**Exhibit 10.65**

 

**SUPPLEMENTAL SECURITY AGREEMENT**

 

THIS SUPPLEMENTALSECURITY AGREEMENT (the “Security Agreement”), dated as of May 1, 2004, ismade by ML MACADAMIA ORCHARDS, L.P., a Delaware limited partnership, and MLRESOURCES, INC., a Hawaii corporation (“Grantor”), in favor of AMERICANAGCREDIT, PCA as successor in interest to PACIFIC COAST FARM CREDIT SERVICES,PCA, (“Lender”).

 

**RECITALS**

 

A.            Pursuant to that certain Amended andRestated Credit Agreement dated as of May 1, 2004 by and among Grantor, asborrower, and Lender, Lender is agreeing to extend financial accommodations toBorrower on the terms set forth therein. Lender is willing to do so, but only upon the condition, among others,that Grantor shall execute this  SecurityAgreement.

 

B.            Pursuant to that certain Credit Agreementdated as of May 1, 2000, by and among Grantor, as borrower, and PacificCoast Farm Credit Services, PCA, Lender extended certain financialaccommodations to Borrower on the terms set forth therein.  Said financial conditions were conditioned,among other things, on the execution of a Security Agreement dated as of May 1,2000 (the “Original Security Agreement”).  It is the intent of the parties hereto that this Security Agreementsupplement the Original Security Agreement which remains 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 renew the Revolving Loan  pursuant to the Amended and Restated CreditAgreement, Grantor agrees, for the benefit of Lender, as follows:

 

**AGREEMENT**

 

1.             DefinedTerms.  Unless otherwise definedherein, (i) terms defined in the Amended and Restated Credit Agreement areused 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 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.

 

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

 

“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.

 

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

 

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

 

“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.

 

“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.

 

“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 othercountry, all registrations and recordings thereof, and all applications forletters patent of the United States or any other country, includingregistrations, recordings and applications in the United States Patent andTrademark Office or in any similar office or agency of the United States, anyState 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.

 

“SecuredObligations” means all obligations of Grantor to Lender under the Amendedand Restated  Credit Agreement or anyother Loan Document.

 

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

 

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“TrademarkLicense” means rights under any written agreement now owned or hereafteracquired by Grantor granting any right to use any Trademark or Trademarkregistration.

 

“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.

 

2.             Grant of 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 Amended and Restated Credit Agreementand to make the Loan in accordance with the terms thereof, Grantor hereby grantsto Lender, a lien on and security interest in all of the property described on **Exhibit A** hereto, whether now owned byor owing to, or hereafter acquired by or arising in favor of Grantor (includingunder any trade names, styles or divisions thereof), and whether owned orconsigned by, or leased to Grantor, and regardless of where located, togetherwith any and all replacements, remedies, or accessions thereto and all proceedsand products thereof (all of which being hereinafter collectively referred to asthe “Collateral”); provided, however, that notwithstanding anyprovision to the contrary contained in this Security Agreement, Grantor doesnot grant, and Lender has not taken, a lien against or security interest in (i) anyHazardous Materials in which Grantor may now or hereafter acquire any interest,or which Grantor may now or hereafter possess, manage or control, any (ii) anyof Grantor’s governmental licenses and permits that if included in theCollateral would violate any mandatory requirements of such licenses andpermits or applicable law prohibiting the creation of security intereststherein.

 

b.             Inaddition, to secure the prompt and complete payment when due of the SecuredObligations and in order to induce Lender to enter into the Amended and RestatedCredit Agreement and to make the Loan in accordance with the terms thereof,Grantor hereby grants to Lenders 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.

 

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

 

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 have beenassigned to Lender and that payments shall be made directly to Lender.  Upon the request of Lender, Grantor shall sonotify such Account Debtors, parties to such Contracts, and obligors in respectof such Instruments and Investment Property. Lender may at any time after the occurrence and during the continuanceof an Event of Default notify obligors in respect of Chattel Paper of Grantorthat the right, title and interest of Grantor in and under such Chattel Paperhas been assigned to Lender and that payments shall be made directly to Lender.

 

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.             Representations and Warranties. Grantor hereby represents 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 that would not be aPermitted Encumbrance upon any property or assets of Grantor pursuant to anycontractual obligation of Grantor.  Uponexecution, this Security Agreement will constitute a valid, binding obligationof Grantor to Lender that is enforceable according to its terms, except as theenforceability of this Security Agreement may be subject to or limited bybankruptcy, insolvency, reorganization, arrangement, moratorium or othersimilar laws relating to or affecting the rights of creditors generally andexcept as the availability of equitable remedies are subject to the applicationof equitable principles.  No furtherconsent, ratification or approval is required for this Security Agreement to beeffective.

