Document:

Exhibit 10.54

 

 

CREDIT AGREEMENT

 

by and among

 

APIO, INC.,

 

as Borrower,

 

CAL EX TRADING
COMPANY

 

and

 

WELLS FARGO BANK,
NATIONAL ASSOCIATION,

 

as Bank

 

Dated as of
September 1, 2004

 

 

 

Table of Contents

 

	
  ARTICLE I

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 1.1.

  	
  Definitions

  	
   

  
	
   

  	
  Section 1.2.

  	
  Other
  Definitional Terms; Rules of Interpretation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 2.1.

  	
  Line of Credit

  	
   

  
	
   

  	
  (a)

  	
   

  	
  Advances

  	
   

  
	
   

  	
  (b)

  	
   

  	
  Payments
  to Sellers

  	
   

  
	
   

  	
  (c)

  	
   

  	
  Overadvances

  	
   

  
	
   

  	
  (d)

  	
   

  	
  Procedures for
  Requesting Advances

  	
   

  
	
   

  	
  Section 2.2.

  	
  Letter
  of Credit Subfeature

  	
   

  
	
   

  	
  (a)

  	
   

  	
  Letters
  of Credit

  	
   

  
	
   

  	
  (b)

  	
   

  	
  Term

  	
   

  
	
   

  	
  (c)

  	
   

  	
  Deemed
  Representation

  	
   

  
	
   

  	
  (d)

  	
   

  	
  Special
  Account

  	
   

  
	
   

  	
  (e)

  	
   

  	
  Payment
  of Amounts Drawn Under Letters of Credit; Obligation of Reimbursement

  	
   

  
	
   

  	
  (f)

  	
   

  	
  Obligations
  Absolute

  	
   

  
	
   

  	
  Section 2.3.

  	
  Term Commitment

  	
   

  
	
   

  	
  Section 2.4.

  	
  Term
  Loan

  	
   

  
	
   

  	
  (a)

  	
   

  	
  Term Loan

  	
   

  
	
   

  	
  (b)

  	
   

  	
  Repayment

  	
   

  
	
   

  	
  (c)

  	
   

  	
  Prepayment

  	
   

  
	
   

  	
  Section 2.5.

  	
  Interest; Default
  Interest; Participations; Usury; Collection of Payments

  	
   

  
	
   

  	
  (a)

  	
   

  	
  Notes

  	
   

  
	
   

  	
  (b)

  	
   

  	
  Default
  Interest Rate

  	
   

  
	
   

  	
  (c)

  	
   

  	
  Swap
  Agreements

  	
   

  
	
   

  	
  (d)

  	
   

  	
  Participations

  	
   

  
	
   

  	
  (e)

  	
   

  	
  Usury

  	
   

  
	
   

  	
  (f)

  	
   

  	
  Collection of Payments

  	
   

  
	
   

  	
  Section 2.6.

  	
  Fees

  	
   

  
	
   

  	
  (a)

  	
   

  	
  Commitment Fee

  	
   

  
	
   

  	
  (b)

  	
   

  	
  Collateral Monitoring Fees

  	
   

  
	
   

  	
  (c)

  	
   

  	
  Letter
  of Credit Fees

  	
   

  
	
   

  	
  (d)

  	
   

  	
  Letter of
  Credit Administrative Fees

  	
   

  
	
   

  	
  (e)

  	
   

  	
  Prepayment
  Fees

  	
   

  
	
   

  	
  (f)

  	
   

  	
  Unused Line
  Fee

  	
   

  
	
   

  	
  (g)

  	
   

  	
  Audit Fees

  	
   

  
	
   

  	
  (h)

  	
   

  	
  Other Fees

  	
   

  
	
   

  	
  Section 2.7.

  	
  Increased Costs;
  Capital Adequacy; Funding Exceptions

  	
   

  
	
   

  	
  (a)

  	
   

  	
  Increased
  Costs; Capital Adequacy

  	
   

  

 

i

 

	
   

  	
  Section 2.8.

  	
  Lockbox

  	
   

  
	
   

  	
  Section 2.9.

  	
   

  	
  Mandatory
  Prepayment

  	
   

  
	
   

  	
  Section 2.10.

  	
  Line of Credit
  Advances to Pay Obligations

  	
   

  
	
   

  	
  Section 2.11.

  	
  Liability
  Records

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 3.1.

  	
  Grant of Security
  Interest

  	
   

  
	
   

  	
  Section 3.2.

  	
  Financing
  Statements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Section 4.1.

  	
  Conditions
  Precedent to the Initial Advances and Letter of Credit

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.1.

  	
  Existence and
  Power; Name; Chief Executive Office; Inventory and Equipment Locations;
  Federal Employer Identification Number

  	
   

  
	
   

  	
  Section 5.2.

  	
  Capitalization

  	
   

  
	
   

  	
  Section 5.3.

  	
  Authorization of
  Borrowing; No Conflict as to Law or Agreements

  	
   

  
	
   

  	
  Section 5.4.

  	
  Legal Agreements

  	
   

  
	
   

  	
  Section 5.5.

  	
  Subsidiaries

  	
   

  
	
   

  	
  Section 5.6.

  	
  Financial
  Condition; No Adverse Change

  	
   

  
	
   

  	
  Section 5.7.

  	
  Litigation

  	
   

  
	
   

  	
  Section 5.8.

  	
  Regulation U

  	
   

  
	
   

  	
  Section 5.9.

  	
  Taxes

  	
   

  
	
   

  	
  Section 5.10.

  	
  Titles and
  Liens

  	
   

  
	
   

  	
  Section 5.11.

  	
  Intellectual
  Property Rights

  	
   

  
	
   

  	
  (a)

  	
   

  	
  Owned
  Intellectual Property

  	
   

  
	
   

  	
  (b)

  	
   

  	
  Agreements
  with Employees and Contractors

  	
   

  
	
   

  	
  (c)

  	
   

  	
  Intellectual
  Property Rights Licensed from Others

  	
   

  
	
   

  	
  (d)

  	
   

  	
  Other
  Intellectual Property Needed for Business

  	
   

  
	
   

  	
  (e)

  	
   

  	
  Infringement

  	
   

  
	
   

  	
  Section 5.12.

  	
  Plans

  	
   

  
	
   

  	
  Section 5.13.

  	
  Default

  	
   

  
	
   

  	
  Section 5.14.

  	
  Environmental
  Matters

  	
   

  
	
   

  	
  Section 5.15.

  	
  Submissions to
  Bank

  	
   

  
	
   

  	
  Section 5.16.

  	
  Financing
  Statements

  	
   

  
	
   

  	
  Section 5.17.

  	
  Rights to Payment

  	
   

  
	
   

  	
  Section 5.18.

  	
  Eligible
  Accounts

  	
   

  
	
   

  	
  Section 5.19.

  	
  Equipment

  	
   

  
	
   

  	
  Section 5.20.

  	
  Fraudulent
  Transfer

  	
   

  
	
   

  	
  Section 5.21.

  	
  Permits,
  Franchises

  	
   

  
	
   

  	
  Section 5.22.

  	
  No Subordination

  	
   

  

 

ii

 

	
  ARTICLE VI

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 6.1.

  	
  Punctual Payments

  	
   

  
	
   

  	
  Section 6.2.

  	
  Reporting
  Requirements

  	
   

  
	
   

  	
  (a)

  	
   

  	
  Annual Financial
  Statements

  	
   

  
	
   

  	
  (b)

  	
   

  	
  Monthly Financial
  Statements

  	
   

  
	
   

  	
  (c)

  	
   

  	
  Collateral
  Reports

  	
   

  
	
   

  	
  (d)

  	
   

  	
  Projections

  	
   

  
	
   

  	
  (e)

  	
   

  	
  Litigation

  	
   

  
	
   

  	
  (f)

  	
   

  	
  Defaults

  	
   

  
	
   

  	
  (g)

  	
   

  	
  Plans

  	
   

  
	
   

  	
  (h)

  	
   

  	
  Disputes

  	
   

  
	
   

  	
  (i)

  	
   

  	
  Officers
  and Directors

  	
   

  
	
   

  	
  (j)

  	
   

  	
  Collateral

  	
   

  
	
   

  	
  (k)

  	
   

  	
  Commercial
  Tort Claims

  	
   

  
	
   

  	
  (l)

  	
   

  	
  Intellectual Property

  	
   

  
	
   

  	
  (m)

  	
   

  	
  Reports
  to Owners

  	
   

  
	
   

  	
  (n)

  	
   

  	
  SEC Filings

  	
   

  
	
   

  	
  (o)

  	
   

  	
  Violations
  of Law

  	
   

  
	
   

  	
  (p)

  	
   

  	
  Other Reports

  	
   

  
	
   

  	
  Section 6.3.

  	
  Financial
  Covenants

  	
   

  
	
   

  	
  (a)

  	
   

  	
  Minimum EBITDA
  Coverage Ratio

  	
   

  
	
   

  	
  (b)

  	
   

  	
  Minimum Tangible Net
  Worth

  	
   

  
	
   

  	
  (c)

  	
   

  	
  Minimum
  Net Income

  	
   

  
	
   

  	
  (d)

  	
   

  	
  Capital
  Expenditures

  	
   

  
	
   

  	
  (e)

  	
   

  	
  Maximum
  Leverage

  	
   

  
	
   

  	
  Section 6.4.

  	
  Permitted
  Liens; Financing Statements

  	
   

  
	
   

  	
  Section 6.5.

  	
  Indebtedness

  	
   

  
	
   

  	
  Section 6.6.

  	
  Guaranties

  	
   

  
	
   

  	
  Section 6.7.

  	
   

  	
  Investments and
  Subsidiaries

  	
   

  
	
   

  	
  Section 6.8.

  	
  Dividends and
  Distributions

  	
   

  
	
   

  	
  Section 6.9.

  	
  Salaries

  	
   

  
	
   

  	
  Section 6.10.

  	
  Key Person Life
  Insurance

  	
   

  
	
   

  	
  Section 6.11.

  	
  Books and
  Records; Inspection and Examination

  	
   

  
	
   

  	
  Section 6.12.

  	
  Account
  Verification

  	
   

  
	
   

  	
  Section 6.13.

  	
  Compliance
  with Laws

  	
   

  
	
   

  	
  Section 6.14.

  	
  Payment of
  Taxes and Other Claims

  	
   

  
	
   

  	
  Section 6.15.

  	
  Maintenance of
  Properties

  	
   

  
	
   

  	
  Section 6.16.

  	
  Insurance

  	
   

  
	
   

  	
  Section 6.17.

  	
  Preservation of
  Existence

  	
   

  
	
   

  	
  Section 6.18.

  	
  Delivery of
  Instruments, etc

  	
   

  
	
   

  	
  Section 6.19.

  	
  Sale or Transfer
  of Assets; Suspension of Business Operations

  	
   

  
	
   

  	
  Section 6.20.

  	
  Consolidation and
  Merger; Asset Acquisitions

  	
   

  
	
   

  	
  Section 6.21.

  	
  Sale and
  Leaseback

  	
   

  
	
   

  	
  Section 6.22.

  	
  Restrictions on
  Nature of Business

  	
   

  

 

iii

 

	
   

  	
  Section 6.23.

  	
  Accounting

  	
   

  
	
   

  	
  Section 6.24.

  	
  Discounts, etc

  	
   

  
	
   

  	
  Section 6.25.

  	
  Plans

  	
   

  
	
   

  	
  Section 6.26.

  	
  Place of
  Business; Name

  	
   

  
	
   

  	
  Section 6.27.

  	
  Constituent
  Documents

  	
   

  
	
   

  	
  Section 6.28.

  	
  Transactions
  With Affiliates

  	
   

  
	
   

  	
  Section 6.29.

  	
  Use of Funds

  	
   

  
	
   

  	
  Section 6.30.

  	
  Subordination of
  Debt

  	
   

  
	
   

  	
  Section 6.31.

  	
  Management Fees

  	
   

  
	
   

  	
  Section 6.32.

  	
  Maintenance of
  Accounts with Bank

  	
   

  
	
   

  	
  Section 6.33.

  	
  Grower Contracts

  	
   

  
	
   

  	
  Section 6.34.

  	
  Performance by
  Bank

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.1.

  	
  Events of Default

  	
   

  
	
   

  	
  Section 7.2.

  	
  Rights and Remedies

  	
   

  
	
   

  	
  Section 7.3.

  	
  Disclaimer of
  Warranties

  	
   

  
	
   

  	
  Section 7.4.

  	
  Compliance With
  Laws

  	
   

  
	
   

  	
  Section 7.5.

  	
  No Marshalling

  	
   

  
	
   

  	
  Section 7.6.

  	
  Borrower to
  Cooperate

  	
   

  
	
   

  	
  Section 7.7.

  	
  Application of
  Proceeds

  	
   

  
	
   

  	
  Section 7.8.

  	
  Remedies Cumulative

  	
   

  
	
   

  	
  Section 7.9.

  	
  Bank Not Liable For
  The Collateral

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 8.1.

  	
  No Waiver

  	
   

  
	
   

  	
  Section 8.2.

  	
  Amendments, Etc

  	
   

  
	
   

  	
  Section 8.3.

  	
  Addresses for
  Notices; Requests for Accounting

  	
   

  
	
   

  	
  Section 8.4.

  	
  Further Documents

  	
   

  
	
   

  	
  Section 8.5.

  	
  Costs and
  Expenses

  	
   

  
	
   

  	
  Section 8.6

  	
  Indemnity

  	
   

  
	
   

  	
  Section 8.7.

  	
  Participants

  	
   

  
	
   

  	
  Section 8.8.

