Exhibit 10.65


 


SUPPLEMENTAL SECURITY AGREEMENT


 


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


 


RECITALS


 


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


 


B.            Pursuant to that certain Credit Agreement
dated as of May 1, 2000, by and among Grantor, as borrower, and Pacific
Coast Farm Credit Services, PCA, Lender extended certain financial
accommodations to Borrower on the terms set forth therein.  Said financial conditions were conditioned,
among other things, on the execution of a Security Agreement dated as of May 1,
2000 (the “Original Security Agreement”).  
It is the intent of the parties hereto that this Security Agreement
supplement the Original Security Agreement which remains in full force and
effect.


 


NOW THEREFORE, for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and in order to induce Lender to renew the Revolving Loan  pursuant to the Amended and Restated Credit
Agreement, Grantor agrees, for the benefit of Lender, as follows:


 


AGREEMENT


 


1.             Defined
Terms.  Unless otherwise defined
herein, (i) terms defined in the Amended and Restated Credit Agreement are
used herein as therein defined except that the defined terms that refer to the “Borrower”
shall refer herein to Grantor, and (ii) the following terms shall have the
following meanings (such meanings being equally applicable to both the singular
and plural forms of the terms defined):


 


“Account Debtor”
means any “account debtor,” as such term is defined in the UCC.


 


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


 


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


 


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


 


“Collateral”
has the meaning assigned to it in Section 2 of this Security Agreement.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“hereby,” “herein,”
“hereof,” and “hereunder” and words of similar import refer to this
Security Agreement as a whole (including any amendments, attachments, and
schedules hereto) and not merely to the specific section, paragraph or clause
in which the respective word appears.


 


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


 


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


 


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


 


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


 


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


 


“Loan” has
the meaning assigned to it in Recital A.


 


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


 


“Patents”
means all of the following in which Grantor now holds or hereafter acquires any
interest: (i) all letters patent of the United States or any other
country, all registrations and recordings thereof, and all applications for
letters patent of the United States or any other country, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State or Territory thereof, or any other country, and (ii) all reissues,
continuations, continuations-in-part or extensions thereof.


 


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


 


“Secured
Obligations” means all obligations of Grantor to Lender under the Amended
and Restated  Credit Agreement or any
other Loan Document.


 


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


 


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“Trademark
License” means rights under any written agreement now owned or hereafter
acquired by Grantor granting any right to use any Trademark or Trademark
registration.


 


“Trademarks”
means all of the following now owned or hereafter acquired by Grantor:  (i) all trademarks, trade names,
corporate names, business names, trade styles, service marks, logos, other
source or business identifiers, prints and labels on which any of the foregoing
have appeared or appear, designs and general intangibles of like nature, now
existing or hereafter adopted or acquired, all registrations and recordings
thereof, and all applications in connection therewith, including registrations,
recordings and applications in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any State or Territory
thereof, or any other country or any political subdivision thereof, and (ii) all
reissues, extensions or renewals thereof.


 


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


 


2.             Grant of Security Interest.


 


a.             To
secure the prompt and complete payment and performance when due (whether at
stated maturity, by acceleration or otherwise) of all the Secured Obligations,
and to induce Lender to enter into the Amended and Restated Credit Agreement
and to make the Loan in accordance with the terms thereof, Grantor hereby grants
to Lender, a lien on and security interest in all of the property described on Exhibit A hereto, whether now owned by
or owing to, or hereafter acquired by or arising in favor of Grantor (including
under any trade names, styles or divisions thereof), and whether owned or
consigned by, or leased to Grantor, and regardless of where located, together
with any and all replacements, remedies, or accessions thereto and all proceeds
and products thereof (all of which being hereinafter collectively referred to as
the “Collateral”); provided, however, that notwithstanding any
provision to the contrary contained in this Security Agreement, Grantor does
not grant, and Lender has not taken, a lien against or security interest in (i) any
Hazardous Materials in which Grantor may now or hereafter acquire any interest,
or which Grantor may now or hereafter possess, manage or control, any (ii) any
of Grantor’s governmental licenses and permits that if included in the
Collateral would violate any mandatory requirements of such licenses and
permits or applicable law prohibiting the creation of security interests
therein.


 


b.             In
addition, to secure the prompt and complete payment when due of the Secured
Obligations and in order to induce Lender to enter into the Amended and Restated
Credit Agreement and to make the Loan in accordance with the terms thereof,
Grantor hereby grants to Lenders a security interest in all other personal
property of Grantor, including all property of every description now or
hereafter in the possession or custody of, or in transit to, Lender for any
purpose, including safekeeping, collection or pledge, for the account of
Grantor, or as to which Grantor may have any right or power.