 

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b.             Titleto Collateral.  Except for thesecurity interest granted to Lender under this Security Agreement and the otherPermitted Encumbrances, Grantor is the sole owner of each item of theCollateral in which it purports to grant a security interest hereunder, havinggood and marketable title thereto free and clear of any and all liens, securityinterests or other encumbrances.

 

c.             NoOther Liens.  No effective securityagreement, financing statement, equivalent security or lien instrument orcontinuation statement covering all or any part of the Collateral is on file orof record in any public office, except such as may have been filed by Grantorin favor of Lender pursuant to this Security Agreement or such as relate toother Permitted Encumbrances or protective filings with respect to equipmentleases.

 

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, except for the Permitted Encumbrances.

 

e.             Accounts.  Subject to reasonable reserves therefor 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.

 

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 Grantor shall not change such chief executive office, principalplace of business, corporate offices, or warehouses or Collateral premises, orremove such records unless it has taken such action as is necessary to causethe Lien of Lender in the Collateral to continue to be perfected.  Grantor shall not change its chief executiveoffice, principal place of business, corporate offices, or warehouses orCollateral 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.             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.  Grantorcovenants and agrees with Lender that from and after the date of this SecurityAgreement and until the Secured Obligations 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

 

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Paper or if a securityinterest in such Collateral can be perfected only by possession, or, ifrequested by Lender).  Grantor alsohereby authorizes Lender to file any such financing or continuation statementwithout the signature of Grantor to the extent permitted by applicable law.  If any amount payable under or in connectionwith any of the Collateral is or shall become evidenced by any Instrument, suchInstrument, other than checks and notes received in the ordinary course ofbusiness, shall be duly endorsed in a manner satisfactory to Lender anddelivered to Lender immediately upon Grantor’s receipt thereof.

 

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 to Grantor,assigned to Grantor, pledged to Grantor or otherwise held by Grantor, togetherwith all corresponding documents including deeds of trust, security agreementsand title insurance policies, with such endorsements thereto as Lender mayreasonably require, (ii) Instruments (except for checks which aredeposited 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 except Permitted Encumbrances. Grantor shall further defend the right, title and interest of Lender inand 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 andto the Proceeds thereof against the claims and demands of all Personswhomsoever except the holders of Permitted Encumbrances.

 

f.              Notices.  Grantor shall advise Lender, in reasonabledetail, promptly, within five (5) Business Days of after it becomes awareof: (i) any material Lien, other than Permitted Encumbrances, attaching toor asserted against any of the Collateral, (ii) any material change in thecomposition of the Collateral (iii) any destruction of or substantialdamage to any of the Collateral in excess of $100,000 and (iv) theoccurrence of any other event which would have a Material Adverse Effect uponthe Collateral and/or Lender’s Lien.

 

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g.             Limitationson Modifications of Accounts. Subject to the terms of the Amended and Restated  Credit Agreement, upon the occurrence andduring the continuation of any Event of Default, Grantor shall not, withoutLender’s prior written consent, (i) grant any extension of the time ofpayment of any of the Accounts, Chattel Paper, Instruments or amounts due underany Contract; (ii) compromise or settle the same for less than the fullamount thereof; (iii) release, in whole or in part, any Person liable forthe payment thereof; or (iv) allow any credit or discount whatsoeverthereon other than trade discounts granted in the ordinary course of businessof Grantor.

 

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 andcorrespondence of Grantor, and Lender or its representatives may examine thesame, take extracts therefrom and make photocopies thereof, and Grantor agreesto render to Lender, at Grantor’s cost and expense, such clerical and otherassistance as may 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 obligationthereunder or arising out of any other agreement, indebtedness or liability atany 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.             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** heretounless Grantor shall have provided Lender with thirty (30) days prior notice ofGrantor’s intent to do so, which notice shall be accompanied by a detaileddescription of the real property on which the crops are grown, and Grantor shallhave provided Lender with a supplement to this Security Agreement and suchfinancing statement amendments and other documents as Lender shall request.

 

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6.  Lender’sAppointment as Attorney-in-Fact.