  	
  Advertising and
  Promotion

  	
   

  
	
   

  	
  Section 8.9.

  	
  Execution in Counterparts;
  Telefacsimile Execution

  	
   

  
	
   

  	
  Section 8.10.

  	
  Retention of
  Borrower’s Records

  	
   

  
	
   

  	
  Section 8.11.

  	
  Binding Effect;
  Assignment; Complete Agreement; Exchanging Information

  	
   

  
	
   

  	
  Section 8.12.

  	
  Severability of
  Provisions

  	
   

  
	
   

  	
  Section 8.13.

  	
  Revival and
  Reinstatement of Obligations

  	
   

  
	
   

  	
  Section 8.14.

  	
  Headings

  	
   

  
	
   

  	
  Section 8.15.

  	
  GOVERNING LAW

  	
   

  
	
   

  	
  Section 8.16.

  	
  SUBMISSION TO JURISDICTION

  	
   

  
	
   

  	
  Section 8.17.

  	
  WAIVER OF JURY TRIAL

  	
   

  
	
   

  	
  Section 8.18.

  	
  Arbitration

  	
   

  
	
   

  	
  (a)

  	
   

  	
  Arbitration

  	
   

  

 

iv

 

	
   

  	
  (b)

  	
   

  	
  Governing
  Rules

  	
   

  
	
   

  	
  (c)

  	
   

  	
  No Waiver of
  Provisional Remedies, Self-Help and Foreclosure

  	
   

  
	
   

  	
  (d)

  	
   

  	
  Arbitrator
  Qualifications and Powers

  	
   

  
	
   

  	
  (e)

  	
   

  	
  Discovery

  	
   

  
	
   

  	
  (f)

  	
   

  	
  Class
  Proceedings and Consolidations

  	
   

  
	
   

  	
  (g)

  	
   

  	
  Payment Of
  Arbitration Costs And Fees

  	
   

  
	
   

  	
  (h)

  	
   

  	
  Real
  Property Collateral; Judicial Reference

  	
   

  
	
   

  	
  (i)

  	
   

  	
  Miscellaneous

  	
   

  
	
   

  	
  Section 8.19.

  	
  Confidentiality

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 9.1.

  	
  Joint and
  Several Liability

  	
   

  
	
   

  	
  Section 9.2.

  	
  Primary Obligation;
  Waiver of Marshalling

  	
   

  
	
   

  	
  Section 9.3.

  	
  Financial
  Condition of Borrower

  	
   

  
	
   

  	
  Section 9.4.

  	
  Continuing Liability

  	
   

  
	
   

  	
  Section 9.5.

  	
  Additional Waivers

  	
   

  
	
   

  	
  Section 9.6.

  	
  Settlement or
  Releases

  	
   

  
	
   

  	
  Section 9.7.

  	
  No
  Election

  	
   

  
	
   

  	
  Section 9.8.

  	
  Indefeasible Payment

  	
   

  
	
   

  	
  Section 9.9.

  	
  Single Loan Account

  	
   

  
	
   

  	
  Section 9.10.

  	
  Apportionment
  of Proceeds of Loans

  	
   

  
	
   

  	
  Section 9.11

  	
  Bank Held Harmless

  	
   

  
	
   

  	
  Section 9.12.

  	
  Borrower
  and Cal Ex’s Integrated Operations

  	
   

  
						

 

v

 

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT
(this “Agreement”)
is dated and made as of September 1, 2004, by and among APIO, INC., a
Delaware corporation (“Borrower”), CAL EX TRADING COMPANY, a
Delaware corporation (“Cal Ex”), and WELLS FARGO BANK, NATIONAL
ASSOCIATION (“Bank”).

 

RECITALS

 

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

 

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

 

ARTICLE I

DEFINITIONS

 

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

 

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

 

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

 

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

 

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

 

“Advance” means a Line of Credit Advance or a Term Commitment
Advance.

 

“Affiliate” means, as applied to any Person, any other Person
who, directly or indirectly, controls, is controlled by, or is under common
control with, such Person.  For purposes
of this

 

 

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

 

“Agreement” means this Credit Agreement.

 

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

 

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

 

“Availability” means the lesser of (i) the Borrowing Base
Availability and (ii) the Line of Credit Commitment Availability.

 

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

 

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

 

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

 

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

 

“Cal Ex” means Cal Ex Trading Company, a Delaware corporation.

 

“Cal Ex Accounts” has the meaning of “Accounts” under the Cal Ex Loan
Agreement.

 

“Cal Ex Line of Credit” has the meaning of “Line of Credit” under the Cal Ex
Loan Agreement.

 

“Cal Ex Line of Credit Note” has the meaning of “Note” under the Cal Ex Loan
Agreement.

 

“Cal Ex Loan Agreement” means that certain Ex-Im Credit Agreement, dated as
of even date herewith, among Cal Ex, as borrower, Borrower and Bank.

 

2

 

“Cal Ex Loan Documents” has the meaning of “Loan Documents” under the Cal Ex
Loan Agreement.

 

“Cal Ex Obligations” has the meaning of “Obligations” under the Cal Ex
Loan Agreement.

 

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

 

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

 

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

 

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

 

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

 

“Closing Date” means September 1, 2004.

 

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

 

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

 

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

 

3

 

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

 

“Credits” means the Line of Credit, the Term Commitment and the
Term Loan.

 

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

 

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

 

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

 

“Default Rate” with respect to the Line of Credit, has the meaning
assigned to such term in the Line of Credit Note, with respect to the Term
Commitment, has the meaning assigned to such term in the Term Commitment Note,
and with respect to the Term Loan, has the meaning assigned to such term in the
Term Note.

 

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

 

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

 

“Director” means a director of Borrower.

 

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

 

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

 

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

 

4

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

5

 

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

 

(xii)                             Accounts owed by an Account Debtor (or an Affiliate of
such Account Debtor), regardless of whether otherwise eligible, to the extent
that the balance of such Accounts exceeds 25% of the sum of the aggregate
amount of all Accounts and, without duplication, the aggregate amount of all
Cal Ex Accounts (except in the case of each of Wal-Mart and Sam’s Club, in
which case such percentage shall be 30% in the aggregate for both Account
Debtors, and except in the case of Costco, in which case such percentage shall
be 30%); exceptions to such limit may be granted by Bank on a case by case
basis, in Bank’s sole and absolute discretion;

 

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

 

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

 

(xv)                            Accounts that are not payable in Dollars;

 

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

 

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

 

(xviii)                   Accounts with respect to which the Account Debtor is located in the
states of New Jersey, Minnesota, or West Virginia (or any other state that
requires a creditor to file a business activity report or similar document in
order to bring suit or otherwise

 

6

 

enforce its remedies against such Account Debtor in the courts or
through any judicial process of such state), unless Borrower has qualified to
do business in New Jersey, Minnesota, West Virginia, or such other states, or
has filed a business activities report with the applicable division of
taxation, the department of revenue, or with such other state offices, as
appropriate, for the then-current year, or is exempt from such filing
requirement;

 

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

 

(xx)                              Any “Eligible Export-Related Accounts
Receivable” constituting part of the “Borrowing Base” for purposes of the Cal
Ex Loan Agreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“GAAP” means generally accepted accounting principles in the United States of
America, consistently applied, which are in effect as of the date of this
Agreement.  If any changes in accounting
principles from those in effect on the date hereof are hereafter occasioned by
promulgation of rules, regulations, pronouncements or opinions by or are
otherwise required by the Financial Accounting Standards Board or the American
Institute of Certified Public Accountants (or successors thereto or agencies
with similar functions), and any of such changes results in a change in the
method of calculation of, or affects the results of such calculation of, any of
the financial covenants, standards or terms found herein, then the parties
hereto agree to enter into and diligently pursue negotiations in order to amend
such financial covenants, standards or terms so as to equitably reflect such
changes, with the desired result that the criteria

 

7

 

for evaluating financial
condition and results of operations of Borrower and the Subsidiaries shall be
the same after such changes as if such changes had not been made.

 

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

 

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

 

“Grower Reserve” means, as of
the date of determination, a reserve against the Borrowing Base in an amount
equal to 100% of all accounts payable then owing to all growers of any of the
produce sold by Borrower that are not parties to Acceptable Grower
Contracts.  The amount of all such
accounts payable shall be determined by Bank in cooperation with Borrower in a
commercially reasonable manner, and shall be prima facie evidence of such
amount.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Insolvency Proceeding” means any proceeding commenced by or against any
Person under any provision of the Bankruptcy Code or under any other state or
federal bankruptcy or insolvency law, assignments for the benefit of creditors,
formal or informal moratoria,

 

8

 

compositions, extensions
generally with creditors, or proceedings seeking reorganization, arrangement,
or other similar relief.

 

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

 

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

 

“Investment Property” means all of Borrower’s investment property, as such
term is defined in the UCC, whether now owned or hereafter acquired, including
but not limited to all securities, security entitlements, securities accounts,
commodity contracts, commodity accounts, stocks, bonds, mutual fund shares,
money market shares and U.S. Government securities.

 

“IRC” means the Internal Revenue Code of 1986.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Life Insurance Assignment” means an Assignment of Life Insurance Policy as
Collateral to be executed by the owner and the beneficiary thereof, in form and
substance

 

9

 

satisfactory to Bank,
granting Bank a first priority Lien on a Life Insurance Policy to secure
payment of the Obligations and the Cal Ex Obligations.

 

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

 

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

 

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

 

“Line of Credit Commitment Amount” means $10,000,000.

 

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

 

“Line of Credit Maturity Date” means August 31, 2006.

 

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

 

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

 

“Loan Documents” means this Agreement, the Notes, any Guaranty, the
Security Documents, the Subordination Agreement, any L/C Application, and the
Cal Ex Loan Documents.

 

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

 

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

 

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

 

“Material Adverse Effect” means any of the following:

 

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

 

10

 

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

 

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

 

(iv)                              any claim against Borrower or any
Guarantor or threat of litigation which is reasonably likely to be determined
adversely to Borrower or any Guarantor and, if so determined, would cause
Borrower or such Guarantor to be liable to pay an amount exceeding $500,000
over applicable insurance coverage, or would be an event described in clauses
(i), (ii) and (iii) above.

 

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

 

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

 

“Note” means the Line of Credit Note, the Term Commitment Note or the Term
Note, and “Notes”
means the Line of Credit Note, the Term Commitment Note and the Term Note.

 

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

 

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

 

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

 

“Overadvance” has the meaning given in Section 2.1(c).

 

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

 

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

 

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

 

11

 

“Parent” means Landec Corporation, a California corporation.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

12

 

“Sellers” shall mean collectively,
Tim Murphy, The Edward W. Silva, Jr. Revocable Trust dated August 6, 1989,
The Larry J. Silva Revocable Trust dated July 31, 1991 and San Ysidro
Farms, a partnership.

 

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

 

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

 

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

 

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

 

“Swap Agreement” means an interest rate protection agreement entered
into between Borrower and Bank (or such third party as Bank may in its
reasonable discretion require), in form and substance acceptable to Bank, which
agreement shall have a termination date not later than date upon which the
final payment is due under the promissory note governing the principal amount
to which the agreement relates and shall provide (among other things) that
Borrower shall (i) receive from the counterparty to such agreement an amount
based upon one month LIBOR (as defined in the Term Commitment Note) multiplied
by the swap notional balance and (ii) pay to the counterparty to such agreement
an amount based upon a fixed rate of interest (determined by Bank in the
exercise of its reasonable discretion) multiplied by the swap notional balance.

 

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

 

“Term Commitment” means a credit accommodation in the maximum principal
amount of the Term Commitment Amount, as described more fully in
Section 2.3.

 

“Term Commitment Advance” has the meaning given to such term in
Section 2.3(a).

 

“Term Commitment Amount” means the lesser of (i) $4,800,000 or
(ii) 80% of Borrower’s invoice cost (net of tax, shipping, freight,
installation, and other so-called “soft costs”) of all Equipment that is to be
or has been purchased by Borrower with the proceeds of

 

13

 

Term Commitment Advances,
or for which Borrower has been reimbursed with the proceeds of Term Commitment
Advances.

 

“Term Commitment Conversion Date” means August 31, 2005.

 

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

 

“Term Loan” has the meaning given in Section 2.4.

 

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

 

“Termination Date” means the earliest of (i) August 31, 2008,
(ii) the date Borrower terminates the Credit Facility, or (iii) the
date Bank demands payment of the Obligations after an Event of Default pursuant
to Section 7.2 hereof.

 

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

 

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

 

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

 

14

 

ARTICLE II

AMOUNT AND TERMS OF THE CREDIT FACILITY

 

Section 2.1.                                   Line of
Credit.

 

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

 

(b)                                 Payments to Sellers.  No proceeds from a Line of Credit Advance
may be used to make any payments owing to the Sellers except for the final
payments to the Sellers due in December 2004 and January 2005 for
$1,235,000 in the aggregate (assuming sufficient Availability); provided
that (x) no Event of Default has occurred and is continuing, and
(y) Availability is at not less than $1,000,000 after giving effect to any
such payments.

 

(c)                                  Overadvances. 
If, at any time or for any reason, the amount of Line of Credit Advances
outstanding plus the L/C Amount exceeds the Borrowing Base (an “Overadvance”),
Borrower shall immediately pay to Bank, upon Bank’s election and demand, in
cash, the amount of such Overadvance to be used by Bank to repay outstanding
Line of Credit Advances.

 

(d)                                 Procedures
for Requesting Advances.

 

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

 

15

 

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

 

Section 2.2.                                   Letter of
Credit Subfeature.

 

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

 

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

 

(ii)                                  Availability.