 


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


 


a.             Grantor
Remains Liable Under Contracts and Licenses.  Grantor agrees that, anything herein to the
contrary notwithstanding, Grantor shall remain liable under each of its
Contracts and each of its Licenses to observe and perform all the conditions
and obligations to be observed and performed by it thereunder and Grantor shall
perform all of its duties and obligations thereunder, all in accordance with
and pursuant to the terms and provisions of each such Contract or License.  Lender shall not have any obligation or
liability under any Contract or License by reason of or arising out of this
Security Agreement or the granting herein of a security interest therein or the
receipt by Lender of any payment relating to any Contract or License pursuant
hereto, nor shall Lender be required or obligated in any manner to perform or
fulfill any of the obligations of Grantor under or pursuant to any Contract or
License, or to make any payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it or the sufficiency of any performance
by any party under any Contract or License, or to present or file any claim, or
to take any action to collect or enforce any performance or the payment of any
amounts which may have been assigned to it or to which it may be entitled at
any time or times.


 


b.             Notice
of Assignment of Collateral to Lender. 
Lender may at any time after the occurrence and during the continuance
of an Event of Default notify Account Debtors of Grantor, parties to the
Contracts of Grantor, and obligors in respect of Instruments and Investment
Property of Grantor that the Accounts and the right, title and interest of
Grantor in and under such Contracts, Instruments, and Investment Property have been
assigned to Lender and that payments shall be made directly to Lender.  Upon the request of Lender, Grantor shall so
notify such Account Debtors, parties to such Contracts, and obligors in respect
of such Instruments and Investment Property. 
Lender may at any time after the occurrence and during the continuance
of an Event of Default notify obligors in respect of Chattel Paper of Grantor
that the right, title and interest of Grantor in and under such Chattel Paper
has been assigned to Lender and that payments shall be made directly to Lender.


 


c.             Verification
of Collateral.  Upon reasonable prior
notice to Grantor (unless an Event of Default has occurred and is continuing,
in which case no notice is necessary), Lender shall have the right to make test
verifications of the Accounts and physical verifications and appraisals of the
Inventory and other Collateral in any manner and through any medium that it
considers advisable, and Grantor agrees to furnish all such assistance and
information as Lender may require in connection therewith.


 


4.             Representations and Warranties. 
Grantor hereby represents and warrants that:


 


a.             Authority;
Execution.  Grantor has the right and
power and is duly authorized and empowered to enter into, execute, deliver and
perform this Security Agreement, and any other agreements, documents or
instruments executed in connection herewith or therewith.  Grantor’s execution and performance of this
Security Agreement will not constitute, cause or result in any breach or
violation of any provision of the partnership agreement, articles of
incorporation or by-laws of Grantor, any law or any contractual obligation of
Grantor and does not conflict with, constitute a default or require any consent
under (other than consents that if not obtained would not have a Material
Adverse Effect) or result in the creation of any Lien that would not be a
Permitted Encumbrance upon any property or assets of Grantor pursuant to any
contractual obligation of Grantor.  Upon
execution, this Security Agreement will constitute a valid, binding obligation
of Grantor to Lender that is enforceable according to its terms, except as the
enforceability of this Security Agreement may be subject to or limited by
bankruptcy, insolvency, reorganization, arrangement, moratorium or other
similar laws relating to or affecting the rights of creditors generally and
except as the availability of equitable remedies are subject to the application
of equitable principles.  No further
consent, ratification or approval is required for this Security Agreement to be
effective.


 


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b.             Title
to Collateral.  Except for the
security interest granted to Lender under this Security Agreement and the other
Permitted Encumbrances, Grantor is the sole owner of each item of the
Collateral in which it purports to grant a security interest hereunder, having
good and marketable title thereto free and clear of any and all liens, security
interests or other encumbrances.


 


c.             No
Other Liens.  No effective security
agreement, financing statement, equivalent security or lien instrument or
continuation statement covering all or any part of the Collateral is on file or
of record in any public office, except such as may have been filed by Grantor
in favor of Lender pursuant to this Security Agreement or such as relate to
other Permitted Encumbrances or protective filings with respect to equipment
leases.


 


d.             Perfection
and Priority of Security Interest in the Collateral.  The security interest granted to Lender in
the Collateral under this Security Agreement is a duly perfected security
interest in favor of Lender to secure the Secured Obligations, and is senior in
priority to all other Liens against and security interests in all or any part
of the Collateral, except for the Permitted Encumbrances.