 

a.             Grantor hereby irrevocably constitutesand appoints Lender and any officer or agent thereof, with full power ofsubstitution, as its true and lawful attorney-in-fact with full irrevocablepower and authority in the place and stead of Grantor and in the name ofGrantor or in its own name, and hereby grants to Lender, in Lender’sdiscretion, the power and right, on behalf of Grantor, without notice to orassent by Grantor, and at any time prior to or after the occurrence of an Eventof Default, to do the following:

 

(i) to take any and all appropriate action and to execute and deliver any and alldocuments and instruments which may be necessary or desirable to continue anyinsurance existing pursuant to the terms of the Amended and Restated CreditAgreement, and pay all or any part of the premiums therefor and the coststhereof; 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.             Grantor hereby irrevocably constitutesand appoints Lender and any officer or agent thereof, with full power ofsubstitution, as its true and lawful attorney-in-fact with full irrevocablepower and authority in the place and stead of Grantor and in the name of Grantoror in its own name, from time to time in Lender’s discretion, for the purposeof carrying out the terms of this Security Agreement, to take any and allappropriate action and to execute and deliver any and all documents andinstruments which may be necessary or desirable to accomplish the purposes ofthis Security Agreement and, without limiting the generality of the foregoing,hereby grants to Lender the power and right, on behalf of Grantor, withoutnotice to or assent by Grantor, upon the occurrence and during the continuationof an Event of Default, to do the following:

 

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

 

(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 therefor 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;

 

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(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;

 

(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

 

(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.             Grantor hereby ratifies, to the extentpermitted by law, all that said attorneys shall lawfully do or cause to be doneby virtue hereof.  The power of attorneygranted pursuant to this Section 6 is a power coupled with an interest andshall be irrevocable until the Secured Obligations are paid or otherwisesatisfied in full.

 

d.             The powers conferred on Lender hereunderare solely to protect Lender’s interests in the Collateral and shall not imposeany duty upon Lender to exercise any such powers.  Lender shall be accountable only for amountsthat it actually receives as a result of the exercise of such powers andneither 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.             Grantor also authorizes Lender toexecute, in connection with the sale provided for in Section 8 hereof, anyendorsements, assignments or other instruments of conveyance or transfer withrespect to the Collateral.

 

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7.             Performance by Lender of Grantor’sObligation.  If Grantor fails to perform or comply withany of its agreements contained herein or in any other Loan Document, andLender, as provided for by the terms of this Security Agreement, or in anyother Loan Document, shall itself perform or comply, or otherwise causeperformance of or compliance with such agreement, the reasonable expenses,including attorneys’ fees, of Lender incurred in connection with suchperformance or compliance, together with interest thereon at the Base Rate thenin effect in respect of the Revolving Loan, shall be payable by Grantor toLender on demand and shall constitute Secured 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 Security Agreement,the Amended and Restated Credit Agreement, the other Loan Documents and underany other instrument or agreement securing, evidencing or relating to theSecured Obligations, all rights and remedies of a secured party under the UCC.  Without limiting the generality of theforegoing, Grantor expressly agrees that in any such event Lender, withoutdemand 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 extentpermitted by the UCC and other applicable law), may forthwith enter upon thepremises of Grantor where any Collateral is located through self-help, withoutjudicial process, without first obtaining a final judgment or giving Grantornotice and opportunity for a hearing on Lender’s claim or action, and withoutpaying rent to Grantor, and collect, receive, assemble, process, appropriateand realize upon the Collateral, or any part thereof, and may forthwith sell,lease, assign, give an option or options to purchase, or sell or otherwisedispose 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 orbroker’s board or at any of Lender’s offices or elsewhere at such prices as itmay deem best, for cash or on credit or for future delivery without assumptionof any credit risk.  Lender shall havethe right upon any such public sale or sales, and, to the extent permitted bylaw, upon any such private sale or sales, to purchase for the benefit of Lenderthe whole or any part of said Collateral so sold, free of any right or equityof redemption, which equity of redemption Grantor hereby releases.  Such sales may be adjourned and continuedfrom time to time with or without notice. Lender shall have the right to conduct such sales on Grantor’s premisesor elsewhere and shall have the right to use Grantor’s premises without chargefor such sales 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 affect 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

 

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of the repossession,retention or sale of the Collateral except such as arise out of the grossnegligence or wilful misconduct of such party. Grantor agrees that five (5) days’ prior notice by Lender of the timeand place of any public sale or of the time after which a private sale may takeplace is reasonable notification of such matters.  Grantor shall remain liable for anydeficiency 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 Amended and Restated 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, orother governmental or regulatory agencies with any jurisdiction over Grantor,with respect to the possibility that Lender may take over the operation of anyGrantor’s business, or the possibility that Lender may take possession of orliquidate any or all of the Collateral.