 

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

 

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

 

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

 

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

 

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

 

16

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

17

 

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

 

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

 

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

 

Section 2.3.                                   Term Commitment.

 

(a)                                  Bank agrees, subject to the terms and
conditions of this Agreement, to make up to four (4) advances to Borrower from
time to time under the Term Commitment (each a “Term Commitment Advance”),
for the purposes of funding certain Capital Expenditures of Borrower, from the
Funding Date up to but not including the Term Commitment Conversion Date.  Each Term Commitment Advance shall be
advanced directly to the applicable vendor or to Borrower, as Borrower may
request.  The foregoing to the contrary
notwithstanding, (i) each Term Commitment Advance shall be in an amount,
as determined by Bank, not to exceed 80% of Borrower’s invoice cost (net of
tax, shipping, freight, installation, and other so-called “soft costs”) of
Equipment that is to be purchased by Borrower with the proceeds of such Term
Commitment Advance, (ii) the Equipment that is to be acquired or that has
been purchased by Borrower must be reasonably acceptable to Bank in all
respects, and, not be a fixture, and not be intended to be affixed to real
property or to become installed in or affixed to other goods that are subject
to any financing Lien (other than Bank’s), (iii) Bank shall have no
obligation to make any Term Commitment Advances hereunder to the extent that
the making thereof would cause the then outstanding amount of all Term
Commitment Advances to exceed the Term Commitment Amount, and (iv) Bank
shall have no obligation to make more than four (4) Term Commitment
Advances.  On the Term Commitment
Conversion Date, Bank’s obligations to make Term Commitment Advances to
Borrower shall cease.  Borrower’s
obligation to pay the Term Commitment Advances shall be evidenced by the Term
Commitment Note and shall be secured by the Collateral.

 

(b)                                 Borrower shall comply with the following
procedures in requesting Term Commitment Advances:

 

(i)                                     Borrower shall make each request for a
Term Commitment Advance to Bank before 11:00 a.m., San Francisco time, three
(3) Business Days before the day of the requested Term Commitment Advance.  Requests shall be made in writing,
specifying the date of the requested Term Commitment Advance, the amount
thereof, and a demonstration that after giving effect to such Term Commitment
Advance, the EBITDA Coverage Ratio shall be in compliance with
Section 6.3(a).  Each request shall
be accompanied by the invoice for the applicable Equipment to be purchased and
proof of delivery to and acceptance by Borrower.  Bank reserves the right to confirm purchase price values.

 

18

 

(ii)                                  Each request shall be by an individual
authorized pursuant to Section 2.1(d).

 

(c)                                  Any request for a Term Commitment Advance
shall be deemed to be a representation by Borrower that the conditions set
forth in Section 4.2 have been satisfied as of the time of the request.

 

(d)                                 Notwithstanding anything to the contrary
in this Section 2.3, Bank shall have no obligation to make any Term
Commitment Advance if, after giving effect to such Term Commitment Advance, the
EBITDA Coverage Ratio shall not be in compliance with Section 6.3(a).

 

(e)                                  Repayment.  The
outstanding principal balance of the Term Commitment Note shall be repaid in
accordance with the provisions thereof.

 

(f)                                    Prepayment.  Borrower may
prepay principal on the Term Commitment solely in accordance with the
provisions of the Term Commitment Note.

 

Section 2.4.                                   Term Loan.

 

(a)                                  Term Loan.  Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make a loan to Borrower in the principal
amount of One Million Two Hundred Thousand Dollars ($1,200,000) (the “Term Loan”),
the proceeds of which shall be used to refinance the outstanding balance of
certain term indebtedness of Borrower secured by the Collateral prior to the
date hereof.  Borrower’s obligation to
repay the Term Loan shall be evidenced by the Term Note and shall be secured by
the Collateral.

 

(b)                                 Repayment.  Principal on the Term Loan
shall be repaid in accordance with the provisions of the Term Note.

 

(c)                                  Prepayment.  Borrower may prepay principal on the Term
Loan solely in accordance with the provisions of the Term Note.

 

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

 

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

 

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

 

19

 

(c)                                  Swap Agreements.  At any time
during which an outstanding principal balance is owing under the Term
Commitment or the Term Loan and so long as an Event of Default has not occurred
and is not continuing under this Agreement, Bank and Borrower agree that
Borrower may, at its option, request that Bank quote to Borrower a fixed rate
to be provided to Borrower pursuant to a Swap Agreement.  Any proposed Swap Agreement offered by Bank
to Borrower will be subject to terms and provisions acceptable to Bank, which
terms and provisions will be those generally available to Bank to offer to a
borrower for a transaction involving a similar principal amount, term, interest
rate and factors similar to Borrower’s credit transaction and generally
available to other customers of Bank similar in nature, risk, business,
financial performance and other risk factors (as determined by Bank in its
reasonable discretion) as Borrower.  Any
proposed Swap Agreement may fix the interest rate with respect to an aggregate
notional balance equal to some or all of the principal owing under the Term
Commitment or the Term Loan (as such principal balance is to be reduced from
time to time pursuant to the repayment schedule applicable thereto) and
for as long as the remaining term of such Credit.

 

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

 

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

 

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

 

20

 

Section 2.6.                                   Fees.

 

(a)                                  Commitment Fee.  Borrower shall pay to Bank a non-refundable
commitment fee for the Line of Credit equal to $10,000, which fee shall be due
and payable in full on the Closing Date.

 

(b)                                 Collateral
Monitoring Fees. 
Borrower shall pay to Bank, within 15 days after written demand,
collateral monitoring fees in connection with any audits or inspections
conducted by or on behalf of Bank of any Collateral or Borrower’s operations or
business at the rates established from time to time by Bank as its audit fees,
together with all actual out-of-pocket costs and expenses incurred in
conducting any such audit or inspection. 
Such collateral monitoring fees plus the collateral monitoring
fees due under Section 2.6(b) of the Cal Ex Loan Agreement shall not
exceed $1,200 per month unless a Default Period is continuing.

 

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

 

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

 

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

 

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

 

21

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

22

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

23

 

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

 

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

 

ARTICLE III

SECURITY INTEREST

 

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

 

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

 

Section 3.2.                                   Financing Statements.  Borrower
authorizes Bank to file from time to time where permitted by law, such
financing statements against collateral described as “all personal property” or
describing specific items of collateral including commercial tort claims as
Bank deems necessary or useful to perfect the Security Interest.  A carbon, photographic or other reproduction
of this Agreement or of any financing statements authorized by Borrower is
sufficient as a financing statement and may be filed as a financing statement
in any state to perfect the security interests granted hereby.  For this purpose, the following information
is set forth:

 

Name and address of
Debtor:

 

Apio, Inc.

4575 West Main Street

Guadalupe, CA 93434

Federal
Employer Identification No. 77-0528042

Organizational Identification No. 2863977

 

24

 

Name and address of
Secured Party:

 

Wells Fargo Bank,
National Association

400 Hamilton Avenue, P.O.
Box 150

Palo Alto, CA  94302

 

ARTICLE IV

CONDITIONS OF LENDING

 

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

 

(a)                                  This Agreement, duly executed by
Borrower.

 

(b)                                 The Notes, duly executed by Borrower.

 

(c)                                  A true and correct copy of any and all
leases pursuant to which Borrower is leasing the Premises, together with a
landlord’s disclaimer and consent with respect to each such lease.

 

(d)                                 A true and correct copy of any and all
mortgages pursuant to which Borrower has mortgaged the Premises, together with
a mortgagee’s disclaimer and consent with respect to each such mortgage.

 

(e)                                  The Life Insurance Assignment (if any),
properly executed by the beneficiary and owner thereof, and the Life Insurance
Policy (if any), together with evidence that such Life Insurance Policy is
subject to no assignments or encumbrances other than the Life Insurance
Assignment.

 

(f)                                    The Lockbox Agreement, duly executed by
Borrower, Bank and Bank of America, National Association.

 

(g)                                 Control agreements, duly executed by
Borrower and each bank at which Borrower maintains deposit accounts.

 

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

 

(i)                                     A Guaranty, duly executed by Parent.

 

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

 

(k)                                  INTENTIONALLY OMITTED.

 

25

 

(l)                                     Current searches of appropriate filing
offices showing that (i) no Liens have been filed and remain in effect
against Borrower except Permitted Liens or Liens held by Persons who have
agreed in writing that upon receipt of some of the proceeds of the Advances to
be made on the Closing Date, they will satisfy, release or terminate such Liens
in a manner satisfactory to Bank, and (ii) Bank has duly filed all
financing statements necessary to perfect the Security Interest, to the extent
the Security Interest is capable of being perfected by filing.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

26

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

 

(v)                                 Review and approval by Bank of the
appraisal of Borrower’s unencumbered Equipment performed by Rabin Brothers
dated July 15, 2003.

 

(w)                               Review and approval by Bank of the
Companies’ internally prepared financial statements for the period ended
May 31, 2004.

 

(x)                                   Review and approval by Bank of Parent’s
consolidating internally prepared financial statements for the period ended
May 31, 2004.

 

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

 

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

 

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

 

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

 

(cc)                            True and complete copies of all license
agreements pursuant to which Borrower licenses any Intellectual Property
Rights, together with a consent to assignment to Bank or its nominee from each
licensor thereof.

 

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

 

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

 

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

 

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

 

27

 

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

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES

 

Borrower represents and
warrants to Bank as follows:

 

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

 

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

 

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

 

28

 

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

 

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

 

Section 5.6.                                   Financial Condition; No Adverse Change. 
Borrower has furnished to Bank the Companies’ audited financial
statements for the fiscal year ended May 31, 2004, and those statements
fairly present in all material respects the Companies’ financial condition on
the dates thereof and the results of their operations and cash flows for the
periods then ended and were prepared in accordance GAAP.  Since the date of the most recent financial
statements, there has been no change in the Companies’ business, properties or condition
(financial or otherwise) which has had a Material Adverse Effect.

 

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

 

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

 

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

 

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

 

29

 

Section 5.11.                             Intellectual Property Rights.

 

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

 

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

 

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

 

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

 

30

 

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

 

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

 

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

 

Section 5.14.                             Environmental Matters.

 

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

 

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

 

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

 

31

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

32

 

Section 5.19.                             Equipment.  All of the
Equipment financed pursuant to the Term Commitment is used or held for use in
Borrower’s business and is fit for such purposes (other than worn out, surplus
or obsolete Equipment).

 

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

 

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

 

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

 

ARTICLE VI

COVENANTS

 

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

 

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

 

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

 

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

 

33

 

officer has knowledge of
the occurrence of any Default or Event of Default and, if so, stating in reasonable
detail the facts with respect thereto.

 

(b)                                 Monthly
Financial Statements. 
As soon as available and in any event within 30 days after the end of
each month, Borrower will deliver to Bank an unaudited/internal balance sheet
and statements of income and reconciliation of retained earnings of Borrower as
at the end of and for such month and for the year to date period then ended,
prepared, if Bank so requests, on a consolidating and consolidated basis to
include any Subsidiaries, in reasonable detail and stating in comparative form
the figures for the corresponding date and periods in the previous year, all
prepared in accordance with GAAP, subject to year-end audit adjustments and
fairly representing in all material respects Companies’ financial position and
the results of its operations.

 

(c)                                  Collateral Reports.  Borrower
will deliver to Bank the following documents at the following times in form
satisfactory to Bank:

 

	
  Monthly

  	
   

  	
  (i)

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

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii)

  	
  a report of outstanding
  payable balances owing to all growers,

  
	
   

  	
   

  	
   

  	
   

  
	
  Monthly (not later than
  the 20th day after each fiscal month end)

  	
   

  	
  (iii)

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

  
	
   

  	
   

  	
   

  
	
   

  	
  (iv)

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

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (v)

  	
  monthly Borrowing Base
  certificate in the form of Exhibit D attached hereto, executed by a
  financial representative of Borrower,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (vi)

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

  

 

34

 

	
  Quarterly

  	
   

  	
  (vii)

  	
  internally-prepared
  consolidating financial statements for Parent (not later than the 45th
  day after each quarter-end),

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (viii)

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

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Semi-Annually

  	
   

  	
  (ix)

  	
  a detailed list of
  Borrower’s customers with contact names and addresses,

  
	
   

  	
   

  	
   

  	
   

  
	
  Upon request by Bank

  	
   

  	
  (x)

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

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (xi)

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

  

 

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

 

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

 

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

 

(g)                                 Plans.  As soon as possible, and in any event within
30 days after Borrower knows or has reason to know that any Reportable Event
with respect to any Pension Plan has occurred, Borrower will deliver to Bank a
statement of the chief financial officer of Borrower

 

35

 

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

 

(h)                                 Disputes.  Promptly upon knowledge thereof, Borrower
will deliver to Bank notice of (i) any disputes or claims by Borrower’s
customersexceeding $100,000 individually or $500,000 in the aggregate during
any fiscal year; (ii) credit memos exceeding $100,000 for any individual
Account Debtor or $500,000 in the aggregate for all Account Debtors; or
(iii) any goods returned to or recovered by Borrower with a value
exceeding $100,000 from any individual Account Debtor or $500,000 in the
aggregate from all Account Debtors.

 

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

 

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

 

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

 

(l)                                     Intellectual Property.

 

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

 

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

 

36

 

threatened cancellation, termination or material limitation of its
Intellectual Property Rights.

 

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

 

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

 

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

 

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

 

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

 

Section 6.3.                                   Financial
Covenants.

