exv10w57



 




Exhibit 10.57


 


Amended and Restated

Credit Agreement




by and between




Apio, Inc.,




as Borrower,




and




Wells Fargo Bank, National Association,




as Bank




Dated as of November 1, 2005



 


 









 








Table of Contents




	 	 	 	 	 	 	 	 	 
	Article I	 	Definitions
	 	 	 1	 
	 	 	 	 	 
	 	 	 	 
	Section 1.1.	 	Definitions
	 	 	1	 
	Section 1.2.	 	Other Definitional Terms; Rules of Interpretation
	 	 	13	 
	 	 	 	 	 
	 	 	 	 
	Article II	 	Amount and Terms of the Credit Facility
	 	 	13	 
	 	 	 	 	 
	 	 	 	 
	Section 2.1.	 	Line of Credit
	 	 	13	 
	Section 2.2.	 	Letter of Credit Subfeature
	 	 	14	 
	Section 2.3.	 	[Reserved]
	 	 	16	 
	Section 2.4.	 	[Reserved]
	 	 	16	 
	Section 2.5.	 	Interest; Default Interest; Participations; Usury;
Collection of Payments
	 	 	16	 
	Section 2.6.	 	Fees
	 	 	18	 
	Section 2.7.	 	Increased Costs; Capital Adequacy; Funding Exceptions
	 	 	19	 
	Section 2.8.	 	Lockbox
	 	 	20	 
	Section 2.9.	 	Mandatory Prepayment
	 	 	20	 
	  Section 2.10.	 	Line of Credit Advances to Pay Obligations
	 	 	20	 
	  Section 2.11.	 	Liability Records
	 	 	21	 
	 	 	 	 	 
	 	 	 	 
	Article III	 	Security Interest
	 	 	21	 
	 	 	 	 	 
	 	 	 	 
	Section 3.1.	 	Grant of Security Interest
	 	 	21	 
	Section 3.2.	 	Financing Statements
	 	 	21	 
	 	 	 	 	 
	 	 	 	 
	Article IV	 	Conditions of Lending
	 	 	22	 
	 	 	 	 	 
	 	 	 	 
	Section 4.1.	 	Conditions Precedent to the Initial Advances and Letter of Credit
	 	 	22	 
	Section 4.2.	 	Conditions Precedent to All Advances and Letters of Credit
	 	 	24	 
	 	 	 	 	 
	 	 	 	 
	Article V	 	Representations and Warranties
	 	 	25	 
	 	 	 	 	 
	 	 	 	 
	Section 5.1.	 	Existence and Power; Name; Chief Executive Office; Inventory and
Equipment Locations; Federal Employer Identification Number
	 	 	25	 
	Section 5.2.	 	Capitalization
	 	 	25	 
	Section 5.3.	 	Authorization of Borrowing; No Conflict as to Law or Agreements
	 	 	25	 
	Section 5.4.	 	Legal Agreements
	 	 	26	 
	Section 5.5.	 	Subsidiaries
	 	 	26	 
	Section 5.6.	 	Financial Condition; No Adverse Change
	 	 	26	 
	Section 5.7.	 	Litigation
	 	 	26	 
	Section 5.8.	 	Regulation U
	 	 	26	 
	Section 5.9.	 	Taxes
	 	 	26	 
	  Section 5.10.	 	Titles and Liens
	 	 	26	 






 i









 






	 	 	 	 	 	 	 	 	 
	Section 5.11.	 	Intellectual Property Rights
	 	 	27	 
	Section 5.12.	 	Plans
	 	 	28	 
	Section 5.13.	 	Default
	 	 	28	 
	Section 5.14.	 	Environmental Matters
	 	 	28	 
	Section 5.15.	 	Submissions to Bank
	 	 	29	 
	Section 5.16.	 	Financing Statements
	 	 	29	 
	Section 5.17.	 	Rights to Payment
	 	 	29	 
	Section 5.18.	 	Eligible Accounts
	 	 	29	 
	Section 5.19.	 	[Reserved]
	 	 	29	 
	Section 5.20.	 	Fraudulent Transfer
	 	 	30	 
	Section 5.21.	 	Permits, Franchises
	 	 	30	 
	Section 5.22.	 	No Subordination
	 	 	30	 
	 	 	 	 	 
	 	 	 	 
	Article VI	 	Covenants
	 	 	30	 
	 	 	 	 	 
	 	 	 	 
	Section
6.1.  	 	Punctual Payments
	 	 	30	 
	Section
6.2.  	 	Reporting Requirements
	 	 	30	 
	Section
6.3.  	 	Financial Covenants
	 	 	34	 
	Section
6.4.  	 	Permitted Liens; Financing Statements
	 	 	35	 
	Section
6.5.  	 	Indebtedness
	 	 	36	 
	Section
6.6.  	 	Guaranties
	 	 	37	 
	Section
6.7.  	 	Investments and Subsidiaries
	 	 	37	 
	Section
6.8.  	 	Dividends and Distributions
	 	 	38	 
	Section
6.9.  	 	Salaries
	 	 	38	 
	Section 6.10.	 	Key Person Life Insurance
	 	 	38	 
	Section 6.11.	 	Books and Records; Inspection and Examination
	 	 	38	 
	Section 6.12.	 	Account Verification
	 	 	38	 
	Section 6.13.	 	Compliance with Laws
	 	 	39	 
	Section 6.14.	 	Payment of Taxes and Other Claims
	 	 	39	 
	Section 6.15.	 	Maintenance of Properties
	 	 	39	 
	Section 6.16.	 	Insurance
	 	 	39	 
	Section 6.17.	 	Preservation of Existence
	 	 	40	 
	Section 6.18.	 	Delivery of Instruments, etc
	 	 	40	 
	Section 6.19.	 	Sale or Transfer of Assets; Suspension of Business Operations
	 	 	40	 
	Section 6.20.	 	Consolidation and Merger; Asset Acquisitions
	 	 	41	 
	Section 6.21.	 	Sale and Leaseback
	 	 	41	 
	Section 6.22.	 	Restrictions on Nature of Business
	 	 	41	 
	Section 6.23.	 	Accounting
	 	 	41	 
	Section 6.24.	 	Discounts, etc
	 	 	41	 
	Section 6.25.	 	Plans
	 	 	41	 
	Section 6.26.	 	Place of Business; Name
	 	 	41	 
	Section 6.27.	 	Constituent Documents
	 	 	41	 
	Section 6.28.	 	Transactions With Affiliates
	 	 	41	 
	Section 6.29.	 	Use of Funds
	 	 	42	 
	Section 6.30.	 	Subordination of Debt
	 	 	42	 






 ii









 






	 	 	 	 	 	 	 	 	 
	Section 6.31.	 	Management Fees
	 	 	42	 
	Section 6.32.	 	Maintenance of Accounts with Bank
	 	 	42	 
	Section 6.33.	 	Grower Contracts
	 	 	42	 
	Section 6.34.	 	Performance by Bank
	 	 	42	 
	 	 	 	 	 
	 	 	 	 
	Article VII	 	Events of Default, Rights and Remedies
	 	 	43	 
	 	 	 	 	 
	 	 	 	 
	Section 7.1.	 	Events of Default
	 	 	43	 
	Section 7.2.	 	Rights and Remedies
	 	 	46	 
	Section 7.3.	 	Disclaimer of Warranties
	 	 	48	 
	Section 7.4.	 	Compliance With Laws
	 	 	48	 
	Section 7.5.	 	No Marshalling
	 	 	48	 
	Section 7.6.	 	Borrower to Cooperate
	 	 	48	 
	Section 7.7.	 	Application of Proceeds
	 	 	48	 
	Section 7.8.	 	Remedies Cumulative
	 	 	49	 
	Section 7.9.	 	Bank Not Liable For The Collateral
	 	 	49	 
	 	 	 	 	 
	 	 	 	 
	Article VIII	 	Miscellaneous
	 	 	49	 
	 	 	 	 	 
	 	 	 	 
	Section 8.1.	 	No Waiver
	 	 	49	 
	Section 8.2.	 	Amendments, Etc
	 	 	49	 
	Section 8.3.	 	Addresses for Notices; Requests for Accounting
	 	 	49	 
	Section 8.4.	 	Further Documents
	 	 	50	 
	Section 8.5.	 	Costs and Expenses
	 	 	50	 
	Section 8.6.	 	Indemnity
	 	 	50	 
	Section 8.7.	 	Participants
	 	 	51	 
	Section 8.8.	 	Advertising and Promotion
	 	 	51	 
	Section 8.9.	 	Execution in Counterparts; Telefacsimile Execution
	 	 	51	 
	  Section 8.10.	 	Retention of Borrower’s Records
	 	 	51	 
	  Section 8.11.	 	Binding Effect; Assignment; Complete Agreement; Exchanging
Information
	 	 	52	 
	  Section 8.12.	 	Severability of Provisions
	 	 	52	 
	  Section 8.13.	 	Revival and Reinstatement of Obligations
	 	 	52	 
	  Section 8.14.	 	Headings
	 	 	52	 
	  Section 8.15.	 	Governing Law
	 	 	53	 
	  Section 8.16.	 	Submission to Jurisdiction
	 	 	53	 
	  Section 8.17.	 	Waiver of Jury Trial
	 	 	53	 
	  Section 8.18.	 	Arbitration
	 	 	53	 
	  Section 8.19.	 	Confidentiality
	 	 	55	 
	  Section 8.20.	 	Effect on Prior Agreement
	 	 	56	 







 iii









 








Amended and Restated

Credit Agreement




     This Amended and Restated Credit Agreement (this “Agreement”) is dated and
made as of November 1, 2005, by and between Apio, Inc., a Delaware corporation
(“Borrower”), and Wells Fargo Bank, National Association (“Bank”), and amends and restates
in its entirety the Credit Agreement, dated as of September 1, 2004 (the “Original Agreement”), by
and among Borrower, Cal Ex Trading Company, a Delaware corporation, and Bank.



Recitals




          Whereas, Borrower has requested that Bank extend or continue credit to Borrower as
described below, and Bank has agreed to provide such credit to Borrower on the terms and conditions
contained herein.




          NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Bank and Borrower hereby agree as follows:




Article I Definitions




     Section 1.1. Definitions. For all purposes of this Agreement, except as otherwise expressly
provided, the following terms shall have the meanings assigned to them in this Section or in the
Section referenced after such term:



     “Acceptable Grower Contract” means a contract between Borrower and a grower of goods pursuant
to which Borrower acquires goods in the ordinary course of business and for which each of the
following requirements has been satisfied: (i) a copy of such contract, together with all
amendments, modifications, supplements and replacements thereto, has been provided to and approved
by Bank, in its reasonable discretion, and (ii) the contract, as amended, modified, supplemented,
or replaced, provides that Borrower’s obligations to make payment to the related grower shall not
be due and payable before the Friday of the fifth (5th) week following the week of delivery of
goods to Borrower from such grower.



     “Acceptable Wells Fargo Deposit Account” has the meaning given in Section 6.10.



     “Account Debtor” means any Person who is or who may become obligated under, with respect to,
or on account of, an Account, chattel paper, or a General Intangible.



     “Accounts” means all of Borrower’s now owned or hereafter acquired right, title, and interest
with respect to “accounts” (as that term is defined in the UCC), and any and all supporting
obligations in respect thereof.



     “Advance” means a Line of Credit Advance.



- 1 -









 





     “Affiliate” means, as applied to any Person, any other Person who, directly or indirectly,
controls, is controlled by, or is under common control with, such Person. For purposes of this
definition, “control” means the possession, directly or indirectly, of the power to direct the
management and policies of a Person, whether through the ownership of stock, by contract, or
otherwise; provided, however, that, in any event: (a) any Person which owns directly or indirectly
10% or more of the securities having ordinary voting power for the election of directors or other
members of the governing body of a Person or 10% or more of the partnership or other ownership
interests of a Person (other than as a limited partner of such Person) shall be deemed to control
such Person, (b) each director (or comparable manager) of a Person shall be deemed to be an
Affiliate of such Person, and (c) each partnership or joint venture in which a Person is a partner
or joint venturer shall be deemed to be an Affiliate of such Person.



     “Agreement” means this Credit Agreement.



     “Aggregate Stated Amount” has the meaning given in Section 2.6(c).



     “Apio Cooling” means Apio Cooling, a California limited partnership.



     “Availability” means, (i) for any date of determination prior to the Borrowing Base Trigger
Date, the Line of Credit Commitment Availability, and (ii) for any date of determination on or
after the Borrowing Base Trigger Date, the lesser of (A) the Borrowing Base Availability and (B)
the Line of Credit Commitment Availability.



     “Bankruptcy Code” means the Bankruptcy Reform Act, Title 11 of the United States Code.



     “Borrowing Base” means, as of any date of determination, (i) 80% of Eligible Accounts, less,
(ii) the Dilution Reserve, if any, less, (iii) the Grower Reserve, if any; provided that, Bank may
create additional reserves against the Eligible Accounts if it reasonably determines that there has
occurred a Material Adverse Effect.



     “Borrowing Base Availability” means, as of any date of determination, and only if a positive
number, the Borrowing Base minus the sum of: (i) the outstanding principal balance of the Line of
Credit and (ii) the L/C Amount.



     “Borrowing Base Trigger Date” means the first date on or after the Closing Date upon which
Borrower requests either a Line of Credit Advance or the issuance of a Letter of Credit that would
cause, after giving effect to such Line of Credit Advance or Letter of Credit, the sum of the
outstanding principal balance of the Line of Credit Advances plus the L/C Amount to equal or exceed
Two Million Five Hundred Thousand Dollars ($2,500,000.00).



     “Business Day” means any day except a Saturday, Sunday or any other day on which commercial
banks in California are authorized or required by law to close.



     “Cal Ex” means Cal Ex Trading Company, a Delaware corporation, and its permitted successors
and assigns.



- 2 -









 





     “Capital Expenditures” means for a period, any expenditure of money during such period for the
purchase or construction of assets, or for improvements or additions thereto, which are capitalized
on Borrower’s balance sheet.



     “Cash Equivalents” has the meaning set forth in Section 6.7(a).



     “Change of Control” means the occurrence of any of the following events:




     (a) any Person or “group” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934), other than Parent, is or becomes the “beneficial owner”
(as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that
a Person will be deemed to have “beneficial ownership” of all securities that such Person
has the right to acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than twenty-five percent of the voting
power of all classes of voting stock of Borrower; or




     (b) during any consecutive two-year period, individuals who at the beginning of such
period constituted the board of Directors of Borrower (together with any new Directors whose
election to such board of Directors, or whose nomination for election by the owners of
Borrower, was approved by a vote of 66-2/3% of the Directors then still in office who were
either Directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a majority of the
board of Directors of Borrower then in office.



     “Closing Date” means November 30, 2005.



     “Collateral” means (a) “Collateral” as such term is defined in the Security Agreement plus (b)
all collateral subject to the Lien of any Security Document other than the Security Agreement.



     “Companies” means Borrower, Cal Ex and Apio Cooling.



     “Constituent Documents” means with respect to any Person, as applicable, such Person’s
certificate of incorporation, articles of incorporation, by-laws, certificate of formation,
articles of organization, limited liability company agreement, management agreement, operating
agreement, shareholder agreement, partnership agreement or similar document or agreement governing
such Person’s existence, organization or management or concerning disposition of ownership
interests of such Person or voting rights among such Person’s owners.



     “Credit Facility” means the credit facility being made available to Borrower by Bank under
Article II hereof.



     “Daily Balance” means, with respect to each day during the term of this Agreement, the amount
of an Obligation owed at the end of such day.



- 3 -









 





     “Default” means an event that, with giving of notice or passage of time or both, would
constitute an Event of Default.



     “Default Period” means any period of time beginning on the day a Default or Event of Default
occurs and ending on the date that such Default or Event of Default has been cured or waived, as
determined by Bank in its sole and absolute discretion.



     “Default Rate” has the meaning assigned to such term in the Line of Credit Note.



     “Dilution” means, as of any date of determination, a percentage, based upon the experience of
the immediately preceding three months, that is the result of dividing the Dollar amount of bad
debt write-downs, returns, rebates, discounts, advertising and other allowances, credits, or other
dilutive items with respect to the Accounts during such period, by Borrower’s gross sales during
such period (excluding extraordinary items).



     “Dilution Reserve” means, as of any date of determination, an amount sufficient to reduce the
advance rate against Eligible Accounts used in the definition of Borrowing Base by one percentage
point for each full percentage point by which Dilution is in excess of 5%.



     “Director” means a director of Borrower.



     “Dollars” or “$” means lawful currency of the United States of America.



     “EBITDA” means, as of any date of determination for any period, the Companies’ consolidated
net profit before tax plus interest expense (net of any capitalized interest), intercompany
interest expense, depreciation expense, amortization expense, and management fees expense of the
Companies accrued by and payable to Parent.



     “EBITDA Coverage Ratio” means, as of any date of determination for any period, (a) EBITDA
divided by (b) the sum of (i) the aggregate of the Companies’ total interest expense (excluding any
interest expense attributable to intercompany debt subordinated pursuant to the Subordination
Agreement) for such period plus (without duplication of amounts) and (ii) the current maturity of
the Companies’ long-term senior debt paid in such period.