 


e.             Accounts.  Subject to reasonable reserves therefor on
the books of Grantor, each Account of Grantor is, or when it comes into
existence will be, a statement of an indebtedness incurred by the obligor
thereunder to Grantor in the amount shown thereon.  All Accounts are, or will be when they come
into existence, bona fide transactions completed in accordance with the terms
and provisions contained in any documents related thereto.


 


f.              Change
of Name.  Grantor did not and has not
done within the last five years business under any trade name or style other
than as disclosed on Exhibit C
hereto.


 


g.             Locations
of Offices and Collateral; Federal Taxpayer Identification.  Grantor’s chief executive office, principal
place of business, corporate offices, all warehouses and premises within which
Collateral is stored or located, and the locations of all of its records
concerning the Collateral are set forth on Exhibit C
hereto, and Grantor shall not change such chief executive office, principal
place of business, corporate offices, or warehouses or Collateral premises, or
remove such records unless it has taken such action as is necessary to cause
the Lien of Lender in the Collateral to continue to be perfected.  Grantor shall not change its chief executive
office, principal place of business, corporate offices, or warehouses or
Collateral premises, or the location of its records concerning the Collateral,
or its federal taxpayer identification number, without giving thirty (30) days’
prior written notice thereof to Lender. 
Grantor’s federal taxpayer identification number is  as set forth on Exhibit C hereto.


 


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


 


i.              Farming
Operations.  Grantor does not own or
have any interest in any real property other than the real property described
in Exhibit B hereto.


 


5.             Covenants.  Grantor
covenants and agrees with Lender that from and after the date of this Security
Agreement and until the Secured Obligations are fully satisfied:


 


a.             Further
Assurances; Pledge of Instruments. 
At any time and from time to time, upon the written request of Lender,
and at the sole expense of Grantor, Grantor shall promptly and duly execute and
deliver any and all such further instruments and documents and take such
further action as Lender may reasonably deem desirable to obtain the full
benefits of this Security Agreement and of the rights and powers herein
granted, including (i) filing any financing or continuation statements
under the UCC with respect to the liens and security interests granted
hereunder or under any other Loan Document and (ii) transferring
Collateral to Lender’s possession (if such Collateral consists of Chattel


 


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Paper or if a security
interest in such Collateral can be perfected only by possession, or, if
requested by Lender).  Grantor also
hereby authorizes Lender to file any such financing or continuation statement
without the signature of Grantor to the extent permitted by applicable law.  If any amount payable under or in connection
with any of the Collateral is or shall become evidenced by any Instrument, such
Instrument, other than checks and notes received in the ordinary course of
business, shall be duly endorsed in a manner satisfactory to Lender and
delivered to Lender immediately upon Grantor’s receipt thereof.


 


b.             Maintenance
of Records.  Grantor shall keep and
maintain, at its own cost and expense, satisfactory and complete records of the
Collateral, including a record of any and all payments received and any and all
credits granted with respect to the Collateral and all other dealings with the
Collateral.  Upon the request of Lender,
Grantor shall mark its books and records pertaining to the Collateral to
evidence this Security Agreement and the security interests granted
hereby.  All Chattel Paper shall be
marked with the following legend:  “This
writing and the obligations evidenced or secured hereby are subject to the
security interest of American AgCredit, PCA.” 
For Lender’s further security, Grantor agrees that Lender shall have a
special property interest in all of Grantor’s books and records pertaining to
the Collateral and, upon the occurrence and during the continuation of any
Event of Default, Grantor shall deliver and turn over any such books and
records to Lender or to its representatives at any time on demand of
Lender.  Prior to the occurrence of an
Event of Default and upon reasonable notice from Lender, Grantor shall permit
any representative of Lender to inspect such books and records and shall
provide photocopies thereof to Lender as more specifically set forth in Section 5(i) below.


 


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


 


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


 


e.             Limitation
on Liens on Collateral.  Grantor
shall not create, permit or suffer to exist, and shall defend the Collateral
against and take such other action as is necessary to remove, any Lien on the
Collateral except Permitted Encumbrances. 
Grantor shall further defend the right, title and interest of Lender in
and to any of Grantor’s rights under the Collateral, including, the Accounts,
Chattel Paper, Contracts, Documents, Equipment, Farm Products, Fixtures,
General Intangibles, Instruments, Investment Property, and Inventory and in and
to the Proceeds thereof against the claims and demands of all Persons
whomsoever except the holders of Permitted Encumbrances.


 


f.              Notices.  Grantor shall advise Lender, in reasonable
detail, promptly, within five (5) Business Days of after it becomes aware
of: (i) any material Lien, other than Permitted Encumbrances, attaching to
or asserted against any of the Collateral, (ii) any material change in the
composition of the Collateral (iii) any destruction of or substantial
damage to any of the Collateral in excess of $100,000 and (iv) the
occurrence of any other event which would have a Material Adverse Effect upon
the Collateral and/or Lender’s Lien.