 

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

 

(b)                                 Minimum
Tangible Net Worth. 
Borrower, together with the other Companies, will maintain, at all
times, Tangible Net Worth, determined as at the end of each fiscal quarter, at
an amount not less than the amount set forth in the table below opposite the
applicable fiscal quarter end:

 

37

 

	
  Fiscal Quarter Ending

  	
   

  	
  Minimum Tangible Net Worth

  
	
  August 2004

  	
   

  	
  $17,000,000

  
	
  November 2004

  	
   

  	
  $18,000,000

  
	
  February 2005

  	
   

  	
  $18,500,000

  
	
  May 2005

  	
   

  	
  $19,500,000

  
	
  August 2005 and each fiscal quarter
  end thereafter

  	
   

  	
  $19,500,000 plus 75% of cumulative Net
  Income realized since May 2005 up to such fiscal quarter end

  

 

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

 

	
  Fiscal Year to Date Period Ending

  	
   

  	
  Minimum Net Income

  
	
  August 31 of each
  year

  	
   

  	
  $

  	
  750,000

  
	
  November 30 of each year

  	
   

  	
  $

  	
  1,750,000

  
	
  February 28 or 29, as applicable,
  of each year

  	
   

  	
  $

  	
  2,150,000

  
	
  May 31 of each year

  	
   

  	
  $

  	
  2,900,000

  

 

(d)                                 Capital Expenditures.  Borrower
together with the other Companies will not incur financed or unfinanced Capital
Expenditures of more than $6,000,000 in the aggregate during the fiscal year
ending May 2005 or any fiscal year thereafter.

 

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

 

Section 6.4.                                   Permitted
Liens; Financing Statements.

 

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

 

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

 

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

 

38

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(a)                                  Indebtedness arising hereunder;

 

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

 

(c)                                  Indebtedness relating to Permitted Liens;

 

39

 

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

 

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

 

(f)                                    Other unsecured indebtedness of Borrower
provided the aggregate principal amount of all such indebtedness does not
exceed $500,000.

 

Section 6.6.                                   Guaranties.  Borrower
will not assume, guarantee, endorse or otherwise become directly or
contingently liable in connection with any obligations of any other Person,
except:

 

(a)                                  the endorsement of negotiable instruments
by Borrower for deposit or collection or similar transactions in the ordinary
course of business; and

 

(b)                                 guaranties, endorsements and other direct
or contingent liabilities in connection with the obligations of other Persons,
in existence on the date hereof and listed in Schedule 6.5 hereto.

 

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

 

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

 

(b)                                 travel advances or loans to Borrower’s
Officers and employees not exceeding at any one time an aggregate of $10,000;

 

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

 

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

 

40

 

(e)                                  value added joint venture investments;
and

 

(f)                                    crop advances.

 

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

 

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

 

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

 

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

 

Section 6.12.                             Account Verification.  Bank may at
any time and from time to time send or require Borrower to send requests for
verification of accounts and amounts owed to Account

 

41

 

Debtors and other
obligors.  Bank may also at any time an
Event of Default has occurred and is continuing and from time to time telephone
Account Debtors and other obligors to verify accounts and send such Account
Debtors and other obligors notification of the assignment of Accounts to Bank.

 

Section 6.13.                             Compliance
with Laws.

 

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

 

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

 

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

 

Section 6.15.                             Maintenance of Properties.

 

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

 

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

 

42

 

Property Rights and to
defend itself against any Person accusing it of Infringing any Person’s
Intellectual Property Rights.

 

Section 6.16.                             Insurance.  Borrower
will obtain and at all times maintain insurance with insurers believed by
Borrower to be responsible and reputable, in such amounts and against such
risks as may from time to time be required by Bank, but in all events in such
amounts and against such risks as is usually carried by companies engaged in
similar business and owning similar properties in the same general areas in
which Borrower operates. Without limiting the generality of the foregoing,
Borrower will at all times keep all tangible Collateral insured against risks
of fire (including so-called extended coverage), theft, collision (for
Collateral consisting of motor vehicles) and such other risks and in such
amounts as Bank may reasonably request, with any loss payable to Bank to the
extent of its interest, and all policies of such insurance shall contain a
lender’s loss payable endorsement for Bank’s benefit.  All policies of liability insurance required hereunder shall name
Bank as an additional insured.

 

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

 

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

 

Section 6.19.                             Sale or Transfer of Assets; Suspension of Business
Operations.  Borrower will not sell, lease, assign,
transfer or otherwise dispose of (i) the stock of any Subsidiary,
(ii) all or a substantial part of its assets, or (iii) any Collateral
or any interest therein (whether in one transaction or in a series of
transactions) to any other Person other than (v) the sale of Inventory in
the ordinary course of business, (w) dispositions of obsolete, surplus,
worn or nonfunctional Equipment, (x) dispositions of cash or Cash
Equivalents not otherwise prohibited under this Agreement, (y) transfers
of Intellectual Property Rights as permitted under this Section 6.19 and
(z) dispositions of other assets in any given fiscal year in an aggregate
amount not to exceed $500,000 or $100,000 for any individual asset.  Borrower will not liquidate, dissolve or
suspend business operations.  Borrower
will not transfer any part of its ownership interest in any Intellectual
Property Rights except for transfers of Immaterial Intellectual Property Rights
and licensing or sublicensing of Intellectual Property Rights in the ordinary
course of Borrower’s business.  Borrower
will not permit any agreement under which it has licensed Licensed Intellectual
Property, other than Immaterial Intellectual Property Rights, to lapse.  If Borrower transfers any Intellectual
Property Rights for value, other than transfers of Immaterial Intellectual
Property Rights and licensing or sublicensing of Intellectual Property Rights
in the ordinary course of Borrower’s business, Borrower will pay over the
proceeds to Bank for application to the Obligations.  Bank hereby agrees that in the event Borrower licenses or
sublicenses any Intellectual Property Rights pursuant to the terms of this
Section 6.19, following written demand of Borrower, Bank shall execute a
form of estoppel reasonably acceptable in form and substance to Borrower and
Bank pursuant to which Bank shall represent that upon its exercise of any of
its rights or remedies hereunder or under any other Loan Document with respect
to the licensed or sublicensed Intellectual Property Rights, including a
foreclosure under any Security Document,

 

43

 

so long as there shall
then exist no breach, default, or event of default on the part of the related
licensee or sublicensee, as applicable, which breach, default or event of
default has continued beyond any cure periods provided in the license or
sublicense, Bank shall not extinguish or terminate the interest of the licensee
or sublicensee, as applicable, by reason of such foreclosure.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

44

 

Section 6.28.                             Transactions With Affiliates.  Borrower
will not directly or indirectly enter into or permit to exist any transaction
with any Affiliate of Borrower except for transactions that are in the ordinary
course of Borrower’s business, upon fair and reasonable terms, that are fully
disclosed to Bank, and that are no less favorable to Borrower than would be
obtained in an arm’s length transaction with a non-Affiliate.

 

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

 

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

 

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

 

Section 6.32.                             Maintenance of Accounts with Bank. 
Borrower shall, and shall cause each of the other Companies to, at all
times during the period commencing 90 days after the Closing Date and ending on
the Termination Date, maintain its primary depository and investment accounts
with Bank, including, without limitation, the Loan Account and the Lockbox
Account, pursuant to account agreements and terms mutually acceptably to
Borrower and Bank; provided, however, that until such time that
Borrower and the other Companies shall maintain such accounts with Bank,
Borrower shall, and shall cause each of the other Companies, to enter into one
or more control agreements with Bank and each other bank or financial
institution at which Borrower or any other Company maintains such accounts.

 

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

 

Section 6.34.                             Performance by Bank.  If Borrower
at any time fails to perform or observe any of the foregoing covenants
contained in this Article VI or elsewhere herein, and if such failure
shall continue for a period of ten calendar days after Bank gives Borrower
written notice

 

45

 

thereof (or in the case
of the agreements contained in Sections 6.14 and 6.16, immediately upon
the occurrence of such failure, without notice or lapse of time), Bank may, but
need not, perform or observe such covenant or covenants on behalf and in the
name, place and stead of Borrower (or, at Bank’s option, in Bank’s name) and
may, but need not, take any and all other actions which Bank may reasonably
deem necessary to cure or correct such failure (including the payment of taxes,
the satisfaction of Liens, the performance of obligations owed to Account
Debtors or other obligors, the procurement and maintenance of insurance, the
execution of assignments, security agreements and financing statements, and the
endorsement of instruments); and Borrower shall thereupon pay to Bank on demand
the amount of all monies expended and all costs and expenses (including
reasonable attorneys’ fees and legal expenses) incurred by Bank in connection
with or as a result of the performance or observance of such agreements or the
taking of such action by Bank, together with interest thereon from the date
expended or incurred at the Default Rate applicable to Line of Credit
Advances.  To facilitate Bank’s
performance or observance of such covenants of Borrower, Borrower hereby
irrevocably appoints Bank, or Bank’s delegate, acting alone, as Borrower’s
attorney in fact (which appointment is coupled with an interest) with the right
(but not the duty) from time to time to create, prepare, complete, execute,
deliver, endorse or file in the name and on behalf of Borrower any and all
instruments, documents, assignments, security agreements, financing statements,
applications for insurance and other agreements and writings required to be
obtained, executed, delivered or endorsed by Borrower under this
Section 6.34.

 

ARTICLE VII

EVENTS OF DEFAULT, RIGHTS AND REMEDIES

 

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

 

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

 

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

 

(c)                                  A Change of Control shall occur;

 

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

 

(e)                                  An Insolvency Proceeding is commenced
against Borrower, or any Guarantor, and any of the following events occur:  (a) Borrower or such Guarantor consents
to the institution of such Insolvency Proceeding against it, (b) the
petition commencing the Insolvency Proceeding is not timely controverted,
(c) the petition commencing the Insolvency Proceeding is not dismissed
within sixty (60) calendar days of the date of the filing thereof; provided,
however,

 

46

 

that, during the pendency
of such period, Bank shall be relieved of its obligations to extend credit
hereunder, (d) an interim trustee is appointed to take possession of all
or any substantial portion of the properties or assets of, or to operate all or
any substantial portion of the business of, Borrower or any such Guarantor, or
(e) an order for relief shall have been entered therein;

 

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

 

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

 

(h)                                 A notice of Lien, levy, or assessment is
filed of record with respect to any of Borrower’s or any Guarantor’s assets by
the United States, or any department, agency, or instrumentality thereof, or by
any state, county, municipal, or governmental agency, or if any taxes or debts
owing at any time hereafter to any one or more of such entities becomes a Lien,
whether choate or otherwise, upon any of Borrower’s or any Guarantor’s assets
valued in excess of $250,000 and the same is not paid before such payment is
delinquent; provided that Bank may at any time that any such Lien exists
reserve against the Borrowing Base in the amount of such Lien;

 

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

 

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

 

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

 

(l)                                     The rendering against Borrower of an
arbitration award, final judgment, decree or order for the payment of money in
excess of $500,000 over applicable insurance coverage and the continuance of
such arbitration award, judgment, decree or order unsatisfied and in effect for
any period of 60 consecutive days without a stay of execution;

 

47

 

(m)                               A default under any bond, debenture, note
or other evidence of material Indebtedness of Borrower owed to any Person other
than Bank, or under any indenture or other instrument under which any such
evidence of Indebtedness has been issued or by which it is governed, or under
any material lease or other contract, and the expiration of the applicable
period of grace, if any, specified in such evidence of Indebtedness, indenture,
other instrument, lease or contract, and the effect of such failure, event or
condition is to cause, or permit the holder or holders thereof to cause,
Indebtedness of Borrower (other than the Obligations) (in an aggregate amount
exceeding $500,000 in the event that such Indebtedness is unsecured) to become
redeemable, due or otherwise payable (whether at scheduled maturity, by
required prepayment, upon acceleration or otherwise);

 

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

 

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

 

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

 

(q)                                 Default in the payment of any amount owed
by Borrower to Bank other than any Indebtedness arising hereunder;

 

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

 

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

 

48

 

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

 

(u)                                 An Event of Default shall occur under the
Cal Ex Loan Agreement; or

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

49

 

without charge, in order
to exercise any of Bank’s rights or remedies provided herein, at law, in
equity, or otherwise;

 

(g)                                 without notice to Borrower (such notice
being expressly waived), and without constituting a retention of any collateral
in satisfaction of an obligation (within the meaning of the UCC), Bank may set
off and apply to the Obligations any and all (i) balances and deposits of
Borrower held by Bank (including any amounts received in the Lockbox), or
(ii) Indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

50

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

51

 

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

 

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

 

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

 

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

 

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

 

ARTICLE VIII

MISCELLANEOUS

 

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

 

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

 

Section 8.3.                                   Addresses for Notices; Requests for Accounting. 
Except as otherwise expressly provided herein, all notices, requests,
demands and other communications provided for under the Loan Documents shall be
in writing and shall be (a) personally delivered, (b) sent by first
class United States mail, (c) sent by overnight courier of national
reputation, or (d) transmitted by telecopy, in each case addressed or
telecopied to the party to whom notice is being given at its address or
telecopier number as set forth below next to its signature or, as to

 

52

 

each party, at such other
address or telecopier number as may hereafter be designated by such party in a
written notice to the other party complying as to delivery with the terms of
this Section.  All such notices, requests,
demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in
the mail if delivered by mail, (c) the date sent if sent by overnight
courier, or (d) the date of transmission if delivered by telecopy, except
that notices or requests to Bank pursuant to any of the provisions of
Article II shall not be effective until received by Bank.  All requests under Section 9210 of the
UCC (i) shall be made in a writing signed by a person authorized under
Section 2.1(d), (ii) shall be personally delivered, sent by
registered or certified mail, return receipt requested, or by overnight courier
of national reputation (iii) shall be deemed to be sent when received by
Bank and (iv) shall otherwise comply with the requirements of
Section 9210.  Borrower requests
that Bank respond to each such request which on its face appears to come from
an authorized individual and releases Bank from any liability for so responding.  Borrower shall pay Bank the maximum amount
allowed by law for responding to such requests.

