointmentwithout prior notice or hearing.  Lendershall 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 suchapplication, and only after so paying over such net proceeds and after thepayment 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 hasreceived what Lender considers reasonable proof of a subordinate party’ssecurity interest), need Lender account for the surplus, if any, toGrantor.  To the maximum extent permittedby applicable law, Grantor waives all claims, damages, and demands againstLender arising out of the repossession, retention or sale of the Collateralexcept such as arise out of the gross negligence or wilful misconduct of suchparty.  Grantor agrees that five (5) days’prior notice by Lender of the time and place of any public sale or of the timeafter which a private sale may take place is reasonable notification of suchmatters.  Grantor shall remain liable forany deficiency if the proceeds of any sale or disposition of the Collateral areinsufficient to pay all amounts to which Lender is entitled, Grantor also beingliable for any attorneys’ fees incurred by Lender to collect such deficiency.

 

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

 

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

 

e.             Theproceeds of any sale, disposition or other realization upon all or any part ofthe Collateral shall be distributed by Lender, upon receipt, in accordance withthe provisions of the Second Amended Credit Agreement.

 

f.              Fromand 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 regulatoryagencies with any jurisdiction over Grantor, with respect to the possibilitythat Lender may take over the operation of any Grantor’s business, or thepossibility that Lender may take possession of or liquidate any or all of theCollateral.

 

g.             Grantoracknowledges that Lender shall be entitled to independently, but withoutduplication, exercise the rights and remedies of Lender exercisable for theirbenefit under this Security Agreement.

 

9.             Indemnity and Expenses.

 

a.             Grantoragrees to indemnify Lender from and against any and all claims, losses andliabilities growing out of or resulting from this Security Agreement(including, enforcement of this Security Agreement), except claims, losses orliabilities resulting from such indemnified party’s gross negligence or willfulmisconduct.

 

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b.             Grantorwill upon demand pay to Lender the amount of any and all reasonableout-of-pocket expenses, including the reasonable fees and disbursements ofcounsel and of any experts and agents, which Lender may incur in connectionwith (i) the administration of this Security Agreement, (ii) thecustody, preservation, use or operation of, or the sale of, collection from, orother realization upon, any of the Collateral, (iii) the exercise orenforcement of any of the rights of Lender hereunder, or (iv) the failure by Grantor to perform or observe anyof the provisions hereof.

 

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

 

11.           Limitationon Lender’s Duty in Respect of Collateral.  Lender shalluse reasonable care with respect to the Collateral in its possession or underits control.  Lender shall have no otherduty as to any Collateral in its possession or control or in the possession orcontrol of any agent or nominee of such party, or any income thereon or as tothe preservation of rights against prior parties or any other rights pertainingthereto.

 

12.           Reinstatement. This Security Agreement shall remain in full force and effect andcontinue to be effective should any petition be filed by or against Grantor forliquidation or reorganization, should Grantor become insolvent or make anassignment for the benefit of creditors or should a receiver or trustee beappointed for all or any significant part of Grantor’s assets, and shallcontinue to be effective or be reinstated, as the case may be, if at any timepayment and performance of the Secured Obligations, or any part thereof, is, pursuantto applicable law, rescinded or reduced in amount, or must otherwise berestored or returned by any obligee of the Secured Obligations, whether as a “voidablepreference,” “fraudulent conveyance,” or otherwise, all as though such paymentor performance had not been made.  In theevent that any payment, or any part thereof, is rescinded, reduced, restored orreturned, the Secured Obligations shall be reinstated and deemed reduced onlyby such amount paid and not so rescinded, reduced, restored or returned.

 

13.           Notices. Except as otherwise provided herein, whenever it is provided herein thatany notice, demand, request, consent, approval, declaration, or othercommunication shall or may be given or delivered to or served upon any of theparties by another, or whenever any of the parties desires to give or deliveror serve upon another any communication with respect to this SecurityAgreement, each such notice, demand, request, consent, approval, declaration,or other communication shall be in writing, shall be addressed to the addressesset forth below, or such other or additional address as the parties may notifyeach other of in writing, and shall be deemed to have been sent, delivered, orgiven and received upon the earlier of:  (a) ifby 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 otherovernight or one-day mail or delivery service, on the next Business Dayfollowing deposit with such delivery service; (c) if by personal delivery,upon completion of delivery; or (d) if by mail, three (3) BusinessDays after deposit in the U.S. Mail, first class, postage prepaid:

 

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(a)  If to AmericanAgCredit, 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 —MLMacadamia Orchards

Facsimile: (707) 521-6105

 

(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 asherein provided.  The giving of anynotice required hereunder may be waived in writing by the party entitled toreceive such notice.  Failure or delay indelivering copies of any notice, demand, request, consent, approval, declaration,or other communication to the persons designated above to receive copies shallin 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 orunenforceable in any jurisdiction shall, as to such jurisdiction, beineffective to the extent of such prohibition or unenforceability withoutinvalidating the remaining provisions hereof, and any such prohibition orunenforceability in any jurisdiction shall not invalidate or renderunenforceable such provision in any other jurisdiction.

