**Exhibit 10.66**

 

**SECONDAMENDED AND RESTATED**

**CREDITAGREEMENT**

 

 

Dated as of July 8,2008

 

among

 

ML MACADAMIAORCHARDS, L.P.

ML RESOURCES, INC.

 

as Borrower

 

and

 

AMERICAN AGCREDIT,PCA

 

 

as Lender

 

Loan No. 5327946

 

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**INDEX OFEXHIBITS**

 
| Exhibit A |   | - Form of Notice  of Revolving Advance                                 |
|----------------|--------|-----------------------------------------------------------------------------|
|           |   |                                                                        |
| Exhibit B |   | - Form of  Certification Regarding Compliance with Financial Covenants |
|           |   |                                                                        |
| Exhibit C |   | - List of Real Property  Collateral                                         |

 

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THIS SECOND AMENDED ANDRESTATED CREDIT AGREEMENT (“Agreement”), dated as of July 8, 2008, is byand among ML MACADAMIA ORCHARDS, L.P., a Delaware limited partnership, and MLRESOURCES, INC., a Hawaii corporation (collectively, “Borrower”), and AMERICANAGCREDIT, PCA as successor in interest to PACIFIC COAST FARM CREDIT SERVICES,PCA, (“Lender”) with respect to the following facts:

 

RECITALS

 

A.          Borrower and Lender entered into aCredit Agreement dated as of May 1, 2000 providing Borrower with certainfinancial accommodations (the “Original Credit Agreement”).  Said Original Credit Agreement was amended byletter agreement on March 26, 2001 and July 25, 2001 (the “LetterAmendments) and by an Amendment to Credit Agreement dated September 16,2002 (the “Amendment”).  The OriginalCredit Agreement, Letter Amendments, and the Amendment are collectivelyreferred to herein as the “Original Amended Credit Agreement”.  The Original Amended Credit Agreement wasreplaced by an Amended and Restated Credit Agreement dated as of May 1,2004 (the “Amended and Restated Credit Agreement”). The Amended and RestatedCredit Agreement was amended by an Amendment dated August 17, 2004, aWaiver and Amendment dated as of March 15, 2005, and by four additionalamendments dated December 27, 2005, July 5, 2007,  March 14, 2008, and April 25, 2008respectively (collectively the “Amendments to the Amended and Restated CreditAgreement”).  Collectively the Amendedand Restated Credit Agreement and the Amendments thereto are referred to hereinas the “Restated Credit Agreement”.

 

B.           The Indebtedness of the Borrower tothe Lender under the terms of the Original Credit Agreement and the RestatedCredit Agreement is secured by certain collateral described in the SecurityAgreement dated as of May 1, 2000, the Supplemental Security Agreementdated as of May 1, 2004, and the Second Supplemental Security Agreementdated as of July 8, 2008 (collectively the “Security Agreements”).

 

C.           Borrower has requested that Lenderextend and amend the terms of the credit evidenced by the Restated CreditAgreement and Lender is willing to do so on the terms and conditions set forthherein.

 

NOW, THEREFORE, inconsideration of the premises and the mutual covenants hereinafter contained,the parties hereto agree as follows:

 

ARTICLE  I.

 

GENERAL TERMS

 

1.1          Certain Defined Terms.  As used in this Agreement, all terms definedin the preamble to this Agreement shall have the meanings set forth therein,and the following terms shall have the following meanings (such meanings to beequally applicable to both the singular and plural forms of the terms defined):

 

“Addendum to Nut PurchaseAgreement” shall have the meaning assigned to it in Section 4.1(e).

 

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“Affiliate” shall meanany person or entity directly or indirectly controlling, controlled by, orunder common control with the Borrower. For the purposes of this definition, “control” (including withcorrelative meanings, the terms “controlled by” and “under common control with”)as used with respect to the Borrower, any person, or entity shall mean thepossession, directly or indirectly, of the power to direct or cause thedirection of the management and policies of the Borrower, any person, orentity, whether through the ownership of voting shares, by contract orotherwise.

 

“Agreement” shall meanthis Second Amended and Restated Credit Agreement, including all amendments,modifications, and supplements hereto and any appendices, exhibits, orschedules to any of the foregoing.

 

“Bankruptcy Code” shallmean 11 U.S.C. §§ 101, et   seq., as in effect from time to time.

 

“Base Rate” shall mean afloating rate of interest equal to the Prime Rate plus a margin of threequarters of one percent (75 basis points).

 

“Borrower” shall mean MLMacadamia Orchards, L.P., a Delaware limited partnership, and ML Resources, Inc.,a Hawaii corporation.

 

“Business Day” shall meanany day that is not a Saturday, a Sunday, or a day on which banks are requiredor permitted to be closed in the State of California.

 

“Capital Lease” shallmean, with respect to any Person, any lease of any property (whether real,personal or mixed) by such Person as lessee that, in accordance with GAAP,either would be required to be classified and accounted for as a capital leaseon a balance sheet of such Person or otherwise be disclosed as such in a noteto such balance sheet, other than, in the case of Borrower, any such leaseunder which Borrower is the lessor.

 

“Charges” shall mean allfederal, state, county, city, municipal, local, foreign, or other governmentaltaxes (including, without limitation, taxes owed to the Pension BenefitGuaranty Corporation or any successor) at the time due and payable, levies,assessments, charges, liens, claims or encumbrances upon or relating to (i) theCollateral, (ii) the Obligations, (iii) the employees, payroll,income, or gross receipts of Borrower, (iv) Borrower’s ownership or use ofany of its assets, or (v) any other aspect of Borrower’s business.

 

“Closing Date” shallmean, (i) with respect to the Revolving Loan, the date set forth in thepreamble to this Agreement, or such other date on which this Agreement isclosed, and (ii) with respect to the Term Loan, the Closing Date was May 1,2000.

 

“Collateral” shall meanany and all property of Borrower in which Lender now or hereafter has a Lien tosecure all or any part of the Obligations to Lender.

 

“Collection Account”shall mean a bank account in the name of Lender at a bank chosen by Borrowerand reasonably acceptable to Lender.

 

“Consolidated EBITDA” shallmean, for any period, for MLO and its Subsidiaries on a consolidated basis, thesum (without duplication) of: (a) Consolidated Net Income; plus (b) thesum of (i) Federal, state, local, and foreign income taxes, (ii) interestexpense (including the interest portion of any capitalized lease obligations), (iii) depletion,depreciation and amortization, and (iv) extraordinary losses; minus (c) thesum of (I) gains on asset sales, and (II) extraordinary gains.

 

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“Consolidated Net Income”shall mean, for any period, on a consolidated basis, the net income, if any, ofMLO, determined in accordance with GAAP.

 

“Default” shall mean anyevent or circumstance which, with the passage of time or the giving of noticeor both, would unless remedied or waived, become an Event of Default.

 

“Default Rate” shall meana rate of interest that is three percent (3.00%) per annum higher than the rateotherwise applicable.

 

“Disclosure Schedule”shall mean the Disclosure Schedule delivered by Borrower to Lender inconjunction with this Agreement.

 

“Environmental Laws”shall mean all federal, state and local laws, statutes, ordinances andregulations, now or hereafter in effect, and in each case as amended orsupplemented from time to time, and any judicial or administrativeinterpretation thereof, including, without limitation, any applicable judicialor administrative order, consent decree or judgment, relative to the applicablereal estate, relating to the regulation and protection of human health, safety,the environment and natural resources (including ambient air, surface water,groundwater, wetlands, land surface or subsurface strata, wildlife, aquaticspecies and vegetation).  EnvironmentalLaws include the Comprehensive Environmental Response, Compensation, andLiability Act of 1980, as amended (42 U.S.C. §§ 9601 et   seq.)(“CERCLA”); the Hazardous Material Transportation Act, as amended (49 U.S.C. §§1801 et   seq.); the Federal Insecticide, Fungicide,and Rodenticide Act, as amended (7 U.S.C. §§ 136 et   seq.);the Resource Conservation and Recovery Act, as amended (42 U.S.C. §§ 6901 et  seq.) (“RCRA”); the Toxic SubstanceControl Act, as amended (15 U.S.C. §§ 2601 et  seq.); the Clean Air Act, as amended (42U.S.C. §§ 7401 et   seq.); the Federal Water Pollution ControlAct, as amended (33 U.S.C. §§ 1251 et   seq.);the Occupational Safety and Health Act, as amended (29 U.S.C. §§ 651 et   seq.);and the Safe Drinking Water Act, as amended (42 U.S.C. §§ 300(f) et  seq.), and any and all regulationspromulgated thereunder, and all analogous state and local counterparts orequivalents and any transfer of ownership notification or approval statutes.

 

“ERISA” shall mean theEmployee Retirement Income Security Act of 1974 (or any successor legislationthereto), as amended from time to time, and any regulations promulgatedthereunder.

 

“ERISA Affiliate” shallmean, with respect to Borrower, any trade or business (whether or notincorporated) under common control with Borrower and which, together withBorrower, are treated as a single employer within the meaning of Section 4001(a) ofERISA.

 

“Eurodollar Business Day”shall mean a business day on which banks generally in the city of London areopen for interbank or foreign exchange transactions.

 

“Event of Default” shallhave the meaning assigned to it in Section 10.1.

 

“Fees” shall mean anyfees referred to in Section 2.8, including the Loan Fee, and ApplicationFee, any prepayment surcharge, and any other fees due to Lender pursuant to theLoan Documents.

 

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“Fiscal Quarter” shallmean any of the quarterly accounting periods of Borrower.

 

“Fiscal Year” shall meanthe 12-month period of Borrower ending December 31 of each year.  Subsequent changes of the fiscal year ofBorrower shall not change the term “Fiscal Year,” unless Lender shall consentin writing to such change.

 

“Fixed Rate” shall mean: (a) withrespect to any portion of the Revolving Loan that Borrower elects at any timepursuant to Section 2.4(b) to convert to a fixed rate of interest,the applicable LIBO Rate as of the date of such election plus a margin equal onthe Closing Date to two and seventy-five one hundredths percent (2.75%); (b) with respect to any portion of Term Loan Tranche A that Borrower elects at anytime pursuant to Section 2.5(b) to convert to a fixed rate ofinterest, the applicable LIBO Rate as of the date of such election plus amargin equal on the Closing Date to two and seventy-five one hundredths percent(2.75%).

 

“GAAP” shall meangenerally accepted accounting principles in the United States of America as ineffect from time to time.

 

“Governmental Authority”shall mean any nation or government, any state or other political subdivisionthereof, and any agency, department or other entity exercising executive,legislative, judicial, regulatory or administrative functions of or pertainingto government.

 

“Hazardous Material”shall mean any substance, material or waste, the generation, handling, storage,treatment or disposal of which is regulated by any local or state governmentauthority in any jurisdiction in which Borrower has owned, leased or operatedreal property or disposed of hazardous materials, or by the United StatesGovernment, including any material or substance which is (i) defined as a “hazardouswaste,” “hazardous material,” “hazardous substance,” “extremely hazardous waste”or “restricted hazardous waste” or other similar term of phrase under any suchlaw, (ii) petroleum, (iii) designated as a “hazardous substance”pursuant to Section 311 of the Clean Water Act, 33 U.S.C. § 1251 et  seq. (33 U.S.C. § 1321) or listedpursuant to Section 307 of the Clean Water Act (33 U.S.C. § 1317), (iv) definedas a “hazardous waste” pursuant to Section 1004 of the ResourceConservation and Recovery Act, 42 U.S.C. § 6901, et   seq.(42 U.S.C. § 6903), or (v) defined as a “hazardous substance” pursuant to Section 101of the Comprehensive Environmental Response, Compensation, and Liability Act,42 U.S.C. § 9601, et   seq. (42 U.S.C. § 9601).

 

“Indebtedness” of anyPerson shall mean all obligations for borrowed money (including the presentvalue of capitalized lease obligations) which, in accordance with GAAP, wouldbe included in determining total liabilities as shown on the liability side ofa balance sheet as of the date at which Indebtedness is to be determined, andguarantees, letters of credit (other than letters of credit to support tradepayables) and endorsements (other than of notes, bills and checks presented tobanks for collection or deposit in the ordinary course of business), in eachcase to support indebtedness for borrowed money of others, but excludingexisting guarantees outstanding on the Closing Date (and extensions or renewalsthereof).

 

“Interest DeterminationDate” shall mean the date, as designated by Borrower pursuant to Section 2.4,Section 2.5 or Section 2.6, on which a portion of the RevolvingAdvances or a portion of the Term Loan shall begin to bear interest at a FixedRate.

 

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“Interest Period” shallmean (a) with respect to any portion of interest on Revolving Advancesthat Borrower elects to have bear interest at a Fixed Rate, a period beginningon the Interest Determination Date and ending, at Borrower’s election, eitherone (1) month, two (2) months, three (3) months, or six (6) monthsthereafter, and (b) with respect to any portion of interest on Term LoanTranche A that Borrower elects to have bear interest at a Fixed Rate, a period beginningon the Interest Determination Date and ending, at Borrower’s election, eitherone (1) month, two (2) month, three (3) months, six (6) months,or twelve (12) months thereafter.