 


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g.             Limitations
on Modifications of Accounts. 
Subject to the terms of the Amended and Restated  Credit Agreement, upon the occurrence and
during the continuation of any Event of Default, Grantor shall not, without
Lender’s prior written consent, (i) grant any extension of the time of
payment of any of the Accounts, Chattel Paper, Instruments or amounts due under
any Contract; (ii) compromise or settle the same for less than the full
amount thereof; (iii) release, in whole or in part, any Person liable for
the payment thereof; or (iv) allow any credit or discount whatsoever
thereon other than trade discounts granted in the ordinary course of business
of Grantor.


 


h.             Continuous
Perfection.  Grantor shall not change
its name, identity or corporate structure in any manner which might make any
financing or continuation statement filed in connection herewith seriously
misleading within the meaning of section 9-402(7) of the UCC or any other
then applicable provision of the UCC unless Grantor shall have given Lender at
least thirty (30) days’ prior written notice thereof and shall have taken all
action (or made arrangements to take such action substantially simultaneously
with such change if it is impossible to take such action in advance) necessary
or reasonably requested by Lender to amend such financing statement or
continuation statement so that it is not seriously misleading.


 


i.              Right
of Inspection.  Upon reasonable
notice to Grantor (unless an Event of Default has occurred and is continuing,
in which case no notice is necessary), Lender shall at all times have full and
free access during normal business hours to all the books and records and
correspondence of Grantor, and Lender or its representatives may examine the
same, take extracts therefrom and make photocopies thereof, and Grantor agrees
to render to Lender, at Grantor’s cost and expense, such clerical and other
assistance as may be reasonably requested with regard thereto.  Upon reasonable notice to Grantor (unless an
Event of Default has occurred and is continuing, in which case no notice is
necessary), Lender and its representatives shall also have the right to enter
into and upon any premises where any of the Inventory is located for the
purpose of inspecting the same, observing its use or otherwise protectings
Lender’s interests in the Collateral.


 


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


 


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


 


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


 


m.            Farming
Operations.  Grantor shall not
undertake any farming operations on any real property other than the property
listed on Exhibit B hereto
unless Grantor shall have provided Lender with thirty (30) days prior notice of
Grantor’s intent to do so, which notice shall be accompanied by a detailed
description of the real property on which the crops are grown, and Grantor shall
have provided Lender with a supplement to this Security Agreement and such
financing statement amendments and other documents as Lender shall request.


 


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


 


a.             Grantor hereby irrevocably constitutes
and appoints Lender and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of Grantor and in the name of
Grantor or in its own name, and hereby grants to Lender, in Lender’s
discretion, the power and right, on behalf of Grantor, without notice to or
assent by Grantor, and at any time prior to or after the occurrence of an Event
of Default, to do the following:


 


(i) 
to take any and all appropriate action and to execute and deliver any and all
documents and instruments which may be necessary or desirable to continue any
insurance existing pursuant to the terms of the Amended and Restated Credit
Agreement, and pay all or any part of the premiums therefor and the costs
thereof; and


 


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


 


b.             Grantor hereby irrevocably constitutes
and appoints Lender and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of Grantor and in the name of Grantor
or in its own name, from time to time in Lender’s discretion, for the purpose
of carrying out the terms of this Security Agreement, to take any and all
appropriate action and to execute and deliver any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Security Agreement and, without limiting the generality of the foregoing,
hereby grants to Lender the power and right, on behalf of Grantor, without
notice to or assent by Grantor, upon the occurrence and during the continuation
of an Event of Default, to do the following:


 


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


 


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


 


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


 


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


 


(v) 
effect any repairs or obtain any insurance called for by the terms of this
Security Agreement and pay all or any part of the premiums therefor and costs
thereof;


 


(vi)          direct
any party liable for any payment under or in respect of any of the Collateral
to make payment of any and all monies due or to become due thereunder, directly
to Lender or as Lender shall direct;


 


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(vii) 
sign and endorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications, and notices in connection with accounts and other documents
constituting or related to the Collateral;


 


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


 


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


 


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


 


(xi)  defend any suit, action or proceeding brought
against Grantor with respect to any Collateral if Grantor does not defend such
suit, action or proceeding or if Lender believes that Grantor is not pursuing
such defense in a manner that will maximize the recovery with respect to such
Collateral;


 


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


 