 

15.           NoWaiver; Cumulative Remedies.  Lender shallnot by any act, delay, omission or otherwise be deemed to have waived any ofits rights or remedies hereunder, and no waiver shall be valid unless inwriting, signed by Lender, and then only to the extent therein set forth.  A waiver by Lender of any right or remedyhereunder on any one occasion shall not be construed as a bar to any right orremedy which Lender would otherwise have had on any future occasion.  No failure to exercise nor any delay inexercising on the part of Lender, any right, power or privilege hereunder,shall operate as a waiver thereof, nor shall any single or partial exercise ofany right, power or privilege hereunder preclude any other or future exercisethereof or the exercise of any other right, power or privilege.  The rights and remedies hereunder providedare cumulative and may be exercised singly or concurrently, and are notexclusive of any rights and remedies provided by law.  None of the terms or provisions of thisSecurity Agreement may be waived, altered, modified or amended except by aninstrument in writing, duly executed by Lender and Grantor affected by suchwaiver.

 

16.           Limitationby Law.  All rights, remedies and powers provided inthis Security Agreement may be exercised only to the extent that the exercisethereof does not violate any applicable provision of law, and all theprovisions of this Security Agreement are intended to be subject to all

 

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applicable mandatoryprovisions of law that may be controlling and to be limited to the extentnecessary 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.

 

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

 

18.           Successorand Assigns.  This Security Agreement and all obligationsof Grantor hereunder shall be binding upon the successors and assigns ofGrantor, and shall, together with the rights and remedies of Lender  hereunder, inure to the benefit of Lender andits successors and assigns, as permitted pursuant to the terms of the OriginalCredit Agreement, the First Amended Credit Agreement, and the Second AmendedCredit Agreement.  No sales ofparticipations, other sales, assignments, transfers or other dispositions ofany agreement governing or instrument evidencing the Secured Obligations or anyportion thereof or interest therein, as permitted pursuant to the terms of theSecond Amended Credit Agreement, shall in any manner affect the securityinterest granted to Lender hereunder. Grantor may not assign, sell or otherwise transfer an interest in thisSecurity Agreement except as provided by the the Original Credit Agreement, theFirst Amended Credit Agreement, or the Second Amended Credit Agreement.

 

19.           FurtherIndemnification.  Grantor agrees to pay, and to hold Lenderharmless from, any and all liabilities with respect to, or resulting from anydelay in paying, any and all excise, sales, or other similar taxes which may bepayable or determined to be payable with respect to any of the Collateral or inconnection with any of the transactions contemplated by this SecurityAgreement.

 

20.           EntireAgreement.  The execution of this Security Agreementsupersedes all the negotiations or stipulations concerning matters thereofwhich preceded or accompanied the execution and delivery of this SecurityAgreement.  This Security Agreement isintended by the parties hereto to be a complete and exclusive statement of theterms and conditions hereof.

 

**21****.  GOVERNINGLAW.  EXCEPT AS OTHERWISE EXPRESSLYPROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERSOF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS SECURITY AGREEMENT AND THEOBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCEDIN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTSMADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDINGCONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.  GRANTOR HEREBY CONSENTS AND AGREES THAT THESUPERIOR COURTS OF SAN FRANCISCO COUNTY, CALIFORNIA, OR, AT LENDERS OPTION, THEUNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA, SHALLHAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTESBETWEEN GRANTOR AND LENDER PERTAINING TO THIS SECURITY AGREEMENT OR TO ANYMATTER ARISING OUT OF OR RELATED TO THIS SECURITY AGREEMENT.  GRANTOR EXPRESSLY SUBMITS AND CONSENTS INADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT,AND GRANTOR HEREBY WAIVES ANY OBJECTION WHICH GRANTOR MAY HAVE BASED UPONLACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUMNONCONVENIENSAND HEREBY CONSENTS TO THE GRANTING FOR SUCH LEGAL OR EQUITABLE RELIEF AS ISDEEMED APPROPRIATE BY SUCH COURT. GRANTOR HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT, ANDOTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF**

 

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**SUCHSUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED ORCERTIFIED MAIL ADDRESSED TO GRANTOR AT THE ADDRESS SET FORTH IN SECTION 13OF THIS SECURITY AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETEDUPON THE EARLIER OF GRANTOR’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYSAFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.  NOTHING IN THIS SECURITY AGREEMENT SHALL BEDEEMED OR OPERATE TO PRECLUDE LENDER OR GRANTOR FROM BRINGING SUIT OR TAKINGOTHER LEGAL ACTION IN ANY OTHER JURISDICTION.**

 

**22****.  MUTUALWAIVER OF JURY TRIAL.  BECAUSEDISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOSTQUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THEPARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THANARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY AJUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIALSYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURYIN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS ORREMEDIES UNDER THIS SECURITY AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.**

 

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

 

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

 

25.           Section Titles. The section titles contained in this Security Agreement are and shall bewithout substantive meaning or content of any kind whatsoever and are not apart of the agreement between the parties hereto.