 

“Lender” shall meanAmerican AgCredit, PCA.

 

“LIBO Rate” shall mean, forany Interest Determination Date, the rate offered from time to time for U.S.Dollar deposits for the Interest Period selected, as quoted by Telerate NewsService on page 3750 recorded as of 11:00 A.M. London setting time(or, if the page 3750 of the Telerate News Service is unavailable, thecomparable reference on the Reuters Screen LIBOR Page or such otherquotation service as may be chosen by Lender) on the second full EurodollarBusiness Day preceding the beginning of the Interest Period; provided, thatif two or more of such offered rates appear on Telerate (or on the ReutersScreen LIBOR Page or alternative service, as the case may be), the “LIBORate” shall be highest of the two rates quoted.

 

“Lien” shall mean anymortgage or deed of trust, pledge, hypothecation, assignment, depositarrangement, lien, charge, claim, security interest or encumbrance, orpreference, priority or other security agreement or preferential arrangement ofany kind or nature whatsoever (including any lease or title retentionagreement, any financing lease having substantially the same economic effect asany of the foregoing, and the filing of, or agreement to give, any financingstatement perfecting a security interest under the Uniform Commercial Code orcomparable law of any jurisdiction).

 

“Loan Documents” shallmean this Agreement, the Revolving Loan Promissory Note of even date herewith,the Term Note dated May 1, 2000, the Security Documents, and all otheragreements, instruments, documents, and certificates identified in any Scheduleof Documents listing documents to be delivered by Borrower to Lender andincluding all other pledges, powers of attorney, consents, mortgages,assignments, contracts and agreements whether heretofore, now, or hereafterexecuted by or on behalf of Borrower or any of its Affiliates, or any employeeof Borrower or any of its Affiliates, and delivered to Lender in connectionwith this Agreement, or any previous versions of this Agreement or thetransactions contemplated thereby or hereby.

 

“Maintenance CapitalExpenditures” shall mean capital expenditures for maintenance and enhancementof MLO’s business operations.

 

“Material Adverse Effect”shall mean a material adverse effect on (i) the business, assets,operations, or financial or other condition of Borrower, (ii) Borrower’sability to pay the Obligations in accordance with the terms thereof, or (iii) theCollateral or Lender’s Liens on the Collateral or the priority of any suchLien, or (iv) Lender’s rights and remedies under this Agreement and theother Loan Documents.

 

“Maturity Date” meanswith respect to the Revolving Loan Promissory Note, June 30, 2009 (“RevolvingLoan Maturity Date”), and with respect to the Term Loan Promissory Note, May 1,2010 (“Term Loan Maturity Date”).

 

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“Maximum Lawful Rate”shall have the meaning assigned to it in Section 2.7(e).

 

“Maximum Revolving Loan”shall mean Six Million Dollars ($6,000,000).

 

“MLO” shall mean MLMacadamia Orchards, L.P., a Delaware limited partnership.

 

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“Mortgage” shall mean themortgage to be delivered to the Lender by the Borrower pursuant to theprovisions of Section 3.3 hereof, covering the real property described in Exhibit Cattached hereto.

 

“Notice of RevolvingAdvance” shall have the meaning assigned to it in Section 2.1(b).

 

“Obligations” shall meanall loans, advances, debts, liabilities, and obligations for the performance ofcovenants, tasks or duties or for payment of monetary amounts (whether or notsuch performance is then required or contingent, or amounts are liquidated ordeterminable and whether or not allowed as a claim in any proceeding referredto in Section 10.1(i) or 10.1(j)) owing by Borrower to Lender, andall covenants and duties regarding such amounts, of any kind or nature, presentor future, whether or not evidenced by any note, agreement or other instrument,arising under any of the Loan Documents. This term includes the Revolving Loan, the Term Loan, all principal,interest, Fees, charges, expenses, attorneys’ fees and any other sum chargeableto Borrower under this Agreement or any of the Loan Documents.

 

“PACA” shall mean thePerishable Agricultural Commodities Act, 7 U.S.C. § 499e(c) (or anysuccessor legislation thereto), as amended from time to time, and anyregulations promulgated thereunder.

 

“Permitted Encumbrances”shall mean the following encumbrances: (i) Liens for taxes or assessmentsor other governmental Charges or levies, either not yet due and payable orwhich are currently being contested in good faith by appropriate proceedingsand which at all times are junior and subordinate to the Lien of Lender; (ii) pledgesor deposits securing obligations under workmen’s compensation, unemploymentinsurance, social security or public liability laws or similar legislation; (iii) pledgesor deposits securing bids, tenders, contracts (other than contracts for thepayment of money) or leases to which Borrower is a party as lessee made in theordinary course of business; (iv) deposits securing public or statutoryobligations of Borrower; (v) inchoate and unperfected workers’, mechanics’,suppliers’ or similar Liens arising in the ordinary course of business; (vi) carriers’,warehousemen’s, or other similar possessory Liens arising in the ordinarycourse of business and securing indebtedness either not yet due and payable orwhich are currently being contested in good faith by appropriate proceedings; (viii) depositssecuring, or in lieu of, surety, appeal or customs bonds in proceedings towhich Borrower is a party; (ix) an attachment or judgment Lien, but onlyfor a period of thirty (30) days following attachment of such Lien and suchattachment or judgment lien shall cease to be a Permitted Lien if theobligation that it secures has not been satisfied or bonded during such thirty(30) day period; (x) zoning restrictions, easements, licenses, or otherrestrictions on the use of real property or other minor irregularities in title(including leasehold title) thereto, so long as the same do not materiallyimpair the use, value, or marketability of such real property, leases orleasehold estates; (xi) Liens existing as of the Closing Date as identified in Part (E) ofthe Disclosure Schedule, but only securing the debt and covering the propertyreferred to therein, (xii) Liens to secure Indebtedness arising fromdevelopment of investment properties, provided that the Liens do not encumberany asset other than the asset benefiting from the improvement, and (xiii) securityinterests securing purchase money indebtedness and liens covering propertyother than Collateral, in each case to the extent permitted by Section 8.4.

 

“Person” shall mean anyindividual, sole proprietorship, partnership, joint venture, trust,unincorporated organization, association, corporation, institution, publicbenefit corporation, entity or government (whether federal, state, county,city, municipal or otherwise, including, without limitation, anyinstrumentality, division, agency, body or department thereof).

 

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“Prime Rate” shall meanthe “Prime” rate as published from time to time in The Wall Street Journal,regardless of whether such rate is actually charged by any bank, or, in theevent that The Wall Street Journal ceases publication of such rate, insuch other nationally recognized financial publication of general circulationas Lender may, from time to time, designate in writing based on Lender’sreasonable determination that the rate so published is comparable to the “Prime”rate published in  The Wall StreetJournal.

 

“Restricted Payment”shall mean (a) any payment or other distribution, direct or indirect, inrespect of any partnership interest or stock in Borrower, except a distributionpayable solely in additional partnership interest or stock, and (b) anypayment, direct or indirect, on account of the redemption, retirement, purchaseor other acquisition of any partnership interest or stock or (c) anypayment, loan, contribution, or other transfer of funds or other property toany partner or stockholder of Borrower except for reasonably equivalent value.

 

“Revolving Advance” shallhave the meaning ascribed to such term in Section 2.1(a).

 

“Revolving Loan” shallmean the aggregate amount of Revolving Advances outstanding at any time.

 

“Security Documents”shall mean all security agreements, mortgages, assignments, and other similardocuments delivered by Borrower to Lender pursuant to which Borrower grants toLender a security interest in, assignment of, or Lien upon any real or personalproperty of Borrower, including all amendments, modifications and supplementsthereto.

 

“Subsidiary” shall meanany corporation, association or business entity of which Borrower owns,directly or indirectly, more than fifty percent of the voting securities orwhich Borrower otherwise controls.

 

“Tangible Net Worth”shall mean the gross book value of the assets of MLO (exclusive of goodwill,patents, trademarks, trade names, organization expense unamortized debt discountand expense, deferred charges and other like intangibles) less (i) reservesapplicable thereto and (ii) all liabilities (including subordinatedliabilities), in each case determined in accordance with GAAP (provided anadjustment shall be made to eliminate the effect of FAS 109), and as reasonablydetermined by Lender in accordance with GAAP.

 

“Term Loan PromissoryNote” means the Borrower’s Term Loan Promissory Note dated as of May 1,2000 with an outstanding principal balance of $800,000 as of June 16,2008.

 

1.2          Accounting Terms.  Any accounting term used in this Agreementshall have, unless otherwise specifically provided herein, the meaningcustomarily given such term in accordance with GAAP, and all financialcomputations hereunder shall be computed, unless otherwise specificallyprovided herein, in accordance with GAAP consistently applied.  That certain terms or computations areexplicitly modified by the phrase “in accordance with GAAP” shall in no way beconstrued to limit the foregoing.

 

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1.3          Certain Matters of Construction.  The words “herein,” “hereof,” “hereto,” “hereunder,”and other words of similar import refer to this Agreement as a whole, includingthe Exhibits and Schedules hereto, as the same may from time to time beamended, modified or supplemented, and not to any particular section,subsection or clause contained in this Agreement.  Any reference to a “Section,” “Exhibit,” or “Schedule”shall refer to the relevant Section or, Exhibit, or Schedule to thisAgreement, unless specifically indicated to the contrary.  Wherever from the context it appearsappropriate, each term stated in either the singular or plural shall includethe singular and plural, and pronouns stated in the masculine, feminine orneuter gender shall include the masculine, feminine or neuter.  The term “including” shall not be limiting orexclusive, unless specifically indicated to the contrary.

 

ARTICLE  II.

 

AMOUNT AND TERMSOF CREDIT

 

2.1          Revolving Advances.

 

(a)           Revolving Advances To Be MadeAvailable.  Upon and subject to theterms and conditions hereof, Lender agrees to make available, from time totime, until the Revolving Loan Maturity Date, for Borrower’s use and upon therequest of Borrower therefore, advances (each, a “Revolving Advance”) thatshall not exceed the Maximum Revolving Loan. The amount of any Revolving Advance shall be not less than FiftyThousand Dollars ($50,000) and shall be in integral multiples of One ThousandDollars ($1,000).    The Revolving Loanshall be evidenced by the Revolving Loan Promissory Note to be executed anddelivered by Borrower to Lender on the Closing Date.

 

(b)           Requests for Advances.  If Borrower desires to receive a RevolvingAdvance, Borrower shall deliver a notice (a “Notice of Revolving Advance”) toLender substantially in the form of Exhibit A no later than 2:00 p.m.(California time) on the Business Day prior to the date of the proposedRevolving Advance.  Lender shall beentitled to rely upon and shall be fully protected under this Agreement inrelying upon any Notice of Revolving Advance reasonably believed by Lender tobe genuine.  Upon the close of businesson the date of the proposed Revolving Advance, Lender shall make the RevolvingAdvance available to Borrower unless Lender determines that Borrower is notentitled to such Revolving Advance under the terms of this Agreement.  All notices delivered pursuant to this Section 2.1(b) shallbe delivered by facsimile to the facsimile number set forth in Section 11.9or to such other facsimile number as a party hereto shall designate in writingpursuant to the provisions of Section 11.9**;**provided that such notices may also be delivered by electronic mail ifapproved by Lender.

 

(c)           Revolving Nature of Loan;Repayment Of Loan.  The RevolvingLoan is a revolving line of credit and Borrower may borrow, repay principal,and reborrow in accordance with the terms of this Agreement; providedthat Borrower shall provide Lender with one (1) day’s advance notice ofany repayment.  Repayments of principalshall be not less than Fifty Thousand Dollars ($50,000) and shall be inintegral multiples of One Thousand Dollars ($1,000).  The Revolving Loan shall mature and shallbecome due and payable in full on the Revolving Loan Maturity Date.

 

2.2          Term Loan.

 

(a)           Term Loan.   On May 1, 2000 Lender advanced the TermLoan to Borrower.  The Term Loan isevidenced by the Term Loan Promissory Note executed and delivered by Borrowerto Lender on May 1, 2000.

 

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(b)           Principal Payments — Term Loan.  With respect to the Term Loan, Borrower shallpay to Lender, annual principal installments of Four Hundred Thousand Dollars($400,000) commencing on May 1, 2009 and continuing on the first day of May ineach year thereafter through and including May 1, 2010; provided,that all unpaid principal, accrued interest and other amounts evidenced by theTerm Loan Promissory Note shall be due and payable in full on the Term LoanMaturity Date.

 

2.3          Prepayments.

 

(a)           Prepayment inFull.  Borrower shall have the rightat any time to voluntarily prepay the entire amount of the outstandingRevolving Loan and the entire amount of the outstanding Term Loan and toterminate this Agreement upon at least three (3) Business Days notice to Lender,without premium or penalty except Borrower shall pay to Lender a prepaymentsurcharge calculated in accordance with Section 2.3(c).  Prepayment in full shall be accompanied bythe payment of all accrued and unpaid interest and all Fees and other remainingObligations.