     “Eligible Accounts” means those Accounts created by Borrower in the ordinary course of its
business, that arise out of Borrower’s sale of goods or rendition of services, that comply with
each of the representations and warranties respecting Eligible Accounts made by Borrower in the
Loan Documents, upon which Borrower’s right to receive payment is absolute and not contingent upon
the fulfillment of any condition whatsoever, in which Bank has a perfected security interest of
first priority, and that are not excluded as ineligible by virtue of one or more of the criteria
set forth below; provided that such criteria may be fixed and revised from time to time by Bank in
Bank’s sole and absolute discretion to address the results of any audit performed by Bank from time
to time after the Closing Date. In determining the amount to be included, Eligible Accounts shall
be calculated net of customer deposits and unapplied cash remitted to Borrower. Eligible Accounts
shall not include the following:



- 4 -









 






     (i) any Account which is more than ninety (90) days past due;




     (ii) any Account that is disputed or subject to a claim of offset or other potential
credit or a contra account;




     (iii) any Account not yet earned by the final delivery of goods or rendition of
services, as applicable, by Borrower to the customer;




     (iv) any Account for services not yet rendered or for goods not yet shipped, including,
without limitation, that portion of any Account, which represents interim or progress
billings or retention rights on the part of the Account Debtor;




     (v) Accounts constituting proceeds of copyrightable material unless such copyrightable
material shall have been registered with the United States Copyright Office and shall be
covered by a duly executed copyright security agreement, in form and substance satisfactory
to Bank, and filed in the United States Copyright Office;




     (vi) Accounts owed by an Account Debtor that is not Solvent, the subject of an
Insolvency Proceeding or has gone out of business;




     (vii) Accounts owed by an Owner, Subsidiary, Affiliate, Officer or employee of
Borrower, or Accounts owed by Cal Ex or Apio Cooling;




     (viii) Accounts not subject to a duly perfected security interest in Bank’s favor or
which are subject to any Lien (including any Liens imposed under PACA and any Producer’s
Lien Law) other than a Permitted Lien;




     (ix) that portion of any Account for which there exists any right of setoff, defense or
discount (except regular discounts allowed in the ordinary course of business to promote
prompt payment) or for which any defense or counterclaim has been asserted;




     (x) that portion of Accounts that has been restructured, extended, amended or modified;




     (xi) that portion of Accounts that constitutes advertising, finance charges, service
charges or sales or excise taxes;




     (xii) Accounts owed by an Account Debtor (or an Affiliate of such Account Debtor),
regardless of whether otherwise eligible, to the extent that the balance of such Accounts
exceeds 25% of the sum of the aggregate amount of all Accounts (except in the case of each
of Wal-Mart and Sam’s Club, in which case such percentage shall be 30% in the aggregate for
both Account Debtors, and except in the case of Costco, in which case such percentage shall
be 30%); exceptions to such limit may be granted by Bank on a case by case basis, in Bank’s
sole and absolute discretion;



- 5 -









 






     (xiii) any Account which represents an obligation of any Account Debtor (or an
Affiliate of such Account Debtor), regardless of whether otherwise eligible, when twenty
percent (20%) or more of Borrower’s Accounts from such Account Debtor are not eligible
pursuant to (i) above;




     (xiv) Accounts arising in a transaction wherein goods are placed on consignment or are
sold pursuant to a guaranteed sale, a sale or return, a sale on approval, a bill and hold,
or any other terms by reason of which the payment by the Account Debtor may be conditional;




     (xv) Accounts that are not payable in Dollars;




     (xvi) Accounts with respect to which the Account Debtor either (A) does not maintain
its chief executive office in the United States or Canada (excluding the Canadian province
of Quebec), or (B) is not organized under the laws of the United States or Canada, or any
state or province thereof (excluding the Canadian province of Quebec), or (C) is the
government for any foreign country or sovereign state, or of any state, province,
municipality, or other political subdivision thereof, or of any department, agency, public
corporation, or other instrumentality thereof, unless (I) the Account is supported by an
irrevocable letter of credit satisfactory to Bank (as to form, substance, and issuer or
domestic confirming bank) that has been delivered to Bank and is directly drawable by Bank,
or (II) the Account is covered by credit insurance in form, substance, and amount, and by an
insurer, satisfactory to Bank;




     (xvii) any Account which represents an obligation of any state or municipal government
or of the United States government or any political subdivision thereof (except Accounts
which represent obligations of the United States government and for which the assignment
provisions of the Federal Assignment of Claims Act, 31 USC § 3727, as amended or recodified
from time to time, have been complied with to Bank’s satisfaction);




     (xviii) Accounts with respect to which the Account Debtor is located in the states of
New Jersey, Minnesota, or West Virginia (or any other state that requires a creditor to file
a business activity report or similar document in order to bring suit or otherwise enforce
its remedies against such Account Debtor in the courts or through any judicial process of
such state), unless Borrower has qualified to do business in New Jersey, Minnesota, West
Virginia, or such other states, or has filed a business activities report with the
applicable division of taxation, the department of revenue, or with such other state
offices, as appropriate, for the then-current year, or is exempt from such filing
requirement; or




     (xix) Upon telephonic notice to Borrower (other than voicemail), any Account deemed
ineligible by Bank when Bank, in its sole discretion, deems the creditworthiness or
financial condition of the Account Debtor, or the industry in which the Account Debtor is
engaged, to be unsatisfactory.



- 6 -









 





     “Environmental Law” means any federal, state, local or other governmental statute, regulation,
law or ordinance dealing with the protection of human health and the environment.



     “Equipment” means all of Borrower’s equipment, as such term is defined in the UCC, whether now
owned or hereafter acquired, including but not limited to all present and future machinery,
vehicles, furniture, fixtures, manufacturing equipment, shop equipment, office and recordkeeping
equipment, parts, tools, supplies, and including specifically the goods described in any equipment
schedule or list herewith or hereafter furnished to Bank by Borrower.



     “ERISA” means the Employee Retirement Income Security Act of 1974.



     “ERISA Affiliate” means any trade or business (whether or not incorporated) that is a member
of a group which includes Borrower and which is treated as a single employer under Section 414 of
the IRC.



     “Event of Default” has the meaning given in Section 7.1.



     “Financial Covenants” means the covenants set forth in Section 6.3.



     “Funding Date” has the meaning given in Section 2.1.



     “GAAP” means generally accepted accounting principles in the United States of America,
consistently applied, which are in effect as of the date of this Agreement. If any changes in
accounting principles from those in effect on the date hereof are hereafter occasioned by
promulgation of rules, regulations, pronouncements or opinions by or are otherwise required by the
Financial Accounting Standards Board or the American Institute of Certified Public Accountants (or
successors thereto or agencies with similar functions), and any of such changes results in a change
in the method of calculation of, or affects the results of such calculation of, any of the
financial covenants, standards or terms found herein, then the parties hereto agree to enter into
and diligently pursue negotiations in order to amend such financial covenants, standards or terms
so as to equitably reflect such changes, with the desired result that the criteria for evaluating
financial condition and results of operations of Borrower and the Subsidiaries shall be the same
after such changes as if such changes had not been made.



     “General Intangibles” means all of Borrower’s general intangibles, as such term is defined in
the UCC, whether now owned or hereafter acquired, including all present and future Intellectual
Property Rights, customer or supplier lists and contracts, manuals, operating instructions,
permits, franchises, the right to use Borrower’s name, and the goodwill of Borrower’s business.



     “Governmental Authority” means any federal, state, local, or other governmental or
administrative body, instrumentality, department, or agency or any court, tribunal, administrative
hearing body, arbitration panel, commission, or other similar dispute-resolving panel or body.



     “Grower Reserve” means, as of the date of determination, a reserve against the Borrowing Base
in an amount equal to 100% of all accounts payable then owing to all growers



- 7 -









 




of any of the produce sold by Borrower that are not parties to Acceptable Grower Contracts.
The amount of all such accounts payable shall be determined by Bank in cooperation with Borrower in
a commercially reasonable manner, and shall be prima facie evidence of such amount.




     “Guarantor(s)” means Parent and any other Person now or hereafter guarantying the Obligations.



     “Guaranty” means each certain Continuing Guaranty now or hereafter executed by a Guarantor in
favor of Bank.



     “Hazardous Substances” means pollutants, contaminants, hazardous substances, hazardous wastes,
petroleum and fractions thereof, and all other chemicals, wastes, substances and materials listed
in, regulated by or identified in any Environmental Law.



     “Immaterial Intellectual Property Rights” means Intellectual Property Rights that Borrower, in
its commercially reasonable judgment, determines from time to time to be no longer material to the
operation of its business.



     “Indebtedness” means of a Person as of a given date, all items of indebtedness or liability
which in accordance with GAAP would be included in determining total liabilities as shown on the
liabilities side of a balance sheet for such Person and shall also include the aggregate payments
required to be made by such Person at any time under any lease that is considered a capitalized
lease under GAAP.



     “Infringe” means, when used with respect to Intellectual Property Rights, any infringement or
other violation of such Intellectual Property Rights.



     “Insolvency Proceeding” means any proceeding commenced by or against any Person under any
provision of the Bankruptcy Code or under any other state or federal bankruptcy or insolvency law,
assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions
generally with creditors, or proceedings seeking reorganization, arrangement, or other similar
relief.



     “Intellectual Property Rights” means all actual or prospective rights arising in connection
with any intellectual property or other proprietary rights, including all rights arising in
connection with copyrights, patents, service marks, trade dress, trade secrets, trademarks, trade
names or mask works.



     “Inventory” means all of Borrower’s inventory, as such term is defined in the UCC, whether now
owned or hereafter acquired, whether consisting of whole goods, spare parts or components, supplies
or materials, whether acquired, held or furnished for sale, for lease or under service contracts or
for manufacture or processing, and wherever located.



     “Investment Property” means all of Borrower’s investment property, as such term is defined in
the UCC, whether now owned or hereafter acquired, including but not limited to all



- 8 -









 




securities, security entitlements, securities accounts, commodity contracts, commodity
accounts, stocks, bonds, mutual fund shares, money market shares and U.S. Government securities.




     “IRC” means the Internal Revenue Code of 1986.



     “Issuer” means the issuer of any Letter of Credit.



     “Landec Ag” means Landec Ag, Inc., a Delaware corporation.



     “L/C Amount” means the sum of (i) the aggregate stated amount of any issued and outstanding
Letters of Credit and (ii) the unpaid amount of the Obligation of Reimbursement.



     “L/C Application” has the meaning specified in Section 2.2(a).



     “Letter of Credit” has the meaning specified in Section 2.2(a).



     “Licensed Intellectual Property” has the meaning given in Section 5.11(c).



     “Licensor Agreement” means that certain Licensor Agreement, dated as of September 1, 2004,
executed by Parent in favor of Bank, with respect to all licensing agreements between Parent and
Borrower.



     “Lien” means any security interest, mortgage, deed of trust, pledge, lien, charge,
encumbrance, title retention agreement or analogous instrument or device, including the interest of
each lessor under any capitalized lease and the interest of any bondsman under any payment or
performance bond, in, of or on any assets or properties of a Person, whether now owned or hereafter
acquired and whether arising by agreement or operation of law.



     “Life Insurance Assignment” means an Assignment of Life Insurance Policy as Collateral to be
executed by the owner and the beneficiary thereof, in form and substance satisfactory to Bank,
granting Bank a first priority Lien on a Life Insurance Policy to secure payment of the
Obligations.



     “Life Insurance Policy” has the meaning given in Section 6.10.



     “Line of Credit” means a credit accommodation in the maximum principal amount of the Line of
Credit Commitment Amount, as defined more fully in Section 2.1.



     “Line of Credit Advance” has the meaning given in Section 2.1(a).



     “Line of Credit Commitment Amount” means $7,000,000.



     “Line of Credit Commitment Availability” means, as of any date of determination, and only if a
positive number, the Line of Credit Commitment Amount minus the sum of: (i) the outstanding
principal balance of the Line of Credit and (ii) the L/C Amount.



- 9 -









 





     “Line of Credit Maturity Date” means August 31, 2007.



     “Line of Credit Note” means Borrower’s revolving promissory note evidencing its obligation to
repay Line of Credit Advances, payable to the order of Bank in substantially the form of Exhibit A
attached hereto, all terms of which are incorporated herein by this reference.



     “Loan Account” has the meaning given in Section 9.9.



     “Loan Documents” means this Agreement, the Line of Credit Note, any Guaranty, the Security
Documents, the Subordination Agreement, and any L/C Application.



     “Lockbox” means the post office box described in the Lockbox Agreement, or any replacement
thereto, through which checks are processed pursuant to the Lockbox Agreement.



     “Lockbox Account” means the “Account” as defined in the Lockbox Agreement.



     “Lockbox Agreement” means the Deposit Account Control Agreement, dated as of August 20, 2003,
by and among Borrower, Wells Fargo Business Credit, Inc. and Bank of America, National Association,
or any subsequent lockbox agreement entered into by Bank and Borrower.



     “Material Adverse Effect” means any of the following:




     (i) a material adverse effect on the business, operations, results of operations,
assets, liabilities or financial condition of the Companies, taken as a whole, or any
Guarantor;




     (ii) a material adverse effect on the ability of Borrower or any Guarantor to perform
its obligations under the Loan Documents;




     (iii) a material adverse effect on the ability of Bank to enforce the Obligations or to
realize the intended benefits of the Security Documents, including a material adverse effect
on the validity or enforceability of any Loan Document or of any rights against any
Guarantor, or on the status, existence, perfection, priority (subject to Permitted Liens) or
enforceability of any Lien securing payment or performance of the Obligations; or




     (iv) any claim against Borrower or any Guarantor or threat of litigation which is
reasonably likely to be determined adversely to Borrower or any Guarantor and, if so
determined, would cause Borrower or such Guarantor to be liable to pay an amount exceeding
$1,000,000 over applicable insurance coverage, or would be an event described in clauses
(i), (ii) and (iii) above.



     “Multiemployer Plan” means a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) to
which Borrower or any ERISA Affiliate contributes or is obligated to contribute.



- 10 -









 





     “Net Income” means fiscal year-to-date after-tax net income from continuing operations, as
determined in accordance with GAAP.



     “Obligation of Reimbursement” has the meaning given in Section 2.2(e)(i).



     “Obligations” means the Line of Credit Note, the Obligation of Reimbursement and each and
every other debt, liability and obligation of Borrower arising under this Agreement or any other
Loan Document, whether such debt, liability or obligation now exists or is hereafter created or
incurred, whether it is direct or indirect, due or to become due, absolute or contingent, primary
or secondary, liquidated or unliquidated, or sole, joint, several or joint and several, and whether
now in effect or hereafter entered into.



     “Officer” means a duly appointed and presently sitting officer of Borrower.



     “Original Closing Date” means September 1, 2004.



     “Owned Intellectual Property” has the meaning given in Section 5.11(a).



     “Owner” means with respect to Borrower, each Person having legal or beneficial title to an
ownership interest in Borrower or a right to acquire such an interest.



     “PACA” means the Perishable Agricultural Commodities Act, 7 U.S.C. § 499e, et seq., as
amended.



     “Parent” means Landec Corporation, a California corporation.



     “Pension Plan” means a pension plan (as defined in Section 3(2) of ERISA) maintained for
employees of Borrower or any ERISA Affiliate and covered by Title IV of ERISA.



     “Permitted Lien” has the meaning given in Section 6.4(a).



     “Person” means any individual, corporation, partnership, joint venture, limited liability
company, association, joint-stock company, trust, unincorporated organization or government or any
agency or political subdivision thereof.



     “Plan” means an employee benefit plan (as defined in Section 3(3) of ERISA) maintained for
employees of Borrower or any ERISA Affiliate.



     “Premises” means all premises where Borrower conducts its business and has any rights of
possession, including the premises described in Exhibit D attached hereto.



     “Producer’s Lien Law” means §55631, et seq. of the California Food and Agriculture Code, and
any similar state or federal statutes creating Liens on agricultural products in favor of unpaid
growers, producers, or processors.



     “Related Documents” has the meaning given in Section 2.2(f)(i).




- 11 -









 






     “Reportable Event” means a reportable event (as defined in Section 4043 of ERISA), other than
an event for which the 30-day notice requirement under ERISA has been waived in regulations issued
by the Pension Benefit Guaranty Corporation.



     “Security Agreement” means that certain Security Agreement, dated as of even date herewith,
executed by Borrower in favor of Bank.



     “Security Agreement Re: Patents and Trademarks” means that certain Security Agreement Re:
Patents and Trademarks, dated as of even date herewith, executed by Borrower in favor of Bank.



     “Security Agreement and Collateral Assignment of Partnership Interest” means that certain
Security Agreement and Collateral Assignment of Partnership Interest, dated as of even date
herewith, executed by Borrower in favor of Bank, with respect to Borrower’s interest in Apio
Cooling.



     “Security Documents” means this Agreement, the Lockbox Agreement, the Security Agreement, the
Security Agreement Re: Patents and Trademarks, the Licensor Agreement, the Security Agreement and
Collateral Assignment of Partnership Interest, and any other agreement, instrument or document
delivered to Bank from time to time to secure the Obligations.



     “Security Interest” has the meaning given in Section 3.1.



     “Solvent” means, with respect to any Person on a particular date, that such Person is not
insolvent (as such term is defined in the Uniform Fraudulent Transfer Act).



     “Special Account” means a specified cash collateral account maintained with Bank in connection
with Letters of Credit, as contemplated by Section 2.2.



     “Subordination Agreement” means the Subordination Agreement of even date herewith, among
Parent, Bank and Borrower, and any other subordination agreement accepted by Bank from time to
time.



     “Subsidiary” means, as to any Person, any Person of which a majority of the shares of
securities or other interests having ordinary voting power for the election of directors or other
governing body (other than securities or interests having such power only by reason of the
happening of a contingency) are at the time beneficially owned, or the management of which is
otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such
Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries”
shall refer to a Subsidiary or Subsidiaries of a Borrower.



     “Tangible Net Worth” means the aggregate of the common and preferred stockholders’ equity in
the Companies plus subordinated debt less any intangible assets, determined in accordance with
GAAP.



- 12 -









 





     “Termination Date” means the earliest of (i) August 31, 2007, (ii) the date Borrower
terminates the Credit Facility, or (iii) the date Bank demands payment of the Obligations after an
Event of Default pursuant to Section 7.2 hereof.



     “Total Liabilities” means, as of the date of determination, the aggregate of the Companies’
consolidated Indebtedness and capitalized leases less subordinated debt.



     “UCC” means the Uniform Commercial Code as in effect in the state designated in Section 8.15
as the state whose laws shall govern this Agreement, or in any other state whose laws are held to
govern this Agreement or any portion hereof.