 

Section 8.4.                                   Further Documents.  Borrower
will from time to time execute and deliver or endorse any and all instruments,
documents, conveyances, assignments, security agreements, financing statements,
control agreements and other agreements and writings that Bank may reasonably
request in order to secure, protect, perfect or enforce the Security Interest
or Bank’s rights under the Loan Documents (but any failure to request or assure
that Borrower executes, delivers or endorses any such item shall not affect or
impair the validity, sufficiency or enforceability of the Loan Documents and
the Security Interest, regardless of whether any such item was or was not
executed, delivered or endorsed in a similar context or on a prior
occasion).  Notwithstanding the
foregoing, Borrower agrees to promptly (but in no event later than thirty (30)
days after the Closing Date) cause (i) Bank of America, National
Association to enter into one or more control agreements in form and substance
acceptable to Bank and Bank of America, National Association;
(ii) Borrower’s counsel to date-down their opinion to take into account
receipt of current certified copies of the articles of incorporation or
certificates of incorporation, as applicable, of Borrower, Cal Ex and Parent;
and (iii) all necessary parties to execute and deliver to Bank the
acknowledgement and consent regarding the assignment of Borrower’s interest in
Apio Cooling.

 

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

 

Section 8.6                                      Indemnity.  In addition
to the payment of expenses pursuant to Section 8.5, Borrower shall
indemnify, defend and hold harmless Bank, and any of its participants, parent
corporations, subsidiary corporations, affiliated corporations, successor
corporations, and all present and future officers, directors, employees,
attorneys and agents of the foregoing (the “Indemnitees”) from and against any of the
following (collectively, “Indemnified Liabilities”),

 

53

 

in each, other than
arising as a result of the gross negligence or willful misconduct of any
Indemnitee:

 

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

 

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

 

(iii)                               any and all other liabilities, losses, damages,
penalties, judgments, suits, claims, costs and expenses of any kind or nature
whatsoever (including the reasonable fees and disbursements of counsel) in
connection with the foregoing and any other investigative, administrative or judicial
proceedings, whether or not such Indemnitee shall be designated a party
thereto, which may be imposed on, incurred by or asserted against any such
Indemnitee, in any manner related to or arising out of or in connection with
the Credit Facility and the Loan Documents or the use or intended use of the
proceeds of the Credits.

 

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

 

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

 

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

 

54

 

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

 

Section 8.10.                             Retention of Borrower’s Records. 
Bank shall have no obligation to maintain any electronic records or any
documents, schedules, invoices, agings, or other papers delivered to Bank by
Borrower or in connection with the Loan Documents for more than twelve months
after receipt by Bank; provided, however, that Borrower shall not
have any obligation to provide Bank with duplicate records and documents after
the same have been destroyed by Bank.

 

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

 

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

 

Section 8.13.                             Revival and Reinstatement of Obligations. 
If the incurrence or payment of the Obligations by Borrower or any
Guarantor or the transfer to Bank of any property should for any reason
subsequently be declared to be void or voidable under any state or federal law
relating to creditors’ rights, including provisions of the Bankruptcy Code
relating to fraudulent

 

55

 

conveyances, preferences,
or other voidable or recoverable payments of money or transfers of property
(collectively, a “Voidable Transfer”), and if Bank is required to repay or
restore, in whole or in part, any such Voidable Transfer, or elects to do so
upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Bank is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of Bank
related thereto, the liability of Borrower or any Guarantor automatically shall
be revived, reinstated, and restored and shall exist as though such Voidable
Transfer had never been made.

 

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

 

Section 8.15.                             GOVERNING
LAW. 
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (EXCEPT AS OTHERWISE
SPECIFIED THEREIN), AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO, SHALL BE
CONSTRUED AND DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA.

 

Section 8.16.                             SUBMISSION
TO JURISDICTION.  SUBJECT TO SECTION 8.17:  (I) ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT SOLELY IN
THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN
DISTRICT OF CALIFORNIA, AND, BY EXECUTION AND DELIVERY HEREOF, EACH OF
BORROWER, CAL EX AND BANK CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
TO THE JURISDICTION OF THOSE COURTS; (II) EACH OF BORROWER, CAL EX AND
BANK IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO.  EACH OF BORROWER, CAL EX AND BANK WAIVES
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE
BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW.

 

Section 8.17.                             WAIVER
OF JURY TRIAL.  EACH OF BORROWER, CAL EX AND BANK, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT
TO A TRAIL BY JURY IN ANY ACTION, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION
IN ANY WAY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS OR EVENTS REFERENCED HEREIN OR THEREIN OR
CONTEMPLATED HEREBY OR THEREBY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS OR OTHERWISE.  THIS WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT OR ANY OTHER OF THE LOAN DOCUMENTS.  A COPY OF THIS SECTION 8.17 MAY BE FILED WITH ANY COURT AS
WRITTEN EVIDENCE OF THE WAIVER OF THE RIGHT TO TRIAL BY JURY AND THE CONSENT TO
TRIAL BY COURT.

 

56

Section 8.18.                             Arbitration.

 

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

 

(b)                                 Governing
Rules.  Any
arbitration proceeding will (i) proceed in a location in California
selected by the American Arbitration Association (“AAA”); (ii) be
governed by the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the documents
between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA’s commercial dispute resolution procedures, unless the claim or
counterclaim is at least $1,000,000.00 exclusive of claimed interest,
arbitration fees and costs in which case the arbitration shall be conducted in
accordance with the AAA’s optional procedures for large, complex commercial
disputes (the commercial dispute resolution procedures or the optional
procedures for large, complex commercial disputes to be referred to, as
applicable, as the “Rules”). 
If there is any inconsistency between the terms hereof and the Rules,
the terms and procedures set forth herein shall control.  Any party who fails or refuses to submit to arbitration
following a demand by any other party shall bear all costs and expenses
incurred by such other party in compelling arbitration of any dispute.  Nothing contained herein shall be deemed to
be a waiver by any party that is a bank of the protections afforded to it under
12 U.S.C. §91 or any similar applicable state law.

 

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

 

(d)                                 Arbitrator
Qualifications and Powers. 
Any arbitration proceeding in which the amount in controversy is
$5,000,000.00 or less will be decided by a single arbitrator selected according
to the Rules, and who shall not render an award of greater than
$5,000,000.00.  Any dispute in which the
amount in controversy exceeds $5,000,000.00 shall be decided by majority vote
of a panel of three arbitrators; provided  however, that all three
arbitrators must actively participate in all hearings and deliberations.  The arbitrator will be a neutral attorney
licensed in the State of California or a neutral retired judge of the state or
federal judiciary of California, in either case with a minimum of ten years
experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated.  The
arbitrator will determine whether or not an issue is arbitratable and will give
effect to the statutes of limitation in determining any claim.  In any arbitration proceeding the arbitrator
will decide (by documents only or with a hearing at the

 

57

 

arbitrator’s discretion) any pre-hearing motions which are similar to
motions to dismiss for failure to state a claim or motions for summary
adjudication.  The arbitrator shall
resolve all disputes in accordance with the substantive law of California and
may grant any remedy or relief that a court of such state could order or grant
within the scope hereof and such ancillary relief as is necessary to make
effective any award.  The arbitrator
shall also have the power to award recovery of all costs and fees, to impose
sanctions and to take such other action as the arbitrator deems necessary to
the same extent a judge could pursuant to the Federal Rules of Civil Procedure,
the California Rules of Civil Procedure or other applicable law.  Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction.  The institution and maintenance of an action
for judicial relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.

 

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

 

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

 

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

 

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

 

58

 

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

 

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

 

ARTICLE IX

JOINT AND SEVERAL LIABILITY

 

Section 9.1.                                   Joint and
Several Liability. 
Cal Ex agrees that it is jointly and severally, directly and primarily
liable to Bank for payment, performance and satisfaction in full of the
Obligations and that such liability is independent of the duties, obligations,
and liabilities of Borrower.  Bank may
bring a separate action or actions on each, any, or all of the obligations of
Borrower hereunder or the obligations of Cal Ex hereunder, whether action is
brought against Borrower or whether Borrower is joined in such action.  In the event that Borrower fails to make any
payment of any obligation hereunder on or before the due date thereof, Cal Ex immediately
shall cause such payment to be made or each of such obligations to be made or
each of such obligations to be performed, kept, observed, or fulfilled.

 

59

 

Section 9.2.                                   Primary Obligation; Waiver of Marshalling.  The obligations of Borrower under the Loan
Documents are a primary and original obligation of Cal Ex, are not the creation
of a surety relationship, and are an absolute, unconditional, and continuing
promise of payment and performance which shall remain in full force and effect without
respect to future changes in conditions, including any change of law or any
invalidity or irregularity with respect to the Loan Documents.  Cal Ex agrees that its liability under the
Loan Documents shall be immediate and shall not be contingent upon the exercise
or enforcement by Bank of whatever remedies they may have against Borrower, or
the enforcement of any lien or realization upon any security Bank may at any
time possess.  Cal Ex consents and
agrees that Bank shall be under no obligation to marshal any assets of Borrower
against or in payment of any or all of the Obligations.

 

Section 9.3.                                   Financial
Condition of Borrower. 
Cal Ex acknowledges that it is presently informed as to the financial
condition of Borrower and of all other circumstances which a diligent inquiry
would reveal and which bear upon the risk of nonpayment of the
Obligations.  Cal Ex hereby covenants
that it will continue to keep informed as to the financial condition of
Borrower, the status of Borrower and of all circumstances which bear upon the
risk of nonpayment of the Obligations. 
Absent a written request from Cal Ex to Bank for information, Cal Ex
hereby waives any and all rights it may have to require Bank to disclose to Cal
Ex any information which Bank may now or hereafter acquire concerning the
condition or circumstances of Borrower and the Obligations.

 

Section 9.4.                                   Continuing
Liability.  The
liability of Cal Ex hereunder includes the obligations of Borrower hereunder
arising under successive transactions continuing, compromising, extending,
increasing, modifying, releasing, or renewing the such obligations, changing
the interest rate, payment terms, or other terms and conditions thereof, or
creating new or additional obligations after prior obligations have been satisfied
in whole or in part.  To the maximum
extent permitted by law, Cal Ex hereby waives any right to revoke its liability
under this Agreement and the Loan Documents as to future indebtedness, and in
connection therewith, Cal Ex hereby waives any rights it may have under
Section 2815 of the California Civil Code.

 

Section 9.5.                                   Additional Waivers.  Cal Ex absolutely, unconditionally,
knowingly, and expressly waives:

 

(a)                                  (1)  notice of acceptance hereof; (2) notice
of any loans or other financial accommodations made or extended under the Loan
Documents or the creation or existence of any obligations under this Agreement;
(3) notice of the amount of the Obligations, subject, however, to Cal Ex’s
right to make inquiry of Bank to ascertain the amount of such obligations at
any reasonable time; (4) notice of any adverse change in the financial
condition of Borrower or of any other fact that might increase Cal Ex’s risk
hereunder; (5) notice of presentment for payment, demand, protest, and
notice thereof as to any instruments among the Loan Documents; (6) notice
of any “Default” or “Event of Default” under the Loan Documents; and
(7) all other notices (except if such notice is specifically required to
be given to Cal Ex hereunder or under the other Loan Documents) and demands to
which Cal Ex might otherwise be entitled;

 

(b)                                 its
right, under Sections 2845 or 2850 of the California Civil Code, or
otherwise, to require Bank to institute suit against, or to exhaust any rights
and remedies which Bank has or

 

60

 

may have against, Borrower or any third party, or against any
collateral for the Obligations provided by Borrower, or any third party.  Cal Ex further waives any defense arising by
reason of any disability or other defense (other than the defense that the
Obligations shall have been fully and finally performed and indefeasibly paid)
of Borrower or by reason of the cessation from any cause whatsoever of the
liability of Borrower in respect thereof;

 

(c)                                  (1)  any rights to assert against Bank any
defense (legal and equitable), set-off, counterclaim, or claim which Cal Ex may
now or at any time hereafter have against Borrower or any other party liable to
Bank; (2) any defense, set-off, counterclaim, or claim, of any kind or
nature, arising directly or indirectly from the present or future lack of
perfection, sufficiency, validity, or enforceability of the Obligations or any
security therefor; (3) any defense Cal Ex has to performance hereunder,
and any right Cal Ex has to be exonerated provided by Sections 2819, 2822,
or 2825 of the California Civil Code, or otherwise, arising by reason of:  the impairment or suspension of Bank’s
rights or remedies against Borrower; the alteration by Bank of the Obligations;
any discharge of Borrower’s obligations to Bank by operation of law as a result
of Bank’s intervention or omission; or the acceptance by Bank of anything in
partial satisfaction of the Obligations; and (4) the benefit of any
statute of limitations affecting Cal Ex’s liability hereunder or the
enforcement thereof, and any act which shall defer or delay the operation of
any statute of limitations applicable to the Obligations shall similarly
operate to defer or delay the operation of such statute of limitations
applicable to Cal Ex’s liability hereunder;

 

(d)                                 any
defense arising by reason of or deriving from (i) any claim or defense
based upon an election of remedies by Bank including any defense based upon an
election of remedies by Bank under the provisions of Sections 580a, 580b,
580d, and 726 of the California Code of Civil Procedure or any similar law of
California or any other jurisdiction; or (ii) any election by Bank under
Section 1111(b) of the Bankruptcy Code to limit the amount of, or any
collateral securing, its claim against Cal Ex. 
Pursuant to California Civil Code Section 2856(b):