 

(b)           Partial Prepayment.  Borrower shall have the right at any time tovoluntarily prepay any portion of the Term Loan, or any portion of theRevolving Loan subject to a Fixed Rate, upon at least three (3) BusinessDays notice to Lender, without premium or penalty except Borrower shall pay toLender, a prepayment surcharge calculated in accordance with Section 2.3(c).  Unless otherwise approved by Lender, anyprepayment of the Term Loan shall be applied pro rata, based on the respectiveaggregate principal amounts then outstanding, to Term Loan Tranche A and TermLoan Tranche B, and shall not reduce the amount of any installment payments toLender.

 

(c)           Prepayment Surcharge.  At the time Borrower makes any Prepayment,Borrower shall simultaneously pay to Lender, a prepayment surcharge for eachFixed Rate portion of the Term Loan and the Revolving Loan so prepaid,calculated as follows:

 

For each portion of theRevolving Loan or the Term Loan bearing interest at a Fixed Rate, the prepaymentsurcharge shall be equal to any funding losses incurred by Lender as a resultof such prepayment, including any loss or unreimbursed expense arising from theredeployment of funds, calculated according to any reasonable methodologyestablished by Lender; and

 

2.4          Interest Rate on Revolving Advances.

 

(a)           Base Rate.  Revolving Advances hereunder shall bearinterest at the Base Rate, unless Borrower elects to convert the interest rateto a Fixed Rate for the period selected by Borrower in accordance with theprovisions of Section 2.4(b).

 

(b)           Fixed Rate for Revolving Loan.  Borrower may, from time to time, elect toconvert all or a portion of the outstanding Revolving Advances to a Fixed Rate;provided, that (i) at least two (2) Business Days prior to theproposed Interest Determination Date, Borrower has provided Lender with writtennotice of such election, the requested Interest Determination Date, the amountof the Revolving Advances to be converted, and the requested Interest Periodfor the amount to be converted, (ii) at the time of delivery of suchwritten notice and upon the date of conversion, no Default or Event of Defaultexists under this Agreement, (iii) at no time shall there be more thanfive (5) outstanding tranches of the Revolving Loan bearing interest at aFixed Rate, (iv) the last day of the Interest Period chosen by Borrowershall not extend beyond the Revolving Loan Maturity Date, and (v) theamount converted to a Fixed Rate at any one time shall be not less than FiftyThousand Dollars ($50,000) and any amounts in

 

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excess thereof shall bein integral multiples of Fifty Thousand Dollars ($50,000).  Any election by Borrower pursuant to this Section 2.4(b) shallbe irrevocable during the Interest Period selected by Borrower, and thatportion of the Revolving Loan so converted shall bear interest at theapplicable Fixed Rate until the expiration of the applicable Interest Period atwhich time, unless another Fixed Rate has been duly elected by Borrowerpursuant to this Section 2.4(b), the interest rate for such portion of theRevolving Loan will automatically convert to the Base Rate.

 

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2.5          Interest Rate on Term Loan TrancheA.

 

(a)           Base Rate.  Term Loan Tranche A is currently bearinginterest at a fixed rate equal to 5.1435% per annum with an Interest Periodexpiring on May 1, 2009.  Uponexpiration of the current interest period Term Loan Tranche A shall bearinterest at the Base Rate, unless Borrower elects to convert the interest rateto a Fixed Rate for the period selected by Borrower in accordance with theprovisions of Section 2.5(b).

 

(b)           Designation of Fixed Rates.  Upon expiration of the current Fixed Rate theBorrower may, from time to time, elect to convert all or a portion of Term LoanTranche A to a Fixed Rate; provided, that (i) at least two (2) BusinessDays prior to the proposed Interest Determination Date, Borrower has providedLender with written notice of such election, the requested InterestDetermination Date, the amount of Term Loan Tranche A to be converted, and therequested Interest Period for the amount to be converted, (ii) at the timeof delivery of such written notice and upon the date of conversion, no Defaultor Event of Default exists under this Agreement, (iii) at no time shallthere be more than four (4) outstanding tranches of Term Loan Tranche Abearing interest at a Fixed Rate, (iv) the last day of the Interest Periodchosen by Borrower shall not extend beyond the Term Loan Maturity Date, and (v) theamount converted to a Fixed Rate at any one time shall be not less than FiftyThousand Dollars ($50,000) and any amounts in excess thereof shall be inintegral multiples of Ten Thousand Dollars ($10,000).  Any election by Borrower pursuant to this Section 2.5(b) shallbe irrevocable during the Interest Period selected by Borrower, and thatportion of Term Loan Tranche A so converted shall bear interest at theapplicable Fixed Rate until the expiration of the applicable Interest Period atwhich time, unless another Fixed Rate has been duly elected by Borrowerpursuant to this Section 2.5(b), the interest rate for such portion ofTerm Loan Tranche A will automatically convert to the Base Rate.

 

(c)           Margin Applicable to Fixed RateElections for Term Loan Tranche A. The margin applicable to Term Loan Tranche A is two and three quarterspercent (2.75%).

 

2.6          Interest Rate on Term Loan TrancheB.

 

(a)           Fixed Rate.    The interest rate on Tranche B is currentlyfixed at 6.8700% per annum with the current Interest Period set to expire onthe Term Loan Maturity Date.

 

2.7          Other Interest Provisions.

 

(a)           Interest Payment Dates.  Interest shall be due and payable on thefirst day of each calendar quarter with respect to all interest accrued on theRevolving Loan and the Term Loan during the preceding calendar quarter; provided,that if any Interest Period shall mature prior to the first day of acalendar quarter, then interest accrued at a Fixed Rate during the particularInterest Period shall be due and payable upon expiration of the InterestPeriod.  Interest accrued on theRevolving Loan but not otherwise due and payable on the Revolving Loan MaturityDate shall become due and payable on the Revolving Loan Maturity Date.  Interest accrued on the Term Loan but nototherwise due and payable on the Term Loan Maturity Date shall become due andpayable on the Term Loan Maturity Date.

 

(b)           Payments Due on Business Days.  If any installment of interest or any otheramount payable under any Loan Document becomes due and payable on a day otherthan a Business Day, the payment date for such payment shall be extended to thenext succeeding Business Day and, with respect to payments of principal orother payments that bear interest (other than interest first due on such

 

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date), interest thereonshall be payable at the then applicable rate during such extension; provided,however, if any installment of interest relating to (i) RevolvingAdvances that have been converted to a Fixed Rate or (ii) the Term Loan,shall become due and payable on a Saturday, the payment date for such paymentshall be the preceding Business Day.

 

(c)           Computation of Interest.  All computations of interest calculated withrespect to the LIBO Rate shall be made by Lender on the basis of a threehundred sixty (360) day year, in each case for the actual number of daysoccurring in the period for which such interest is payable.  All computations of interest calculated withrespect to the Base Rate shall be made by Lender on the basis of a threehundred sixty five (365) day year, in each case for the actual number of daysoccurring in the period for which such interest is payable.   Any change in the applicable rate shallbecome effective on the day such change occurs. Each determination by Lender of an interest rate hereunder shall beconclusive and binding for all purposes, absent manifest error or bad faith.  Term Note Tranches A and B are currentlyaccruing interest on the basis of a three hundred sixty-five (365) day year andactual days elapsed until the end of their respective Interest DeterminationPeriods.

 

(d)           Default Rate.  Any overdue principal or interest withrespect to any Revolving Advance, or the Term Loan, and the amount of any fees,costs, or expenses that Borrower is obligated to pay to Lender under thisAgreement or any Loan Document not paid when due, shall bear interest, payableon demand, for each day until paid at a rate per annum equal to the Default Rate.  In addition, upon and after the occurrence ofan Event of Default and continuing until such Event of Default has been curedor waived in writing by Lender in accordance with the terms of this Agreement,interest shall accrue on the Obligations at the Default Rate.  The interest rate increase to the DefaultRate shall take effect immediately upon the occurrence of an Event of Default,without prior notice to Borrower.

 

(e)           Interest Not to Exceed MaximumLawful Rate.  Notwithstandinganything to the contrary set forth in this Agreement, if at any time untilpayment in full of all of the Obligations, the rate of interest payablehereunder exceeds the highest rate of interest permissible under any law whicha court of competent jurisdiction shall, in a final determination, deemapplicable hereto (the “Maximum Lawful Rate”), then in such event and so longas the Maximum Lawful Rate would be so exceeded, the rate of interest payablehereunder shall be equal to the Maximum Lawful Rate; provided, that ifat any time thereafter the rate of interest payable hereunder is less than theMaximum Lawful Rate, Borrower shall continue to pay interest hereunder at theMaximum Lawful Rate until such time as the total interest received by Lenderhereunder, is equal to the total interest which Lender would have received hadthe interest rate payable hereunder been (but for the operation of this Section 2.7(e))the interest rate payable since the Closing Date.  Thereafter, the interest rate payablehereunder shall be the rate of interest set forth herein, unless and until therate of interest again exceeds the Maximum Lawful Rate, in which event thisparagraph shall again apply.  In no eventshall the total interest received by Lender pursuant to the terms hereof exceedthe amount which Lender could lawfully have received had the interest duehereunder been calculated for the full term hereof at the Maximum LawfulRate.  In the event the Maximum LawfulRate is calculated pursuant to this Section 2.7(e),such interest shall be calculated at a daily rate equal to the Maximum LawfulRate divided by the number of days in the year in which such calculation ismade.  In the event that a court ofcompetent jurisdiction, notwithstanding the provisions of this Section 2.7(e),shall make a final determination that Lender has received interest hereunder orunder any of the Loan Documents in excess of the Maximum Lawful Rate, Lendershall to the extent permitted by applicable law, promptly apply such excessfirst to any interest due and not yet paid under the Revolving Loan and theTerm Loan, then to the outstanding principal of the Revolving Loan, and theTerm Loan (without premium or penalty), and then to Fees and any other unpaidObligations and thereafter shall refund any excess to Borrower or as a court ofcompetent jurisdiction may otherwise order.

 

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(f)            Additional Fixed Rate Provisions.  If at any time Lender reasonably determinesthat for any reason adequate and reasonable means do not exist for ascertainingthe LIBO Rate or the LIBO Rate generally becomes unavailable to Lender, Lendershall promptly give notice thereof to Borrower, and upon the giving of suchnotice, no new Fixed Rate may be selected by Borrower, until Lender is reasonablyable to ascertain the LIBO Rate and Lender shall promptly notify Borrower atsuch time; provided, that Lender’s determination under this Section 2.7(f) as toBorrower shall be in accordance with its treatment of other borrowers undercommercial loans generally.  In the eventthat any law, treaty, rule, regulation, or determination of a court orgovernmental authority or any change therein or in the interpretation orapplication thereof or compliance by Lender with any request or directive(whether or not having the force of law) from any central bank or governmentalauthority:

 

(i)            shall subject Lender to any tax ofany kind whatsoever with respect to any LIBO Rate, or change the basis oftaxation of payments to Lender of principal, interest or any other amountpayable under any Loan Document (except for changes in the rate of tax on theoverall net income of a Lender); or

 

(ii)     shall impose, modify or hold applicable anyreserve, special deposit, compulsory loan, or similar requirement againstassets held by, or deposits or other liabilities in or for the account of,advances or loans by, or other credit extended by, or any other acquisition offunds by, any office of Lender; or

 

(iii)          shall impose on Lender any othercondition; and the result of any of the foregoing is to increase the cost toLender of making, renewing, or maintaining any portion of the Revolving Loan orTerm Loan with interest rates tied to the LIBO Rate and/or to reduce any amountreceivable by Lender in connection therewith; then in any such case, Borrowershall pay to Lender, immediately upon demand, such amount or amounts as may benecessary to compensate Lender for any additional costs incurred by Lenderand/or reductions in amounts received by Lender which are attributable to LIBORates made available to Borrower hereunder. In determining which costs incurred by a Lender and/or reductions inamounts received by a Lender are attributable to such LIBO Rates, anyreasonable allocation made by Lender among its operations shall be conclusiveand binding upon Borrower; provided, that Lender’s determination underthis Section 2.7(f) asto Borrower is in accordance with its treatment of other borrowers undercommercial loans generally.

 

2.8          Fees.  In addition to the other Fees listed in thisAgreement, Borrower shall, upon the Closing Date, pay to Lender a loan fee inthe amount of Twenty-one Thousand Dollars ($21,000.00).

 

2.9          FeesCumulative and Non-Refundable.  AllFees payable under any Loan Document shall be cumulative and all Fees shall beconsidered fully earned on the date of payment and shall not be refundableunder any circumstances.

 

2.10        Farm Credit Stock.  So long as any Indebtedness remainsoutstanding under the terms of this Agreement, Borrower shall maintain itsownership of One Thousand Dollars ($1,000) of stock in American AgCredit orsuch other amount thereof as may be required by Lender.