     Section 1.2. Other Definitional Terms; Rules of Interpretation. The words “hereof”, “herein”
and “hereunder” and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. All accounting terms
not otherwise defined herein have the meanings assigned to them in accordance with GAAP. All terms
defined in the UCC and not otherwise defined herein have the meanings assigned to them in the UCC.
References to Articles, Sections, subsections, Exhibits, Schedules and the like, are to Articles,
Sections and subsections of, or Exhibits or Schedules attached to, this Agreement unless otherwise
expressly provided. The words “include”, “includes” and “including” shall be deemed to be followed
by the phrase “without limitation”. Unless the context in which used herein otherwise clearly
requires, “or” has the inclusive meaning represented by the phrase “and/or”. Defined terms include
in the singular number the plural and in the plural number the singular. Reference to any
agreement (including the Loan Documents), document or instrument means such agreement, document or
instrument as amended or modified and in effect from time to time in accordance with the terms
thereof (and, if applicable, in accordance with the terms hereof and the other Loan Documents),
except where otherwise explicitly provided, and reference to any promissory note includes any
promissory note which is an extension or renewal thereof or a substitute or replacement therefor.
Reference to any law, rule, regulation, order, decree, requirement, policy, guideline, directive or
interpretation means as amended, modified, codified, replaced or reenacted, in whole or in part,
and in effect on the determination date, including rules and regulations promulgated thereunder.



Article II



Amount and Terms of the Credit Facility




     Section 2.1. Line of Credit.



     (a) Advances. Bank agrees, on the terms and subject to the conditions herein set forth, to
make advances to Borrower from time to time under the Line of Credit (each such advance, a “Line of
Credit Advance”), for working capital and general corporate purposes, from the date all of the
conditions set forth in Section 4.1 are satisfied (the “Funding Date”) to the Line of Credit
Maturity Date. Bank shall have no obligation to make a Line of Credit Advance to the extent the
amount of the requested Line of Credit Advance exceeds Availability. Borrower’s obligation to
repay the Line of Credit Advances shall be evidenced by the Line of
Credit Note and shall be secured by the Collateral. Within the limits set forth in this
Section 2.1 and in the Line of Credit Note, Borrower may from time to time prior to the Line of
Credit



- 13 -









 




Maturity Date borrow, partially or wholly repay its outstanding borrowings, and reborrow
under the Line of Credit, subject to all of the limitations, terms and conditions contained herein
or in the Line of Credit Note.





	 	(b)	 	[Reserved.]
	 
	 	(c)	 	[Reserved.]
	 
	 	(d)	 	Procedures for Requesting Advances.






     (i) Time for Requests. Borrower shall request each Line of Credit Advance not later
than 10:00 a.m., San Francisco time (or 9:00 a.m., San Francisco time, on the last Business
Day of each month, on Christmas eve, and on New Years eve) on the Business Day which is the
date the Line of Credit Advance is to be made. Each such request shall be effective upon
receipt by Bank, shall be in writing or by telephone, telecopy transmission or email, to be
confirmed in writing by Borrower if so requested by Bank, shall be by (i) an Officer of
Borrower; or (ii) a person designated as Borrower’s agent by an Officer of Borrower in a
writing delivered to Bank; or (iii) a person whom Bank reasonably believes to be an Officer
of Borrower or such a designated agent. Borrower shall repay all Line of Credit Advances
even if Bank does not receive such confirmation and even if the person requesting a Line of
Credit Advance was not in fact authorized to do so. Any request for a Line of Credit
Advance, whether written or telephonic, shall be deemed to be a representation by Borrower
that the conditions set forth in Section 4.2 have been satisfied as of the time of the
request.




     (ii) Disbursement. Upon fulfillment of the applicable conditions set forth in Article
IV, Bank shall disburse the proceeds of the requested Line of Credit Advance by crediting
the same to the Loan Account, on that same Business Day, unless Bank and Borrower shall
agree in writing to another manner of disbursement.



     Section 2.2. Letter of Credit Subfeature.



     (a) Letters of Credit. As a subfeature under the Line of Credit, Bank agrees from time to
time during the term thereof to issue or cause an Affiliate to issue irrevocable standby or
documentary letters of credit for the account of Borrower (each, a “Letter of Credit” and
collectively, “Letters of Credit”); provided that the aggregate undrawn amount of all outstanding
Letters of Credit shall not at any time exceed the lesser of:




	 	(i)	 	$500,000 less the L/C Amount, or
	 
	 	(ii)	 	Availability.




The form and substance of each Letter of Credit shall be subject to approval by Bank, in its sole
but reasonable discretion. Each Letter of Credit shall be subject to the additional terms and
conditions of the Letter of Credit agreements, applications and any related documents required by
the Issuer in connection with the issuance thereof (collectively, an “L/C Application”), the




- 14 -









 







terms and conditions of which shall supplement the terms and conditions hereof, but if the terms of any
such L/C Application and the terms of this Agreement are inconsistent, the terms hereof shall
control.




     (b) Term. No Letter of Credit shall be issued with an expiry date later than the Line of
Credit Maturity Date.



     (c) Deemed Representation. Any request to issue a Letter of Credit shall be deemed to be a
representation by Borrower that the conditions set forth in Section 4.2 have been satisfied as of
the date of the request.



     (d) Special Account. If the Credit Facility is terminated for any reason while any Letter of
Credit is outstanding, Borrower shall thereupon pay Bank in immediately available funds for deposit
in the Special Account an amount equal to the L/C Amount. The Special Account shall be an interest
bearing account with Bank. Bank may apply amounts on deposit in the Special Account at any time or
from time to time to the Obligations in Bank’s sole discretion. Borrower may not withdraw any
amounts on deposit in the Special Account as long as Bank maintains a security interest therein.
Bank agrees to transfer any balance in the Special Account to Borrower when Bank is required to
release its security interest in the Special Account under applicable law.



     (e) Payment of Amounts Drawn Under Letters of Credit; Obligation of Reimbursement. Borrower
shall pay to Bank any and all amounts required to be paid under the applicable L/C Application,
when and as required to be paid thereby, and the amounts designated below, when and as designated:




     (i) Borrower shall pay to Bank on the day a draft is honored under any Letter of Credit
a sum equal to all amounts drawn under such Letter of Credit plus any and all reasonable
charges and expenses that the Issuer or Bank may pay or incur relative to such draw and the
applicable L/C Application, plus interest on all such amounts, charges and expenses as set
forth below (Borrower’s obligation to pay all such amounts is herein referred to as the
“Obligation of Reimbursement”).




     (ii) Whenever a draft is submitted under a Letter of Credit, Borrower authorizes Bank
to make a Line of Credit Advance in the amount of the Obligation of Reimbursement and to
apply the proceeds of such Line of Credit Advance thereto. Such Line of Credit Advance shall
be repayable in accordance with and be treated in all other respects as a Line of Credit
Advance hereunder.




     (iii) If a draft is submitted under a Letter of Credit when Borrower is unable, because
a Default Period exists or for any other reason, to obtain a Line of Credit Advance to pay
the Obligation of Reimbursement, Borrower shall pay to Bank on
demand and in immediately available funds, the amount of the Obligation of Reimbursement
together with interest, accrued from the date of the draft until payment in full at the
Default Rate. Notwithstanding Borrower’s inability to obtain a Line of Credit Advance for
any reason, Bank is irrevocably authorized, in its sole discretion, to make a



- 15 -









 







Line of Credit Advance in an amount sufficient to discharge the Obligation of Reimbursement and all accrued
but unpaid interest thereon.




     (iv) Borrower’s obligation to pay any Line of Credit Advance made under this Section
2.2, shall be evidenced by the Line of Credit Note and shall bear interest as provided
therein.



     (f) Obligations Absolute. Borrower’s obligations arising under this Section 2.2 shall be
absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of
this Section 2.2, under all circumstances whatsoever, including (without limitation) the following
circumstances:




     (i) any lack of validity or enforceability of any Letter of Credit or any other
agreement or instrument relating to any Letter of Credit (collectively the “Related
Documents”);




     (ii) any amendment or waiver of or any consent to departure from all or any of the
Related Documents;




     (iii) the existence of any claim, setoff, defense or other right which Borrower may
have at any time, against any beneficiary or any transferee of any Letter of Credit (or any
persons or entities for whom any such beneficiary or any such transferee may be acting), or
other person or entity, whether in connection with this Agreement, the transactions
contemplated herein or in the Related Documents or any unrelated transactions;




     (iv) any statement or any other document presented under any Letter of Credit proving
to be forged, fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect whatsoever;




     (v) payment by or on behalf of the Issuer under any Letter of Credit against
presentation of a draft or certificate which does not strictly comply with the terms of such
Letter of Credit; or




     (vi) any other circumstance or happening whatsoever, whether or not similar to any of
the foregoing.




	 	 	 	Section 2.3. [Reserved].






	 	 	 	Section 2.4. [Reserved].






	 	 	 	Section 2.5. Interest; Default Interest; Participations; Usury; Collection of Payments.





     (a) Notes. Except as set forth in Subsections (b) and (e), the outstanding principal balance
of the Line of Credit Note shall bear interest at the rate of interest, and in the manner, set
forth therein, and shall be due as set forth therein.



- 16 -









 





     (b) Default Interest Rate. The principal of the Line of Credit outstanding from time to time
shall bear interest at the applicable Default Rates, as more fully described in the Line of Credit
Note. Bank’s election to charge such Default Rates shall be in its sole discretion and shall not
be a waiver of any of its other rights and remedies. Bank’s election to charge interest at the
Default Rate for less than the entire period during which the Default Rate may be charged shall not
be a waiver of its right to subsequently charge the Default Rate for the entirety of another
Default Period.



     (c) [Reserved.]



     (d) Participations. If any Person shall acquire a participation in the Line of Credit or the
Obligation of Reimbursement, Borrower shall be obligated to Bank to pay the full amount of all
interest calculated under this Section 2.5, along with all other fees, charges and other amounts
due under this Agreement, regardless if such Person elects to accept interest with respect to its
participation at a lower rate than that calculated under this Section 2.5, or otherwise elects to
accept less than its pro rata share of such fees, charges and other amounts due under this
Agreement.



     (e) Usury. In any event, no rate change shall be put into effect which would result in a rate
greater than the highest rate permitted by law. Notwithstanding anything to the contrary contained
in any Loan Document, all agreements which either now are or which shall become agreements between
Borrower and Bank are hereby limited so that in no contingency or event whatsoever shall the total
liability for payments in the nature of interest, additional interest and other charges exceed the
applicable limits imposed by any applicable usury laws. If any payments in the nature of interest,
additional interest and other charges made under any Loan Document are held to be in excess of the
limits imposed by any applicable usury laws, it is agreed that any such amount held to be in excess
shall be considered payment of principal hereunder, and the indebtedness evidenced by the Line of
Credit Note shall be reduced by such amount so that the total liability for payments in the nature
of interest, additional interest and other charges shall not exceed the applicable limits imposed
by any applicable usury laws, in compliance with the desires of Borrower and Bank. This provision
shall never be superseded or waived and shall control every other provision of the Loan Documents
and all agreements between Borrower and Bank, or their successors and assigns.



     (f) Collection of Payments. All payments to Bank shall be made in immediately available funds
and shall be applied to the Obligations upon receipt by Bank. Bank may hold all payments not
constituting immediately available funds for three (3) additional days before applying them to the
Obligations then due and payable. Subject to Section 7.7 of this
Agreement, all payments with respect to the Obligations may be applied, and in Bank’s sole
discretion reversed and re-applied, to the Obligations, in such order and manner as Bank shall
determine in its sole discretion.



- 17 -









 





     Section 2.6. Fees.



     (a) Commitment Fee. Borrower shall pay to Bank a non-refundable commitment fee for the Line
of Credit equal to $5,000.00, which fee shall be due and payable in full on the Closing Date.



     (b) Collateral Monitoring Fees. Borrower shall pay to Bank, within 15 days after written
demand, collateral monitoring fees, at the rates established from time to time by Bank as its audit
fees, in connection with any audits or inspections conducted at any time after the Borrowing Base
Trigger Date by or on behalf of Bank of any Collateral or Borrower’s operations or business,
including, without limitation, audits and inspections conducted by or on behalf of Bank as part of
its normal monthly collateral monitoring process as have been conducted by Bank with respect to the
Collateral since the Original Closing Date, together with all actual out-of-pocket costs and
expenses incurred in conducting any such audit or inspection. Such collateral monitoring fees
shall not exceed $1,200 per month unless a Default Period is continuing.



     (c) Letter of Credit Fees. Borrower shall pay to Bank a fee with respect to each Letter of
Credit, if any, accruing on a daily basis and computed at the per annum rate of one percent
(1.00%), of the aggregate amount that may then be drawn under it assuming compliance with all
conditions for drawing (the “Aggregate Stated Amount”), from and including the date of issuance of
such Letter of Credit until such date as such Letter of Credit shall terminate by its terms or be
returned to the Issuer, due and payable monthly in arrears on the first day of each month and on
the expiration date thereof; provided that during Default Periods, in Bank’s sole discretion and
without waiving any of its other rights and remedies, such fee shall increase to three percent
(3.00%) of the Aggregate Stated Amount. The foregoing fee shall be in addition to any and all
fees, commissions and charges of the Issuer with respect to or in connection with such Letter of
Credit.



     (d) Letter of Credit Administrative Fees. Borrower shall pay to Bank, within fifteen (15)
days after written demand, the administrative fees charged by the Issuer in connection with the
honoring of drafts under any Letter of Credit, amendments thereto, transfers thereof and all other
activity with respect to any Letters of Credit at the then-current rates published by the Issuer
for such services rendered on behalf of customers of the Issuer generally.



     (e) Prepayment Fees. Borrower shall pay prepayment fees, if any, in the amount and manner
described in the Line of Credit Note.



     (f) Unused Line Fee. On the first day of each calendar quarter during the term of this
Agreement, Borrower shall pay to Bank, in arrears for the immediately preceding calendar quarter,
an unused line fee in an amount equal to 0.100% per annum times the result of (a) the Line of
Credit Commitment Amount less (b) the sum of (i) the average Daily Balance of
indebtedness under the Line of Credit outstanding during the immediately preceding calendar
quarter and (ii) the average Daily Balance of the L/C Amount during the immediately preceding
calendar quarter. The unused line fee due under this paragraph (f) shall not be payable following
the termination and payment in full of the Line of Credit.



- 18 -









 





     (g) Audit Fees. In addition to the fees described in paragraph (b) of this Section 2.6,
Borrower shall pay Bank, within 15 days after written demand, fees in connection with any audits or
inspections conducted by or on behalf of Bank of Borrower’s operations or business at the rates
established from time to time by Bank as its audit fees, together with all actual out-of-pocket
costs and expenses incurred in conducting any such audit or inspection. There shall be no more
than one such audit of Borrower per year unless a Default Period is continuing, in which case Bank
may conduct as many audits as it may require.



     (h) Other Fees. Bank may from time to time, upon five (5) days prior written notice to
Borrower during a Default Period, charge additional fees for Line of Credit Advances made and
Letters of Credit issued in excess of Availability, for late delivery of reports and in lieu of
imposing interest at the Default Rate. Borrower’s request for a Line of Credit Advance or the
issuance of a Letter of Credit at any time after such notice is given and such five (5) day period
has elapsed shall constitute Borrower’s agreement to pay the fees described in such notice.



     Section 2.7. Increased Costs; Capital Adequacy; Funding Exceptions.



     (a) Increased Costs; Capital Adequacy. If Bank determines at any time that its Return (as
defined below) has been reduced as a result of any Rule Change (as defined below), Bank may so
notify Borrower and require Borrower, beginning thirty (30) days after such notice is received by
Borrower, to pay it the amount necessary to restore its Return to what it would have been had there
been no Rule Change. For purposes of this Section 2.7:




     (i) “Capital Adequacy Rule” means any law, rule, regulation, guideline, directive,
requirement or request regarding capital adequacy, or the interpretation or administration
thereof by any Governmental Authority, whether or not having the force of law, that applies
to any Related Bank (as defined below), including rules requiring financial institutions to
maintain total capital in amounts based upon percentages of outstanding loans, binding loan
commitments and letters of credit.




     (ii) “L/C Rule” means any law, rule, regulation, guideline, directive, requirement or
request regarding letters of credit, or the interpretation or administration thereof by any
Governmental Authority, whether or not having the force of law, that applies to any Related
Bank, including those that impose taxes, duties or other similar charges, or mandate
reserves, special deposits or similar requirements against assets of, deposits with or for
the account of, or credit extended by any Related Bank, on letters of credit.




     (iii) “Related Bank” includes (but is not limited to) Bank, any parent of Bank and any
assignee of any interest of Bank hereunder.




     (iv) “Return”, for any period, means the percentage determined by dividing (i) the sum
of interest and ongoing fees earned by Bank under this Agreement during such period, by (ii)
the average capital such Bank is required to maintain during such period as a result of its
being a party to this Agreement, as determined by Bank based upon its total capital
requirements and a reasonable attribution formula that takes account



- 19 -









 







of the Capital Adequacy Rules and L/C Rules, (if applicable) then in effect, costs of issuing or maintaining any
Advance or Letter of Credit and amounts received or receivable under this Agreement or the
Line of Credit Note with respect to any Advance or Letter of Credit. Return may be
calculated for each calendar quarter and for the shorter period between the end of a
calendar quarter and the date of termination in whole of this Agreement.




     (v) “Rule Change” means any change in any Capital Adequacy Rule, or L/C Rule, (if
applicable) occurring after the date of this Agreement, but the term does not include any
changes that at the Funding Date are scheduled to take place under the existing Capital
Adequacy Rules, or L/C Rules or any increases in the capital that Bank is required to
maintain to the extent that the increases are required due to a regulatory authority’s
assessment of that Bank’s financial condition.



     (b) The initial notice sent by Bank shall be sent as promptly as practicable after Bank learns
that its Return has been reduced, shall include a demand for payment of the amount necessary to
restore Bank’s Return for the subsequent quarter in which the notice is sent, and shall state in
reasonable detail the cause for the reduction in its Return and its calculation of the amount of
such reduction. Thereafter, Bank may send a new notice during each calendar quarter setting forth
the calculation of the reduced Return for that quarter and including a demand for payment of the
amount necessary to restore its Return for that quarter. Bank’s calculation in any such notice
shall be prima facie evidence of such amount.