 

CAL EX WAIVES ALL RIGHTS AND DEFENSES ARISING OUT OF AN ELECTION OF
REMEDIES BY BANK, EVEN THOUGH THAT ELECTION OF REMEDIES, SUCH AS A NONJUDICIAL
FORECLOSURE WITH RESPECT TO SECURITY FOR A GUARANTEED OBLIGATION, HAS DESTROYED
CAL EX’S RIGHTS OF SUBROGATION AND REIMBURSEMENT AGAINST BORROWER BY THE
OPERATION OF SECTION 580(D) OF THE CALIFORNIA CODE OF CIVIL PROCEDURE OR
OTHERWISE;

 

(e)                                  all
rights and defenses that Cal Ex may have because the Obligations.  This means, among other things:  (1) Bank may collect from Cal Ex
without first foreclosing on any real or personal property collateral pledged
by Borrower; and (2) if Bank forecloses on any real property collateral
pledged by Borrower:  (A) the
amount of the Obligations may be reduced only by the price for which that
collateral is sold at the foreclosure sale, even if the collateral is worth
more than the sale price; and (B) Bank may collect from Cal Ex even if
Bank, by foreclosing on the real property collateral, has destroyed any right
Cal Ex may have to collect from Borrower. 
This is an unconditional and irrevocable waiver of any rights and
defenses Cal Ex may have because the Obligations.  These rights and defenses include, but are not limited to, any
rights or defenses based upon Section 580a, 580b, 580d, or 726 of the
California Code of Civil Procedure;

 

61

 

(f)                                    (i)  any right of subrogation Cal Ex has or may
have as against Borrower with respect to the Obligations; (ii) any right
to proceed against Borrower or any other Person, now or hereafter, for
contribution, indemnity, reimbursement, or any other suretyship rights and
claims, whether direct or indirect, liquidated or contingent, whether arising
under express or implied contract or by operation of law, which Cal Ex may now
have or hereafter have as against Borrower with respect to the Obligations; and
(iii) any right to proceed or seek recourse against or with respect to any
property or asset of Borrower; and

 

(g)                                 WITHOUT
LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER PROVISION SET FORTH IN
THIS AGREEMENT, CAL EX HEREBY ABSOLUTELY, KNOWINGLY, UNCONDITIONALLY, AND
EXPRESSLY WAIVES AND AGREES NOT TO ASSERT ANY AND ALL BENEFITS OR DEFENSES
ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF CALIFORNIA CIVIL CODE
SECTIONS 2799, 2808, 2809, 2810, 2815, 2819, 2820, 2821, 2822, 2825, 2839,
2845, 2848, 2849, AND 2850, CALIFORNIA CODE OF CIVIL PROCEDURE
SECTIONS 580A, 580B, 580C, 580D, AND 726, CALIFORNIA UNIFORM COMMERCIAL
CODE SECTIONS 3116, 3118, 3119, 3419, AND 3605, AND CHAPTER 2 OF
TITLE 14 OF PART 4 OF DIVISION 3 OF THE CALIFORNIA CIVIL CODE.

 

Section 9.6.                                   Settlement or Releases.  Cal Ex consents and agrees that without notice
to or by Cal Ex, and without affecting or impairing the liability of Cal Ex
hereunder, Bank may, by action or inaction:

 

(a)                                  compromise,
settle, extend the duration or the time for the payment of, or discharge the
performance of, or may refuse to or otherwise not enforce the Loan Documents,
or any part thereof, with respect to Borrower or any guarantor under this
Agreement;

 

(b)                                 release
Borrower or any guarantor under this Agreement or grant other indulgences to
Borrower or any guarantor under this Agreement in respect thereof;

 

(c)                                  amend
or modify in any manner and at any time (or from time to time) any of the Loan
Documents; or

 

(d)                                 release
or substitute any guarantor under this Agreement, if any, of the obligations
hereunder, or enforce, exchange, release, or waive any security for the such
obligations or any other guaranty of such obligations, or any portion thereof.

 

Section 9.7.                                   No Election.  Bank shall have the right to seek recourse
against Cal Ex to the fullest extent provided for herein, and no election by
Bank to proceed in one form of action or proceeding, or against any party, or
on any obligation, shall constitute a waiver of Bank’s right to proceed in any
other form of action or proceeding or against other parties unless Bank has
expressly waived such right in writing. 
Specifically, but without limiting the generality of the foregoing, no
action or proceeding by Bank under the Loan Documents shall serve to diminish
the liability of Cal Ex under the Loan Documents except to the extent that Bank
finally and unconditionally shall have realized indefeasible payment if full by
such action or proceeding.

 

Section 9.8.                                   Indefeasible
Payment.  The
obligations under this Agreement shall not be considered indefeasibly paid
unless and until all payments to Bank are no longer subject to any

 

62

 

right on the part of any Person, including Borrower, Borrower as a
debtor in possession, or any trustee (whether appointed pursuant to the
Bankruptcy Code, or otherwise) of any of Borrower’s assets to invalidate or set
aside such payments or to seek to recoup the amount of such payments or any
portion thereof, or to declare same to be fraudulent or preferential.  Upon such full and final performance and
indefeasible payment of the obligations under this Agreement, Bank shall have
no obligation whatsoever to transfer or assign its interest in this Agreement
and the Loan Documents to Cal Ex.  In
the event that, for any reason, any portion of such payments to Bank is set aside
or restored, whether voluntarily or involuntarily, after the making thereof,
then the obligation intended to be satisfied thereby shall be revived and
continued in full force and effect as if said payment or payments had not been
made, and Cal Ex shall be liable for the full amount Bank is required to repay
plus any and all costs and expenses (including attorneys’ fees and attorneys’
fees incurred in proceedings brought under the Bankruptcy Code) paid by Bank in
connection therewith.

 

Section 9.9.                                   Single Loan
Account.  At the
request of Borrower and Cal Ex, to facilitate and expedite the administration
and accounting processes and procedures of the Credits and the Cal Ex Line of
Credit, Bank has agreed, in lieu of maintaining separate loan accounts on Bank’s
books in the name of Borrower and Cal Ex, that Bank may maintain a single loan
account under the name of all of both Borrower and Cal Ex (the “Loan
Account”).  The Credits and
the Cal Ex Line of Credit shall be made jointly and severally to Borrower and
Cal Ex and shall be charged to the Loan Account, together with all interest and
other charges as permitted under and pursuant to this Agreement and the Cal Ex
Loan Agreement.  The Loan Account shall
be credited with all repayments of Obligations and obligations under the Cal Ex
Loan Agreement received by Bank, on behalf of Borrower and Cal Ex, from
Borrower and Cal Ex pursuant to the terms of this Agreement and the Cal Ex Loan
Agreement.

 

Section 9.10.                             Apportionment
of Proceeds of Loans. 
Borrower and Cal Ex expressly agree and acknowledge that Bank shall have
no responsibility to inquire into the correctness of the apportionment or
allocation of or any disposition by either Borrower or Cal Ex of (a) the
Advances or the Cal Ex Line of Credit, or (b) any of the expenses and
other items charged to the Loan Account pursuant to this Agreement and the Cal
Ex Loan Agreement.  The Advances and the
Cal Ex Line of Credit and all such expenses and other items shall be made for
the collective, joint, and several account of Borrower and Cal Ex and shall be
charged to the Loan Account.

 

Section 9.11                                Bank Held Harmless.  Borrower and Cal Ex agree and acknowledge
that the administration of this Agreement and the Cal Ex Loan Agreement on a
combined basis, as set forth herein, is being done as an accommodation to
Borrower and Cal Ex, and at their request, and that Bank shall incur no
liability to Borrower or Cal Ex as a result thereof.  To induce Bank to do so, and in consideration thereof, Borrower
and Cal Ex hereby agree to indemnify and hold Bank harmless from and against
any and all liability, expense, loss, damage, claim of damage, or injury, made
against Bank by Borrower, Cal Ex or any other person or entity, arising from or
incurred by reason of such administration of this Agreement and the Cal Ex Loan
Agreement.

 

Section 9.12.                             Borrower and
Cal Ex’s Integrated Operations.  Borrower and Cal Ex represent and warrant to Bank that the
collective administration of the Advances and the Cal Ex Line of Credit is
being undertaken by Bank pursuant to this Agreement because Borrower and

 

63

 

Cal Ex are integrated in their operation and administration and require
financing on a basis permitting the availability of credit from time to time to
each of them.  Borrower will derive
benefit, directly and indirectly, from such collective administration and
credit availability because the successful operation of Borrower is enhanced by
the continued successful performance of the integrated group.

 

[Signatures on Next Page]

 

64

 

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

 

	
  Apio, Inc.

  	
  APIO, INC.

  
	
  4575 West Main Street

  	
   

  
	
  Guadalupe, CA 93434

  	
   

  
	
  Telecopier: (805) 249-6257

  	
  By:

  	
   

  	
   

  
	
  Attention: Kathleen Morgan

  	
   

  	
  Gregory S. Skinner

  
	
  e-mail: kmorgan@apioinc.com

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  Cal Ex Trading Company

  	
  CAL EX TRADING COMPANY

  
	
  4575 West Main Street

  	
   

  
	
  Guadalupe, CA 93434

  	
   

  
	
  Telecopier: (805) 249-6257

  	
  By:

  	
   

  	
   

  
	
  Attention: Kathleen Morgan

  	
   

  	
  Gregory S. Skinner

  
	
  e-mail: kmorgan@apioinc.com

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  Wells Fargo Bank, N.A.

  	
  WELLS FARGO BANK, NATIONAL ASSOCIATION

  
	
  Peninsula RCBO

  	
   

  
	
  400 Hamilton Avenue, P.O. Box 150

  	
   

  
	
  Palo Alto, CA 94302

  	
  By:

  	
   

  	
   

  
	
  Telecopier: (650) 328-0814

  	
   

  	
  Jill B. Ta

  
	
  Attention: Jill Ta

  	
   

  	
  Senior Vice President

  
	
  e-mail: tajillb@wellsfargo.com

  	
   

  
					

 

 

	
  Table of Exhibits and Schedules

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Form of Line of Credit Note

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit B

  	
  Form of Term Commitment Note

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit C

  	
  Form of Term Note

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit D

  	
  Form of Borrowing Base Certificate

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit E

  	
  Form of Compliance Certificate

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit F

  	
  Premises

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 5.1

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

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 5.2

  	
  Capitalization and Organizational Chart

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 5.5

  	
  Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 5.11

  	
  Intellectual Property Disclosures

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 6.3

  	
  Permitted Liens

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 6.4

  	
  Permitted Indebtedness and GuarantiesExhibit
10.55

 

 

EX-IM CREDIT AGREEMENT

 

by and among

 

CAL EX TRADING COMPANY,

 

as Borrower,

 

APIO, INC.

 

and

 

WELLS FARGO BANK,
NATIONAL ASSOCIATION,

 

as Bank

 

Dated as of
September 1, 2004

 

 

Table of Contents

 

	
  ARTICLE I

  	
   

  
	
   

  	
   

  
	
   

  	
  Section 1.1.

  	
  Definitions

  	
   

  
	
   

  	
  Section 1.2.

  	
  Other
  Definitional Terms; Rules of Interpretation

  	
   

  
	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
   

  	
   

  
	
   

  	
  Section 2.1.

  	
  Line of Credit

  	
   

  
	
   

  	
  (a)

  	
  Advances

  	
   

  
	
   

  	
  (b)

  	
  [Intentionally
  Omitted.]

  	
   

  
	
   

  	
  (c)

  	
  Overadvances

  	
   

  
	
   

  	
  (d)

  	
  Procedures
  for Requesting Advances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 2.2.

  	
  [Intentionally
  Omitted.]

  	
   

  
	
   

  	
  Section 2.3.

  	
  [Intentionally
  Omitted.]

  	
   

  
	
   

  	
  Section 2.4.

  	
  [Intentionally
  Omitted.]

  	
   

  
	
   

  	
  Section 2.5.

  	
  Interest;
  Default Interest; Participations; Usury; Collection of Payments

  	
   

  
	
   

  	
  (a)

  	
  Note

  	
   

  
	
   

  	
  (b)

  	
  Default Interest
  Rate

  	
   

  
	
   

  	
  (c)

  	
  [Reserved]

  	
   

  
	
   

  	
  (d)

  	
  Participations

  	
   

  
	
   

  	
  (e)

  	
  Usury

  	
   

  
	
   

  	
  (f)

  	
  Collection of
  Payments

  	
   

  
	
   

  	
  Section 2.6.

  	
  Fees

  	
   

  
	
   

  	
  (a)

  	
  Application Fee

  	
   

  
	
   

  	
  (b)

  	
  Collateral
  Monitoring Fees

  	
   

  
	
   

  	
  (c)

  	
  [Reserved]

  	
   

  
	
   

  	
  (d)

  	
  [Reserved]

  	
   

  
	
   

  	
  (e)

  	
  Prepayment Fees

  	
   

  
	
   

  	
  (f)

  	
  Ex-Im Annual Fee

  	
   

  
	
   

  	
  (g)

  	
  Audit Fees

  	
   

  
	
   

  	
  (h)

  	
  Other Fees

  	
   

  
	
   

  	
  Section 2.7.

  	
  Increased
  Costs; Capital Adequacy; Funding Exceptions

  	
   

  
	
   

  	
  (a)

  	
  Increased
  Costs; Capital Adequacy

  	
   

  
	
   

  	
  Section 2.8.

  	
  Lockbox

  	
   

  
	
   

  	
  Section 2.9.