 

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2.11        Receipt of Payments.  Borrower shall make each payment under thisAgreement not later than 12:00 P.M.(California time) on the day when due in lawful money of the United States ofAmerica by wire transfer of immediately available funds to the CollectionAccount.  Borrower shall have advisedLender in writing of each payment being made by Borrower no later than 2:00 p.m.(California time) on the Business Day prior to the date of making of suchpayment.  For purposes of computinginterest and fees and determining the amount of funds available for borrowingby Borrower pursuant to Article II,payments of immediately available funds by wire transfer deposited in theCollection Account not later than 10:30 a.m. (California time) (and forwhich Lender has received notice prior to the making of such payment) shall bedeemed received by Lender upon that Business Day.  If payment shall be deposited later than10:30 a.m. (California time) on any particular Business Day (or if Lenderwas not given prior notice of the payment by 2:00 p.m. (California time)on the Business Day preceding the date of payment), such payment shall bedeemed received on the following Business Day. If Lender, in its sole discretion, determines to accept from Borrowerpayment by checks, drafts, or similar non-cash items, payment shall be deemedreceived by Lender two (2) Business Days after notice to Lender anddeposit of such payment in the Collection Account.

 

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2.12        Accounting.  Lender will provide a monthly accounting oftransactions under the Revolving Loan, and a quarterly accounting oftransactions under the Term Loan to Borrower. Each and every such accounting shall (absent manifest error) be deemedfinal, binding, and conclusive in all respects as to all matters reflectedtherein, unless Borrower or Lender, within one hundred twenty (120) days afterthe date any such accounting is rendered, shall notify Lender in writing of anyobjection which Borrower or Lender may have to any such accounting, describingthe basis for such objection with specificity. In that event, only those items expressly objected to in such noticeshall be deemed to be disputed by Borrower or Lender.  Lender’s determination, based upon the factsavailable, of any item objected to by Borrower or Lender in such notice shall(absent manifest error) be final, binding, and conclusive, unless Borrowershall commence a judicial proceeding to resolve such objection within sixty(60) days following Lender’s notifying Borrower of such determination.

 

2.13        Taxes.

 

(a)           Any and all payments by Borrowerhereunder or under the Loan Documents shall be made, in accordance with this Section 2.13,free and clear of and without deduction for any and all present or futuretaxes, levies, imposts, deductions, Charges, or withholdings, and allliabilities with respect thereto, excluding taxes imposed on or measured by thenet income of Lender by the jurisdiction under the laws of which Lender isorganized or any political subdivision thereof (all such non-excluded taxes,levies, imposts, deductions, Charges, withholdings and liabilities beinghereinafter referred to as “Taxes”).  IfBorrower shall be required by law to deduct any Taxes from or in respect of anysum payable hereunder or under any Revolving Note or Term Note to Lender, (i) thesum payable shall be increased as may be necessary so that after making allrequired deductions (including deductions applicable to additional sums payableunder this Section 2.13) Lender receives an amount equal to the sum itwould have received had no such deductions been made, (ii) Borrower shallmake such deductions, and (iii) Borrower shall pay the full amountdeducted to the relevant taxing or other authority in accordance withapplicable law.

 

(b)           In addition, Borrower agrees to payany present or future stamp or documentary taxes or any other sales, transfer,excise, mortgage recording, or property taxes, Charges or similar levies thatarise from any payment made hereunder or under the Revolving Notes, Term Notes,or from the execution, sale, transfer, delivery or registration of, or otherwisewith respect to, this Agreement or the Revolving Notes, Term Notes, the LoanDocuments and any other agreements and instruments contemplated thereby(hereinafter referred to as “Other Taxes”).

 

(c)           Borrower shall indemnify Lender forthe full amount of Taxes or Other Taxes (including any Taxes or Other Taxesimposed by any jurisdiction on amounts payable under this Section 2.13)paid by Lender and any liability (including penalties, interest and expenses)arising there from or with respect thereto, whether or not such Taxes or OtherTaxes were correctly or legally asserted. This indemnification shall be made within thirty (30) days from the dateLender makes written demand therefor.

 

(d)           Within thirty (30) days after thedate of any payment of Taxes, Borrower shall furnish to Lender the original ora certified copy of a receipt evidencing payment thereof.

 

(e)           Without prejudice to the survival ofany other agreement of Borrower hereunder, the agreements and obligations ofBorrower contained in this Section 2.13 shall survive the payment in fullof all Obligations.

 

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2.14        Capital Adequacy.

 

(a)           Borrower shall pay to Lender fromtime to time on written request such amounts as Lender may reasonably determineto be necessary to compensate Lender for any increased costs to Lender that itreasonably determines are attributable to any law or regulation, or anyinterpretation, directive, or request (whether or not having the force of lawand whether or not failure to comply therewith would be unlawful) of any courtor governmental or monetary authority (i) following any Regulatory Changeor (ii) implementing after the Closing Date any risk-based capitalguideline or other capital requirement (whether or not having the force of lawand whether or not the failure to comply therewith would be unlawful)heretofore or hereafter issued by any Governmental Authority in respect ofLender’s Percentage of the Revolving Loan or Term Loan (such compensation toinclude an amount equal to any reduction of the rate of return on assets orequity of Lender to a level below that which Lender could have achieved but forsuch law, regulation, interpretation, directive or request); providedthat with respect to this Section 2.14, Lender shall treat Borrower as Lender generally treats its othersimilarly situated borrowers.

 

(b)           Lender will furnish to Borrower acertificate setting forth the basis and amount of each request by Lender forcompensation under this Section 2.14. Determinations and allocations by Lender for purposes of this Section 2.14of the effect of any Regulatory Change pursuant to or of capital maintainedpursuant to this Section 2.14, on its costs or rate of return ofmaintaining Revolving Advances or the Term Loan and or its commitment to makeRevolving Advances or the Term Loan, and of the amounts required to compensateLender under this Section 2.14, shall be conclusive absent manifest erroror bad faith.

 

(c)           As used in this Section 2.14, “RegulatoryChange” shall mean any change after the Closing Date in federal, state, orforeign law or regulations (including Regulation D) or the adoption or makingafter such date of any interpretation, directive or request applying to a classof lenders including Lender of or under any Federal, state, or foreign law orregulations (whether or not having the force of law and whether or not failureto comply therewith would be unlawful) by any court or governmental or monetaryauthority charged with the interpretation or administration thereof.

 

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ARTICLE  III.

 

COLLATERAL

 

3.1          Borrower’s Obligations.  The Obligations of Borrower to pay all sumsdue to Lender and to perform all other covenants and agreements under thisAgreement and the other Loan Documents to which Borrower is a party, shall besecured by all Collateral to the extent provided in the Security Documents.

 

3.2          Assurances.  Borrower shall, at its sole cost and expense,execute and deliver to Lender all such further documents, instruments, andagreements and to perform all such other acts which may be reasonably requiredin the opinion of Lender to enable Lender to perfect, protect, exercise, orenforce their respective rights as the secured parties or beneficiaries underthe Security Documents.  To the extentpermitted by applicable law, Borrower hereby authorizes Lender to filefinancing statements and continuation statements with respect to the securityinterests granted under the Security Documents in favor of Lender and toexecute such financing statements and continuation statements on behalf ofBorrower and hereby grants Lender with a limited power-of-attorney to doso.  Such power-of-attorney is coupledwith an interest and is irrevocable.

 

3.3          Mortgage of Real Property.  In addition to the Collateral currentlypledged to secure the Indebtedness of the Borrower to the Lender hereunder,Borrower shall, within ninety (90) days of the Closing Date, deliver to Lendera Mortgage in form and substance satisfactory to Lender covering the realproperty located in the State of Hawaii and described in Exhibit Cattached hereto. Said Mortgage shall secure both the existing Revolving Loanand the Term Loan made hereunder.

 

ARTICLE  IV.

 

CONDITIONSPRECEDENT

 

4.1          Conditions Precedent to ClosingDate.  Notwithstanding any otherprovision of this Agreement and without affecting in any manner the rights ofLender hereunder, the Closing Date shall not occur until and unless each andevery one of the following conditions has been satisfied or waived, in Lender’ssole discretion:

 

(a)           Borrower shall have delivered toLender all documents required by Lender to be delivered on or before theClosing Date;

 

(b)           Lender shall have received fromBorrower current interim and, or fiscal year end financial statements, allupdated pro-forma financial information, copies of all public filings anddisclosures, evidence of receipt of all necessary governmental approvals,required certifications, including, but not limited to, compliance with all laws,payment of all taxes and satisfaction of all insurance requirements, and suchlegal opinions as may reasonably be required by Lender;

 

(c)           No Material Adverse Effect shall haveoccurred or shall exist;

 

(d)           No Default or Event of Default shallhave occurred and be continuing; and

 

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(e)                                  Lender has received an executed copy ofthe Addendum to Macadamia Nut Purchase Agreement dated July 8, 2008between Mauna Loa Macadamia Nut Corporation and Borrower (the “Addendum to NutPurchase Agreement”) with terms and conditions to be approved by Lender.  The Addendum to Nut Purchase Agreement shallterminate no sooner than June 30, 2009, unless terminated earlier asprovided in the Macadamia Nut Purchase Agreement.  In addition, the Addendum to Nut PurchaseAgreement shall include a requirement for Mauna Loa to purchase a minimum of 9million wet in shell pounds of macadamia nuts from Borrower up to a maximum of12 million wet in shell pounds.  Theminimum price shall be $0.60 per pound, adjusted to 20% moisture and 30%saleable kernel recovery to dry shell.

 

4.2                                 Conditions Precedent to Each RevolvingAdvance.  It shall be a condition to the funding ofeach subsequent Revolving Advance that the following statements shall be trueon the date of each such funding or advance:

 

(a)                                  All of Borrower’s representations andwarranties contained herein or in any of the Loan Documents shall be true andcorrect in all material respects on and as of the Closing Date and the date ofeach such Revolving Advance is incurred as though made on and as of such date, exceptto the extent that any such representation or warranty expressly relates to anearlier date and for changes therein permitted or contemplated by thisAgreement.

 

(b)                                 No event shall have occurred and becontinuing, or would result from the funding of any Revolving Advance or theTerm Loan, which (i) constitutes or would constitute a Default or an Eventof Default, or (ii) which has a Material Adverse Effect.

 

(c)                                  After giving effect to each RevolvingAdvance, the aggregate principal amount of the Revolving Loan shall not exceedthe Maximum Revolving Loan.

 

The acceptance byBorrower of the proceeds of any Revolving Advance shall be deemed toconstitute, as of the date of such acceptance, a representation and warranty byBorrower that the conditions in this Section 4.2 have been satisfied.

 

4.3                                 Conditions Subsequent. Within ninety (90) days of the Closing Date, Borrower shall deliver toLender the following:

 

(a)                                  An Hawaiian Mortgage, in form andsubstance satisfactory to Lender covering the real property listed in Exhibit Chereto.

 

(b)                                 An ALTA 2006 lender’s policy of titleinsurance, including the appropriate endorsements, provided, however, thatcertain survey requirements may be waived and the survey exception shall bepermitted.  The policy or policies shallbe subject to such exceptions and conditions of title as Lender may, at itssole discretion, approve.  The amount andcoverage under the policy or policies shall be determined by Lender uponcompletion of Lender’s due diligence.

 

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ARTICLE  V.

 

REPRESENTATIONS AND WARRANTIES

 

Toinduce Lender to enter into this Second Amended and Restated Credit Agreementand to make the Revolving Loan, as herein provided for, Borrower makes thefollowing representations and warranties to Lender, each and all of which shallbe true and correct as of the date of execution and delivery of this Agreement,and shall survive the execution and delivery of this Agreement:

 

5.1                                 Corporate Existence; Compliance with Law. MLO is a limited partnership duly organized, validly existing, and ingood standing under the laws of the State of Delaware.  ML Resources, Inc.  is the managing general partner of MLO.  ML Resources, Inc. is a corporation dulyorganized, validly existing and in good standing under the laws of the State ofHawaii.  Neither Borrower has any Subsidiaries.  Each Borrower (i) is duly qualified as aforeign corporation or limited partnership and is in good standing under thelaws of each jurisdiction where its ownership or lease of property or theconduct of its business requires such qualification (except for jurisdictionsin which such failure to so qualify or to be in good standing would not have aMaterial Adverse Effect); (ii) has the requisite corporate power andauthority and the legal right to own, pledge, mortgage or otherwise encumberand operate all real property that it owns, to lease the real property itoperates under lease, and to conduct its business as now, heretofore, andproposed to be conducted; (iii) has all material licenses, permits,consents, or approvals from or by, and has made all material filings with, andhas given all material notices to, all Governmental Authorities havingjurisdiction, to the extent required for such ownership, operation, andconduct; (iv) is in compliance with its certificate of incorporation andby-laws, or its agreement of limited partnership, as applicable; and (v) isin compliance with all applicable provisions of law where the failure to complywould have a Material Adverse Effect.

