Exhibit 10.67


 


SECOND SUPPLEMENTAL SECURITY
AGREEMENT


 


THIS
SECOND SUPPLEMENTAL SECURITY AGREEMENT (this “Security Agreement”), dated as of
July 8, 2008, 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 Second Amended and Restated Credit Agreement dated as of July 8,
2008 (the “Second Amended Credit Agreement”) by and among Grantor, as borrower,
and Lender, Lender is agreeing to extend financial accommodations to Borrower
on the terms set forth therein (the “Loan”). 
Lender is willing to do so, but only upon the condition, among others,
that Grantor shall execute this Security Agreement.


 


B.            Pursuant to that certain Credit Agreement dated as of May 1,
2000 (the “Original Credit Agreement”), by and among Grantor, as borrower, and
Pacific Coast Farm Credit Services, PCA, Lender extended certain financial
accommodations to Borrower conditioned upon, among other things, the execution
of a Security Agreement dated as of May 1, 2000 (the “Original Security
Agreement”).   In addition, pursuant to
that certain Amended and Restated Credit Agreement dated as of May 1, 2004
(the “First Amended Credit Agreement”), by and among Borrower and Lender,
Lender extended certain further financial accommodations to Borrower
conditioned upon, among other things, the execution of a Supplemental Security
Agreement dated as of May 1, 2004 (the “Supplemental Security Agreement”).   It is the intent of the parties hereto that
this Security Agreement supplement both the Original Security Agreement and the
Supplemental Security Agreement, both of which are to remain 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 enter into the Second Amended
Credit Agreement, Grantor agrees, for the benefit of Lender, as follows:


 


AGREEMENT


 


1.             Defined
Terms.  Unless otherwise defined
herein, (i) terms defined in the Second Amended 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.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“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.


 


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


 


“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.


 


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


 


“Secured Obligations” shall mean any and all loans, advances,
obligations, covenants, and duties owing to Lender by Grantor of any kind or
nature, absolute or contingent, due or to become due, whether now existing or
hereafter arising, whether or not evidenced by any note, guaranty, non-recourse
guaranty or other instrument, agreement or writing, including, without
limitation, the Original Credit Agreement, the First Amended Credit Agreement,
the Second Amended Credit Agreement, all interest, charges, fees, attorneys’
fees, expenses, and any other sum chargeable by Lender to Grantor under this or
any other agreement.


 


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


 


“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.


 


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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 Second Amended 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 Second Amended
Credit Agreement and to make the Loan in accordance with the terms thereof,
Grantor hereby grants to Lender 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.


 


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.


 


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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 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.


 


b.             Title
to Collateral.  Except for the
security interest granted to Lender under this Security Agreement, 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 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.


 


e.             Accounts.  Subject to reasonable reserves therefore 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.


 


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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 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.


 


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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.  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.


 


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, 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.


 


g.             Limitations
on Modifications of Accounts. 
Subject to the terms of the Second Amended 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.


 


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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 Second Amended Credit Agreement, and pay
all or any part of the premiums therefore and the costs thereof; and


 


(ii) 
to file any financing or continuation statements under the UCC with respect 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 acquitances 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 therefore 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;


 


(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;


 


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(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


 


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(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.


 


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 Original Credit Agreement, the First Amended Credit Agreement,
the Second Amended Credit Agreement, or any of the other Documents evidencing
any loan obligations from Grantor to Lender, 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 


 


11

















 


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 effect a sale, lease, or other disposition of Collateral,
Lender shall have the right to use or operate Collateral on behalf of Lender,
or any part thereof, to the extent that it deems appropriate for the purpose 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 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 Second Amended 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
duplication, 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.


 


12

















 


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.           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:


 


13

















 


(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


 


(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


 


14

















 


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 Original
Credit Agreement, the First Amended Credit Agreement, and the Second Amended
Credit Agreement.  No sales of
participations, other sales, assignments, transfers or other dispositions of
any agreement governing or instrument evidencing the Secured Obligations or any
portion thereof or interest therein, as permitted pursuant to the terms of the
Second Amended 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 the Original Credit Agreement, the
First Amended Credit Agreement, or the Second Amended 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


 


15

















 


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 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.


 


16

















 


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

  	
   

  



 


17

















 


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;


 


18

















 


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;


 


19

















 


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.


 


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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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