     (c) Borrower shall not be required to compensate Bank pursuant to the provisions of this
Section 2.7 for any reduction of its Return suffered more than 90 days prior to the date that Bank
notifies Borrower of the Rule Change giving rise to such reduction and of Bank’s intention to claim
compensation therefor.



     Section 2.8. Lockbox. Borrower shall instruct all Account Debtors to pay all Accounts
directly to the Lockbox. If, notwithstanding such instructions, Borrower receives any payments on
Accounts, Borrower shall deposit such payments into the Lockbox Account.



     Section 2.9. Mandatory Prepayment. Without notice or demand, if the sum of the outstanding
principal balance of the Line of Credit Advances plus the L/C Amount shall at any time exceed the
Borrowing Base, Borrower shall (i) first, immediately prepay the Line of Credit Advances to the
extent necessary to eliminate such excess; and (ii) if prepayment in full of the Line of Credit
Advances is insufficient to eliminate such excess, pay to Bank in immediately available funds for
deposit in the Special Account an amount equal to the remaining excess. Any payment received by
Bank under this Section 2.9 may be applied to the Obligations, in such order and in such amounts as Bank, in
its reasonable discretion, may from time to time determine.



     Section 2.10. Line of Credit Advances to Pay Obligations. Notwithstanding anything in Section
2.1, Bank may, in its discretion at any time or from time to time, without Borrower’s request and
even if the conditions set forth in Section 4.2 would not be satisfied, make a Line of Credit
Advance in an amount equal to the portion of the Obligations from time to time due and



- 20 -









 







payable. Bank will use its commercially reasonable best efforts to provide Borrower with prompt notice after
any such Advance pursuant to this Section 2.10 has been made; provided that any failure by Bank to
provide such notice shall not be deemed to be a breach or default by Bank of its obligations
hereunder.



     Section 2.11. Liability Records. Bank may maintain from time to time, at its discretion,
records as to the Obligations. All entries made on any such record shall be presumed correct until
Borrower establishes the contrary. Upon Bank’s demand, Borrower will admit and certify in writing
the exact principal balance of the Obligations that Borrower then asserts to be outstanding. Any
billing statement or accounting rendered by Bank shall be conclusive and fully binding on Borrower
unless Borrower gives Bank specific written notice of exception within 30 days after receipt.



Article III



Security Interest




     Section 3.1. Grant of Security Interest. Borrower hereby pledges, assigns and grants to Bank,
and reaffirms its prior pledge, assignment and grant to Bank of, a lien and security interest
(collectively referred to as the “Security Interest”) in the Collateral, as security for the
payment and performance of the Obligations. Upon request by Bank, Borrower will grant Bank a
security interest in all commercial tort claims it may have against any Person.



     All of the foregoing shall be evidenced by and subject to the terms of such security
agreements, financing statements and other documents as Bank shall reasonably require, all in form
and substance satisfactory to Bank (including, without limitation, the Security Documents).
Borrower shall reimburse Bank within fifteen (15) days after written demand for all reasonable
costs and expenses incurred by Bank in connection with any of the foregoing security, including
without limitation, filing and recording fees and costs of appraisals and audits.



     Section 3.2. Financing Statements. Borrower authorizes Bank to file from time to time where
permitted by law, such financing statements against collateral described as “all personal property”
or describing specific items of collateral including commercial tort claims as Bank deems necessary
or useful to perfect the Security Interest, including, without limitation, amendments to any
financing statements that were filed prior to the Closing Date. A carbon, photographic or other
reproduction of this Agreement or of any financing statements authorized by Borrower is sufficient
as a financing statement and may be filed as a financing statement in any state to perfect the security
interests granted hereby. For this purpose, the following information is set forth:


Name and address of Debtor:



Apio, Inc.

4575 West Main Street

Guadalupe, CA 93434

Federal Employer Identification No. 77-0528042

Organizational Identification No. 2863977




- 21 -









 




Name and address of Secured Party:



Wells Fargo Bank, National Association

400 Hamilton Avenue, P.O. Box 150

Palo Alto, CA 94302




Article IV



Conditions of Lending




     Section 4.1. Conditions Precedent to the Initial Advances and Letter of Credit. The
obligation of Bank to extend any credit contemplated by this Agreement is subject to the
fulfillment to Bank’s satisfaction of all of the following conditions:



     (a) This Agreement, duly executed by Borrower.



     (b) The Line of Credit Note, duly executed by Borrower.



     (c) To the extent not previously delivered in connection with the closing of the Original
Agreement, a true and correct copy of any and all leases pursuant to which Borrower is leasing the
Premises, together with a landlord’s disclaimer and consent with respect to each such lease.



     (d) To the extent not previously delivered in connection with the closing of the Original
Agreement, a true and correct copy of any and all mortgages pursuant to which Borrower has
mortgaged the Premises, together with a mortgagee’s disclaimer and consent with respect to each
such mortgage.



     (e) To the extent not previously delivered in connection with the closing of the Original
Agreement, the Life Insurance Assignment (if any), properly executed by the beneficiary and owner
thereof, and the Life Insurance Policy (if any), together with evidence that such Life Insurance
Policy is subject to no assignments or encumbrances other than the Life Insurance Assignment.



     (f) [Reserved].



     (g) To the extent not previously delivered in connection with the closing of the Original
Agreement, control agreements, duly executed by Borrower and each bank at which Borrower maintains
deposit accounts.



     (h) Each of the Security Agreement, the Security Agreement Re: Patents and Trademarks, the
Licensor Agreement, and the Security Agreement and Collateral Assignment of Partnership Interest,
duly executed by Borrower.



     (i) A Guaranty, duly executed by Parent.



- 22 -









 





     (j) The Subordination Agreement, duly executed by Parent and acknowledged by Borrower.



     (k) [Reserved].



     (l) [Reserved].



     (m) One or more certificates of Borrower’s Secretary or Assistant Secretary certifying that
attached to such certificate, or incorporated therein, are (i) the resolutions of Borrower’s
Directors and, if required, Owners, authorizing the execution, delivery and performance of the Loan
Documents to which Borrower is a party, (ii) true, correct and complete copies of Borrower’s
Constituent Documents, and (iii) examples of the signatures of Borrower’s Officers or agents
authorized to execute and deliver the Loan Documents to which Borrower is a party and other
instruments, agreements and certificates, including requests for Advances, on Borrower’s behalf.



     (n) A current certificate issued by the Secretary of State of Delaware, certifying that
Borrower is in good standing and is in compliance with all applicable formation requirements of the
State of Delaware.



     (o) One or more certificates of Parent’s Secretary or Assistant Secretary certifying that
attached to such certificate, or incorporated therein, are (i) the resolutions of Parent’s board of
directors and, if required, owners, authorizing the execution, delivery and performance of the Loan
Documents to which Parent is a party, (ii) true, correct and complete copies of Parent’s
Constituent Documents, and (iii) examples of the signatures of Parent’s corporate officers or
agents authorized to execute and deliver the Loan Documents to which Parent is a party and other
instruments, agreements and certificates on Parent’s behalf.



     (p) A current certificate issued by the Secretary of State of California, certifying that
Parent is in good standing and is in compliance with all applicable formation requirements of the
State of California.



     (q) Evidence that Borrower is duly licensed or qualified to transact business in all
jurisdictions where the character of the property owned or leased or the nature of the business
transacted by it makes such licensing or qualification necessary.



     (r) A certificate of an Officer of Borrower confirming the representations and warranties set
forth in Article V.



     (s) A favorable opinion of counsel to Borrower and Parent, addressed to Bank.



     (t) Certificates of the insurance required hereunder, with all hazard insurance containing a
lender’s loss payable endorsement in Bank’s favor and with all liability insurance naming Bank as
an additional insured.



- 23 -









 





     (u) Payment of the fees and commissions due under Section 2.6 through the date of the initial
Advances or Letter of Credit and reasonable expenses incurred by Bank through such date and
required to be paid by Borrower under Section 8.5, including all reasonable legal expenses incurred
through the date of this Agreement.



     (v) [Reserved].



     (w) Review and approval by Bank of the Companies’ internally prepared financial statements for
the period ended May 31, 2005.



     (x) Review and approval by Bank of Parent’s consolidating internally prepared financial
statements for the period ended May 31, 2005.



     (y) Review and approval of the Companies’ consolidated financial projections.



     (z) Satisfactory results of invoice verifications and vendor references.



     (aa) Review and approval by Bank of all material agreements, including licensing agreements,
royalty agreements, shareholder debt agreements, the management fee agreement, earn-out agreements,
seller notes, mortgage agreements, grower contracts, material leases, and the agreements relating
to the sale of Borrower’s domestic commodity vegetable business.



     (bb) No material adverse change in the financial condition of the Companies or Parent shall
have occurred since the date of the most recent financial statement of Borrower received by Bank.



     (cc) To the extent not previously delivered in connection with the closing of the Original
Agreement, true and complete copies of all license agreements pursuant to which Borrower licenses
any Intellectual Property Rights, together with a consent to assignment to Bank or its nominee from
each licensor thereof.



     (dd) Such other documents as Bank may reasonably require.



     Section 4.2. Conditions Precedent to All Advances and Letters of Credit. The obligation of
Bank to make each extension of credit requested by Borrower hereunder shall be subject to the
fulfillment to Bank’s satisfaction of each of the following conditions:



     (a) the representations and warranties contained in Article V are correct on and as of the
date of such extension of credit as though made on and as of such date, except to the extent that
such representations and warranties relate solely to an earlier date;



     (b) no event has occurred and is continuing, or would result from such extension of credit
which constitutes a Default or an Event of Default; and



- 24 -









 





     (c) no injunction, writ, restraining order, or other order of any nature prohibiting, directly
or indirectly, the extending of such credit shall have been issued and remain in force by any
Governmental Authority against Borrower, Bank, or any of their Affiliates.



Article V



Representations and Warranties




     Borrower represents and warrants to Bank as follows:



     Section 5.1. Existence and Power; Name; Chief Executive Office; Inventory and Equipment
Locations; Federal Employer Identification Number. Borrower is a corporation, duly organized,
validly existing and in good standing under the laws of the State of Delaware, and is duly licensed
or qualified to transact business in all jurisdictions where the character of the property owned
or leased or the nature of the business transacted by it makes such licensing or qualification
necessary. Borrower has all requisite power and authority to conduct its business, to own its
properties and to execute and deliver, and to perform all of its obligations under, the Loan
Documents to which it is a party. During its existence, Borrower has done business solely under
the names set forth in Schedule 5.1 and all of Borrower’s records relating to its business or the
Collateral are kept at the location set forth on Schedule 5.1. Borrower’s chief executive office
and principal place of business is located at the address set forth in Schedule 5.1. All Inventory
and Equipment is located at that location or at one of the other locations listed in Schedule 5.1.
Borrower’s federal employer identification number and organizational identification number are each
correctly set forth in Section 3.2.



     Section 5.2. Capitalization. Schedule 5.2 constitutes a correct and complete list of all
ownership interests of Borrower and rights to acquire ownership interests including the record
holder, number of interests and percentage interests on a fully diluted basis, and an
organizational chart showing the ownership structure of all Subsidiaries of Borrower.



     Section 5.3. Authorization of Borrowing; No Conflict as to Law or Agreements. The execution,
delivery and performance by Borrower of the Loan Documents to which it is a party and the
borrowings from time to time hereunder have been duly authorized by all necessary corporate action
and do not and will not (i) require any consent or approval of Borrower’s Owners; (ii) require any
authorization, consent or approval by, or registration, declaration or
filing with, or notice to, any Governmental Authority, or any third Person, except such
authorization, consent, approval, registration, declaration, filing or notice as has been obtained,
accomplished or given prior to the date hereof; (iii) violate any provision of any law, rule or
regulation (including Regulation X of the Board of Governors of the Federal Reserve System) or of
any order, writ, injunction or decree presently in effect having applicability to Borrower or of
Borrower’s Constituent Documents; (iv) result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other material agreement, lease or instrument to which
Borrower is a party or by which it or its properties may be bound or affected, in each case, the
failure of which to comply with would result in a Material Adverse Effect; or (v) result in, or
require, the creation or imposition of any Lien (other than the Security Interest) upon or with
respect to any of the properties now owned or hereafter acquired by Borrower.



- 25 -









 





     Section 5.4. Legal Agreements. This Agreement and the other Loan Documents to which Borrower
is a party, upon their execution and delivery in accordance with the provisions hereof, will
constitute the legal, valid and binding obligations of Borrower, enforceable against Borrower in
accordance with their respective terms, except as enforcement may be limited by equitable
principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or
limiting creditors’ rights generally.



     Section 5.5. Subsidiaries. Borrower has no Subsidiaries other than as set forth in Schedule
5.5 hereto.



     Section 5.6. Financial Condition; No Adverse Change. Borrower has furnished to Bank the
Companies’ audited financial statements for the fiscal year ended May 31, 2005, and those
statements fairly present in all material respects the Companies’ financial condition on the dates
thereof and the results of their operations and cash flows for the periods then ended and were
prepared in accordance GAAP. Since the date of the most recent financial statements, there has
been no change in the Companies’ business, properties or condition (financial or otherwise) which
has had a Material Adverse Effect.



     Section 5.7. Litigation. There are no actions, suits or proceedings pending or, to Borrower’s
knowledge, threatened against or affecting Borrower or any of its Affiliates or the properties of
Borrower or any of its Affiliates before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which, is reasonably likely to be adversely
determined and, if determined adversely to Borrower or any of its Affiliates, would have a Material
Adverse Effect.



     Section 5.8. Regulation U. Borrower is not engaged in the business of extending credit for
the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Board
of Governors of the Federal Reserve System), and no part of the proceeds of any Advance will be
used to purchase or carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.



     Section 5.9. Taxes. Borrower and its Affiliates have paid or caused to be paid to the proper
authorities when due all federal, state and local taxes required to be paid by each of them (other
than taxes that are being contested in good faith through appropriate processes and for which
adequate reserves have been established) and Borrower has no knowledge of any pending assessments
or adjustments of its income tax payable with respect to any year or the income tax payable by any
Affiliate with respect to any year. Borrower and its Affiliates have filed all federal, state and
local tax returns which to the knowledge of the Officers of Borrower or the officers of any
Affiliate, as the case may be, are required to be filed, and Borrower and its Affiliates have paid
or caused to be paid to the respective taxing authorities all taxes as shown on said returns or on
any assessment received by any of them to the extent such taxes have become due.



     Section 5.10. Titles and Liens. Borrower has good and absolute title to all Collateral free
and clear of all Liens other than Permitted Liens. No financing statement naming Borrower as
debtor is on file in any office except to perfect only Permitted Liens.




- 26 -










 






     Section 5.11. Intellectual Property Rights



     (a) Owned Intellectual Property. Schedule 5.11 (as updated by written notice to Bank from
time to time) contains a complete list of all patents, applications for patents, trademarks,
applications for trademarks, service marks, applications for service marks, mask works, trade dress
and copyrights for which Borrower is the registered owner (the “Owned Intellectual Property”).
Except for Immaterial Intellectual Property Rights or as disclosed on Schedule 5.11, (i) Borrower
owns the Owned Intellectual Property free and clear of all restrictions (including covenants not to
sue a third party), court orders, injunctions, decrees, writs or Liens, whether by written
agreement or otherwise, (ii) no Person other than Borrower owns or has been granted any right in
the Owned Intellectual Property, (iii) all Owned Intellectual Property is valid, subsisting and
enforceable and (iv) Borrower has taken all commercially reasonable action necessary to maintain
and protect the Owned Intellectual Property.



     (b) Agreements with Employees and Contractors. Borrower has entered into a legally
enforceable agreement with each of its employees and subcontractors obligating each such Person to
assign to Borrower, without any additional compensation, any Intellectual Property Rights created,
discovered or invented by such Person in the course of such Person’s employment or engagement with
Borrower (except to the extent prohibited by law), and further requiring such Person to cooperate
with Borrower, without any additional compensation, in connection with securing and enforcing any
Intellectual Property Rights therein; provided that the foregoing shall not apply with respect to
employees and subcontractors whose job descriptions are of the type such that no such assignments
are reasonably foreseeable.



     (c) Intellectual Property Rights Licensed from Others. Schedule 5.11 (as updated by written
notice to Bank from time to time) contains a complete list of all agreements under which Borrower
has licensed Intellectual Property Rights from another Person (“Licensed Intellectual Property”)
other than readily available, non-negotiated licenses of computer software and other intellectual
property used solely for performing accounting, word processing and similar administrative tasks
(“Off-the-shelf Software”) and a summary of any ongoing payments Borrower is obligated to make with
respect thereto. Except as disclosed on Schedule 5.11 and in written agreements copies of which
have been given to Bank, Borrower’s licenses to use the
Licensed Intellectual Property are free and clear of all restrictions, Liens, court orders,
injunctions, decrees, or writs, whether by written agreement or otherwise. Except as disclosed on
Schedule 5.11 (as updated by written notice to Bank from time to time), Borrower is not obligated
or under any liability whatsoever to make any payments of a material nature by way of royalties,
fees or otherwise to any owner of, licensor of, or other claimant to, any Intellectual Property
Rights.



     (d) Other Intellectual Property Needed for Business. Except for Off-the-shelf Software and as
disclosed on Schedule 5.11 (as updated by written notice to Bank from time to time), the Owned
Intellectual Property and the Licensed Intellectual Property constitute all Intellectual Property
Rights used or necessary to conduct Borrower’s business as it is presently conducted or as Borrower
reasonably foresees conducting it.



- 27 -









 





     (e) Infringement. Except as disclosed on Schedule 5.11 (as updated by written notice to Bank
from time to time), Borrower has no knowledge of, and has not received any written claim or notice
alleging, any Infringement of another Person’s Intellectual Property Rights (including any written
claim that Borrower must license or refrain from using the Intellectual Property Rights of any
third party) nor, to Borrower’s knowledge, is there any threatened claim or any reasonable basis
for any such claim.