 

g.             Grantoracknowledges that Lender shall be entitled to independently, but withoutdupilication, 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.

 

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.           Grant of License to Use Patent andTrademark Collateral.  For the purpose of enabling Lender toexercise rights and remedies under Section 8 hereof (including, withoutlimiting the terms of Section 8 hereof, in order to take possession of,hold, preserve, process, assemble, prepare for sale, market for sale, sell orotherwise dispose of Collateral) at such time as Lender shall be lawfullyentitled to exercise such rights and remedies, Grantor hereby grants to Lenderan irrevocable, non-exclusive license (exercisable without payment of royaltyor other compensation to Grantor) to use, transfer, license or sublicense anyPatent, Trademark, trade secret, or copyright now owned or hereafter acquiredby Grantor, and wherever the same may be located, and including in such licensereasonable access to all media in which any of the licensed items may berecorded or stored and to all computer and automatic machinery software andprograms used for the compilation or printout thereof.

 

11

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** **

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

 

12.           Reinstatement.  This Security Agreement shall remain in fullforce and effect and continue to be effective should any petition be filed byor against Grantor for liquidation or reorganization, should Grantor becomeinsolvent or make an assignment for the benefit of creditors or should areceiver or trustee be appointed for all or any significant part of Grantor’sassets, and shall continue to be effective or be reinstated, as the case maybe, if at any time payment and performance of the Secured Obligations, or anypart thereof, is, pursuant to applicable law, rescinded or reduced in amount,or must otherwise be restored or returned by any obligee of the SecuredObligations, whether as a “voidable preference,” “fraudulent conveyance,” orotherwise, all as though such payment or performance had not been made.  In the event that any payment, or any partthereof, is rescinded, reduced, restored or returned, the Secured Obligationsshall be reinstated and deemed reduced only by such amount paid and not sorescinded, reduced, restored or returned.

 

13.           Notices.  Except as otherwise provided herein, wheneverit is provided herein that any notice, demand, request, consent, approval,declaration, or other communication shall or may be given or delivered to orserved upon any of the parties by another, or whenever any of the parties desiresto give or deliver or serve upon another any communication with respect to thisSecurity Agreement, each such notice, demand, request, consent, approval,declaration, or other communication shall be in writing, shall be addressed tothe addresses set forth below, or such other or additional address as theparties may notify each other of in writing, and shall be deemed to have beensent, delivered, or given and received upon the earlier of:  (a) if by facsimile, upon transmissionif transmission occurs between 8:00 a.m. and 5:00 p.m. on anyBusiness Day; (b) if by Federal Express or other overnight or one-day mailor delivery service, on the next Business Day following deposit with suchdelivery 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 AmericanAgCredit, at:

 

 American AgCredit, PCA

 5560 South Broadway

 Eureka, California  95503

 Attention: Account Officer — ML Macadamia Orchards

 Facsimile: (707) 442-1268

 

 AmericanAgCredit, 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 MacadamiaOrchards, L.P.

 ML Resources, Inc.

 26-238 HawaiiBelt 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 receivecopies 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 whichis prohibited or unenforceable in any jurisdiction shall, as to suchjurisdiction, be ineffective to the extent of such prohibition orunenforceability without invalidating the remaining provisions hereof, and anysuch prohibition or unenforceability in any jurisdiction shall not invalidateor render unenforceable such provision in any other jurisdiction.

 

15.           NoWaiver; Cumulative Remedies.  Lendershall not by any act, delay, omission or otherwise be deemed to have waived anyof its 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 of anyright, 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 andpowers provided in this Security Agreement may be exercised only to the extentthat the exercise thereof does not violate any applicable provision of law, andall the provisions of this Security Agreement are intended to be subject to allapplicable mandatory provisions of law that may be controlling and to belimited to the extent necessary so that they shall not render this SecurityAgreement invalid, unenforceable, in whole or in part, or not entitled to berecorded, registered, or filed under the provisions of any applicable law.

 

17.           Terminationof this Security Agreement.  Subjectto Section 12 hereof, this Security Agreement shall terminate upon fulland final payment and performance of all of the Secured Obligations.