(xiii)  sell, transfer, pledge, make any agreement
with respect to, or otherwise deal with any of the Collateral as fully and
completely as though Lender were the absolute owner thereof for all purposes,
and to do, at Lender’s option and Grantor’s expense, at any time, or from time
to time, all acts and things which Lender reasonably deems necessary to
perfect, preserve, or realize upon the Collateral and Lender’s Lien therein in
order to effect the intent of this Security Agreement, all as fully and
effectively as Grantor might do; and


 


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


 


c.             Grantor hereby ratifies, to the extent
permitted by law, all that said attorneys shall lawfully do or cause to be done
by virtue hereof.  The power of attorney
granted pursuant to this Section 6 is a power coupled with an interest and
shall be irrevocable until the Secured Obligations are paid or otherwise
satisfied in full.


 


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


 


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


 


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7.             Performance by Lender of Grantor’s
Obligation.  If Grantor fails to perform or comply with
any of its agreements contained herein or in any other Loan Document, and
Lender, as provided for by the terms of this Security Agreement, or in any
other Loan Document, shall itself perform or comply, or otherwise cause
performance of or compliance with such agreement, the reasonable expenses,
including attorneys’ fees, of Lender incurred in connection with such
performance or compliance, together with interest thereon at the Base Rate then
in effect in respect of the Revolving Loan, shall be payable by Grantor to
Lender on demand and shall constitute Secured Obligations secured hereby.


 


8.             Remedies, Rights Upon Default.


 


a.             If
any Event of Default shall occur and be continuing, Lender may exercise in
addition to all other rights and remedies granted to it under this Security Agreement,
the Amended and Restated Credit Agreement, the other Loan Documents and under
any other instrument or agreement securing, evidencing or relating to the
Secured Obligations, all rights and remedies of a secured party under the UCC.  Without limiting the generality of the
foregoing, Grantor expressly agrees that in any such event Lender, without
demand of performance or other demand, advertisement or notice of any kind
(except the notice specified below of time and place of public or private sale)
to or upon Grantor or any other Person (all and each of which demands,
advertisements and notices are hereby expressly waived to the maximum extent
permitted by the UCC and other applicable law), may forthwith enter upon the
premises of Grantor where any Collateral is located through self-help, without
judicial process, without first obtaining a final judgment or giving Grantor
notice and opportunity for a hearing on Lender’s claim or action, and without
paying rent to Grantor, and collect, receive, assemble, process, appropriate
and realize upon the Collateral, or any part thereof, and may forthwith sell,
lease, assign, give an option or options to purchase, or sell or otherwise
dispose of and deliver said Collateral (or contract to do so), or any part thereof,
in one or more parcels at public or private sale or sales, at any exchange or
broker’s board or at any of Lender’s offices or elsewhere at such prices as it
may deem best, for cash or on credit or for future delivery without assumption
of any credit risk.  Lender shall have
the right upon any such public sale or sales, and, to the extent permitted by
law, upon any such private sale or sales, to purchase for the benefit of Lender
the whole or any part of said Collateral so sold, free of any right or equity
of redemption, which equity of redemption Grantor hereby releases.  Such sales may be adjourned and continued
from time to time with or without notice. 
Lender shall have the right to conduct such sales on Grantor’s premises
or elsewhere and shall have the right to use Grantor’s premises without charge
for such sales for such time or times as Lender deems necessary or advisable.


 


b.             Grantor
further agrees, at Lender’s request, to assemble the Collateral and make it
available to Lender at places which Lender shall reasonably select, whether at
Grantor’s premises or elsewhere.  Until
Lender is able to affect a sale, lease, or other disposition of Collateral,
Lender shall have the right to use or operate Collateral on behalf of Lender,
or any part thereof, to the extent that it deems appropriate for the purpose of
preserving Collateral or its value or for any other purpose deemed appropriate
by Lender.  Lender shall have no
obligation to Grantor to maintain or preserve the rights of Grantor as against
third parties with respect to Collateral while Collateral is in the possession
of Lender.  Lender may, if it so elects,
seek the appointment of a receiver or keeper to take possession of Collateral
and to enforce any of Lender’s remedies with respect to such appointment
without prior notice or hearing.  Lender
shall apply the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, as provided in Section 8(e) hereof,
such Grantor remaining liable for any deficiency remaining unpaid after such
application, and only after so paying over such net proceeds and after the
payment by Lender of any other amount required by any provision of law,
including section 9-504(1)(c) of the UCC (but only after Lender has
received what Lender considers reasonable proof of a subordinate party’s
security interest), need Lender account for the surplus, if any, to
Grantor.  To the maximum extent permitted
by applicable law, Grantor waives all claims, damages, and demands against
Lender arising out


 


10

















 


of the repossession,
retention or sale of the Collateral except such as arise out of the gross
negligence or wilful misconduct of such party. 
Grantor agrees that five (5) days’ prior notice by Lender of the time
and place of any public sale or of the time after which a private sale may take
place is reasonable notification of such matters.  Grantor shall remain liable for any
deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay all amounts to which Lender is entitled, Grantor also being
liable for any attorneys’ fees incurred by Lender to collect such deficiency.