     Section 5.12. Plans. Except as disclosed to Bank in writing prior to the date hereof, neither
Borrower nor any ERISA Affiliate (i) maintains or has maintained any Pension Plan, (ii) contributes
or has contributed to any Multiemployer Plan or (iii) provides or has provided post-retirement
medical or insurance benefits with respect to employees or former employees (other than benefits
required under Section 601 of ERISA, Section 4980B of the IRC or applicable state law). Neither
Borrower nor any ERISA Affiliate has received any notice or has any knowledge to the effect that it
is not in full compliance with any of the requirements of ERISA, the IRC or applicable state law
with respect to any Plan. No Reportable Event exists in connection with any Pension Plan. Each
Plan which is intended to qualify under the IRC is so qualified, and no fact or circumstance exists
which may have an adverse effect on the Plan’s tax-qualified status. Neither Borrower nor any
ERISA Affiliate has (i) any accumulated funding deficiency (as defined in Section 302 of ERISA and
Section 412 of the IRC) under any Plan, whether or not waived, (ii) any liability under Section
4201 or 4243 of ERISA for any withdrawal, partial withdrawal, reorganization or other event under
any Multiemployer Plan or (iii) any liability or knowledge of any facts or circumstances which
could result in any liability to the Pension Benefit Guaranty Corporation, the Internal Revenue
Service, the Department of Labor or any participant in connection with any Plan (other than routine
claims for benefits under the Plan).



     Section 5.13. Default. Borrower is in compliance with all provisions of all agreements,
instruments, decrees and orders to which it is a party or by which it or its property is bound or
affected, the breach or default of which could have a Material Adverse Effect.



     Section 5.14. Environmental Matters.



     (a) To Borrower’s best knowledge, there are not present in, on or under the Premises any
Hazardous Substances in such form or quantity as to create any material liability or obligation for
either Borrower or Bank under common law of any jurisdiction or under any Environmental Law, and no
Hazardous Substances have ever been stored, buried, spilled, leaked, discharged, emitted or
released in, on or under the Premises in such a way as to create any such material liability.



     (b) To Borrower’s best knowledge, Borrower has not disposed of Hazardous Substances in such a
manner as to create any material liability under any Environmental Law.



     (c) To Borrower’s best knowledge, there are not any requests, claims, notices, investigations,
demands, administrative proceedings, hearings or litigation, relating in any way to the Premises or
Borrower, alleging material liability under, violation of, or noncompliance with



- 28 -









 




any Environmental Law or any license, permit or other authorization issued pursuant thereto. To Borrower’s best
knowledge, no such matter is threatened or impending.




     (d) To Borrower’s best knowledge, Borrower’s businesses are and have in the past always been
conducted in accordance with all Environmental Laws and all licenses, permits and other
authorizations required pursuant to any Environmental Law and necessary for the lawful and
efficient operation of such businesses are in Borrower’s possession and are in full force and
effect. No permit required under any Environmental Law is scheduled to expire within 12 months and
there is no threat that any such permit will be withdrawn, terminated, limited or materially
changed.



     (e) To Borrower’s best knowledge, the Premises are not and never have been listed on the
National Priorities List, the Comprehensive Environmental Response, Compensation and Liability
Information System or any similar federal, state or local list, schedule, log, inventory or
database.



     (f) Borrower has delivered to Bank all environmental assessments, audits, reports, permits,
licenses and other documents describing or relating in any way to the Premises or Borrower’s
businesses.



     Section 5.15. Submissions to Bank. All financial and other information provided to Bank by or
on behalf of Borrower in connection with Borrower’s request for the credit facilities contemplated
hereby is (i) true and correct in all material respects, (ii) does not omit any material fact
necessary to make such information not misleading and (iii) as to projections, valuations or
proforma financial statements, present a good faith opinion as to such projections, valuations and
proforma condition and results.



     Section 5.16. Financing Statements. Borrower has authorized the filing of financing
statements sufficient when filed to perfect the Security Interest and the other security interests
created by the Security Documents. When such financing statements are filed in the offices noted
therein, Bank will have a valid and perfected security interest in all Collateral which is capable
of being perfected by filing financing
statements. None of the Collateral is or will become a fixture on real estate, unless a
sufficient fixture filing is in effect with respect thereto.



     Section 5.17. Rights to Payment. To Borrower’s best knowledge, each right to payment and each
instrument, document, chattel paper and other agreement constituting or evidencing Collateral is
(or, in the case of all future Collateral, will be when arising or issued) the valid, genuine and
legally enforceable obligation, subject to no defense, setoff or counterclaim, of the Account
Debtor or other obligor named therein or in Borrower’s records pertaining thereto as being
obligated to pay such obligation.



     Section 5.18. Eligible Accounts. All Accounts that are included in the Borrowing Base are
Eligible Accounts, and meet the definition thereof.



     Section 5.19. [Reserved].



- 29 -









 





     Section 5.20. Fraudulent Transfer. Borrower is Solvent. No transfer of property is being
made by Borrower and no obligation is being incurred by Borrower in connection with the
transactions contemplated by this Agreement or the other Loan Documents with the intent to hinder,
delay, or defraud either present or future creditors of Borrower.



     Section 5.21. Permits, Franchises. Borrower possesses, and will hereafter possess, all
permits, consents, approvals, franchises and licenses required and rights to all trademarks, trade
names, patents, and fictitious names, if any, necessary to enable it to conduct the business in
which it is now engaged in compliance with applicable law and the failure of which to obtain would
result in a Material Adverse Effect.



     Section 5.22. No Subordination. There is no agreement, indenture, contract or instrument to
which Borrower is a party or by which Borrower may be bound that requires the subordination in
right of payment of any of Borrower’s obligations subject to this Agreement to any other obligation
of Borrower.



Article VI

Covenants




     So long as the Obligations shall remain unpaid, or the Credit Facility shall remain
outstanding, Borrower will comply with the following requirements, unless Bank shall otherwise
consent in writing:



     Section 6.1. Punctual Payments. Borrower shall punctually pay all principal, interest, fees
or other liabilities due under any of the Loan Documents at the times and place and in the manner
specified therein.



     Section 6.2. Reporting Requirements. Borrower will deliver, or cause to be delivered, to Bank
each of the following, which shall be in form and detail acceptable to Bank:



     (a) Financial Statements.




     (i) As soon as available, and in any event within 120 days after the end of each fiscal
year of Parent, Borrower will deliver, or cause to be delivered, to Bank, Parent’s audited
financial statements with the unqualified opinion of independent certified public
accountants selected by Parent and acceptable to Bank, which annual financial statements
shall include Parent’s balance sheet as at the end of such fiscal year and the related
statements of Parent’s income, reconciliation of retained earnings and cash flows for the
fiscal year then ended, prepared on a consolidated basis to include any Affiliates, all in
reasonable detail and prepared in accordance with GAAP, together with (A) copies of all
management letters prepared by such accountants; and (B) a certificate of the chief
financial officer of Borrower stating that such financial statements have been prepared in
accordance with GAAP, fairly represent Parent’s financial position and the results of its
operations, and whether or not such officer has knowledge of the occurrence of any Default
or Event of Default and, if so, stating in reasonable detail the facts with respect thereto.



- 30 -









 






     (ii) As soon as available, and in any event within 45 days after the end of each fiscal
quarter of Parent, Borrower will deliver, or cause to be delivered, to Bank, Parent’s
internally-prepared consolidating financial statements, which financial statements shall
include Parent’s balance sheet as at the end of such fiscal quarter and the related
statements of Parent’s income, reconciliation of retained earnings and cash flows for the
fiscal quarter then ended, prepared on a consolidated basis to include any Affiliates, all
in reasonable detail and prepared in accordance with GAAP.




     (iii) As soon as available, and in any event within 45 days after the end of each
fiscal quarter of Borrower, Borrower will deliver to Bank an unaudited/internal balance
sheet and statements of income and reconciliation of retained earnings of Borrower as at the
end of and for such fiscal quarter and for the year to date period then ended, prepared, if
Bank so requests, on a consolidating and consolidated basis to include any Subsidiaries, in
reasonable detail and stating in comparative form the figures for the corresponding date and
periods in the previous year, all prepared in accordance with GAAP, subject to year-end
audit adjustments and fairly representing in all material respects Companies’ financial
position and the results of its operations.



     (b) Other Information. Borrower will deliver to Bank the following documents at the following
times in form satisfactory to Bank:



	 	 	 	 	 
	Quarterly

	 	(i)
	 	a certificate of the chief
financial Officer of Borrower,
substantially in the form of Exhibit
C hereto stating (i) whether or not
such officer has knowledge of the
occurrence of any Default or Event
of Default not theretofore reported
and remedied and, if so, stating in
reasonable detail the facts with
respect thereto, and (ii) all
relevant facts in reasonable detail
to evidence, and the computations as
to, whether or not Borrower is
compliance with the Financial
Covenants and other covenants
contained in this Agreement,
	 
	 	 	 	 
	Semi-Annually

	 	(ii)
	 	a detailed list of Borrower’s
customers with contact names and
addresses,
	 
	 	 	 	 
	Upon request by Bank

	 	(iii)
	 	copies of invoices in
connection with the Accounts, credit
memos, remittance advices, deposit
slips, shipping and delivery
documents in connection with the
Accounts and, for Inventory and
Equipment acquired by Borrower,
purchase orders and invoices, and
	 
	 	 	 	 
	 

	 	(iv)
	 	such other reports or
information as to the Collateral, or
the financial condition of Borrower,
or otherwise, as Bank may reasonably
request.






     (c) Collateral Reports. On and after the occurrence of a Borrowing Base Trigger Date,
Borrower will deliver to Bank the following documents at the following times in form reasonably
satisfactory to Bank:



	 	 	 	 	 
	On the

	 	(i)
	 	a Borrowing Base certificate in the form of Exhibit B attached
hereto






- 31 -









 






	 	 	 	 	 
	Borrowing

Base Trigger Date

	 	 	 	(dated as of such Borrowing Base Trigger Date), executed by
a financial representative of Borrower,
	 
	 	 	 	 
	Monthly (not later

than the 25th day

after each fiscal

month)

	 	(ii)
	 	a report of cash collections, sales assignments, credit
memos/adjustments and deposits (provided that the frequency of
such reports may be increased to weekly or daily, at Bank’s
option, during any Default Period),
	 
	 	 	 	 
	 

	 	(iii)
	 	a report of outstanding payable balances owing to all
growers,
	 
	 	 	 	 
	 

	 	(iv)
	 	a detailed calculation of the Borrowing Base (including
detail regarding those Accounts that are not Eligible Accounts),
	 
	 	 	 	 
	 

	 	(v)
	 	a detailed listing and aging, by total, of the Accounts,
together with a reconciliation to the detailed calculation of the
Borrowing Base previously provided to Bank,
	 
	 	 	 	 
	 

	 	(vi)
	 	monthly Borrowing Base certificate in the form of Exhibit B
attached hereto, executed by a financial representative of
Borrower, and
	 
	 	 	 	 
	 

	 	(vii)
	 	a detailed aging, by vendor, of Borrower’s accounts payable
and any book overdraft, together with a reconciliation to
Borrower’s general ledger and monthly financial statements
delivered pursuant to Section 6.2(b).






     (d) Projections. Within 30 days after the beginning of each fiscal year of Borrower, Borrower
will deliver to Bank the projected balance sheets and income statements for each month of such year
for the Companies, Parent and Landec Ag, each in reasonable detail, representing Borrower’s good
faith projections and certified by the chief financial officer of Borrower and Parent as being the
most accurate projections available and identical to the projections used by Borrower and Parent
for internal planning purposes, together with a statement of underlying assumptions and such
supporting schedules and information as Bank may in its discretion require.



     (e) Litigation. Immediately after the commencement thereof, Borrower will deliver to Bank
notice in writing of all litigation and of all proceedings before any governmental or regulatory
agency affecting Borrower (i) of the type described in Section 5.14(c) or (ii) which seek a
monetary recovery against Borrower in excess of $500,000.



     (f) Defaults. As promptly as practicable (but in any event not later than five business days)
after an Officer of Borrower obtains knowledge of the occurrence of any Default or Event of
Default, Borrower will deliver to Bank notice of such occurrence, together with a detailed
statement by a responsible Officer of Borrower of the steps being taken by Borrower to cure the
effect thereof.



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     (g) Plans. As soon as possible, and in any event within 30 days after Borrower knows or has
reason to know that any Reportable Event with respect to any Pension Plan has occurred, Borrower
will deliver to Bank a statement of the chief financial officer of Borrower setting forth details
as to such Reportable Event and the action which Borrower proposes to take with respect thereto,
together with a copy of the notice of such Reportable Event to the Pension Benefit Guaranty
Corporation. As soon as possible, and in any event within 10 days after Borrower fails to make any
quarterly contribution required with respect to any Pension Plan under Section 412(m) of the IRC,
Borrower will deliver to Bank a statement of the chief financial officer of Borrower setting forth
details as to such failure and the action which Borrower proposes to take with respect thereto,
together with a copy of any notice of such failure required to be provided to the Pension Benefit
Guaranty Corporation. As soon as possible, and in any event within 10 days after Borrower knows or
has reason to know that it has or is reasonably expected to have any liability under Section 4201
or 4243 of ERISA for any withdrawal, partial withdrawal, reorganization or other event under any
Multiemployer Plan, Borrower will deliver to Bank a statement of the chief financial officer of
Borrower setting forth details as to such liability and the action which Borrower proposes to take
with respect thereto.



     (h) Disputes. Promptly upon knowledge thereof, Borrower will deliver to Bank notice of (i)
any disputes or claims by Borrower’s customers exceeding $250,000 individually or $1,000,000 in the
aggregate during any fiscal year; (ii) credit memos exceeding $250,000 for any individual Account
Debtor or $1,000,000 in the aggregate for all Account Debtors; or (iii) any
goods returned to or recovered by Borrower with a value exceeding $250,000 from any individual
Account Debtor or $1,000,000 in the aggregate from all Account Debtors.



     (i) Officers and Directors. Promptly upon knowledge thereof, Borrower will deliver to Bank
notice any change in the persons constituting Borrower’s Officers and Directors.



     (j) Collateral. Promptly upon knowledge thereof, Borrower will deliver to Bank notice of any
loss of or material damage to any material portion of the Collateral or of any substantial adverse
change in any material portion of the Collateral or the prospect of payment thereof.



     (k) Commercial Tort Claims. Promptly upon knowledge thereof, Borrower will deliver to Bank
notice of any commercial tort claims it may bring against any person, including the name and
address of each defendant, a summary of the facts, an estimate of Borrower’s damages, copies of any
complaint or demand letter submitted by Borrower, and such other information as Bank may request.



     (l) Intellectual Property.




     (i) Borrower will give Bank 30 days prior written notice of its intent to acquire
material Intellectual Property Rights; except for transfers permitted under Section 6.19,
Borrower will give Bank 30 days prior written notice of its intent to dispose of material
Intellectual Property Rights; and upon request, shall provide Bank with copies of all
applicable documents and agreements.



- 33 -









 






     (ii) Promptly upon knowledge thereof, Borrower will deliver to Bank notice of (A) any
Infringement of its Intellectual Property Rights by others, (B) claims that Borrower is
Infringing another Person’s Intellectual Property Rights and (C) any threatened
cancellation, termination or material limitation of its Intellectual Property Rights.




     (iii) Promptly upon receipt, Borrower will give Bank copies of all registrations and
filings with respect to its Intellectual Property Rights.



     (m) Reports to Owners. Promptly upon their distribution, Borrower will deliver to Bank copies
of all financial statements, reports and proxy statements which Parent shall have sent to its
owners.



     (n) SEC Filings. Promptly after the sending or filing thereof, Borrower will deliver to Bank
copies of all regular and periodic reports which Parent shall file with the Securities and Exchange
Commission or any national securities exchange.



     (o) Violations of Law. Promptly upon knowledge thereof, Borrower will deliver to Bank notice
of Borrower’s violation of any law, rule or regulation, the non-compliance with which could
materially and adversely affect Borrower’s business or its financial condition.



     (p) Other Reports. From time to time, with reasonable promptness, Borrower will deliver to
Bank any and all receivables schedules, collection reports, deposit records, Equipment schedules,
copies of invoices to Account Debtors, shipment documents and delivery receipts for goods sold, and
such other material, reports, records or information as Bank may reasonably request.



     Section 6.3. Financial Covenants.



     (a) Minimum EBITDA Coverage Ratio. Borrower, together with the other Companies, will maintain
the EBITDA Coverage Ratio, measured on a trailing 12 month basis as of the end of each fiscal
quarter, at not less than 1.50:1.00.



     (b) Minimum Tangible Net Worth. Borrower, together with the other Companies, will maintain,
at all times, Tangible Net Worth, determined as of the end of each fiscal quarter, at an amount not
less than $19,500,000 plus 75% of cumulative Net Income realized since May 2005 up to such fiscal
quarter end.



     (c) Minimum Net Income. Borrower, together with the other Companies, will achieve (together
with the other Companies) during each period described below, consolidated Net Income, of not less
than the amount set forth in the table below opposite such period:



- 34 -









 





	 	 	 	 	 
	Fiscal Year to Date Period Ending	 	Minimum Net Income
	August 31, 2005

	 	$	400,000	 
	November 30, 2005

	 	$	1,500,000	 
	Commencing with August 31, 2006, August 31 of each year

	 	$	750,000	 
	Commencing with the November 30, 2006, November 30 of
each year

	 	$	1,750,000	 
	February 28 or 29, as applicable, of each year

	 	$	2,150,000	 
	May 31 of each year

	 	$	2,900,000	 






     (d) Capital Expenditures. Borrower together with the other Companies will not incur financed
or unfinanced Capital Expenditures of more than $6,000,000 in the aggregate during any fiscal year.



     (e) Maximum Leverage. Borrower, together with the other Companies, will maintain Total
Liabilities divided by Tangible Net Worth, as of the end of each fiscal quarter, at not greater
than 1.50:1.00.



     Section 6.4. Permitted Liens; Financing Statements.