 

18.           Successorand Assigns.  This Security Agreementand all obligations of Grantor hereunder shall be binding upon the successorsand assigns of Grantor, and shall, together with the rights and remedies ofLender  hereunder, inure to the benefitof Lender and its successors and assigns, as permitted pursuant to the terms ofthe Amended and Restated Credit Agreement. No sales of participations, other sales, assignments, transfers or otherdispositions of any agreement governing or

 

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instrument evidencing theSecured Obligations or any portion thereof or interest therein, as permittedpursuant to the terms of the Amended and Restated Credit Agreement, shall inany manner affect the security interest granted to Lender hereunder.  Grantor may not assign, sell or otherwisetransfer an interest in this Security Agreement except as provided by theAmended and Restated Credit Agreement.

 

19.           FurtherIndemnification.  Grantor agrees topay, 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 othersimilar taxes which may be payable or determined to be payable with respect toany of the Collateral or in connection with any of the transactionscontemplated by this Security Agreement.

 

20.           EntireAgreement.  The execution of thisSecurity Agreement supersedes all the negotiations or stipulations concerningmatters thereof which preceded or accompanied the execution and delivery ofthis Security Agreement.  This SecurityAgreement is intended by the parties hereto to be a complete and exclusivestatement of the terms 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 THEREOFREGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OFAMERICA.  GRANTOR HEREBY CONSENTS ANDAGREES THAT THE SUPERIOR COURTS OF SAN FRANCISCO COUNTY, CALIFORNIA, OR, ATLENDERS OPTION, THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OFCALIFORNIA, SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANYCLAIMS OR DISPUTES BETWEEN GRANTOR AND LENDER PERTAINING TO THIS SECURITYAGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS SECURITYAGREEMENT.  GRANTOR EXPRESSLY SUBMITS ANDCONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANYSUCH COURT, AND GRANTOR HEREBY WAIVES ANY OBJECTION WHICH GRANTOR MAY HAVEBASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUMNONCONVENIENS AND HEREBY CONSENTS TO THE GRANTING FOR SUCH LEGAL OREQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.  GRANTOR HEREBY WAIVES PERSONAL SERVICE OF THESUMMONS, COMPLAINT, AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT ANDAGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BEMADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO GRANTOR AT THE ADDRESS SETFORTH IN SECTION 13 OF THIS SECURITY AGREEMENT AND THAT SERVICE SO MADESHALL BE DEEMED COMPLETED UPON THE EARLIER OF GRANTOR’S ACTUAL RECEIPT THEREOFOR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGEPREPAID.  NOTHING IN THIS SECURITYAGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LENDER OR GRANTOR FROMBRINGING SUIT OR TAKING OTHER 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**

 

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**BESTCOMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THEPARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, ORPROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THISSECURITY AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.**

 

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

 

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

 

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

 

26.           Counterparts.  This Security Agreement may be executed inany number of identical counterparts, each of which shall be an original, butall of which shall constitute one and the same agreement.  This Security Agreement shall becomeeffective when Lender shall have received all original executed counterparts

 

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

 

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IN WITNESSWHEREOF, each of the parties hereto has caused this Security Agreement to beexecuted and delivered by its duly authorized officer on the date first setforth 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 OF COLLATERAL

 

TO

 

UNIFORM COMMERCIAL CODE FINANCING STATEMENTS

 

AND

 

SECURITY AGREEMENT

 

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

 ML Resources, Inc., a Hawaii corporation

 

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

 

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

 

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

 

(1)           Allrights in, to and under all purchase orders or receipts now owned or hereafteracquired by Grantor for goods or services;

 

(2)           Allrights to any goods represented by any of the foregoing (including, withoutlimitation, an unpaid seller’s rights of rescission, replevin, reclamation andstoppage in transit and rights to returned, reclaimed or repossessedgoods);

 

(3)           Allmonies due or to become due under all purchase orders and contracts for thesale of goods or the performance of services or both by Grantor or inconnection with any other transaction (whether or not yet earned by performanceon the part of Grantor) now or hereafter in existence, including, withoutlimitation, the right to receive the proceeds of said purchase orders andcontracts; and

 

(4)           Allcollateral 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 chattelpaper 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 haveany right, title or interest, including, any agreement relating to the terms ofpayment or the terms of performance of any account of Grantor;

 