 

5.2                                 Corporate Power; Authorization;Enforceable Obligations.  The execution, delivery, andperformance by Borrower of the Loan Documents to which it is a party, and allinstruments and documents required to be delivered by Borrower under any of theLoan Documents, and the creation of all Liens provided for in any LoanDocuments: (i) are within Borrower’s corporate or partnership power; (ii) havebeen duly authorized by all necessary or proper corporate or partnershipaction; (iii) are not in contravention of any provision of Borrower’scertificate of incorporation or by-laws or agreement of limited partnership, asapplicable; (iv) will not violate any law or regulation, or any order ordecree of any court or governmental instrumentality; (v) will not conflictwith or result in the breach or termination of, constitute a default under oraccelerate any performance required by, any material indenture, mortgage, deedof trust, lease, agreement or other instrument to which Borrower is a party orby which Borrower or any of its property is bound; (vi) will not result inthe creation or imposition of any Lien upon any of the property of Borrowerother than those in favor of Lender, all pursuant to the Loan Documents; and (vii) donot require the consent or approval of any Governmental Authority or any otherPerson, except for consents or approvals which have been duly obtained orspecifically waived in writing by Lender. At or prior to the Closing Date, each of the Loan Documents requiredhereunder to be delivered at or prior to the Closing Date shall have been dulyexecuted and delivered on behalf of Borrower and each shall then constitute alegal, valid, and binding obligation of Borrower, to the extent it is a partythereto, enforceable against it in accordance with its terms except for generalprinciples of equity and the effect of bankruptcy, insolvency, and other lawsaffecting the rights of creditors generally.

 

5.3                                 Solvency; Projections. Borrower is solvent and will be solvent after completion of suchacquisition and after giving effect to the initial advance hereunder.  All budget forecasts and projections ofBorrower delivered to Lender are based upon reasonable estimates andassumptions, all of which are fair in light of current conditions, have beenprepared on the basis of the assumptions stated therein, and reflect thereasonable estimate of Borrower of the results of operations and otherinformation projected therein.

 

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5.4                                 Ownership of Property; Liens.  Noneof the properties and assets of Borrower are subject to any Liens, exceptPermitted Encumbrances and the Lien in favor of Lender pursuant to the SecurityDocuments.  All real property owned orleased by Borrower on the Closing Date is set forth on Parts (A) and (B) ofthe Disclosure Schedule.  NeitherBorrower nor any other party to any such lease is in default of its obligationsthereunder, except for any default which would not have a Material AdverseEffect.  All permits required to havebeen issued to enable the real property owned or leased by Borrower to belawfully occupied and used for all of the purposes for which they are currentlyoccupied and used, have been lawfully issued and are, as of the date hereof, infull force and effect, except for any permit for which the failure of suchpermit to be issued and in full force and effect would not have a MaterialAdverse Effect.  Borrower has notreceived any notice, and to Borrower’s knowledge does not have, any pending,threatened, or contemplated condemnation proceeding affecting any real propertyowned or leased by Borrower or any part thereof, or of any sale or otherdisposition of any real property owned or leased by Borrower or any partthereof in lieu of condemnation.

 

5.5                                 No Default.  Borrower isnot in default, and to Borrower’s knowledge no third party is in default, underor with respect to any contract, agreement, lease or other instrument to whichit is a party, which default in each case or in the aggregate would have aMaterial Adverse Effect.  No Default orEvent of Default has occurred and is continuing.

 

5.6                                 Burdensome Restrictions. No contract, lease, agreement, or other instrument to which Borrower isa party or is bound and no provision of applicable law or governmentalregulation has a Material Adverse Effect, or insofar as Borrower can reasonablyforesee, may have a Material Adverse Effect.

 

5.7                                 Labor Matters. There are no strikes or other labor disputes against Borrower that arepending or, to Borrower’s knowledge, threatened which would have a MaterialAdverse Effect.  Hours worked by andpayment made to employees of Borrower have not been in violation of the FairLabor Standards Act or any other applicable law dealing with such matters whichwould have a Material Adverse Effect. All payments due from Borrower on account of employee health and welfareinsurance which would have a Material Adverse Effect if not paid have been paidor accrued as a liability on the books of Borrower.

 

5.8                                 Other Ventures. Except as set forth in Part (C) of the Disclosure Schedule,Borrower is not engaged in any joint venture or partnership with any otherPerson.

 

5.9                                 Investment Company Act. Borrower is not an “investment company” or an “affiliated person” of, or“promoter” or “principal underwriter” for, an “investment company,” as suchterms are defined in the Investment Company Act of 1940, as amended.  The making of the Revolving Loan and TermLoan by Lender, the application of the proceeds and repayment thereof byBorrower and the consummation of the transactions contemplated by thisAgreement and the other Loan Documents will not violate any provision of suchAct or any rule, regulation, or order issued by the Securities and ExchangeCommission thereunder.

 

5.10                           Margin Regulations. Borrower does not own any “margin security”, as that term is defined inRegulations U of the Board of Governors of the Federal Reserve System (the “FederalReserve Board”).  The Revolving Advancesand Term Loan will not be used, directly or indirectly, for the purpose 

 

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of purchasing or carryingany margin security, for the purpose of reducing or retiring any indebtednesswhich was originally incurred to purchase or carry any margin security or forany other purpose which might cause any of the loans under this Agreement to beconsidered a “purpose credit” within the meaning of Regulation T, U, or X ofthe Federal Reserve Board.

 

5.11                           Taxes.  All federal,state, local, and foreign tax returns, reports, and statements, includinginformation returns required to be filed by Borrower, have been filed with theappropriate Governmental Authority and all Charges and other impositions shownthereon to be due and payable have been paid prior to the date on which anyfine, penalty, interest, or late charge may be added thereto for nonpaymentthereof, or any such fine, penalty, interest, late charge, or loss has beenpaid.  Borrower has paid when due andpayable all Charges required to be paid by it. Proper and accurate amounts have been withheld by Borrower from theirrespective employees for all periods in full and complete compliance with thetax, social security, and unemployment withholding provisions of applicablefederal, state, local and foreign law and such withholdings have been timelypaid to the respective governmental agencies. None of Borrower’s tax returns, with respect to Borrower’s corporateincome, are currently being audited by the Internal Revenue Service or anyother applicable Governmental Authority.

 

5.12                           ERISA.  Each “Plan”(as defined below) is in compliance in all material respects with theapplicable provisions of ERISA and the Internal Revenue Code (“IRC”) and withrespect to each Plan, other than a Qualified Plan, all required contributionsand benefits have been paid in accordance with the provisions of each such Planto the extent that the failure to pay any such contribution or benefit wouldhave a Material Adverse Effect.  Thereare no pending or, to Borrower’s knowledge, threatened claims, actions orlawsuits (other than claims for benefits in the normal course), asserted orinstituted against Borrower or any Plan or its assets.  Neither Borrower nor any ERISA Affiliate ofeither has incurred or reasonably expects to incur any Withdrawal Liabilityunder Section 4201 of ERISA as a result of a complete or partialwithdrawal from a Multiemployer Plan. Borrower has not engaged in a prohibited transaction, as defined in Section 4975of the IRC or Section 406 of ERISA, in connection with any Plan, whichwould subject Borrower (after giving effect to any exemption) to a material taxon prohibited transactions imposed by Section 4975 of the IRC or any othermaterial liability.  As used above, theterm “Plan” means, with respect to Borrower or any ERISA Affiliate of either,at any time, an employee benefit plan, as defined in Section 3(3) ofERISA, which Borrower maintains, contributes to or has an obligation tocontribute to on behalf of participants who are or were employed by any of them.  The terms “Qualified Plan” and “MultiemployerPlan” shall have the meaning given them in ERISA.

 

5.13                           No Litigation. Except as set forth in Part (D) of the Disclosure Schedule, noaction, claim or proceeding is now pending or, to Borrower’s knowledge, threatenedagainst Borrower, at law, in equity or otherwise, before any court, board,commission, agency, or instrumentality of any federal, state, or localgovernment or of any agency or subdivision thereof, or before any arbitrator orpanel of arbitrators, which, if determined adversely, could have a MaterialAdverse Effect, nor to Borrower’s knowledge does a state of facts exist whichis reasonably likely to give rise to such proceedings.  None of the matters set forth in Part (D) ofthe Disclosure Schedule questions the validity of any of the Loan Documents orany action taken or to be taken pursuant thereto, or would have eitherindividually or in the aggregate a Material Adverse Effect.

 

5.14                           Brokers.  No broker orfinder acting on behalf of Borrower brought about the obtaining, making, orclosing of the loans made pursuant to this Agreement or the transactionscontemplated by the Loan Documents and has no obligation to any Person inrespect of any finder’s or brokerage fees in connection therewith.

 

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5.15                           Patents, Trademarks, Copyrights, andLicenses.Borrower owns or possess all licenses, permits, franchises, authorizations,patents, copyrights, service marks, trademarks and trade names, or rights thereto,that individually or in the aggregate are necessary to the conduct of Borrower’sbusiness, without known conflict with the rights of others.  To the best knowledge of Borrower, no productof Borrower infringes in any material respect any license, permit, franchise,authorization, patent, copyright, service mark, trademark and trade name orother right owned by any other Person. To the best knowledge of Borrower, there is no material violation by anyPerson of any right of Borrower with respect to any patent, copyright, servicemark, trademark and trade name or other right owned by Borrower.

 

5.16                           Full Disclosure. To Borrower’s knowledge, no information contained in this Agreement, theother Loan Documents, any budget forecasts or projections, the financialstatements delivered to Lender, or any written statement furnished by or onbehalf of Borrower pursuant to the terms of this Agreement, which haspreviously been delivered to Lender, contains any untrue statement of amaterial fact or omits to state a material fact necessary to make thestatements contained herein or therein not misleading in light of thecircumstances under which made.

 

5.17                           Environmental Matters. Borrower is and has been in compliance with all Environmental Laws,except for such noncompliance which would not result in EnvironmentalLiabilities which could reasonably be expected to exceed $100,000. Borrower hasobtained, and is in compliance with, all environmental permits required byEnvironmental Laws for the operations of its business, except where the failureto so obtain or comply with such environmental permits would not result inEnvironmental Liabilities that could reasonably be expected to exceed $100,000,and all such Environmental Permits are valid, uncontested and in good standing.  Borrower is not involved in operations anddoes not know of any facts, circumstances or conditions, including any releasesof Hazardous Materials, that are likely to result in any EnvironmentalLiabilities of Borrower that could reasonably be expected to exceed$100,000.  There is no litigation arisingunder or related to any Environmental Laws, environmental permits or HazardousMaterial that seeks damages, penalties, fines, costs or expenses in excess of $50,000or injunctive relief against, or that alleges criminal misconduct by,Borrower.  No notice has been received byBorrower identifying it as a “potentially responsible party” or requestinginformation under CERCLA or analogous state statutes, and to the knowledge ofBorrower, there are no facts, circumstances or conditions that may result inBorrower being identified as a “potentially responsible party” under CERCLA oranalogous state statutes.

 

5.18                           Insurance Policies. Borrower has disclosed to Lender in writing all insurance of any naturemaintained for current occurrences by Borrower, as well as a summary of theterms of such insurance.  Borrower shallmaintain “All Risk” physical damage insurance on all of Borrower’s tangiblereal and personal property and assets, wherever located, and covers, withoutlimitation, fire and extended coverage, boiler and machinery coverage, liquids,theft, burglary, explosion, collapse, and all other hazards and risksordinarily insured against by owners or users of such properties in similarbusinesses.  All policies of insurance onsuch real and personal property contain an endorsement, in form and substanceacceptable to Lender, showing loss payable to Lender (Form 438 BFU or itsequivalent) and extra expense and business interruption endorsements.  Such endorsement, or an independentinstrument furnished to Lender, provides that the insurance companies will giveLender at least thirty (30) days prior written notice before any such policy orpolicies of insurance shall be altered or canceled and that no act or defaultof Borrower or any other Person shall affect the right of Lender to recoverunder such policy or policies of insurance in case of loss or damage.  In addition, Borrower shall maintain thefollowing types of insurance coverage, in such amounts as may be approved byLender: (a) comprehensive general 

 

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liability insurance on an“occurrence basis” against claims for personal injury, bodily injury andproperty damage, including premises/operations, broad form contractualliability, underground, explosion and collapse hazard, independent contractors,broad form property coverage, products and completed operations liability; (b) statutorylimits of worker’s compensation insurance, (c) automobile liabilityinsurance for all owned, non-owned or hired automobiles against claims forpersonal injury, bodily injury, and property damage; and (d) umbrellainsurance.  All of such policies are infull force and effect and in form and with insurers recognized as adequate byLender, and provide coverage of such risks and for such amounts as arecustomarily maintained for businesses of the scope and size of Borrower’s andas otherwise acceptable to Lender.  Eachinsurance policy contains a clause which provides that Lender’s interest undersuch policy shall not be invalidated by any act or omission to act of, or anybreach of warranty by, the insured, or by any change in the title, ownership orpossession of the insured property, or by the use of the property for purposesmore hazardous than is permitted in such policy.  Borrower has delivered to Lender acertificate of insurance that evidences the existence of each policy ofinsurance, payment of all premiums therefor and compliance with all provisionsof this Agreement.

 

5.19                           PACA.  Borrower isnot a “dealer,” “commission merchant,” or “broker” under PACA, and Borrower’sassets are not subject to the trust provisions provided for under PACA.

 

ARTICLE  VI.