     (a) Borrower will not create, incur or suffer to exist any Lien upon or of any of its assets,
now owned or hereafter acquired, to secure any Indebtedness; excluding, however,
from the operation of the foregoing, the following (collectively, “Permitted Liens”):




     (i) in the case of any of Borrower’s property which is not Collateral, covenants,
restrictions, rights, easements and minor irregularities in title which do not materially
interfere with Borrower’s business or operations as presently conducted;




     (ii) Liens in existence on the date hereof and listed in Schedule 6.4 hereto, securing
Indebtedness for borrowed money permitted under Section 6.5;




     (iii) the Security Interest and Liens created by the Security Documents;




     (iv) liens of carriers, warehousemen, mechanics, materialmen, vendors, and landlords
and other similar liens imposed by law incurred in the ordinary course of business for sums
not overdue or being contested in good faith, provided that adequate reserves for the
payment thereof have been established in accordance with GAAP;



- 35 -









 






     (v) deposits under workers’ compensation, unemployment insurance and social security
laws or to secure the performance of bids, tenders, contracts (other than for the repayment
of borrowed money) or leases, or to secure statutory obligations of surety or appeal bonds
or to secure indemnity, performance or other similar bonds in the ordinary course business;




     (vi) banker’s liens and similar liens (including set-off rights) in respect of bank
deposits;




     (vii) purchase money Liens incurred in connection with Capital Expenditures otherwise
permitted pursuant to this Agreement; provided that such Liens attach only to the Equipment
acquired thereby;




     (viii) Liens incurred in connection with extensions, renewals or refinancings of the
indebtedness secured by Liens of the type described above;




     (ix) Liens incurred in connection with leases, subleases, licenses and sublicenses
granted, in the ordinary course of Borrower’s business, to Persons not interfering in any
material respect with the business of Borrower and its Subsidiaries and any interest or
title of a lessee or licensee under any such lease, sublease, license or sublicense; and




     (x) Liens incurred in connection with the financing of the approximately 48,000 square
foot expansion of Borrower’s facility located at 4575 W. Main Street, Guadalupe, California;
provided that (A) the aggregate principal amount of such
financing does not exceed $5,000,000, and (B) such Liens are limited to the real property on
which such Borrower’s facility is located and any improvements and fixtures affixed thereto.



     (b) Borrower will not amend any financing statements in favor of Bank except as permitted by
law. Any authorization by Bank to any Person to amend financing statements in favor of Bank shall
be in writing.



     Section 6.5. Indebtedness. Borrower will not incur, create, assume or permit to exist any
Indebtedness or liability on account of deposits or advances or any Indebtedness for borrowed money
or letters of credit issued on Borrower’s behalf, or any other Indebtedness or liability evidenced
by notes, bonds, debentures or similar obligations, except:



     (a) Indebtedness arising hereunder;



     (b) Indebtedness of Borrower in existence on the date hereof and listed in Schedule 6.5
hereto;



     (c) Indebtedness relating to Permitted Liens;



- 36 -









 





     (d) Indebtedness of Borrower arising from the endorsement of instruments for collection in the
ordinary course of business;



     (e) Indebtedness of Borrower under initial or successive refinancings of any Indebtedness
permitted by clause (b) or (c) above, provided that (i) the principal amount of any such
refinancing does not exceed the principal amount of the Indebtedness being refinanced and (ii) the
material terms and provisions of any such refinancing (including maturity, redemption, prepayment,
default and subordination provisions) are no less favorable to Bank than the Indebtedness being
refinanced; and



     (f) Other unsecured indebtedness of Borrower provided the aggregate principal amount of all
such indebtedness does not exceed $1,000,000.



     Section 6.6. Guaranties. Borrower will not assume, guarantee, endorse or otherwise become
directly or contingently liable in connection with any obligations of any other Person, except the
endorsement of negotiable instruments by Borrower for deposit or collection or similar transactions
in the ordinary course of business.



     Section 6.7. Investments and Subsidiaries. Borrower will not purchase or hold beneficially
any stock or other securities or evidences of indebtedness of, make or permit to exist any loans or
advances to, or make any investment or acquire any interest whatsoever in, any other Person,
including any partnership or joint venture, except:



     (a) investments in direct obligations of the United States of America or any agency or
instrumentality thereof whose obligations constitute full faith and credit obligations of the
United States of America having a maturity of one year or less, commercial paper issued by U.S.
corporations rated “A-1” or “A-2” by Standard & Poor’s Corporation or “P-1” or “P-2” by Moody’s
Investors Service or certificates of deposit or bankers’ acceptances having a maturity of one year
or less issued by members of the Federal Reserve System having deposits in excess of $100,000,000
(which certificates of deposit or bankers’ acceptances are fully insured by the Federal Deposit
Insurance Corporation) (each of the foregoing, collectively, “Cash Equivalents”);



     (b) travel advances or loans to Borrower’s Officers and employees not exceeding at any one
time an aggregate of $50,000;



     (c) security deposits, ground leases, and advances in the form of progress payments;



     (d) current investments in the Subsidiaries in existence on the date hereof and listed in
Schedule 5.5 hereto;



     (e) value added joint venture investments; and



     (f) crop advances.



- 37 -









 





     Section 6.8. Dividends and Distributions. Borrower will not declare or pay any dividends
(other than dividends payable solely in stock of Borrower) on any class of its stock or make any
payment on account of the purchase, redemption or other retirement of any shares of such stock or
make any distribution in respect thereof, either directly or indirectly.



     Section 6.9. Salaries. Borrower will not pay excessive or unreasonable salaries, bonuses,
commissions, consultant fees or other compensation to the extent that such payment would cause an
Event of Default.



     Section 6.10. Key Person Life Insurance. If Borrower shall at any time maintain insurance
upon the life of any key Officer (“Life Insurance Policy”), then Borrower shall promptly notify
Bank of each such Life Insurance Policy and assign to Bank the right to receive the proceeds of
such Life Insurance Policy by a Life Insurance Assignment. The proceeds of any such Life Insurance
Policy (“Life Insurance Proceeds”), whenever and however arising, shall be deposited in an
Acceptable Wells Fargo Deposit Account and shall constitute Collateral for purposes of this
Agreement and the other Loan Documents. For purposes of this Agreement, the term “Acceptable Wells
Fargo Deposit Account” shall mean an interest bearing deposit account held at Bank over which
Borrower shall have no control and in which Bank has a perfected security interest in such deposit
account subject only to such other Liens as Bank may approve and subject to such additional
security agreements and other documentation reasonably requested by Bank. Borrower hereby agrees
that any Life Insurance Proceeds may be held by Bank as additional
collateral for the Obligations until the repayment in full of all of the Obligations and the
termination of this Agreement.



     Section 6.11. Books and Records; Inspection and Examination. Borrower will keep accurate
books of record and account for itself pertaining to the Collateral and pertaining to Borrower’s
business and financial condition and such other matters as Bank may from time to time reasonably
request in which true and complete entries will be made in accordance with GAAP and, upon Bank’s
request, will permit any officer, employee, attorney or accountant for Bank to audit, review, make
extracts from or copy any and all company and financial books and records of Borrower during
ordinary business hours and upon one Business Day’s advance notice (unless a Default Period exists
in which case no notice shall be required), and to discuss Borrower’s affairs with any of its
Directors, Officers, and/or accounting personnel. Borrower hereby irrevocably authorizes all
accountants and third parties to disclose and deliver to Bank, at Borrower’s expense, all financial
information, books and records, work papers, management reports and other information in its
possession regarding Borrower. Borrower will permit Bank, or its employees, accountants, attorneys
or agents, to examine and inspect any Collateral or any other property of Borrower during ordinary
business hours and upon one Business Day’s advance notice (unless a Default Period exists in which
case no notice shall be required).



     Section 6.12. Account Verification. Bank may at any time and from time to time send or
require Borrower to send requests for verification of accounts and amounts owed to Account Debtors
and other obligors. Bank may also at any time an Event of Default has occurred and is continuing
and from time to time telephone Account Debtors and other obligors to verify accounts and send such
Account Debtors and other obligors notification of the assignment of Accounts to Bank.



- 38 -









 





     Section 6.13. Compliance with Laws.



     (a) Borrower will (i) comply with the requirements of applicable laws and regulations, the
non-compliance with which would materially and adversely affect its business or its financial
condition and (ii) use and keep the Collateral, and require that others use and keep the
Collateral, only for lawful purposes, without violation of any federal, state or local law, statute
or ordinance.



     (b) Without limiting the foregoing undertakings, Borrower specifically agrees that it will
comply with all applicable Environmental Laws and obtain and comply with all permits, licenses and
similar approvals required by any Environmental Laws, and will not generate, use, transport, treat,
store or dispose of any Hazardous Substances in such a manner as to create any material liability
or obligation under the common law of any jurisdiction or any Environmental Law.



     Section 6.14. Payment of Taxes and Other Claims. Borrower will pay or discharge, when due,
(a) all taxes, assessments and governmental charges levied or imposed upon it or upon its income or
profits, upon any properties belonging to it (including the Collateral) or upon or against the
creation, perfection or continuance of the Security Interest, prior to the date on which penalties
attach thereto, (b) all federal, state and local taxes required to be withheld by it, and (c) all
lawful claims for labor, materials and supplies which, if unpaid, might by law become a Lien upon
any properties of Borrower; provided that Borrower shall not be required to pay any such tax,
assessment, charge or claim whose amount, applicability or validity is being contested in good
faith by appropriate proceedings and for which proper reserves have been made.



     Section 6.15. Maintenance of Properties.



     (a) Borrower will keep and maintain the Collateral and all of its other properties necessary
or useful in its business in good condition, repair and working order (normal wear and tear
excepted) and will from time to time replace or repair any worn, defective or broken parts;
provided that nothing in this Section 6.15 shall prevent Borrower from discontinuing the operation
and maintenance of any of its properties if such discontinuance is, in Borrower’s commercially
reasonable judgment, desirable in the conduct of Borrower’s business and not disadvantageous in any
material respect to Bank. Borrower will take all commercially reasonable steps necessary to
protect and maintain its Intellectual Property Rights, other than Immaterial Intellectual Property
Rights.



     (b) Borrower will defend the Collateral against all Liens, claims or demands of all Persons
(other than Bank) claiming the Collateral or any interest therein. Borrower will keep all
Collateral free and clear of all Liens except Permitted Liens. Borrower will take all commercially
reasonable steps necessary to prosecute any Person Infringing its Intellectual Property Rights and
to defend itself against any Person accusing it of Infringing any Person’s Intellectual Property
Rights.



     Section 6.16. Insurance. Borrower will obtain and at all times maintain insurance with
insurers believed by Borrower to be responsible and reputable, in such amounts and against such



- 39 -









 




risks as may from time to time be required by Bank, but in all events in such amounts and against
such risks as is usually carried by companies engaged in similar business and owning similar
properties in the same general areas in which Borrower operates. Without limiting the generality of
the foregoing, Borrower will at all times keep all tangible Collateral insured against risks of
fire (including so-called extended coverage), theft, collision (for Collateral consisting of motor
vehicles) and such other risks and in such amounts as Bank may reasonably request, with any loss
payable to Bank to the extent of its interest, and all policies of such insurance shall contain a
lender’s loss payable endorsement for Bank’s benefit. All policies of liability insurance required
hereunder shall name Bank as an additional insured.




     Section 6.17. Preservation of Existence. Borrower will preserve and maintain its existence
and all of its rights, privileges and franchises necessary or desirable in the normal conduct of
its business and shall conduct its business in an orderly, efficient and regular manner.



     Section 6.18. Delivery of Instruments, etc. Upon request by Bank, Borrower will promptly
deliver to Bank in pledge all instruments, documents and chattel paper constituting Collateral,
duly endorsed or assigned by Borrower.



     Section 6.19. Sale or Transfer of Assets; Suspension of Business Operations. Borrower will
not sell, lease, assign, transfer or otherwise dispose of (i) the stock of any Subsidiary, (ii) all
or a substantial part of its assets, or (iii) any Collateral or any interest therein (whether in
one transaction or in a series of transactions) to any other Person other than (v) the sale of
Inventory in the ordinary course of business, (w) dispositions of obsolete, surplus, worn or
nonfunctional Equipment, (x) dispositions of cash or Cash Equivalents not otherwise prohibited
under this Agreement, (y) transfers of Intellectual Property Rights as permitted under this Section
6.19 and (z) dispositions of other assets in any given fiscal year in an aggregate amount not to
exceed $750,000 or $250,000 for any individual asset. Borrower will not liquidate, dissolve or
suspend business operations. Borrower will not transfer any part of its ownership interest in any
Intellectual Property Rights except for transfers of Immaterial Intellectual Property Rights and
licensing or sublicensing of Intellectual Property Rights in the ordinary course of Borrower’s
business. Borrower will not permit any agreement under which it has licensed Licensed Intellectual
Property, other than Immaterial Intellectual Property Rights, to lapse. If Borrower transfers any
Intellectual Property Rights for value, other than transfers of Immaterial Intellectual Property
Rights and licensing or sublicensing of Intellectual Property Rights in the ordinary course of
Borrower’s business, Borrower will pay over the proceeds to Bank for application to the
Obligations. Bank hereby agrees that in the event Borrower licenses or sublicenses any
Intellectual Property Rights pursuant to the terms of this Section 6.19, following written demand
of Borrower, Bank shall execute a form of estoppel reasonably acceptable in form and substance to
Borrower and Bank pursuant to which Bank shall represent that upon its exercise of any of its
rights or remedies hereunder or under any other Loan Document with respect to the licensed or
sublicensed Intellectual Property Rights, including a foreclosure under any Security Document, so
long as there shall then exist no breach, default, or event of default on the part of the related
licensee or sublicensee, as applicable, which breach, default or event of default has continued
beyond any cure periods provided in the license or sublicense, Bank shall not extinguish or
terminate the interest of the licensee or sublicensee, as applicable, by reason of such
foreclosure.



- 40 -









 





     Section 6.20. Consolidation and Merger; Asset Acquisitions. Borrower will not consolidate
with or merge into any Person, or
permit any other Person to merge into Borrower, or acquire (in a transaction analogous
in purpose or effect to a consolidation or
merger) all or substantially all the assets of any other Person.



     Section 6.21. Sale and Leaseback. Borrower will not enter into any arrangement, directly or
indirectly, with any other
Person whereby Borrower shall sell or transfer any real or personal property, whether now owned or
hereafter acquired, and then or
thereafter rent or lease as lessee such property or any part thereof or any other
property which Borrower intends to use for
substantially the same purpose or purposes as the property being sold or transferred.



     Section 6.22. Restrictions on Nature of Business. Borrower will not engage in any line of business materially different
from that presently engaged in by Borrower and will not purchase, lease or otherwise acquire assets not related to its business.



     Section 6.23. Accounting. Borrower will not adopt any material change in accounting principles other than as required by
GAAP. Borrower will not adopt, permit or consent to any change in its fiscal year.



     Section 6.24. Discounts, etc. Borrower will not grant any discount, credit or allowance to any customer of Borrower or
accept any return of goods sold except in accordance with its historical practice or in the ordinary course of business. After
notice from Bank, Borrower will not at any time modify, amend, subordinate, cancel or terminate the obligation of any Account Debtor
or other obligor of Borrower.



     Section 6.25. Plans. Unless disclosed to Bank pursuant to Section 5.12, neither Borrower nor any ERISA Affiliate will
(i) adopt, create, assume or become a party to any Pension Plan, (ii) incur any obligation to contribute to any Multiemployer Plan,
(iii) incur any obligation to provide post-retirement medical or insurance benefits with respect to employees or former employees
(other than benefits required by law) or (iv) amend any Plan in a manner that would materially increase its funding obligations.



     Section 6.26. Place of Business; Name. Borrower will not transfer its chief executive office or principal place of
business, or move, relocate, close or sell any business location. Borrower will not permit any tangible Collateral or any records
pertaining to the Collateral to be located in any state or area in which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in fact been, filed in order to perfect the Security Interest.
Borrower will not change its name or jurisdiction of organization.



     Section 6.27. Constituent Documents. Borrower will not amend its Constituent Documents in any respect that will result
in a Material Adverse Effect.



     Section 6.28. Transactions With Affiliates. Borrower will not directly or indirectly enter into or permit to exist any
transaction with any Affiliate of Borrower except for transactions that are in the ordinary course of Borrower’s business, upon fair
and reasonable terms, that are fully




- 41 -










 





disclosed to Bank, and that are no less favorable to Borrower than would be obtained in an
arm’s length transaction with a non-Affiliate.




     Section 6.29. Use of Funds. Borrower will not use any of the proceeds of any credit extended
hereunder except for the purposes stated in Article II hereof.



     Section 6.30. Subordination of Debt. All obligations of Borrower to any Guarantor or any
Affiliate of Borrower (other than amounts arising pursuant to the tax sharing agreement among the
Companies and Parent) shall be subordinated in right of repayment to all obligations of Borrower to
Bank, as evidenced by and subject to the terms of subordination agreements in form and substance
satisfactory to Bank.



     Section 6.31. Management Fees. The Companies, collectively, will not pay management fees to
Parent (including any fees or other amounts due Parent pursuant to the Corporate Services
Agreement, dated November 15, 1999, between Parent and Borrower) in an amount greater than
$2,500,000 during any one fiscal year and, with respect solely to operating expenses paid by Parent
on behalf of the Companies in the ordinary course of business of such parties and in line with
historical practices, will reimburse Parent only for the reasonable portion of any such expenses;
provided during any Default Period, Borrower shall not make any payments of management fees or
expense reimbursements and any such items that would otherwise be paid notwithstanding such Default
Period shall be accrued until such time, if any, following the expiration of such Default Period.
Any management fees paid by Borrower to Parent shall be paid no more frequently than once per
month.



     Section 6.32. Maintenance of Accounts with Bank. Borrower shall, and shall cause each of the
other Companies to, at all times during the period commencing on the Closing Date and ending on the
Termination Date, maintain its primary depository accounts with Bank, including, without
limitation, the Loan Account and the Lockbox Account, pursuant to account agreements and terms
mutually acceptable to Borrower and Bank.



     Section 6.33. Grower Contracts. With respect to all contracts with growers entered into by
Borrower after the Closing Date, (i) Borrower shall use its commercially reasonable efforts to
ensure that all such contracts shall be Acceptable Grower Contracts and (ii) upon Bank’s request,
Borrower shall permit any officer, employee, attorney or accountant for Bank to audit, review, make
extracts from or copy any and all such grower contracts.