  	
  [Reserved]

  	
   

  
	
   

  	
  Section 2.10.

  	
  Line of
  Credit Advances to Pay Obligations

  	
   

  
	
   

  	
  Section 2.11.

  	
  Liability
  Records

  	
   

  
	
   

  	
  Section 2.12.

  	
  Ex-Im Bank

  	
   

  
	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
   

  	
   

  
	
   

  	
  Section 3.1.

  	
  Grant
  of Security Interest

  	
   

  
	
   

  	
  Section 3.2.

  	
  Financing
  Statements

  	
   

  
					

 

i

 

	
  ARTICLE IV

  	
   

  
	
   

  	
   

  
	
   

  	
  Section 4.1.

  	
  Conditions
  Precedent to the Initial Advance

  	
   

  
	
   

  	
  Section 4.2.

  	
  Conditions
  Precedent to All Advances and Letters of Credit

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
   

  	
   

  
	
   

  	
  Section 5.1.

  	
  Existence
  and Power; Name; Chief Executive Office; Inventory and Equipment Locations;
  Federal Employer Identification Number

  	
   

  
	
   

  	
  Section 5.2.

  	
  Capitalization

  	
   

  
	
   

  	
  Section 5.3.

  	
  Authorization
  of Borrowing; No Conflict as to Law or Agreements

  	
   

  
	
   

  	
  Section 5.4.

  	
  Legal Agreements

  	
   

  
	
   

  	
  Section 5.5.

  	
  Subsidiaries

  	
   

  
	
   

  	
  Section 5.6.

  	
  Financial
  Condition; No Adverse Change

  	
   

  
	
   

  	
  Section 5.7.

  	
  Litigation

  	
   

  
	
   

  	
  Section 5.8.

  	
  Regulation U

  	
   

  
	
   

  	
  Section 5.9.

  	
  Taxes

  	
   

  
	
   

  	
  Section 5.10.

  	
  Titles and Liens

  	
   

  
	
   

  	
  Section 5.11.

  	
  Intellectual
  Property Rights

  	
   

  
	
   

  	
  (a)

  	
  Owned
  Intellectual Property

  	
   

  
	
   

  	
  (b)

  	
  Agreements
  with Employees and Contractors

  	
   

  
	
   

  	
  (c)

  	
  Intellectual
  Property Rights Licensed from Others

  	
   

  
	
   

  	
  (d)

  	
  Other
  Intellectual Property Needed for Business

  	
   

  
	
   

  	
  (e)

  	
  Infringement

  	
   

  
	
   

  	
  Section 5.12.

  	
  Plans

  	
   

  
	
   

  	
  Section 5.13.

  	
  Default

  	
   

  
	
   

  	
  Section 5.14.

  	
  Environmental
  Matters

  	
   

  
	
   

  	
  Section 5.15.

  	
  Submissions to
  Bank

  	
   

  
	
   

  	
  Section 5.16.

  	
  Financing
  Statements

  	
   

  
	
   

  	
  Section 5.17.

  	
  Rights to
  Payment

  	
   

  
	
   

  	
  Section 5.18.

  	
  Eligible
  Export-Related Accounts Receivable

  	
   

  
	
   

  	
  Section 5.19.

  	
  Equipment

  	
   

  
	
   

  	
  Section 5.20.

  	
  Fraudulent
  Transfer

  	
   

  
	
   

  	
  Section 5.21.

  	
  Permits,
  Franchises

  	
   

  
	
   

  	
  Section 5.22.

  	
  No
  Subordination

  	
   

  
	
   

  	
  Section 5.23.

  	
  Suspension and
  Debarment, etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 6.1.

  	
  Punctual
  Payments

  	
   

  
	
   

  	
  Section 6.2.

  	
  Reporting
  Requirements

  	
   

  
	
   

  	
  (a)

  	
  Annual Financial Statements

  	
   

  
	
   

  	
  (b)

  	
  Monthly Financial Statements

  	
   

  
	
   

  	
  (c)

  	
  Collateral Reports

  	
   

  
	
   

  	
  (d)

  	
  Projections

  	
   

  
	
   

  	
  (e)

  	
  Litigation

  	
   

  

 

ii

 

	
   

  	
  (f)

  	
  Defaults

  	
   

  
	
   

  	
  (g)

  	
  Plans

  	
   

  
	
   

  	
  (h)

  	
  Disputes

  	
   

  
	
   

  	
  (i)

  	
  Officers
  and Directors

  	
   

  
	
   

  	
  (j)

  	
  Collateral

  	
   

  
	
   

  	
  (k)

  	
  Commercial
  Tort Claims

  	
   

  
	
   

  	
  (l)

  	
  Intellectual
  Property

  	
   

  
	
   

  	
  (m)

  	
  Reports to
  Owners

  	
   

  
	
   

  	
  (n)

  	
  SEC Filings

  	
   

  
	
   

  	
  (o)

  	
  Violations
  of Law

  	
   

  
	
   

  	
  (p)

  	
  Other Reports

  	
   

  
	
   

  	
  Section 6.3.

  	
  Financial
  Covenants

  	
   

  
	
   

  	
  (a)

  	
  Minimum EBITDA Coverage
  Ratio

  	
   

  
	
   

  	
  (b)

  	
  Minimum Tangible Net Worth

  	
   

  
	
   

  	
  (c)

  	
  Minimum
  Net Income

  	
   

  
	
   

  	
  (d)

  	
  Capital
  Expenditures

  	
   

  
	
   

  	
  (e)

  	
  Maximum
  Leverage

  	
   

  
	
   

  	
  Section 6.4.

  	
  Permitted Liens;
  Financing Statements

  	
   

  
	
   

  	
  Section 6.5.

  	
  Indebtedness

  	
   

  
	
   

  	
  Section 6.6.

  	
  Guaranties

  	
   

  
	
   

  	
  Section 6.7.

  	
  Investments and
  Subsidiaries

  	
   

  
	
   

  	
  Section 6.8.

  	
  Dividends and Distributions

  	
   

  
	
   

  	
  Section 6.9.

  	
  Salaries

  	
   

  
	
   

  	
  Section 6.10.

  	
  Key Person Life Insurance

  	
   

  
	
   

  	
  Section 6.11.

  	
  Books and
  Records; Inspection and Examination

  	
   

  
	
   

  	
  Section 6.12.

  	
  Account
  Verification

  	
   

  
	
   

  	
  Section 6.13.

  	
  Compliance
  with Laws

  	
   

  
	
   

  	
  Section 6.14.

  	
  Payment of Taxes and
  Other Claims

  	
   

  
	
   

  	
  Section 6.15.

  	
  Maintenance of Properties

  	
   

  
	
   

  	
  Section 6.16.

  	
  Insurance

  	
   

  
	
   

  	
  Section 6.17.

  	
  Preservation of Existence

  	
   

  
	
   

  	
  Section 6.18.

  	
  Delivery of Instruments,
  etc

  	
   

  
	
   

  	
  Section 6.19.

  	
  Sale or
  Transfer of Assets; Suspension of Business Operations

  	
   

  
	
   

  	
  Section 6.20.

  	
  Consolidation
  and Merger; Asset Acquisitions

  	
   

  
	
   

  	
  Section 6.21.

  	
  Sale and
  Leaseback

  	
   

  
	
   

  	
  Section 6.22.

  	
  Restrictions on
  Nature of Business

  	
   

  
	
   

  	
  Section 6.23.

  	
  Accounting

  	
   

  
	
   

  	
  Section 6.24.

  	
  Discounts, etc

  	
   

  
	
   

  	
  Section 6.25.

  	
  Plans

  	
   

  
	
   

  	
  Section 6.26.

  	
  Place
  of Business; Name

  	
   

  
	
   

  	
  Section 6.27.

  	
  Constituent
  Documents

  	
   

  
	
   

  	
  Section 6.28.

  	
  Transactions With
  Affiliates

  	
   

  
	
   

  	
  Section 6.29.

  	
  Use of Funds

  	
   

  
	
   

  	
  Section 6.30.

  	
  Subordination
  of Debt

  	
   

  
	
   

  	
  Section 6.31.

  	
  Management
  Fees

  	
   

  

 

iii

 

	
   

  	
  Section 6.32.

  	
  Maintenance of
  Accounts with Bank

  	
   

  
	
   

  	
  Section 6.33.

  	
  Grower
  Contracts

  	
   

  
	
   

  	
  Section 6.34.

  	
  Performance by
  Bank

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.1.

  	
  Events of Default

  	
   

  
	
   

  	
  Section 7.2.

  	
  Rights and
  Remedies

  	
   

  
	
   

  	
  Section 7.3.

  	
  Disclaimer of
  Warranties

  	
   

  
	
   

  	
  Section 7.4.

  	
  Compliance With
  Laws

  	
   

  
	
   

  	
  Section 7.5.

  	
  No Marshalling

  	
   

  
	
   

  	
  Section 7.6.

  	
  Borrower to
  Cooperate

  	
   

  
	
   

  	
  Section 7.7.

  	
  Application of
  Proceeds

  	
   

  
	
   

  	
  Section 7.8.

  	
  Remedies
  Cumulative

  	
   

  
	
   

  	
  Section 7.9.

  	
  Bank Not Liable
  For The Collateral

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 8.1.

  	
  No Waiver

  	
   

  
	
   

  	
  Section 8.2.

  	
  Amendments, Etc

  	
   

  
	
   

  	
  Section 8.3.

  	
  Addresses for
  Notices; Requests for Accounting

  	
   

  
	
   

  	
  Section 8.4.

  	
  Further
  Documents

  	
   

  
	
   

  	
  Section 8.5.

  	
  Costs and
  Expenses

  	
   

  
	
   

  	
  Section 8.6

  	
  Indemnity

  	
   

  
	
   

  	
  Section 8.7.

  	
  Participants

  	
   

  
	
   

  	
  Section 8.8.

  	
  Advertising and
  Promotion

  	
   

  
	
   

  	
  Section 8.9.

  	
  Execution in
  Counterparts; Telefacsimile Execution

  	
   

  
	
   

  	
  Section 8.10.

  	
  Retention of
  Borrower’s Records

  	
   

  
	
   

  	
  Section 8.11.

  	
  Binding
  Effect; Assignment; Complete Agreement; Exchanging Information

  	
   

  
	
   

  	
  Section 8.12.

  	
  Severability
  of Provisions

  	
   

  
	
   

  	
  Section 8.13.

  	
  Revival and
  Reinstatement of Obligations

  	
   

  
	
   

  	
  Section 8.14.

  	
  Headings

  	
   

  
	
   

  	
  Section 8.15.

  	
  GOVERNING LAW

  	
   

  
	
   

  	
  Section 8.16.

  	
  SUBMISSION TO JURISDICTION

  	
   

  
	
   

  	
  Section 8.17.

  	
  WAIVER OF JURY TRIAL

  	
   

  
	
   

  	
  Section 8.18.

  	
  Confidentiality

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 9.1.

  	
  Joint and
  Several Liability

  	
   

  
	
   

  	
  Section 9.2.

  	
  Primary
  Obligation; Waiver of Marshalling

  	
   

  
	
   

  	
  Section 9.3.

  	
  Financial
  Condition of Borrower

  	
   

  
	
   

  	
  Section 9.4.

  	
  Continuing
  Liability

  	
   

  
	
   

  	
  Section 9.5.

  	
  Additional
  Waivers

  	
   

  
	
   

  	
  Section 9.6.

  	
  Settlement or
  Releases

  	
   

  
	
   

  	
  Section 9.7.

  	
  No Election

  	
   

  
	
   

  	
  Section 9.8.

  	
  Indefeasible
  Payment

  	
   

  

 

iv

 

	
   

  	
  Section 9.9.

  	
  Single Loan
  Account

  	
   

  
	
   

  	
  Section 9.10.

  	
  Apportionment
  of Proceeds of Loans

  	
   

  
	
   

  	
  Section 9.11

  	
  Bank Held
  Harmless

  	
   

  
	
   

  	
  Section 9.12.

  	
  Borrower and
  Apio’s Integrated Operations

  	
   

  

 

v

 

EX-IM CREDIT AGREEMENT

 

THIS EX-IM CREDIT
AGREEMENT (this “Agreement”) is dated and made as of
September 1, 2004, by and among CAL EX TRADING COMPANY, a Delaware
corporation (“Borrower”), APIO, INC., a Delaware corporation (“Apio”),
and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”).

 

RECITALS

 

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

 

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

 

ARTICLE I

DEFINITIONS

 

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

 

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

 

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

 

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

 

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

 

“Advance” means a Line of Credit Advance.

 

 

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

 

“Agreement” means this Credit Agreement.

 

“Apio” means Apio, Inc., a Delaware corporation.

 

“Apio Accounts” has the meaning of “Accounts” under the Apio Loan
Agreement.

 

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

 

“Apio L/C Amount” has the meaning of “L/C Amount” under the Apio Loan
Agreement.

 

“Apio Line of Credit” has the meaning of “Line of Credit” under the Apio
Loan Agreement.

 

“Apio Line of Credit Commitment Amount” has the meaning of “Line of Credit
Commitment Amount” under the Apio Loan Agreement.

 

“Apio Loan Agreement” means that certain Credit Agreement, dated as of even
date herewith, among Apio, as borrower, Borrower and Bank.

 

“Apio Loan Documents” has the meaning of “Loan Documents” under the Apio
Loan Agreement.

 

“Apio Obligations” has the meaning of “Obligations” under the Apio Loan
Agreement.

 

“Availability” means the lesser of (i) the Borrowing Base
Availability and (ii) the Line of Credit Commitment Availability.