 

FINANCIAL STATEMENTS AND INFORMATION

 

6.1                                 Reports and Notices. Borrower covenants and agrees that it shall deliver to Lender:

 

(a)                                  Within fifteen (15) days after the end ofeach calendar month ending January 31, February 28/29, April 30,May 31, July 31, August 31, October 31 and November 30,and forty five (45) days after the end of each calendar quarter ending March 31,June 30, September 30 and December 31 (i) financial andother information requested by Lender, including an internally-prepared (orpublicly-filed, if available) statement of income and cash flow, balance sheet(and management letter, if the month end is also a Fiscal Quarter end), each ofwhich shall provide comparisons to the prior year’s equivalent period and tothe budgets provided to Lender, (ii) the certification of the chieffinancial officer of Borrower that all such financial statements and schedulesare complete and correct and present fairly in accordance with GAAP (subject tonormal year-end adjustments), the financial position, the results of operationsand the statements of cash flows of Borrower as at the end of such month (andfor the Fiscal Quarter just ended, if applicable), and that there was noDefault or Event of Default in existence as of such time; and (iii) if themonth end is also a Fiscal Quarter end, a certificate in the form attachedhereto as Exhibit B, containing the certification of Borrower’s chieffinancial officer that Borrower has complied with all of the covenants setforth in Section 8.12 as of the end of such Fiscal Quarter;

 

(b)                                 Within ninety (90) days after the end ofeach Fiscal Year, audited financial statements, consisting of balance sheetsand statements of income and retained earnings and cash flows, setting forth incomparative form in each case the figures for the previous Fiscal Year, whichfinancial statements shall be prepared in accordance with GAAP, certifiedwithout qualification by a firm of independent certified public accountants ofrecognized national standing selected by Borrower and acceptable to Lender, andaccompanied by (i) a report from such accountants to the effect that inconnection with their audit examination, nothing has come to their attention tocause them to believe that a Default or Event of Default had occurred and that,to the best of their knowledge, Borrower was in 

 

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compliance with all thecovenants set forth in Section 8.12 as of the end of such Fiscal Year, (ii) theannual letter from Borrower’s chief financial officer to such accountants inconnection with their audit examination detailing Borrower’s contingentliabilities and material litigation matters involving Borrower, (iii) acertification of the chief financial officer of Borrower that all suchfinancial statements are complete and correct and present fairly in accordancewith GAAP the financial position, the results of operations and the statementsof cash flow of Borrower as at the end of such year and for the period thenended and that there was no Default or Event of Default in existence as of suchtime, and (iv) a certificate in the form attached hereto as Exhibit B,containing the certification of Borrower’s chief financial officer thatBorrower has complied with all of the covenants set forth in Section 8.12as of the end of such Fiscal Year;

 

(c)                                  Within ninety (90) days after the startof any Fiscal Year, an annual budget and forecast for such Fiscal Year,substantially in the form provided to Lender prior to the Closing Date, andcontaining such information as Lender shall request;

 

(d)                                 Within ninety (90) days after completionof crop harvesting, an annual crop production report containing suchinformation as Lender shall request;

 

(e)                                  As soon as practicable, but in any eventwithin one (1) Business Day after Borrower becomes aware of the existenceof any Default or Event of Default, or any development or other informationwhich would have a Material Adverse Effect, telephonic notice specifying thenature of such Default or Event of Default or development or information,including the anticipated effect thereof, which notice shall be promptlyconfirmed in writing within three (3) Business Days;

 

(f)                                    Copies of all federal, state, local andforeign tax returns, information returns and reports in respect of income,franchise or other taxes on or measured by income (excluding sales, use or liketaxes) filed by Borrower; and

 

(g)                                 Such other information respectingBorrower’s business, financial condition or prospects as Lender may, from timeto time, reasonably request.

 

6.2                                 Communication with Accountants.  Lenderis authorized to communicate directly with Borrower’s independent certifiedpublic accountants and tax advisors, and such accountants and tax advisors arehereby authorized to disclose directly to Lender any and all financialinformation requested by Lender.

 

ARTICLE  VII.

 

AFFIRMATIVE COVENANTS

 

Borrowercovenants and agrees that, unless Lender shall have otherwise consented,Borrower shall comply with and observe each of the following covenants.

 

7.1                                 Maintenance of Existence; Conduct ofBusiness.  Borrower shall: (a) do or cause to bedone all things necessary to preserve and keep in full force and effect itscorporate or partnership existence and its rights and franchises; (b) continueto conduct its business substantially as now conducted or as otherwise permittedhereunder; and (c) maintain all of its property that is necessary oruseful in the proper conduct of its business in good working condition (takinginto consideration ordinary wear and tear).

 

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7.2                                 Payment of Obligations. Borrower shall pay and discharge or cause to be paid and dischargedpromptly all Charges imposed upon it, its income, and profits, or any of itsproperty, and lawful claims for labor, materials, supplies, and services orotherwise before any thereof shall become in default, except for those that arebeing contested in good faith by proper legal actions or proceedings.

 

7.3                                 Books and Records. Borrower shall keep adequate records and books of account with respectto its business activities, in which proper entries, reflecting all of itsfinancial transactions, are made in accordance with GAAP and on a basisconsistent with the financial statements delivered to Lender.

 

7.4                                 Litigation.  Borrowershall notify Lender in writing, promptly upon learning thereof, of anylitigation commenced or threatened against Borrower, and of the institutionagainst it of any suit or administrative proceeding that (a) may involvean amount in excess of One Hundred Thousand Dollars ($100,000) or (b) mayhave a Material Adverse Effect if adversely determined.

 

7.5                                 Insurance.  Borrowershall, at its sole cost and expense, maintain the policies of insurancedescribed in Section 5.18 in form and with insurers recognized as adequateby Lender, and all such policies shall be in such amounts as may be reasonablysatisfactory to Lender.  In addition,Borrower shall notify Lender promptly of any occurrence causing a material lossor decline in value of any real or personal property and the estimated (oractual, if available) amount of such loss or decline.  Borrower hereby directs all present andfuture insurers under its “All Risk” policies of insurance to pay all proceedspayable thereunder directly to Lender. Borrower irrevocably makes, constitutes and appoints Lender (and allofficers, employees, or agents designated by Lender) as Borrower’s true andlawful agent and attorney-in-fact for the purpose of making, settling, andadjusting claims under the “All Risk” policies of insurance, endorsing the nameof Borrower on any check, draft, instrument or other item of payment for theproceeds of such “All Risk” policies of insurance, and for making alldeterminations and decisions with respect to such “All Risk” policies ofinsurance; provided Lender agrees that it shall not exercise its right tosettle or adjust any claim unless an Event of Default has occurred and iscontinuing.  In the event Borrower at anytime or times hereafter shall fail to obtain or maintain any of the policies ofinsurance required above or to pay any premium in whole or in part relatingthereto, Lender, without waiving or releasing any Obligations or Default orEvent of Default hereunder, may at any time or times thereafter (but shall notbe obligated to) obtain and maintain such policies of insurance and pay suchpremium and take any other action with respect thereto which Lender deemsadvisable.  All sums so disbursed byLender, including reasonable attorneys’ fees, court costs, expenses and othercharges relating thereto, shall be payable, on demand, by Borrower to Lenderand shall be additional Obligations hereunder secured by the Collateral.  Lender reserves the right at any time, uponreview of Borrower’s risk profile, to require additional forms and limits ofinsurance to, in Lender’s reasonable judgment, after consultation withBorrower, adequately protect Lender’s interests.

 

7.6                                 Compliance with Laws and Agreements. Borrower shall comply in all material respects with all federal, stateand local laws and regulations applicable to it.  Borrower shall perform, within all requiredtime periods, all of its obligations and enforce all of its rights under eachmaterial agreement to which it is a party.

 

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7.7                                 Environmental Matters. Borrower shall (i) comply in all material respects with theEnvironmental Laws applicable to it, (ii) notify Lender promptly afterknowledge in the event of any spill or release which is reportable to anyGovernmental Authority upon any premises owned or occupied by it, and (iii) promptlyforward to Lender a copy of any order, notice, permit, application, or anyother communication or report received by Borrower in connection with anymatter relating to the Environmental Laws that may materially affect suchpremises.

 

ARTICLE  VIII.

 

NEGATIVE COVENANTS

 

Borrowercovenants and agrees that, unless Lender shall have otherwise consented,Borrower shall comply with and observe each of the following covenants.

 

8.1                                 Mergers, Etc.; Change of Business. Borrower shall not, directly or indirectly, by operation of law orotherwise, merge with, consolidate with, acquire all or substantially all ofthe assets or capital stock of, or otherwise combine with, any Person or formany Subsidiary.  Borrower shall notengage in any business other than those businesses in which Borrower is engagedon the Closing Date.

 

8.2                                 Capital Structure. Borrower shall not make any material changes in its capital structure oramend its certificate of incorporation, by-laws, limited partnership agreementwithout the prior written consent of Lender, which consent will not beunreasonably withheld.

 

8.3                                 Investments; Loans and Advances. Borrower shall not make any investment in, or make or accrue loans oradvances of money to any Person, through the direct or indirect holding ofsecurities or otherwise; provided, that Borrower may: (a) make andmaintain investments in cash equivalents, (b) make and maintain loans oradvances to, any of its wholly-owned Subsidiaries (provided that the creationof such wholly-owned Subsidiary has been approved by Lender and has guaranteedall Obligations and secured such guarantee by a first priority securityinterest in all of such Subsidiary’s assets), (c) loans to employees tothe extent disclosed to and approved by Lender, (d) investments existingon the Closing Date to the extent approved by Lender.

 

8.4                                 Indebtedness. Except as otherwise expressly permitted by this Agreement, Borrowershall not create, incur, assume, or permit to exist any Indebtedness, except (a) Indebtednesssecured by Permitted Encumbrances, (b) the Revolving Loan, (c) theTerm Loan, (d) all unfunded pension fund and other employee benefit planobligations and liabilities but only to the extent they are permitted to remainunfunded under applicable law, (e) Indebtedness under Capital Leases tothe extent permitted under this Agreement, but not to exceed One Million TwoHundred Thousand Dollars ($1,200,000) at any time outstanding, (f) Indebtednesssecured by property of Borrower other than the Collateral in an aggregateamount not to exceed Five Hundred Thousand Dollars ($500,000), (g) unsecuredIndebtedness in an aggregate amount not to exceed One Hundred Thousand Dollars($100,000), and (h) purchase money indebtedness with respect to theacquisition of new capital assets so long as such Indebtedness is secured onlyby the particular asset being acquired.

 

8.5                                 Transactions with Affiliates. Borrower shall not enter into or be a party to any transaction with(including the purchase from, sale to, or exchange of property with, or therendering of any service by or for) any Affiliate of Borrower, except in theordinary course of and pursuant to the 

 

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reasonable requirementsof Borrower’s business and upon fair and reasonable terms that are fullydisclosed to Lender and are no less favorable to Borrower than would beobtained in a comparable arm’s-length transaction with a Person not anAffiliate of Borrower; provided, that MLO may reimburse ML Resources, Inc.for reasonable management expenses.

 

8.6                                 Liens.  Borrowershall not create or permit any Lien on any of its properties or assets exceptthe Lien of Lender under the Loan Documents and Permitted Encumbrances.

 

8.7                                 Sales of Assets. Borrower shall not sell, transfer (including any consensual transfersuch as the execution of a deed in lieu of foreclosure), convey, assign, orotherwise dispose of any of its assets or properties involved in Borrower’smacadamia operations; provided, that the foregoing shall not prohibit (i) thesale of inventory in the ordinary course of business, (ii) disposal ofworn out or obsolete assets, (iii) the sale or other disposal of usedequipment which is being replaced by equipment having a similar value orserving a similar function, and (iv) sale of other assets in an aggregateamount not to exceed One Million Dollars ($1,000,000) from and after theClosing Date.

 

8.8                                 Cancellation of Claims. Borrower shall not cancel any claim or debt owing to it, except forreasonable consideration or in the ordinary course of business.

 

8.9                                 Restricted Payments. Borrower shall not make any Restricted Payments.

 

8.10                           Environmental Compliance. Borrower shall not and shall not knowingly permit any other Personwithin the control of Borrower to cause or permit the presence, use,generation, manufacture, installation, release, discharge, storage or disposalof any Hazardous Materials on, under, in or about any of its real estate or thetransportation of any Hazardous Materials to or from any real estate where suchpresence, use, generation, manufacture, installation, release, discharge,storage or disposal would violate any Environmental Laws, the violation ofwhich would have a Material Adverse Effect.

 

8.11                           PACA License. Borrower shall not obtain or attempt to obtain a dealer license underPACA.

 

8.12                           Financial Covenants.

 

(a)                                  Minimum Tangible Net Worth. MLO shall not permit its Tangible Net Worth, as of the last day of anyfiscal quarter beginning with the fiscal quarter ending September 30,2008, to be less than the applicable “Minimum Tangible Net Worth Amount.”  The Minimum Tangible Net Worth Amount shallinitially be Forty-One Million Dollars ($41,000,000.00) and shall be increaseddollar for dollar by the amount of positive Consolidated Net Income achieved byMLO, beginning October 1, 2008 and thereafter.