     Section 6.34. Performance by Bank. If Borrower at any time fails to perform or observe any of
the foregoing covenants contained in this Article VI or elsewhere herein, and if such failure shall
continue for a period of ten calendar days after Bank gives Borrower written notice thereof (or in
the case of the agreements contained in Sections 6.14 and 6.16, immediately upon the occurrence of
such failure, without notice or lapse of time), Bank may, but need not, perform or observe such
covenant or covenants on behalf and in the name, place and stead of Borrower (or, at Bank’s option,
in Bank’s name) and may, but need not, take any and all other actions which Bank may reasonably
deem necessary to cure or correct such failure (including the payment of taxes, the satisfaction of
Liens, the performance of obligations owed to Account Debtors or other obligors, the procurement
and maintenance of insurance, the execution of



- 42 -









 




assignments, security agreements and financing statements, and the endorsement of
instruments); and Borrower shall thereupon pay to Bank on demand the amount of all monies expended
and all costs and expenses (including reasonable attorneys’ fees and legal expenses) incurred by
Bank in connection with or as a result of the performance or observance of such agreements or the
taking of such action by Bank, together with interest thereon from the date expended or incurred at
the Default Rate applicable to Line of Credit Advances. To facilitate Bank’s performance or
observance of such covenants of Borrower, Borrower hereby irrevocably appoints Bank, or Bank’s
delegate, acting alone, as Borrower’s attorney in fact (which appointment is coupled with an
interest) with the right (but not the duty) from time to time to create, prepare, complete,
execute, deliver, endorse or file in the name and on behalf of Borrower any and all instruments,
documents, assignments, security agreements, financing statements, applications for insurance and
other agreements and writings required to be obtained, executed, delivered or endorsed by Borrower
under this Section 6.34.




Article VII

Events of Default, Rights and Remedies




     Section 7.1. Events of Default. “Event of Default”, wherever used herein, means any one of
the following events:



     (a) Default in the payment of any Obligations when they become due and payable;



     (b) Default in the performance, or breach, of any covenant or agreement of Borrower contained
in this Agreement or in any other Loan Document, and (i) with respect to any such default under
Section 6.2, such default shall continue unremedied for a period of five (5) days, and (ii) and
with respect to any such default under Sections 6.13, 6.14, 6.15 and 6.18, such default shall
continue unremedied for twenty (20) days after the earlier of (A) the date upon which an Officer or
Director of Borrower obtained actual knowledge of such failure or (B) the date upon which written
notice thereof is given to Borrower by Bank.



     (c) A Change of Control shall occur;



     (d) An Insolvency Proceeding is commenced by Borrower or any Guarantor;



     (e) An Insolvency Proceeding is commenced against Borrower, or any Guarantor, and any of the
following events occur: (a) Borrower or such Guarantor consents to the institution of such
Insolvency Proceeding against it, (b) the petition commencing the Insolvency Proceeding is not
timely controverted, (c) the petition commencing the Insolvency Proceeding is not dismissed within
sixty (60) calendar days of the date of the filing thereof; provided that, during the pendency of
such period, Bank shall be relieved of its obligations to extend credit hereunder, (d) an interim
trustee is appointed to take possession of all or any substantial portion of the properties or
assets of, or to operate all or any substantial portion of the business of, Borrower or any such
Guarantor, or (e) an order for relief shall have been entered therein;



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     (f) Any material portion of Borrower’s or any Guarantor’s assets is attached, seized,
subjected to a writ or distress warrant, levied upon, or comes into the possession of any third
Person;



     (g) Borrower or any Guarantor is enjoined, restrained, or in any way prevented by court order
from continuing to conduct all or any material part of its business affairs;



     (h) A notice of Lien, levy, or assessment is filed of record with respect to any of Borrower’s
or any Guarantor’s assets by the United States, or any department, agency, or instrumentality
thereof, or by any state, county, municipal, or governmental agency, or if any taxes or debts owing
at any time hereafter to any one or more of such entities becomes a Lien, whether choate or
otherwise, upon any of Borrower’s or any Guarantor’s assets valued in excess of $500,000 and the
same is not paid before such payment is delinquent; provided that Bank may at any time that any
such Lien exists reserve against the Borrowing Base in the amount of such Lien;



     (i) This Agreement or any other Loan Document that purports to create a Lien, shall, for any
reason, fail or cease to create a valid and perfected and, except to the extent permitted by the
terms hereof or thereof, first priority Lien on or security interest in the Collateral covered
hereby or thereby; provided that any such event described in this clause (i) shall not be an Event
of Default for so long as Borrower is diligently assisting Bank, as determined by Bank in its sole
and absolute discretion, in correcting the applicable problem;



     (j) Any provision of any Loan Document shall at any time for any reason be declared to be null
and void, or the validity or enforceability thereof shall be contested by Borrower, or a proceeding
shall be commenced by Borrower, or by any Governmental Authority having jurisdiction over Borrower,
seeking to establish the invalidity or unenforceability thereof, or Borrower shall deny that
Borrower has any liability or obligation purported to be created under any Loan Document;



     (k) Any representation or warranty made by Borrower in this Agreement or in any other Loan
Document, by any Guarantor in any guaranty delivered to Bank, or by Borrower (or any of its
Officers) or any Guarantor in any agreement, certificate, instrument or financial statement or
other statement contemplated by or made or delivered pursuant to or in connection with this
Agreement or any such guaranty shall prove to have been incorrect in any material respect when
deemed to be effective;



     (l) The rendering against Borrower of an arbitration award, final judgment, decree or order
for the payment of money in excess of $1,000,000 over applicable insurance coverage and the
continuance of such arbitration award, judgment, decree or order unsatisfied and in effect for any
period of 60 consecutive days without a stay of execution;



     (m) A default under any bond, debenture, note or other evidence of material Indebtedness of
Borrower owed to any Person other than Bank, or under any indenture or other instrument under which
any such evidence of Indebtedness has been issued or by which it is governed, or under any material
lease or other contract, and the expiration of the applicable



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period of grace, if any, specified in such evidence of Indebtedness, indenture, other
instrument, lease or contract, and the effect of such failure, event or condition is to cause, or
permit the holder or holders thereof to cause, Indebtedness of Borrower (other than the
Obligations) (in an aggregate amount exceeding $500,000 in the event that such Indebtedness is
unsecured) to become redeemable, due or otherwise payable (whether at scheduled maturity, by
required prepayment, upon acceleration or otherwise);




     (n) Any Reportable Event, which Bank determines in good faith might constitute grounds for the
termination of any Pension Plan or for the appointment by the appropriate United States District
Court of a trustee to administer any Pension Plan, shall have occurred and be continuing 30 days
after written notice to such effect shall have been given to Borrower by Bank; or a trustee shall
have been appointed by an appropriate United States District Court to administer any Pension Plan;
or the Pension Benefit Guaranty Corporation shall have instituted proceedings to terminate any
Pension Plan or to appoint a trustee to administer any Pension Plan; or Borrower or any ERISA
Affiliate shall have filed for a distress termination of any Pension Plan under Title IV of ERISA;
or Borrower or any ERISA Affiliate shall have failed to make any quarterly contribution required
with respect to any Pension Plan under Section 412(m) of the IRC, which Bank determines in good
faith may by itself, or in combination with any such failures that Bank may determine are likely to
occur in the future, result in the imposition of a Lien on Borrower’s assets in favor of the
Pension Plan; or any withdrawal, partial withdrawal, reorganization or other event occurs with
respect to a Multiemployer Plan which results or could reasonably be expected to result in a
material liability of Borrower to the Multiemployer Plan under Title IV of ERISA.



     (o) An event of default shall occur under any Security Document;



     (p) Borrower shall liquidate, dissolve, terminate or suspend its business operations or
otherwise fail to operate its business in the ordinary course, or sell or attempt to sell all or
substantially all of its assets;



     (q) Default in the payment of any amount owed by Borrower to Bank other than any Indebtedness
arising hereunder after the expiration of any applicable express grace period related to such
amount;



     (r) Any Guarantor shall repudiate, purport to revoke or fail to perform his obligations under
his guaranty in favor of Bank, any individual Guarantor shall die or any other Guarantor shall
cease to exist;



     (s) Borrower shall take or participate in any action which would be prohibited under the
provisions of any Subordination Agreement or make any payment on any indebtedness subordinated
thereby that any Person was not entitled to receive under the provisions of the Subordination
Agreement;



     (t) The occurrence of any “Default” or “Event of Default” under, and as defined in, any
agreement between any Affiliate of Borrower and Bank (but giving effect to any applicable grace or
cure periods with respect thereto); or



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     (u) Any other event having a Material Adverse Effect shall occur, and if such Material Adverse
Effect is capable of cure, such Material Adverse Effect shall continue uncured for twenty (20) days
after the earlier of (A) the date upon which an Officer or Director of Borrower obtained actual
knowledge of such Material Adverse Effect or (B) the date upon which written notice thereof is
given to Borrower by Bank.



     Section 7.2. Rights and Remedies. Upon the occurrence and during the continuation of an Event
of Default, Bank may exercise any or all of the following rights and remedies, all of which
Borrower acknowledges and agrees are commercially reasonable:



     (a) Bank may, by notice to Borrower, declare the Credit Facility to be terminated, whereupon
the same shall forthwith terminate;



     (b) Bank may, by notice to Borrower, declare the Obligations to be forthwith due and payable,
whereupon all Obligations shall become and be forthwith due and payable, without presentment,
notice of dishonor, protest or further notice of any kind, all of which Borrower hereby expressly
waives;



     (c) Bank may, without notice to Borrower and without further action, apply any and all money
owing by Bank to Borrower to the payment of the Obligations;



     (d) Bank may settle or adjust disputes and claims directly with Account Debtors for amounts
and upon terms which Bank considers advisable, and in such cases, Bank will credit the Obligations
with only the net amounts received by Bank in payment of such disputed Accounts after deducting all
expenses incurred or expended by Bank in connection therewith;



     (e) Bank may cause Borrower to hold all returned Inventory in trust for Bank, segregate all
returned Inventory from all other assets of Borrower or in Borrower’s possession and conspicuously
label said returned Inventory as the property of Bank;



     (f) without notice to or demand upon Borrower or any Guarantor, Bank may make such payments
and do such acts as Bank considers necessary or reasonable to protect its security interests in the
Collateral. Borrower agrees to assemble the Collateral if Bank so requires, and to make the
Collateral available to Bank at a place that Bank may designate which is reasonably convenient to
both parties. Borrower authorizes Bank to enter the premises where the Collateral is located, to
take and maintain possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any Lien that in Bank’s determination appears to conflict with Bank’s Liens and to
pay all expenses incurred in connection therewith and to charge the Obligations therefor. With
respect to any of Borrower’s owned or leased premises, Borrower hereby grants Bank a license to
enter into possession of such premises and to occupy the same, without charge, in order to exercise
any of Bank’s rights or remedies provided herein, at law, in equity, or otherwise;



     (g) without notice to Borrower (such notice being expressly waived), and without constituting
a retention of any collateral in satisfaction of an obligation (within the meaning of the UCC),
Bank may set off and apply to the Obligations any and all (i) balances and deposits of



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Borrower held by Bank (including any amounts received in the Lockbox), or (ii) Indebtedness at
any time owing to or for the credit or the account of Borrower held by Bank;




     (h) Bank may hold, as cash collateral, any and all balances and deposits of Borrower held by
Bank, and any amounts received in the Lockbox, to secure the full and final repayment of all of the
Obligations;



     (i) Bank may ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,
advertise for sale, and sell (in the manner provided for herein) the Collateral;



     (j) Bank may sell the Collateral at either a public or private sale, or both, by way of one or
more contracts or transactions, for cash or on terms, in such manner and at such places (including
Borrower’s premises) as Bank determines is commercially reasonable. It is not necessary that the
Collateral be present at any such sale;



     (k) Bank shall give notice of the disposition of the Collateral as follows:




     (i) Bank shall give Borrower a notice in writing of the time and place of public sale,
or, if the sale is a private sale or some other disposition other than a public sale is to
be made of the Collateral, the time on or after which the private sale or other disposition
is to be made; and




     (ii) The notice shall be personally delivered or mailed, postage prepaid, to Borrower
as provided in Section 8.3, at least 10 days before the earliest time of disposition set
forth in the notice; no notice needs to be given prior to the disposition of any portion of
the Collateral that is perishable or threatens to decline speedily in value or that is of a
type customarily sold on a recognized market;



     (l) Bank may credit bid and purchase at any public sale;



     (m) Bank may seek the appointment of a receiver or keeper to take possession of all or any
portion of the Collateral or to operate the same and, to the maximum extent permitted by law, may
seek the appointment of such a receiver without the requirement of prior notice or a hearing;



     (n) If Bank sells any of the Collateral on credit, the Obligations will be reduced only to the
extent of payments actually received. If the purchaser fails to pay for the Collateral, Bank may
resell the Collateral and shall apply any proceeds actually received to the Obligations;



     (o) Bank shall have no obligation to attempt to satisfy the Obligations by collecting them
from any third Person which may be liable for them or any portion thereof, and Bank may release,
modify or waive any collateral provided by any other Person as security for the Obligations or any
portion thereof, all without affecting Bank’s rights against Borrower. Borrower waives any right
it may have to require Bank to pursue any third Person for any of the Obligations;



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     (p) Bank may make demand upon Borrower and, forthwith upon such demand, Borrower will pay to
Bank in immediately available funds for deposit in the Special Account an amount equal to the
aggregate maximum amount available to be drawn under all Letters of Credit then outstanding,
assuming compliance with all conditions for drawing thereunder;



     (q) Bank may exercise and enforce its rights and remedies under the Loan Documents; and



     (r) Bank may exercise any other rights and remedies available to it by law or agreement.


Notwithstanding the foregoing, upon the occurrence of an Event of Default described in subsections
(d) or (e) of Section 7.1, the Obligations shall be immediately due and payable automatically
without presentment, demand, protest or notice of any kind.




     Section 7.3. Disclaimer of Warranties. Bank may sell the Collateral without giving any
warranties as to the Collateral. Bank may specifically disclaim any warranties of title or the
like. This procedure will not be considered to adversely affect the commercial reasonableness of
any sale of the Collateral.



     Section 7.4. Compliance With Laws. Bank may comply with any applicable state or federal law
requirements in connection with a disposition of the Collateral, and Bank’s compliance therewith
will not be considered to adversely affect the commercial reasonableness of any sale of the
Collateral.



     Section 7.5. No Marshalling. Bank shall be under no obligation to marshal any assets in favor
of Borrower, or against or in payment of the Obligations or any other obligation owned to Bank by
Borrower or any other Person.



     Section 7.6. Borrower to Cooperate. Upon the exercise by Bank of any power, right, privilege,
or remedy pursuant to this Agreement which requires any consent, approval, registration,
qualification, or authorization of any Governmental Authority, Borrower agrees to execute and
deliver, or will cause the execution and delivery of, all applications, certificates, instruments,
assignments, and other documents and papers that Bank or any purchaser of the Collateral may be
required to obtain for such governmental consent, approval, registration, qualification, or
authorization.



     Section 7.7. Application of Proceeds. All proceeds realized as the result of any sale of the
Collateral shall be applied by Bank:




     FIRST to the costs, expenses, liabilities, obligations and attorneys’ fees incurred by
Bank in the exercise of its rights under this Agreement;




     SECOND to the interest and fees due upon any of the Obligations; and



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     THIRD to the principal of the Obligations, in such order as Bank shall determine in its
sole discretion. Any surplus shall be paid to Borrower or other Persons legally entitled
thereto; Borrower shall remain liable to Bank for any deficiency.



     Section 7.8. Remedies Cumulative. The rights and remedies of Bank under this Agreement, the
other Loan Documents, and all other agreements contemplated hereby and thereby shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as provided under the UCC,
by law, or in equity. No exercise by Bank of any one right or remedy shall be deemed an election
of remedies, and no waiver by Bank of any default on Borrower’s part shall be deemed a continuing
waiver of any further defaults.



     Section 7.9. Bank Not Liable For The Collateral. So long as Bank complies with the
obligations, if any, imposed by the UCC, Bank shall not otherwise be liable or responsible in any
way or manner for: (a) the safekeeping of the Collateral; (b) any loss or damage thereto occurring
or arising in any manner or fashion or from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee, forwarding agency, or other person
whomsoever, in each case, other than arising as a result of the gross negligence or willful
misconduct of Bank. Borrower bears the risk of loss or damage of the Collateral.



Article VIII

Miscellaneous




     Section 8.1. No Waiver. No failure or delay by Bank in exercising any right, power or remedy
under the Loan Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further exercise thereof or the
exercise of any other right, power or remedy under the Loan Documents.



     Section 8.2. Amendments, Etc. No amendment, modification, termination or waiver of any
provision of any Loan Document or consent to any departure by Borrower therefrom or any release of
a Security Interest shall be effective unless the same shall be in writing and signed by Bank, and
then such waiver or consent shall be effective only in the specific instance and for the specific
purpose for which given. No notice to or demand on Borrower in any case shall entitle Borrower to
any other or further notice or demand in similar or other circumstances.



     Section 8.3. Addresses for Notices; Requests for Accounting. Except as otherwise expressly
provided herein, all notices, requests, demands and other communications provided for under the
Loan Documents shall be in writing and shall be (a) personally delivered, (b) sent by first class
United States mail, (c) sent by overnight courier of national reputation, or (d) transmitted by
telecopy, in each case addressed or telecopied to the party to whom notice is being given at its
address or telecopier number as set forth below next to its signature or, as to each party, at such
other address or telecopier number as may hereafter be designated by such party in a written notice
to the other party complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on (a) the date
received if personally delivered, (b) when deposited in the mail if delivered by mail, (c) the date
sent if sent by overnight courier, or (d) the date of transmission if delivered by telecopy, except
that notices or requests to Bank pursuant to any of the provisions



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of Article II shall not be effective until received by Bank. All requests under Section 9210
of the UCC (i) shall be made in a writing signed by a person authorized under Section 2.1(d), (ii)
shall be personally delivered, sent by registered or certified mail, return receipt requested, or
by overnight courier of national reputation (iii) shall be deemed to be sent when received by Bank
and (iv) shall otherwise comply with the requirements of Section 9210. Borrower requests that Bank
respond to each such request which on its face appears to come from an authorized individual and
releases Bank from any liability for so responding. Borrower shall pay Bank the maximum amount
allowed by law for responding to such requests.