 


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


 


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


 


e.             The
proceeds of any sale, disposition or other realization upon all or any part of
the Collateral shall be distributed by Lender, upon receipt, in accordance with
the provisions of the Amended and Restated Credit Agreement.


 


f.              From
and after the occurrence and during the continuation of an Event of Default,
Lender may, at its sole discretion, contact any and all Federal, state, or
other governmental or regulatory agencies with any jurisdiction over Grantor,
with respect to the possibility that Lender may take over the operation of any
Grantor’s business, or the possibility that Lender may take possession of or
liquidate any or all of the Collateral.


 


g.             Grantor
acknowledges that Lender shall be entitled to independently, but without
dupilication, exercise the rights and remedies of Lender exercisable for their
benefit under this Security Agreement.


 


9.             Indemnity and Expenses.


 


a.             Grantor
agrees to indemnify Lender from and against any and all claims, losses and
liabilities growing out of or resulting from this Security Agreement
(including, enforcement of this Security Agreement), except claims, losses or
liabilities resulting from such indemnified party’s gross negligence or willful
misconduct.


 


b.             Grantor
will upon demand pay to Lender the amount of any and all reasonable
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel and of any experts and agents, which Lender may incur in connection
with (i) the administration of this Security Agreement, (ii) the
custody, preservation, use or operation of, or the sale of, collection from, or
other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of Lender 
hereunder, or (iv) the failure by Grantor to perform or observe any
of the provisions hereof.


 


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


 


11
















 


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


 


12.           Reinstatement.  This Security Agreement shall remain in full
force and effect and continue to be effective should any petition be filed by
or against Grantor for liquidation or reorganization, should Grantor become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of Grantor’s
assets, and shall continue to be effective or be reinstated, as the case may
be, if at any time payment and performance of the Secured Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount,
or must otherwise be restored or returned by any obligee of the Secured
Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or
otherwise, all as though such payment or performance had not been made.  In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Secured Obligations
shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.


 


13.           Notices.  Except as otherwise provided herein, whenever
it is provided herein that any notice, demand, request, consent, approval,
declaration, or other communication shall or may be given or delivered to or
served upon any of the parties by another, or whenever any of the parties desires
to give or deliver or serve upon another any communication with respect to this
Security Agreement, each such notice, demand, request, consent, approval,
declaration, or other communication shall be in writing, shall be addressed to
the addresses set forth below, or such other or additional address as the
parties may notify each other of in writing, and shall be deemed to have been
sent, delivered, or given and received upon the earlier of:  (a) if by facsimile, upon transmission
if transmission occurs between 8:00 a.m. and 5:00 p.m. on any
Business Day; (b) if by Federal Express or other overnight or one-day mail
or delivery service, on the next Business Day following deposit with such
delivery service; (c) if by personal delivery, upon completion of delivery;
or (d) if by mail, three (3) Business Days after deposit in the U.S.
Mail, first class, postage prepaid:


 


(a)  If to American
AgCredit, at:


 


 American AgCredit, PCA


 5560 South Broadway


 Eureka, California  95503


 Attention: 
Account Officer — ML Macadamia Orchards


 Facsimile: 
(707) 442-1268


 


 American
AgCredit, PCA


 200 Concourse Blvd.


 P.O. Box 1120


 Santa Rosa, CA 95402-1120


 Attn: Account Officer —ML Macadamia Orchards


 Facsimile: (707) 521-6105


 


12

















 


(b)  If to Grantor, at:


 


 ML Macadamia
Orchards, L.P.


 ML Resources, Inc.


 26-238 Hawaii
Belt Road


 Hilo,
Hawaii  96720


 Attention: Mr. 
Dennis J. Simonis


 Facsimile:
(808) 969-8152


 


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


 


14.           Severability.  Any provision of this Security Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.


 


15.           No
Waiver; Cumulative Remedies.  Lender
shall not by any act, delay, omission or otherwise be deemed to have waived any
of its rights or remedies hereunder, and no waiver shall be valid unless in
writing, signed by Lender, and then only to the extent therein set forth.  A waiver by Lender of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which Lender would otherwise have had on any future occasion.  No failure to exercise nor any delay in
exercising on the part of Lender, any right, power or privilege hereunder,
shall operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or future exercise
thereof or the exercise of any other right, power or privilege.  The rights and remedies hereunder provided
are cumulative and may be exercised singly or concurrently, and are not
exclusive of any rights and remedies provided by law.  None of the terms or provisions of this
Security Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by Lender and Grantor affected by such
waiver.