 

(b)                                 Minimum Consolidated EBITDA.                Commencing on September 30, 2008, MLO shall have ConsolidatedEBITDA of not less than $600,000 for the three quarters ended September 30,2008; Consolidated EBITDA of not less than $1,150,000 for the four quartersended December 31, 2008; and Consolidated EBITDA of not less than$1,200,000 for the four quarters ended March 31, 2009 and thereafter.

 

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8.13                                                                          Addendum to Nut Purchase Agreement. Borrower shall not terminate that Addendum to Nut Purchase Agreementprior to June 30, 2009 without prior written consent of Lender.

 

ARTICLE  IX.

 

INDEMNITY

 

9.1                                 Indemnification. Borrower shall indemnify and hold Lender and Lender’s affiliates,subsidiaries, officers, directors, employees, attorneys, and agents (each, an “IndemnifiedPerson”), harmless from and against any and all suits, actions, proceedings,claims, damages, losses, liabilities and expenses (including reasonable attorneys’fees and disbursements (including allocated costs of internal counsel) andother costs of investigations or defense, including those incurred upon anyappeal) which may be instituted or asserted against or incurred by suchIndemnified Person as a result of credit having been extended under thisAgreement and the other Loan Documents or in connection with Lender’s interestin any Collateral; provided, that Borrower shall not be liable for anyindemnification to such Indemnified Person to the extent that any such suit,action, proceeding, claim, damage, loss, liability or expense was the result ofany action by such Indemnified Person or results from such Indemnified Person’sgross negligence or willful misconduct. NEITHER LENDER NOR ANY OTHER INDEMNIFIED PERSON SHALL BE RESPONSIBLE ORLIABLE TO BORROWER, ANY OTHER PERSON, ANY SUCCESSOR, ASSIGNEE, OR THIRD PARTYBENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELYTHROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY, OR CONSEQUENTIAL DAMAGESWHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED UNDER THELOAN DOCUMENTS.

 

ARTICLE  X.

 

EVENTS OF DEFAULT; RIGHTS AND REMEDIES

 

10.1                           Events of Default. The occurrence of any one or more of the following events (regardless ofthe reason therefor) shall constitute an “Event of Default” hereunder:

 

(a)                                  Failure to Pay Principal. Borrower shall fail to make any payment of principal owing with respectto the Revolving Loan or any regularly scheduled payment of principal owingwith respect to the Term Loan when due and payable and such failure shallremain uncured for a period of two (2) Business Days; provided that thefailure to make such payment may only be cured by paying the amount duetogether with interest on such amount at the Default Rate.

 

(b)                                 Failure to Pay Interest or Other AmountsOther than Expenses.  Borrower shall fail to make any payment ofinterest on the Revolving Loan, the Term Loan, or any other amount (other thanexpenses payable under any Loan Document) owing with respect to the RevolvingLoan, the Term Loan or any of the other Obligations when due and payable ordeclared due and payable and such failure shall remain uncured for a period oftwo (2) Business Days; provided that the failure to make such payment mayonly be cured by paying the amount due together with interest on such amount atthe Default Rate.

 

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(c)                                  Failure to Pay Expenses. Borrower shall fail to make any payment of any expenses payable underany Loan Document, and such failure shall have remained uncured for a period often (10) days after Borrower has received notice of such failure fromLender; provided that the failure to make such payment may only be cured bypaying the amount due together with interest on such amount at the DefaultRate.

 

(d)                                 Breach of Covenants or Other Provisionsof This Agreement.  Borrower shall fail or neglect to perform,keep, or observe any other provision of this Agreement or of any of the otherLoan Documents, and the same is by its nature incapable of being cured or shallremain unremedied for a period ending on the first to occur of twenty (20) daysafter Borrower shall receive written notice of any such failure from Lender orthirty (30) days after Borrower shall become aware thereof.  A breach by Borrower of the financialcovenants set forth in Section 8.12 are incapable of being cured.

 

(e)                                  Default Under Other Indebtedness. A default shall occur under any other agreement, document, or instrumentto which Borrower is a party or by which Borrower or Borrower’s property isbound and such default involves the failure to make any payment (whether ofprincipal, interest, or otherwise) due (whether by scheduled maturity, requiredprepayment, acceleration, demand, or otherwise, but only after expiration ofany cure periods provided by the underlying agreement, document, or instrument)in respect of any Indebtedness of Borrower in excess of One Hundred ThousandDollars ($100,000).

 

(f)                                    Breach of Representation or Warranty. Any material representation or warranty herein or in any Loan Documentor in any written statement pursuant thereto or hereto, report, financialstatement, or certificate made or delivered to Lender by Borrower shall beuntrue or incorrect, as of the date when made or deemed made (including thosemade or deemed made pursuant to Section 4.2) and the same is by its natureincapable of being cured or shall remain unremedied for a period ending on thefirst to occur of twenty (20) days after Borrower shall receive written noticeof any such failure from Lender or thirty (30) days after Borrower shall becomeaware thereof.

 

(g)                                 Loss of Assets.  (i) Anyof the assets of Borrower shall be attached, seized, levied upon, or subjectedto a writ or distress warrant, or come within the possession of any receiver,trustee, custodian, or assignee for the benefit of creditors of Borrower andshall remain unstayed or undismissed for thirty (30) consecutive days, (ii) anyPerson other than Borrower shall apply for the appointment of a receiver,trustee or custodian for any of Borrower’s assets and such application shallremain unstayed or undismissed for thirty (30) consecutive days, or (iii) Borrowershall have concealed, removed, or permitted to be concealed or removed, anypart of its property, with intent to hinder, delay, or defraud its creditors orany of them or made or suffered a transfer of any of its property or theincurring of an obligation which may be fraudulent under any bankruptcy,fraudulent conveyance or other similar law.

 

(h)                                 Involuntary Insolvency Actions. A case or proceeding shall have been commenced against Borrower in acourt having competent jurisdiction seeking a decree or order (i) underthe Bankruptcy Code, or any other applicable federal, state, or foreignbankruptcy or other similar law, (ii) appointing a custodian, receiver,liquidator, assignee, trustee or sequestrator (or similar official) of Borroweror of any substantial part of its properties, or (iii) ordering thewinding-up or liquidation of the affairs of Borrower and such case orproceeding shall remain undismissed or unstayed for thirty (30) consecutivedays or such court shall enter a decree or order granting the relief sought insuch case or proceeding.

 

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(i)                                     Voluntary Insolvency Actions. Borrower shall (i) file a petition seeking relief under theBankruptcy Code, or any other applicable federal, state or foreign bankruptcyor other similar law, (ii) consent to the institution of proceedingsthereunder or to the filing of any such petition or to the appointment of ortaking possession by a custodian, receiver, liquidator, assignee, trustee, orsequestrator (or similar official) of Borrower or of any substantial part ofits properties, (iii) fail generally to pay its debts as such debts becomedue, or (iv) take any corporate action in furtherance of any such action.

 

(j)                                     Judgments.  Finaljudgment or judgments for the payment of money in excess of Fifty ThousandDollars ($50,000) in the aggregate shall be rendered against Borrower and thesame shall not be (i) fully covered by insurance, or (ii) vacated,stayed, bonded, paid, or discharged for a period of thirty (30) days.

 

(k)                                  Material Adverse Effect. There shall occur any event or circumstance that constitutes a MaterialAdverse Effect.

 

10.2                           Acceleration; Remedies.

 

(a)                                  Automatic Acceleration; Exercise ofRemedies.  If an Event of Default shall occur and becontinuing: (i) all Obligations and any indebtedness of Borrower under anyof the Loan Documents, any term thereof to the contrary notwithstanding, shallat Lender’s option and without notice be accelerated and become immediately dueand payable without presentment, demand, protest, or notice of dishonor, all ofwhich are hereby expressly waived by Borrower; and (ii) the obligation, ifany, of Lender to make further Revolving Advances shall immediately cease andterminate.  Lender shall have all rights,powers, and remedies available under each of the Loan Documents, including theright to resort to any or all Collateral for any Obligations and to exerciseany or all of the rights of a beneficiary or secured party with respect to theCollateral pursuant to applicable law. All rights, powers and remedies of Lender in connection with each of theLoan Documents (x) may be exercised at any time and from time to timeafter the occurrence and during the continuation of an Event of Default, (y) arecumulative and not exclusive, and (z) shall be in addition to any otherrights, powers or remedies provided by law or equity.  Without limiting the foregoing, Lender may,as provided in the Farm Credit Act of 1971, as amended, retire and cancel allor any portion of Borrower’s stock or other equities in Lender and apply theproceeds thereof to the Obligations.  Inaddition, Lender may hold, set off, sell, and/or apply against Borrower’sindebtedness any and all cash, accounts, securities, instruments, documents, orother property in Lender’s possession or under its control.

 

(b)                                 Payments to Third Parties. At its sole discretion and without any obligation to do so, Lender maypay any amount to any Person as Lender deems reasonably necessary to preservethe value of, avoid loss of or damage to, or prevent foreclosure, sale, orforfeiture of any of the Collateral, including bidding at or redeeming from anysale of Collateral. Any amounts paid or expended by Lender in connectionherewith shall constitute Obligations which shall be payable on demand andwhich shall bear interest at the Default Rate from the date paid by Lender.

 

(c)                                  Appointment of Receiver. After the occurrence of an Event of Default, Lender may (but shall notbe obligated to) seek to obtain the appointment of a receiver who shall bevested with any and all such powers and rights as Lender may request of thecourt, including the right (i) to sell the Collateral at one or moreprivate or public sales, (ii) to undertake cultivation, harvest,purchasing, processing, sales, collections, or other work in connection withany Collateral (or any portion thereof) in accordance with this Agreement andthe other Loan Documents (or any other plan of cultivation, harvest,processing, preservation or maintenance approved by Lender and the receiver orthe court), and (iii) to exercise any or all such rights, powers orprivileges as Borrower or Lender might exercise on its own behalf.

 

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10.3                           Distribution and Application of AmountsReceived After an Event of Default.  Any amountsreceived by Lender on account of the Obligations after an Event of Default,whether from voluntary payment by Borrower, from a foreclosure sale, or fromsome other source shall be distributed against such portions of the Obligationsand in such order as Lender, in its sole discretion, shall determine.  Borrower irrevocably waives the right todirect the application of any and all payments at any time or times hereafterreceived by Lender from or on behalf of Borrower, and Borrower irrevocablyagrees that Lender shall have the continuing exclusive right to apply any andall such payments against the then due and payable Obligations of Borrower asLender may deem advisable.

 

10.4                           Waivers by Borrower. Except as otherwise provided for in this Agreement, Borrower waives (i) presentment,demand and protest and notice of presentment, dishonor, notice of intent toaccelerate, notice of acceleration, protest, default, nonpayment, maturity, release,compromise, settlement, extension, or renewal of any or all commercial paper,accounts, contract rights, documents, instruments, chattel paper and guarantiesat any time held by Lender on which Borrower may in any way be liable andhereby ratifies and confirms whatever Lender may do in this regard, (ii) allrights to notice and a hearing prior to Lender’s taking possession or controlof, or to Lender’s replevy, attachment or levy upon, the Collateral or any bondor security which might be required by any court prior to allowing Lender toexercise any of its remedies, and (iii) the benefit of all valuation,appraisal and exemption laws.

 

ARTICLE  XI.

 

MISCELLANEOUS

 

11.1                           Successors and Assigns. This Agreement and the other Loan Documents shall be binding on andshall inure to the benefit of Borrower and Lender and their respectivesuccessors and assigns, except as otherwise provided herein or therein.  Borrower may not assign, transfer,hypothecate, or otherwise convey its rights, benefits, obligations, or dutieshereunder or thereunder without the prior express written consent ofLender.  Any purported assignment,transfer, hypothecation, or other conveyance by Borrower without the priorexpress written consent of all of Lender shall be void.  Lender may sell, assign, transfer, grant aparticipation in, or otherwise dispose of all or any portion of its interest inthis Agreement at any time without consent of Borrower.  In connection therewith, Lender shall be entitledto provide to any assignee or participant or prospective assignee orparticipant such information pertaining to Borrower as Lender may deemappropriate or such assignee or participant or prospective assignee orparticipant may request; provided, that such assignee or participant or prospectiveassignee or participant shall agree (a) to treat in confidence suchinformation, and (b) not to make use of such information for purposes oftransactions other than contemplated by such assignment or participation.

 

11.2                           Complete Agreement; Modification ofAgreement; Consents and Waivers.  The LoanDocuments constitute the complete agreement between the parties with respect tothe subject matter hereof and may not be modified, altered, or amended exceptby an agreement in writing executed by Borrower and Lender.  No amendment or waiver of any provision ofthis Agreement or any Loan Document, nor consent to any departure by Borrowertherefrom, shall in any event be effective unless the same shall be in writingand executed by Lender.