     Section 8.4. Further Documents. Borrower will from time to time execute and deliver or
endorse any and all instruments, documents, conveyances, assignments, security agreements,
financing statements, control agreements and other agreements and writings that Bank may reasonably
request in order to secure, protect, perfect or enforce the Security Interest or Bank’s rights
under the Loan Documents (but any failure to request or assure that Borrower executes, delivers or
endorses any such item shall not affect or impair the validity, sufficiency or enforceability of
the Loan Documents and the Security Interest, regardless of whether any such item was or was not
executed, delivered or endorsed in a similar context or on a prior occasion).



     Section 8.5. Costs and Expenses. Borrower shall pay within fifteen (15) days after written
demand all costs and expenses, including reasonable attorneys’ fees, incurred by Bank in connection
with the Obligations, this Agreement, the Loan Documents, any Letter of Credit and any other
document or agreement related hereto or thereto, and the transactions contemplated hereby,
including all such costs, expenses and fees incurred in connection with the negotiation,
preparation, execution, amendment, administration, performance, collection and enforcement of the
Obligations and all such documents and agreements and the creation, perfection, protection,
satisfaction, foreclosure or enforcement of the Security Interest.



     Section 8.6. Indemnity. In addition to the payment of expenses pursuant to Section 8.5,
Borrower shall indemnify, defend and hold harmless Bank, and any of its participants, parent
corporations, subsidiary corporations, affiliated corporations, successor corporations, and all
present and future officers, directors, employees, attorneys and agents of the foregoing (the
“Indemnitees”) from and against any of the following (collectively, “Indemnified Liabilities”), in
each, other than arising as a result of the gross negligence or willful misconduct of any
Indemnitee:




     (i) any and all transfer taxes, documentary taxes, assessments or charges made by any
Governmental Authority by reason of the execution and delivery of the Loan Documents or the
making of the Advances;




     (ii) any claims, loss or damage to which any Indemnitee may be subjected if any
representation or warranty contained in Section 5.14 proves to be incorrect in any respect
or as a result of any violation of the covenant contained in Section 6.13(b); and




     (iii) any and all other liabilities, losses, damages, penalties, judgments, suits,
claims, costs and expenses of any kind or nature whatsoever (including the reasonable fees
and disbursements of counsel) in connection with the foregoing and any other



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investigative, administrative or judicial proceedings, whether or not such Indemnitee shall
be designated a party thereto, which may be imposed on, incurred by or asserted against any
such Indemnitee, in any manner related to or arising out of or in connection with the Credit
Facility and the Loan Documents or the use or intended use of the proceeds of the Line of
Credit.


If any investigative, judicial or administrative proceeding arising from any of the foregoing is
brought against any Indemnitee, upon such Indemnitee’s request, Borrower, or counsel designated by
Borrower and satisfactory to the Indemnitee, will resist and defend such action, suit or proceeding
to the extent and in the manner directed by the Indemnitee, at Borrower’s sole costs and expense.
Each Indemnitee will use its best efforts to cooperate in the defense of any such action, suit or
proceeding. If the foregoing undertaking to indemnify, defend and hold harmless may be held to be
unenforceable because it violates any law or public policy, Borrower shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which
is permissible under applicable law. Borrower’s obligation under this Section 8.6 shall survive
the termination of this Agreement and the discharge of Borrower’s other obligations hereunder.




     Section 8.7. Participants. Borrower hereby authorizes Bank to disclose to any assignee or any
participant (either, a “Transferee”) and any prospective Transferee any and all financial
information in Bank’s possession concerning Borrower which has been delivered to Bank by Borrower
pursuant to this Agreement or which has been delivered to Bank by Borrower in connection with
Bank’s credit evaluation prior to entering into this Agreement. Bank and its participants, if any,
are not partners or joint venturers, and Bank shall not have any liability or responsibility for
any obligation, act or omission of any of its participants. All rights and powers specifically
conferred upon Bank may be transferred or delegated to any of Bank’s participants, successors or
assigns.



     Section 8.8. Advertising and Promotion. Borrower agrees that Bank may use Borrower’s name in
advertising and promotional materials, and in conjunction therewith, Bank may disclose the amount
of the Credit Facility and the purpose thereof.



     Section 8.9. Execution in Counterparts; Telefacsimile Execution. This Agreement and the other
Loan Documents may be executed in any number of counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which counterparts, taken together, shall
constitute but one and the same instrument. Delivery of an executed counterpart of this Agreement
by telefacsimile shall be equally as effective as delivery of an original executed counterpart of
this Agreement. Any party delivering an executed counterpart of this Agreement by telefacsimile
also shall deliver an original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.



     Section 8.10. Retention of Borrower’s Records. Bank shall have no obligation to maintain any
electronic records or any documents, schedules, invoices, agings, or other papers delivered to Bank
by Borrower or in connection with the Loan Documents for more than twelve



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months after receipt by Bank; provided that Borrower shall not have any obligation to provide
Bank with duplicate records and documents after the same have been destroyed by Bank.




     Section 8.11. Binding Effect; Assignment; Complete Agreement; Exchanging Information. The
Loan Documents shall be binding upon and inure to the benefit of Borrower and Bank and their
respective successors and assigns, except that Borrower shall not have the right to assign its
rights thereunder or any interest therein without Bank’s prior written consent. Bank shall not
assign any of its rights and obligations arising under this Agreement or the Line of Credit Note
without the prior written consent of Borrower, which consent shall not be unreasonably withheld or
delayed; provided notwithstanding the foregoing, Borrower’s consent to any such assignment shall
not be required (i) if a Default Period has occurred and is continuing, (ii) if Bank assigns this
Agreement in connection with any sale or all or any portion of its loan portfolio, or (iii) if Bank
assigns this Agreement to any Affiliate of Bank. To the extent permitted by law, Borrower waives
and will not assert against any assignee any claims, defenses or set-offs which Borrower could
assert against Bank. This Agreement shall also bind all Persons who become a party to this
Agreement as Borrower. This Agreement, together with the Loan Documents, comprises the complete
and integrated agreement of the parties on the subject matter hereof and supersedes all prior
agreements, written or oral, on the subject matter hereof. Without limiting Bank’s right to share
information regarding Borrower and its Affiliates with Bank’s participants, accountants, lawyers
and other advisors, Bank, Wells Fargo & Company, and all direct and indirect subsidiaries of Wells
Fargo & Company, may exchange any and all information they may have in their possession regarding
Borrower and its Affiliates, and Borrower waives any right of confidentiality it may have with
respect to such exchange of such information.



     Section 8.12. Severability of Provisions. Any provision of this Agreement which is prohibited
or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof.



     Section 8.13. Revival and Reinstatement of Obligations. If the incurrence or payment of the
Obligations by Borrower or any Guarantor or the transfer to Bank of any property should for any
reason subsequently be declared to be void or voidable under any state or federal law relating to
creditors’ rights, including provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers of property
(collectively, a “Voidable Transfer”), and if Bank is required to repay or restore, in whole or in
part, any such Voidable Transfer, or elects to do so upon the reasonable advice of its counsel,
then, as to any such Voidable Transfer, or the amount thereof that Bank is required or elects to
repay or restore, and as to all reasonable costs, expenses, and attorneys fees of Bank related
thereto, the liability of Borrower or any Guarantor automatically shall be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been made.



     Section 8.14. Headings. Article, Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.



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     Section 8.15. Governing Law. This agreement and the other loan documents (except
as otherwise specified therein), and the rights and duties of the parties hereto, shall be
construed and determined in accordance with the internal laws of the state of California.



     Section 8.16. Submission to Jurisdiction. Subject to section 8.17: (i) any legal action
or proceeding with respect to this Agreement or any other Loan Document may be brought solely in
the courts of the state of California or of the United States for the Northern District of
California, and, by execution and delivery hereof, each of Borrower and Bank consents, for itself
and in respect of its property, to the jurisdiction of those courts; (ii) each of Borrower and Bank
irrevocably waives any objection, including any objection to the laying of venue or based on the
grounds of forum non conveniens, which it may now or hereafter have to the bringing of any action
or proceeding in such jurisdiction in respect of this agreement or any document related hereto.
Each of Borrower and Bank waives personal service of any summons, complaint or other process, which
may be made by any other means permitted by California law.



     Section 8.17. Waiver of Jury Trial. Each of Borrower and Bank, to the fullest extent
permitted by applicable law, hereby irrevocably waives all right to a trail by jury in any action,
proceeding, counterclaim or other litigation in any way arising out of or relating to this
Agreement, any other of the Loan Documents or any of the transactions or events referenced herein
or therein or contemplated hereby or thereby, whether with respect to contract claims, tort claims
or otherwise. This waiver shall apply to any subsequent amendments, renewals, supplements or
modifications to this Agreement or any other of the Loan Documents. A copy of this section 8.17
may be filed with any court as written evidence of the waiver of the right to trial by jury and the
consent to trial by court.



     Section 8.18. Arbitration.



     (a) Arbitration. The parties hereto agree, upon demand by any party, to submit to binding
arbitration all claims, disputes and controversies between or among them (and their respective
employees, officers, directors, attorneys, and other agents), whether in tort, contract or
otherwise arising out of or relating to in any way (i) the loan and related Loan Documents which
are the subject of this Agreement and its negotiation, execution, collateralization,
administration, repayment, modification, extension, substitution, formation, inducement,
enforcement, default or termination; or (ii) requests for additional credit.



     (b) Governing Rules. Any arbitration proceeding will (i) proceed in a location in California
selected by the American Arbitration Association (“AAA”); (ii) be governed by the Federal
Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law
provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such
other administrator as the parties shall mutually agree upon, in accordance with the AAA’s
commercial dispute resolution procedures, unless the claim or counterclaim is at



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least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case
the arbitration shall be conducted in accordance with the AAA’s optional procedures for large,
complex commercial disputes (the commercial dispute resolution procedures or the optional
procedures for large, complex commercial disputes to be referred to, as applicable, as the
“Rules”). If there is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to submit to arbitration
following a demand by any other party shall bear all costs and expenses incurred by such other
party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a
waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. §91 or any
similar applicable state law.




     (c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration requirement
does not limit the right of any party to (i) foreclose against real or personal property
collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such
as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin,
injunctive relief, attachment or the appointment of a receiver, before during or after the pendency
of any arbitration proceeding. This exclusion does not constitute a waiver of the right or
obligation of any party to submit any dispute to arbitration or reference hereunder, including
those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this
paragraph.



     (d) Arbitrator Qualifications and Powers. Any arbitration proceeding in which the amount in
controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to
the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which
the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of
three arbitrators; provided however, that all three arbitrators must actively participate in all
hearings and deliberations. The arbitrator will be a neutral attorney licensed in the State of
California or a neutral retired judge of the state or federal judiciary of California, in either
case with a minimum of ten years experience in the substantive law applicable to the subject matter
of the dispute to be arbitrated. The arbitrator will determine whether or not an issue is
arbitratable and will give effect to the statutes of limitation in determining any claim. In any
arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the
arbitrator’s discretion) any pre-hearing motions which are similar to motions to dismiss for
failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all
disputes in accordance with the substantive law of California and may grant any remedy or relief
that a court of such state could order or grant within the scope hereof and such ancillary relief
as is necessary to make effective any award. The arbitrator shall also have the power to award
recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator
deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure,
the California Rules of Civil Procedure or other applicable law. Judgment upon the award rendered
by the arbitrator may be entered in any court having jurisdiction. The institution and maintenance
of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff, to submit the controversy
or claim to arbitration if any other party contests such action for judicial relief.



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     (e) Discovery. In any arbitration proceeding discovery will be permitted in accordance with
the Rules. All discovery shall be expressly limited to matters directly relevant to the dispute
being arbitrated and must be completed no later than 20 days before the hearing date and within 180
days of the filing of the dispute with the AAA. Any requests for an extension of the discovery
periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a
showing that the request for discovery is essential for the party’s presentation and that no
alternative means for obtaining information is available.



     (f) Class Proceedings and Consolidations. The resolution of any dispute arising pursuant to
the terms of this Agreement shall be determined by a separate arbitration proceeding and such
dispute shall not be consolidated with other disputes or included in any class proceeding.



     (g) Payment Of Arbitration Costs And Fees. The arbitrator shall award all costs and expenses
of the arbitration proceeding.



     (h) Real Property Collateral; Judicial Reference. Notwithstanding anything herein to the
contrary, no dispute shall be submitted to arbitration if the dispute concerns indebtedness secured
directly or indirectly, in whole or in part, by any real property unless (i) the holder of the
mortgage, lien or security interest specifically elects in writing to proceed with the arbitration,
or (ii) all parties to the arbitration waive any rights or benefits that might accrue to them by
virtue of the single action rule statute of California, thereby agreeing that all indebtedness and
obligations of the parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any such dispute is not
submitted to arbitration, the dispute shall be referred to a referee in accordance with California
Code of Civil Procedure Section 638 et seq., and this general reference agreement is intended to be
specifically enforceable in accordance with said Section 638. A referee with the qualifications
required herein for arbitrators shall be selected pursuant to the AAA’s selection procedures.
Judgment upon the decision rendered by a referee shall be entered in the court in which such
proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and
645.



     (i) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the
parties shall take all action required to conclude any arbitration proceeding within 180 days of
the filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding
may disclose the existence, content or results thereof, except for disclosures of information by a
party required in the ordinary course of its business or by applicable law or regulation. If more
than one agreement for arbitration by or between the parties potentially applies to a dispute, the
arbitration provision most directly related to the Loan Documents or the subject matter of the
dispute shall control. This arbitration provision shall survive termination, amendment or
expiration of any of the Loan Documents or any relationship between the parties.



     Section 8.19. Confidentiality. Bank shall hold all confidential non-public information
obtained by Bank in accordance with Bank’s customary procedures for handling confidential
information of this nature; provided that Bank may disclose such confidential information (i) to
its examiners, Affiliates, outside auditors, counsel and other professional advisors on a need to



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know basis, (ii) to any prospective participant or transferee of Bank’s rights or obligations
hereunder, provided such participant or transferee agrees, prior to the disclosure of such
information by Bank, to be bound by the terms of this Section 8.19 with respect to such information
and (iii) as required or requested by any Governmental Authority or representative thereof or
pursuant to legal process; provided further that this duty shall expire if such information becomes
publicly available through no breach of this Section 8.19 by Bank; provided further that unless
specifically prohibited by applicable law or court order, Bank shall use commercially reasonable
efforts, prior to disclosure thereof, to notify Borrower of the request for disclosure of such
non-public information (A) by a Governmental Authority or representative thereof or (B) pursuant to
legal process. Notwithstanding anything herein to the contrary, Bank may disclose to any and all
Persons, without limitation of any kind, any information with respect to the “tax treatment” and
“tax structure” (in each case, within the meaning of Treasury Regulation Section 1.6011-4) of the
transactions contemplated hereby and all materials of any kind (including opinions or other tax
analyses) that are provided Bank relating to such tax treatment and tax structure; provided that
with respect to any document or similar item that in either case contains information concerning
the tax treatment or tax structure of the transaction as well as other information, this sentence
shall only apply to such portions of the document or similar item that relate to the tax treatment
or tax structure of the transactions contemplated hereby.




     Section 8.20. Effect on Prior Agreement. This Agreement amends and restates the Original
Agreement in its entirety, effective as of the Closing Date, and is not intended to constitute a
novation of the obligations thereunder. Nothing contained herein shall terminate any security
interests, guaranties or subordinations in favor of Bank and all such security interests,
guaranties and subordinations shall continue in full force and effect.


[Signatures on Next Page]




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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their
respective officers thereunto duly authorized as of the date first above written.








	 	 	 	 	 
	Apio, Inc.	 
	4575 West Main Street
	 	 	 	 
	Guadalupe, CA 93434
	 	 	 	 
	Telecopier: (805) 249-6257

	 	 
	Attention: Kathleen Morgan

	 	 	 
	e-mail: kmorgan@apioinc.com

	 	 	 
	 
	 	 	 	 
	Wells Fargo Bank, N.A.	 
	Peninsula RCBO
	 	 	 	 
	400 Hamilton Avenue, P.O. Box 150
	 	 	 	 
	Palo Alto, CA 94302

	 	 
	Telecopier: (650) 328-0814

	 	 	 
	Attention: Tim Palmer

	 	 	 
	e-mail: palmert@wellsfargo.com
	 	 	 	 










	 	 	 	 	 
	Apio, Inc.

	 	 	 	 	 
	By:
	 	     /s/ Kathleen Morgan
	 	 	     Kathleen Morgan
	 	 	     Chief Financial Officer
	 
	Wells Fargo Bank, National Association
	 
	By:
	 	     /s/ Tim Palmer
	 	 	     Tim Palmer
	 	 	     Vice President












Amended
and Restated 
Credit Agreement

 









 






Table of Exhibits and Schedules




	 	 	 	 	 
	 

	 	Exhibit A
	 	Form of Line of Credit Note
	 
	 	 	 	 
	 

	 	Exhibit B
	 	Form of Borrowing Base Certificate
	 
	 	 	 	 
	 

	 	Exhibit C
	 	Form of Compliance Certificate
	 
	 	 	 	 
	 

	 	Exhibit D
	 	Premises
	 
	 	 	 	 
	 

	 	Schedule 5.1
	 	Trade Names, Chief Executive Office, Principal Place of
Business, and Locations of Collateral
	 
	 	 	 	 
	 

	 	Schedule 5.2
	 	Capitalization and Organizational Chart
	 
	 	 	 	 
	 

	 	Schedule 5.5
	 	Subsidiaries
	 
	 	 	 	 
	 

	 	Schedule 5.11
	 	Intellectual Property Disclosures
	 
	 	 	 	 
	 

	 	Schedule 6.4
	 	Permitted Liens
	 
	 	 	 	 
	 

	 	Schedule 6.5
	 	Permitted Indebtedness and Guaranties