 

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

 

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

 

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IN WITNESS WHEREOF, eachof the parties hereto has caused this Security Agreement to be executed anddelivered 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: | President |

 

 
| ML RESOURCES, INC., a  Hawaii corporation |   |                  |
|-------------------------------------------|--------|-----------------------|
|                                      |   |                  |
|                                      | By:    | /s/ Dennis J. Simonis |
|                                      | Name:  | Dennis J. Simonis     |
|                                      | Title: | 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 OFCOLLATERAL

 

TO

 

UNIFORM COMMERCIALCODE FINANCING STATEMENTS

 

AND

 

SECURITY AGREEMENT

 

Debtorand Grantor:             ML Macadamia Orchards, L.P., a Delawarelimited partnership

ML Resources, Inc.,a Hawaii corporation

 

SecuredParty:      American AgCredit, PCA, successor in interest toPacific Coast Farm Credit Services, PCA

 

All of the Debtor’s andthe Grantor’s now existing and hereafter arising interest in the followingcollateral:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

D.            “Documents”— all documents as defined in the Uniform Commercial Code, including, withoutlimitation, all bills of lading, dock warrants, dock receipts, warehousereceipts, or other documents of title;

 

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E.             “Equipment”— all equipment as defined in the Uniform Commercial Code, including, withoutlimitation, all machinery, equipment, furnishings, vehicles and computers andother electronic data-processing and other office equipment, and any and alladditions, substitutions and replacements of any of the foregoing, togetherwith all attachments, components, parts, equipment, and accessories installedon or affixed to any of the foregoing;

 

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

 

G.            “Fixtures”— all fixtures as defined in the Uniform Commercial Code, including, withoutlimitation, all of the fixtures, systems, machinery, apparatus, equipment andfittings of every kind and nature whatsoever and all appurtenances andadditions thereto and substitutions therefor or replacements thereof, now orhereafter attached or affixed to or constituting a part of, or located in orupon, real property wherever located (including, without limitation, allheating, 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 anyof the foregoing, together with all extensions, improvements, betterments,renewals, substitutes, and replacements of, and all additions and appurtenancesto any of the foregoing property);

 

H.            “GeneralIntangibles” — all general intangibles as defined in the Uniform CommercialCode, including, without limitation, all right, title and interest whichGrantor may now or hereafter have in or under any contracts, customer lists,trademarks, patents, service marks, trade names, business names, corporatenames, trade styles, logos and other source or business identifiers, and allapplications therefor and reissues, extensions or renewals thereof, rights inintellectual property, interests in and rights to distributions frompartnerships, 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 anytrademark, trademark registration or trademark licensed under any trademarklicense), all rights and claims in or under insurance policies (including,without limitation, insurance for fire, damage, loss, and casualty, whethercovering personal property, real property, tangible rights or intangiblerights, 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, andother payments and rights of indemnification;

 

I.              “Instruments”— all instruments as defined in the Uniform Commercial Code, including, withoutlimitation, all certificated and uncertificated securities, all certificates ofdeposit, and all notes and other evidences of indebtedness, other thaninstruments that constitute, or are a part of a group of writings thatconstitute, chattel paper;

 

J.             “Inventory”— all inventory as defined in the Uniform Commercial Code, wherever located,including, without limitation, inventory, macadamia nuts, merchandise, goodsand other personal property which are held by or on behalf of Grantor for saleor lease or are furnished or are to be furnished under a contract of service orwhich constitute raw materials, work in process or materials used or consumedor 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 aconsignment basis;

 

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

 

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

 

M.           “GovernmentalProgram Payments” — all right to receive any payment under any governmentprogram, including, set aside, price support, deficiency, or disaster reliefpayments.

 

N.            “InvestmentProperty” — all investment property as defined in the Uniform CommercialCode, including, without limitation, all securities, whether certificated oruncertificated, all security entitlements, all security accounts, all commoditycontracts and all commodity accounts;

 

O.            “OtherPersonal 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 anyform (including, without limitation, any insurance proceeds, and all claims byGrantor against third parties for loss or damage to, or destruction of, orotherwise relating to any or all of the foregoing) and all accessions to,substitutions and replacements for, and rents, profits and products of, each ofthe foregoing.

 

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EXHIBIT B

 

TO SECURITYAGREEMENT

 

Debtorand Grantor:             ML Macadamia Orchards, L.P., a Delawarelimited partnership

ML Resources, Inc.,a Hawaii corporation

 

SecuredParty:      American AgCredit, PCA, successor in interest toPacific Coast Farm Credit Services, PCA

 

See attached for propertydescription.

 

EXHIBIT C

 

TO SECURITYAGREEMENT

 

Debtorand Grantor:             ML Macadamia Orchards, L.P., a Delawarelimited partnership

ML Resources, Inc.,a Hawaii corporation

 

SecuredParty:      American AgCredit, PCA, successor in interest toPacific Coast Farm Credit Services, PCA

 

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

 

Mauna Loa MacadamiaPartners, L.P.

 

(2)           Locations.

 

(a)           Chiefexecutive office:

 

26-238 Hawaii Belt Road

Hilo, Hawaii   96720

 

(b)           Principalplace of business:

 

Kau, HA

 

(c)           Otherlocations 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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