 


16.           Limitation
by Law.  All rights, remedies and
powers provided in this Security Agreement may be exercised only to the extent
that the exercise thereof does not violate any applicable provision of law, and
all the provisions of this Security Agreement are intended to be subject to all
applicable mandatory provisions of law that may be controlling and to be
limited to the extent necessary so that they shall not render this Security
Agreement invalid, unenforceable, in whole or in part, or not entitled to be
recorded, registered, or filed under the provisions of any applicable law.


 


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


 


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


 


13

















 


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


 


19.           Further
Indemnification.  Grantor agrees to
pay, and to hold Lender harmless from, any and all liabilities with respect to,
or resulting from any delay in paying, any and all excise, sales, or other
similar taxes which may be payable or determined to be payable with respect to
any of the Collateral or in connection with any of the transactions
contemplated by this Security Agreement.


 


20.           Entire
Agreement.  The execution of this
Security Agreement supersedes all the negotiations or stipulations concerning
matters thereof which preceded or accompanied the execution and delivery of
this Security Agreement.  This Security
Agreement is intended by the parties hereto to be a complete and exclusive
statement of the terms and conditions hereof.


 


21.  GOVERNING
LAW.  EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS
OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS SECURITY AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF
REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA.  GRANTOR HEREBY CONSENTS AND
AGREES THAT THE SUPERIOR COURTS OF SAN FRANCISCO COUNTY, CALIFORNIA, OR, AT
LENDERS OPTION, THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
CALIFORNIA, SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN GRANTOR AND LENDER PERTAINING TO THIS SECURITY
AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS SECURITY
AGREEMENT.  GRANTOR EXPRESSLY SUBMITS AND
CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY
SUCH COURT, AND GRANTOR HEREBY WAIVES ANY OBJECTION WHICH GRANTOR MAY HAVE
BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM  NON
CONVENIENS AND HEREBY CONSENTS TO THE GRANTING FOR SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.  GRANTOR HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT, AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE
MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO GRANTOR AT THE ADDRESS SET
FORTH IN SECTION 13 OF THIS SECURITY AGREEMENT AND THAT SERVICE SO MADE
SHALL BE DEEMED COMPLETED UPON THE EARLIER OF GRANTOR’S ACTUAL RECEIPT THEREOF
OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE
PREPAID.  NOTHING IN THIS SECURITY
AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LENDER OR GRANTOR FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION.


 


22.  MUTUAL
WAIVER OF JURY TRIAL.  BECAUSE
DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST
QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE
PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN
ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. 
THEREFORE, TO ACHIEVE THE


 


14

















 


BEST
COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS
SECURITY AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.


 


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


 


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


 


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


 


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


 


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


 


15

















 


IN WITNESS
WHEREOF, each of the parties hereto has caused this Security Agreement to be
executed and delivered by its duly authorized officer on the date first set
forth above.


 


	
   

  	
   

  	
  ML MACADAMIA ORCHARDS,
  L.P., a Delaware limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  ML RESOURCES, INC., a
  Hawaii corporation, its managing general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Dennis J.
  Simonis

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Dennis J.
  Simonis

  
	
   

  	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ML RESOURCES, INC., a
  Hawaii corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Dennis J. Simonis

  
	
   

  	
   

  	
  Name:

  	
  Dennis J. Simonis

  
	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ACCEPTED:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  AMERICAN AGCREDIT, PCA

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Sean O’Day

  	
   

  	
   

  
	
  Name:

  	
  Sean O’Day

  	
   

  	
   

  
	
  Title:

  	
  Senior Vice
  President

  	
   

  	
   

  
								



 


16

















 


EXHIBIT A


 


DESCRIPTION OF COLLATERAL


 


TO


 


UNIFORM COMMERCIAL CODE FINANCING STATEMENTS


 


AND


 


SECURITY AGREEMENT


 


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


 ML Resources, Inc., a Hawaii corporation


 


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


 


All of the Debtor’s
and the Grantor’s now existing and hereafter arising interest in the following
collateral:


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


D.            “Documents” — all documents as
defined in the Uniform Commercial Code, including, without limitation, all
bills of lading, dock warrants, dock receipts, warehouse receipts, or other
documents of title;


 


17

















 