 

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11.3                           Fees and Expenses. Borrower shall reimburse Lender for all reasonable fees, costs, andexpenses incurred in connection with: (a) the preparation and negotiationof the Loan Documents (including the reasonable fees and expenses of internalcounsel, and appraisers and consultants, retained in connection with the LoanDocuments and the transactions contemplated thereby and advice in connectiontherewith); (b) any amendment, modification, or waiver of, or consent withrespect to, any of the Loan Documents; (c) any advice in connection withthe administration of the Revolving Loan, the Term Loan, this Agreement, anyLoan Document, or the Collateral; (d) any litigation, contest, dispute,suit, proceeding, or action (whether instituted by Lender, Borrower or anyother Person) in any way relating to the Collateral, any of the Loan Documentsor any other agreements to be executed or delivered in connection therewith orherewith, including any litigation, contest, dispute, suit, case, proceeding oraction, and any appeal or review thereof, in connection with a case commencedby or against Borrower or any other Person that may be obligated to Lender byvirtue of this Agreement, or the other Loan Documents, under the Bankruptcy Code,or any other applicable federal, state or foreign bankruptcy or other similarlaw (including the seeking of relief from the automatic stay or proposal ofopposition to a plan of reorganization); (e) any attempt to enforce anyrights of Lender against Borrower or any other Person that may be obligated toLender by virtue of any of the Loan Documents; or (f) any attempt to (i) monitorthe Revolving Loan or Term Loan, (ii) evaluate, observe, assess Borroweror its affairs, and (iii) verify, protect, evaluate, assess, appraise,collect, sell, liquidate or otherwise dispose of the Collateral, including andfield inspections; then, in any such event, the reasonable attorneys’ and otherprofessional and service providers’ fees (including internally-allocated costsof in-house counsel) arising from such services, including those of anyappellate proceedings, and all expenses, costs, charges, and other feesincurred by such counsel and others in any way or respect arising in connectionwith or relating to any of the events or actions described in this Section 11.3,shall be payable, on demand, by Borrower to Lender and shall be additionalObligations secured under this Agreement and the other Loan Documents by all ofthe Collateral.

 

11.4                           Access.  Borrowershall provide access to Lender, exercisable as frequently as Lender reasonablydetermines to be appropriate, upon reasonable advance notice (unless an Eventof Default shall have occurred and be continuing, in which event no noticeshall be required and Lender shall have access at any and all times), duringnormal business hours (or at such other times as may reasonably be requested byLender), to inspect the properties and facilities of Borrower and to inspect,audit, and make extracts from all of Borrower’s records, files, and books ofaccount and Borrower shall make such items available to Lender.

 

11.5                           No Waiver by Lender. Lender’s failure, at any time or times, to require strict performance byBorrower of any provision of this Agreement and any of the other Loan Documentsshall not waive, affect, or diminish any right of Lender thereafter to demandstrict compliance and performance therewith. Any suspension or waiver by Lender of an Event of Default by Borrowerunder the Loan Documents shall not suspend, waive, or affect any other Event ofDefault by Borrower under this Agreement and any of the other Loan Documentswhether the same is prior or subsequent thereto and whether of the same or of adifferent type.  None of the undertakings,agreements, warranties, covenants, and representations of Borrower contained inthis Agreement or any of the other Loan Documents and no Default or Event ofDefault by Borrower under this Agreement and no defaults by Borrower under anyof the other Loan Documents shall be deemed to have been suspended or waived byLender, unless such suspension or waiver is by an instrument in writing signedby an officer of Lender, and directed to Borrower specifying such suspension orwaiver.

 

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11.6                           Severability. Wherever possible, each provision of this Agreement shall be interpretedin such manner as to be effective and valid under applicable law, but if anyprovision of this Agreement shall be prohibited by or invalid under applicablelaw, such provision shall be ineffective to the extent of such prohibition orinvalidity, without invalidating the remainder of such provision or theremaining provisions of this Agreement.

 

11.7                           Parties.  ThisAgreement and the other Loan Documents shall be binding upon, and inure to thebenefit of, the successors of Borrower, Lender and the assigns, transferees andendorsees of Lender.

 

11.8                           GOVERNING LAW.  EXCEPTAS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS,INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENTAND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED ANDENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TOCONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLESTHEREOF REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITEDSTATES OF AMERICA.  BORROWER HEREBYCONSENTS AND AGREES THAT THE SUPERIOR COURTS OF SAN FRANCISCO COUNTY, CALIFORNIA,OR, AT LENDER’S OPTION, THE UNITED STATES DISTRICT COURT FOR THE NORTHERNDISTRICT OF CALIFORNIA, SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR ANDDETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO THISAGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT.  BORROWER EXPRESSLY SUBMITS AND CONSENTS INADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT,AND BORROWER HEREBY WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASEDUPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS ANDHEREBY CONSENTS TO THE GRANTING FOR SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMEDAPPROPRIATE BY SUCH COURT.  BORROWERHEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT, AND OTHER PROCESSISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS,COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAILADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN SECTION 11.9 OF THISAGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIEROF BORROWER’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT INTHE U.S. MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LENDERFROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION.

 

11.9                           Notices.  Except asotherwise provided herein, whenever it is provided herein that any notice,demand, request, consent, approval, declaration, or other communication shallor may be given or delivered to or served upon any of the parties by another,or whenever any of the parties desires to give or deliver or serve upon anotherany communication with respect to this Agreement, each such notice, demand,request, consent, approval, declaration, or other communication shall be inwriting, shall be addressed to the addresses set forth below, or such other oradditional address as the parties may notify each other of in writing, andshall be deemed to have been sent, delivered, or given and received upon theearlier of:  (a) if by facsimile orother electronic means, 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 

 

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personal delivery, uponcompletion of delivery; or (d) if by mail, three (3) Business Daysafter deposit in the U.S. Mail, first class, postage prepaid :

 

(a)                                 If to Lender, at:

 

AmericanAgCredit, PCA

5560South Broadway

Eureka,California 95503

Attention: Account Officer – ML Macadamia Orchards

Facsimile:  (707) 442-1268

 

AmericanAgCredit, ACA

200Concourse Boulevard

SantaRosa, California 95403

Attention:Account Officer – ML Macadamia Orchards

Facsimile:  (707) 545-9400

Email:vzander@agloan.com

 

(b)                                If to Borrower, at:

 

MLMacadamia Orchards, L.P.

MLResources, Inc.

26-238Hawaii Belt Road

Hilo,Hawaii 96720

Attention:Mr. Dennis J. Simonis

Facsimile:(808) 969-8152

Email:Dsimonis@MLNut.com

 

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

 

11.10                     Survival.  Therepresentations and warranties of Borrower in this Agreement shall survive theexecution, delivery and acceptance hereof by the parties hereto and the closingof the transactions described herein or related hereto.

 

11.11                     Section Titles. The Section titles and Table of Contents contained in thisAgreement are and shall be without substantive meaning or content of any kindwhatsoever and are not a part of the agreement between the parties hereto.

 

11.12                     Counterparts. This Agreement may be executed in any number of separate counterparts,each of which shall be deemed an original, but all such counterparts togethershall constitute one and the same instrument.

 

11.13                     Performance Always Due on Business Day. To the extent that any date under this Agreement is not a Business Day,then the payment or performance due on such day shall be due on the nextBusiness Day.

 

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11.14                     MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIALTRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED ANDEXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BERESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATION OFTHE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETOWAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TOENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY OF THEOTHER LOAN DOCUMENTS.

 

11.15                     Time of the Essence. Time is of the essence in every provision of this Agreement.

 

11.16                     No Third Party Beneficiaries. This Agreement is made and entered into for the sole protection andbenefit of the parties hereto and their respective permitted successors andassigns, and no other Person shall be a third party beneficiary of, or have anydirect or indirect cause of action or claim in connection with, this Agreementor any other Loan Document.

 

INWITNESS WHEREOF, this Agreement has been duly executed as of the date firstwritten 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, as Borrower       |
|   |                                                         |
|   | By:                                                          | /s/ Dennis J.  Simonis |
|   | Name:                                                        | Dennis J.  Simonis |
|   | Title:                                                       | President |
|   |                                                         |   |
|   | AMERICAN  AGCREDIT, PCA                                      |
|   |                                                         |
|   | By:                                                          | /s/ Sean O’day |
|   | Name:                                                        | Sean O’day |
|   | Title:                                                       | Senior Vice  President |
|        |                                                              |  |  |

 

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EXHIBIT A

 

FORM OF NOTICE OF REVOLVING ADVANCE

 

[DATE]

 

American AgCredit, ACA

200 Concourse Blvd.

Santa Rosa, CA  95403

 

Attention:  Account Executive (ML Macadamia Orchards)

 

Re:                               Revolving Advance under Second Amendedand Restated Credit Agreement dated as of July 8, 2008

 

Ladies and Gentlemen:

 

Theundersigned, ML Macadamia Orchards, L.P., a Delaware limited partnership, andML Resources, Inc., a Hawaii corporation, refer to the Second Amended andRestated Credit Agreement, dated as of July 8, 2008 (the “Credit Agreement”),among the undersigned, and American AgCredit, PCA, (“Lender”), and herebynotifies Lender, pursuant to Section 2.1 of the Credit Agreement, that theundersigned hereby requests a “Revolving Advance,” under and as defined in theCredit Agreement and in connection therewith, sets forth the information below,relating to such Revolving Advance:

 

(i)                                     The date of the requested RevolvingAdvance shall be                        ;

 

(ii)                                  The aggregate amount of the requestedRevolving Advance is                                      (Dollars)($                      );and

 

(iii)                               The requested Revolving Advance should be directed to[Bank, address, account and wiring instructions].

 

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Theundersigned hereby certifies that the conditions contained in Section 4.2of the Credit Agreement are satisfied on the date hereof, and will be satisfiedon the date of the requested Revolving Advance, before and after giving effectthereto and to the application of the proceeds therefrom, unless waived inwriting by Lender.

 

 
|   | Very truly  yours,                                           |
|--------|--------------------------------------------------------------|
|   |                                                         |
|   | ML MACADAMIA  ORCHARDS, L.P., a Delaware limited partnership |
|   |                                                         |
|   | By:                                                          | ML RESOURCES,  INC., a Hawaii corporation, |
|   |                                                         | its managing general partner |
|   |                                                         |
|   |                                                         |
|   |                                                         | By: |   |
|   |                                                         | Name: |   |
|   |                                                         | Title: |   |
|   |                                                         |
|   | ML RESOURCES,  INC., a Hawaii corporation                    |
|   |                                                         |
|   | By:                                                          |   |
|   | Name:                                                        |   |
|   | Title:                                                       |   |
|        |                                                              |  |  |  |

 

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EXHIBIT B

 

FORM OF NOTICE OF CERTIFICATION OF FINANCIAL COVENANTS

 

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EXHIBIT C

 

REAL PROPERTY TO BE MORTGAGED

 

| ** **    | ** ** | ** **   | ** ** | ** ** | ** ** | **LESSOR/** | ** ** |
|---------------|------------|--------------|------------|------------|------------|-------------|------------|
| **TMK**       | ** ** | **LOCATION** | ** ** | **ACRES**  | ** ** | **OR FEE**  | ** ** |
| 3-1-6-001-017 |       | KEAAU II     |       | 161.229    |       | FEE         |       |
| 3-1-6-001-020 |       | KEAAU I      |       | 313.042    |       | FEE         |       |
| 3-1-6-001-022 |       | KEAAU I      |       | 95.502     |       | FEE         |       |
| 3-1-6-001-023 |       | KEAAU I      |       | 338.369    |       | FEE         |       |
| 3-1-6-001-027 |       | KEAAU I      |       | 143.012    |       | FEE         |       |
| 3-1-6-001-029 |       | KEAAU X      |       | 89.811     |       | FEE         |       |
| 3-1-6-001-030 |       | KEAAU II     |       | 90.501     |       | FEE         |       |
| 3-1-6-001-035 |       | KEAAU I      |       | 287.036    |       | FEE         |       |
| 3-1-6-003-079 |       | KEAAU I      |       | 285.239    |       | FEE         |       |
| 3-1-6-003-082 |       | KEAAU I      |       | 228.212    |       | FEE         |       |
|          |       |         |       | 2,031.953  |       |        |       |
|          |       |         |       |       |       |        |       |
| 3-9-6-003-006 |       | KA’U I  |       | 14.500     |       | FEE         |       |
| 3-9-6-003-015 |       | KA’U I  |       | 382.128    |       | FEE         |       |
| 3-9-6-003-021 |       | KA’U I  |       | 116.820    |       | FEE         |       |
| 3-9-6-004-002 |       | KA’U I  |       | 8.551      |       | FEE         |       |
| 3-9-6-004-003 |       | KA’U I  |       | 3.938      |       | FEE         |       |
| 3-9-6-004-005 |       | KA’U I  |       | 18.780     |       | FEE         |       |
| 3-9-6-004-017 |       | KA’U I  |       | 8.557      |       | FEE         |       |
| 3-9-6-004-018 |       | KA’U I  |       | 16.536     |       | FEE         |       |
| 3-9-6-004-019 |       | KA’U I  |       | 9.126      |       | FEE         |       |
| 3-9-6-012-017 |       | KA’U I  |       | 25.572     |       | FEE         |       |
|          |       |         |       | 604.508    |       |        |       |
|          |       |         |       |       |       |        |       |
|          |       | Total        |       | 2,636.461  |       |        |       |

 

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