D.            “Documents” — all documents asdefined in the Uniform Commercial Code, including, without limitation, allbills of lading, dock warrants, dock receipts, warehouse receipts, or otherdocuments of title;

 

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E.             “Equipment” — all equipment asdefined in the Uniform Commercial Code, including, without limitation, allmachinery, equipment, furnishings, vehicles and computers and other electronicdata-processing and other office equipment, and any and all additions,substitutions and replacements of any of the foregoing, together with allattachments, components, parts, equipment, and accessories installed on oraffixed to any of the foregoing;

 

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

 

G.            “Fixtures” — all fixtures asdefined in the Uniform Commercial Code, including, without limitation, all ofthe fixtures, systems, machinery, apparatus, equipment and fittings of everykind and nature whatsoever and all appurtenances and additions thereto andsubstitutions therefor or replacements thereof, now or hereafter attached oraffixed to or constituting a part of, or located in or upon, real propertywherever located (including, without limitation, all heating, electrical,mechanical, lighting, lifting, plumbing, ventilating, air-conditioning and aircooling, refrigerating, incinerating and power, loading and unloading, signs,escalators, elevators, boilers, communication, switchboards, sprinkler andother fire prevention and extinguishing fixtures, systems, machinery, apparatusand equipment, and all engines, motors, dynamos, machinery, pipes, pumps,tanks, conduits and ducts constituting a part of any of the foregoing, togetherwith all extensions, improvements, betterments, renewals, substitutes, andreplacements of, and all additions and appurtenances to any of the foregoingproperty);

 

H.            “General Intangibles” — allgeneral intangibles as defined in the Uniform Commercial Code, including,without limitation, all right, title and interest which Grantor may now orhereafter 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 thereforand reissues, extensions or renewals thereof, rights in intellectual property,interests in and rights to distributions from partnerships, joint ventures andother business associations, licenses, permits, copyrights, trade secrets,proprietary or confidential information, inventions (whether or not patented orpatentable), technical information, procedures, designs, knowledge, know-how,software, data bases, data, skill, expertise, experience, processes, models,drawings, materials and records, goodwill (including, without limitation, thegoodwill associated with any trademark, trademark registration or trademarklicensed under any trademark license), all rights and claims in or underinsurance policies (including, without limitation, insurance for fire, damage,loss, and casualty, whether covering personal property, real property, tangiblerights or intangible rights, all liability, life, key person, and businessinterruption insurance, and all unearned premiums), uncertificated securities,choses in action, deposit accounts and other bank accounts, rights to receivetax refunds, and other payments and rights of indemnification;

 

I.              “Instruments” — all instruments asdefined in the Uniform Commercial Code, including, without limitation, allcertificated and uncertificated securities, all certificates of deposit, andall notes and other evidences of indebtedness, other than instruments thatconstitute, or are a part of a group of writings that constitute, chattelpaper;

 

J.             “Inventory” — all inventory asdefined in the Uniform Commercial Code, wherever located, including, withoutlimitation, inventory, macadamia nuts, merchandise, goods and other personalproperty which are held by or on behalf of Grantor for sale or lease or arefurnished or are to be furnished under a contract of service or whichconstitute raw materials, work in process or materials used or consumed or tobe used or consumed in Grantor’s business or in the processing, production,packaging, promotion, delivery or shipping of the same, including, withoutlimitation, all finished goods, and goods held by Grantor on a consignmentbasis;

 

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

 

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

 

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

 

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

 

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

 

P.             “Proceeds” — to the extent nototherwise included, all proceeds of the foregoing, in any form (including,without limitation, any insurance proceeds, and all claims by Grantor againstthird parties for loss or damage to, or destruction of, or otherwise relatingto any or all of the foregoing) and all accessions to, substitutions andreplacements 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 Delawarelimited partnership

ML Resources, Inc.,a Hawaii corporation

 

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

 

See attached for property description.

 

EXHIBIT C

 

TO

 

SECURITY AGREEMENT

 

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

ML Resources, Inc.,a Hawaii corporation

 

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

 

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

 

Mauna LoaMacadamia Partners, L.P.

 

(2)           Locations.

 

(a)                                  Chief executive office:

 

26-238 Hawaii BeltRoad

Hilo, Hawaii   96720

 

(b)                                 Principal place of business:

 

Kau, HA

 

(c)                                  Other locations where Collateral located:

 

Keaau and MaunaKea, HA

 

(3)           Grantor’s federal taxpayer identificationnumber.

 

99-0248088

 

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

 

None.

 

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