E.             “Equipment” — all equipment as
defined in the Uniform Commercial Code, including, without limitation, all
machinery, equipment, furnishings, vehicles and computers and other electronic
data-processing and other office equipment, and any and all additions,
substitutions and replacements of any of the foregoing, together with all
attachments, components, parts, equipment, and accessories installed on or
affixed to any of the foregoing;


 


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


 


G.            “Fixtures” — all fixtures as
defined in the Uniform Commercial Code, including, without limitation, all of
the fixtures, systems, machinery, apparatus, equipment and fittings of every
kind and nature whatsoever and all appurtenances and additions thereto and
substitutions therefor or replacements thereof, now or hereafter attached or
affixed to or constituting a part of, or located in or upon, real property
wherever located (including, without limitation, all heating, electrical,
mechanical, lighting, lifting, plumbing, ventilating, air-conditioning and air
cooling, refrigerating, incinerating and power, loading and unloading, signs,
escalators, elevators, boilers, communication, switchboards, sprinkler and
other fire prevention and extinguishing fixtures, systems, machinery, apparatus
and equipment, and all engines, motors, dynamos, machinery, pipes, pumps,
tanks, conduits and ducts constituting a part of any of the foregoing, together
with all extensions, improvements, betterments, renewals, substitutes, and
replacements of, and all additions and appurtenances to any of the foregoing
property);


 


H.            “General Intangibles” — all
general intangibles as defined in the Uniform Commercial Code, including,
without limitation, all right, title and interest which Grantor may now or
hereafter have in or under any contracts, customer lists, trademarks, patents,
service marks, trade names, business names, corporate names, trade styles,
logos and other source or business identifiers, and all applications therefor
and reissues, extensions or renewals thereof, rights in intellectual property,
interests in and rights to distributions from partnerships, joint ventures and
other business associations, licenses, permits, copyrights, trade secrets,
proprietary or confidential information, inventions (whether or not patented or
patentable), technical information, procedures, designs, knowledge, know-how,
software, data bases, data, skill, expertise, experience, processes, models,
drawings, materials and records, goodwill (including, without limitation, the
goodwill associated with any trademark, trademark registration or trademark
licensed under any trademark license), all rights and claims in or under
insurance policies (including, without limitation, insurance for fire, damage,
loss, and casualty, whether covering personal property, real property, tangible
rights or intangible rights, all liability, life, key person, and business
interruption insurance, and all unearned premiums), uncertificated securities,
choses in action, deposit accounts and other bank accounts, rights to receive
tax refunds, and other payments and rights of indemnification;


 


I.              “Instruments” — all instruments as
defined in the Uniform Commercial Code, including, without limitation, all
certificated and uncertificated securities, all certificates of deposit, and
all notes and other evidences of indebtedness, other than instruments that
constitute, or are a part of a group of writings that constitute, chattel
paper;


 


J.             “Inventory” — all inventory as
defined in the Uniform Commercial Code, wherever located, including, without
limitation, inventory, macadamia nuts, merchandise, goods and other personal
property which are held by or on behalf of Grantor for sale or lease or are
furnished or are to be furnished under a contract of service or which
constitute raw materials, work in process or materials used or consumed or to
be used or consumed in Grantor’s business or in the processing, production,
packaging, promotion, delivery or shipping of the same, including, without
limitation, all finished goods, and goods held by Grantor on a consignment
basis;


 


18

















 


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


 


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


 


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


 


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


 


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


 


P.             “Proceeds” — to the extent not
otherwise included, all proceeds of the foregoing, in any form (including,
without limitation, any insurance proceeds, and all claims by Grantor against
third parties for loss or damage to, or destruction of, or otherwise relating
to any or all of the foregoing) and all accessions to, substitutions and
replacements for, and rents, profits and products of, each of the foregoing.


 


19

















 


EXHIBIT B


 


TO


 


SECURITY AGREEMENT


 


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


ML Resources, Inc.,
a Hawaii corporation


 


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


 


See attached for property description.


 


EXHIBIT C


 


TO


 


SECURITY AGREEMENT


 


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


ML Resources, Inc.,
a Hawaii corporation


 


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


 


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


 


Mauna Loa
Macadamia Partners, L.P.


 


(2)           Locations.


 


(a)                                  Chief executive office:


 


26-238 Hawaii Belt
Road


Hilo, Hawaii   96720


 


(b)                                 Principal place of business:


 


Kau, HA


 


(c)                                  Other locations where Collateral located:


 


Keaau and Mauna
Kea, HA


 


(3)           Grantor’s federal taxpayer identification
number.


 


99-0248088


 


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


 


None.


 


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