 

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

 

“Borrower Agreement” means that certain Borrower Agreement, dated as of
even date herewith, between Borrower and Ex-Im Bank, and acknowledged by Bank.

 

2

 

“Borrowing Base” means, as of any date of determination, (i) 85% of
Eligible Export-Related Accounts Receivable, less, (ii) the Dilution
Reserve, if any, less, (iii) the Grower Reserve, if any; provided, however,
Bank may create additional reserves against the Eligible Export-Related
Accounts Receivable if it reasonably determines that there has occurred a
Material Adverse Effect.

 

“Borrowing Base Availability” means, as of any date of determination, and only if a
positive number, the Borrowing Base minus the outstanding principal balance of
the Line of Credit.

 

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

 

“Buyer” means a Person that has entered into one or more
Export Orders with Borrower.

 

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

 

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

 

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

 

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

 

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

 

“Closing Date” means September 1, 2004.

 

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

 

“Companies” means Borrower, Apio and Apio Cooling.

 

3

 

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

 

“Costs” means all expenditures or obligations incurred and
the value of all assets expended in the manufacture or provision of Items.

 

“Country Limitation Schedule” means the schedule published from time to time
by Ex-Im Bank and provided to Borrower by Bank which sets forth on a country by
country basis whether and under what conditions Ex-Im Bank will provide
coverage for the financing of export transactions to the countries listed.

 

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

 

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

 

“Debarment Regulations” means, collectively, (a) the Governmental
Debarment and Suspension (Nonprocurement) regulations (Common Rule), 53 Fed.
Reg. 19204 (May 26, 1988), (b) Subpart 9.4 (Debarment, Suspension, and
Ineligibility) of the Federal Acquisition Regulations, 48 C.F.R. 9.400-9.409,
and (c) the revised Governmentwide Debarment and Suspension
(Nonprocurement) regulations (Common Rule), 60 Fed. Reg. 33037 (June 26,
1995).

 

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

 

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

 

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

 

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

 

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

 

4

 

“Director” means a director of Borrower.

 

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

 

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

 

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

 

“Eligible Export-Related Accounts Receivable” means an Export-Related Account
Receivable excluding, however, any Export-Related Account Receivable:

 

(i)                                     that portion related to Accounts which
are more than sixty (60) days past the stated due date or unpaid one hundred
twenty (120) days or more after the earlier of the invoice date and the
shipment date;

 

(ii)                                  that are due and payable more than one
hundred twenty (120) days from the earlier of the invoice date and the shipment
date;

 

(iii)                               that does not arise from the sale of Items in the
ordinary course of Borrower’s business;

 

(iv)                              that is not subject to a valid, perfected
first priority Lien in favor of Bank;

 

(v)                                 as to which any covenant, representation
or warranty contained in the Loan Documents with respect to such Account has
been breached;

 

(vi)                              that is not owned by Borrower or is
subject to any right, claim or interest of another Person other than the Liens
in favor of Bank;

 

(vii)                           with respect to which an invoice has not been sent;

 

(viii)                        that arises from the sale of defense articles or
defense services;

 

(ix)                                that is due and payable from a Buyer
located in a country with which Ex-Im Bank is prohibited from doing business as
designated in the Country Limitation Schedule;

 

(x)                                   that does not comply with the
requirements of the Country Limitation Schedule;

 

5

 

(xi)                                that arises from a sale of goods to or
performance of services for an employee of Borrower, a stockholder of Borrower,
a subsidiary of Borrower, a Person with a controlling interest in Borrower or a
Person which shares common controlling ownership with Borrower;

 

(xii)                             that is backed by a letter of credit unless the Items
covered by the subject letter of credit have been shipped;

 

(xiii)                          that Bank or Ex-Im Bank, in its reasonable judgment,
deems uncollectible for any reason;

 

(xiv)                         that is due and payable in a currency other than Dollars,
except as may be approved in writing by Ex-Im Bank;

 

(xv)                            that is not collectible in the United
States;

 

(xvi)                         that is due and payable from a military Buyer, except
as may be approved in writing by Ex-Im Bank;

 

(xvii)                      that does not comply with the terms of sale set forth
in Section 7 of the Loan Authorization Notice;

 

(xviii)                   that is due and payable from a Buyer who (i) applies for, suffers, or
consents to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part of
its property or calls a meeting of its creditors, (ii) admits in writing its
inability, or is generally unable, to pay its debts as they become due or
ceases operations of its present business, (iii) makes a general assignment for
the benefit or creditors, (iv) commences a voluntary case under any state or
federal bankruptcy laws (as now or hereafter in effect), (v) is adjudicated as
bankrupt or insolvent, (vi) files a petition seeking to take advantage of any
other law providing for the relief of debtors, (vii) acquiesces to, or fails to
have dismissed, any petition which is filed against it in any involuntary case
under such bankruptcy laws, or (viii) takes any action for the purpose of
effecting any of the foregoing;

 

(xix)                           that arises from a bill-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment or any other repurchase or
return basis or is evidenced by chattel paper;

 

(xx)                              for which the Items giving rise to such
Account have not been shipped or the services giving rise to such Account have
not been performed by Borrower or the Account otherwise does not represent a
final sale;

 

(xxi)                           that is subject to any offset, deduction, defense,
dispute, or counterclaim or the Buyer is also a creditor or supplier of
Borrower or the Account is contingent in any respect or for any reason;

 

6

 

(xxii)                        to which Borrower has made any arrangement with the
Buyer for any deduction therefrom, except for discounts or allowances made in
the ordinary course of business for prompt payment, all of which discounts or
allowances are reflected in the calculation of the face value of each
respective invoice related thereto;

 

(xxiii)                     for which any of the Items giving rise to such Account
have been returned, rejected or repossessed;

 

(xxiv)                    to the extent it includes any finance charges, service
charges, taxes, discounts, credits, allowances and retainages;

 

(xxv)                       that arise from the sales of Items containing less
than fifty (50%) percent U.S. Content;

 

(xxvi)                    that arise from the sale of Items, containing any
Foreign Content not incorporated into such Items in the United States;

 

(xxvii)                 that arise from the sale of any Items to be used in the construction,
alteration, operation or maintenance of nuclear, power, enrichment,
reprocessing, research or heavy water production facilities;

 

(xxviii)              owed
by an Account Debtor (or an Affiliate of such Account Debtor), regardless of
whether otherwise eligible, if twenty-five (25%) percent or more of the total
amount due under Accounts from such Account Debtor is ineligible under clause
(i) above;

 

(xxix)                      owed by any one Account Debtor to the extent Accounts
owed by such Account Debtor exceed twenty (20%) percent of the sum of the aggregate
amount of all of Borrower’s Accounts and, without duplication, the aggregate
amount of all Apio Accounts; or

 

(xxx)                         that is an “Eligible Account” constituting part of the
“Borrowing Base” for purposes of the Apio Loan Agreement.

 

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

 

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

 

“Ex-Im Bank” means the Export-Import Bank of the United States.

 

7

 

“Export Order” means a written export order or contract for the
purchase by a Buyer from Borrower of any of the Items.

 

“Export-Related Accounts Receivable” means that portion of Accounts
consisting of the unpaid obligations of Buyers arising from the sale of Items
which is due and payable to Borrower in the United States.

 

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

 

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

 

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

 

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

 

“Foreign Content” means that portion of the cost of an Item arising
from materials which are not of United States origin or from labor and services
not performed in the United States.

 

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

 

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

 

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

 

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

 

8

 

“Grower Reserve” means, as of
the date of determination, a reserve against the Borrowing Base in an amount
equal to 100% of all accounts payable then owing to all growers of any of the
produce sold by Borrower that are not parties to Acceptable Grower
Contracts.  The amount of all such accounts
payable shall be determined by Bank in cooperation with Borrower in a
commercially reasonable manner, and shall be prima facie evidence of such
amount.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

9

 

“Investment Property” means all of Borrower’s investment property, as such
term is defined in the UCC, whether now owned or hereafter acquired, including
but not limited to all securities, security entitlements, securities accounts,
commodity contracts, commodity accounts, stocks, bonds, mutual fund shares,
money market shares and U.S. Government securities.

 

“IRC” means the Internal Revenue Code of 1986.

 

“Items” means the finished goods or services which are
intended for export from the United States, as specified in Section 4(A)
of the Loan Authorization Notice.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Line of Credit Commitment Amount” means $3,000,000.

 

“Line of Credit Commitment Availability” means, as of any date of determination,
and only if a positive number, (i) the lesser of the Line of Credit
Commitment Amount and the Unused Apio Line of Credit Commitment Amount minus
(ii) the outstanding principal balance of the Line of Credit.

 

“Line of Credit Maturity Date” means August 31, 2006.

 

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

 

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

 

10

 

“Loan Authorization Notice” means that certain Loan Authorization Notice from
Bank to the Ex-Im Bank with respect to the Loan Documents.

 

“Loan Documents” means this Agreement, the Note, any Guaranty, the
Security Documents, the Borrower Agreement, the Loan Authorization Notice, the
Subordination Agreement, and the Apio Loan Documents.

 

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

 

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

 

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

 

“Master Guarantee” means that certain Master Guarantee Agreement No.
MN-MGA-99-001, dated as of July 20, 1999, between Bank and the Ex-Im Bank.

 

“Material Adverse Effect” means any of the following:

 

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

 

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

 

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

 

(iv)                              any claim against Borrower or any
Guarantor or threat of litigation which is reasonably likely to be determined
adversely to Borrower or any Guarantor and, if so determined, would cause
Borrower or such Guarantor to be liable to pay an amount exceeding $500,000
over applicable insurance coverage, or would be an event described in clauses
(i), (ii) and (iii) above.

 

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

 

11

 

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

 

“Note” means the Line of Credit Note.

 

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

 

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

 

“Overadvance” has the meaning given in Section 2.1(c).

 

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

 

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

 

“Parent” means Landec Corporation, a California corporation.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

12

 

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

 

“Security Documents” means this Agreement, the Lockbox Agreement, the
Security Agreement and any other agreement, instrument or document delivered to
Bank from time to time to secure the Obligations.

 

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

 

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

 

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

 

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

 

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

 

“Termination Date” means the earliest of (i) August 31, 2006,
(ii) the date Borrower terminates the Credit Facility, (iii) the date
Bank demands payment of the Obligations after an Event of Default pursuant to
Section 7.2 hereof, or (iv) the effective date of termination of the
Apio Loan Agreement.

 

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

 

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

 

“Unused Apio Line of Credit Commitment Amount” means, as of any date of determination,
the difference between the Apio Line of Credit Commitment Amount and the sum
of:  (i) the outstanding principal
balance of the Apio Line of Credit and (ii) the Apio L/C Amount.

 

13

 

“U.S. Content” means that portion of the cost of an Item arising
from materials which are of United States origin or from labor and services
performed in the United States.

 

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

 

ARTICLE II

AMOUNT AND TERMS OF THE CREDIT FACILITY

 

Section 2.1.                                   Line of Credit.

 

(a)                                  Advances.  Bank agrees, on the terms and subject to
the conditions herein set forth, to make advances to Borrower from time to time
under the Line of Credit (each such advance, a “Line of Credit Advance”),
to provide Borrower with working capital to fulfill Export Orders, from the
date all of the conditions set forth in Section 4.1 are satisfied (the “Funding
Date”) to the Line of Credit Maturity Date.  Bank shall have no obligation to make a Line
of Credit Advance to the extent the amount of the requested Line of Credit
Advance exceeds Availability. 
Borrower’s obligation to repay the Line of Credit Advances shall be
evidenced by the Line of Credit Note and shall be secured by the
Collateral.  Within the limits set forth
in this Section 2.1 and in the Line of Credit Note, Borrower may from time
to time prior to the Line of Credit Maturity Date borrow, partially or wholly
repay its outstanding borrowings, and reborrow under the Line of Credit,
subject to all of the limitations, terms and conditions contained herein or in
the Line of Credit Note.

 

(b)                                 [Intentionally Omitted.]

 

(c)                                  Overadvances.  If, at any
time or for any reason, the amount of Line of Credit Advances outstanding
exceeds the Borrowing Base (an “Overadvance”), Borrower shall

 

14

 

immediately pay to Bank, upon Bank’s election and demand, in cash, the
amount of such Overadvance to be used by Bank to repay outstanding Line of
Credit Advances.

 

(d)                                 Procedures for Requesting Advances.

 

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

 

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

 

Section 2.2.                                   [Intentionally Omitted.]

 

Section 2.3.                                   [Intentionally Omitted.]

 

Section 2.4.                                   [Intentionally Omitted.]

 

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

 

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

 

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

 

(c)                                  [Reserved].

 

15

 

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

 

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

 

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

 

Section 2.6.                                   Fees.

 

(a)                                  Application Fee.  Borrower
shall reimburse Bank for the $100 application fee payable to Ex-Im Bank in
connection with the Joint Application For Working Capital made to the Ex-Im
Bank pursuant to the transactions contemplated herein.

 

(b)                                 Collateral Monitoring Fees.  Borrower
shall pay to Bank, within 15 days after written demand, collateral monitoring
fees in connection with any audits or inspections conducted by or on behalf of
Bank of any Collateral or Borrower’s operations or business at the rates
established from time to time by Bank as its audit fees, together with all
actual out-of-pocket costs and expenses incurred in conducting any such audit
or inspection.  Such collateral
monitoring fees plus the collateral monitoring fees due under Section 2.6(b)
of the Apio Loan Agreement shall not exceed $1,200 per month unless a Default
Period is continuing.

 

(c)                                  [Reserved].

 

16

 

(d)                                 [Reserved].

 

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

 

(f)                                    Ex-Im Annual Fee.  Annually, in
advance, on the Funding Date and again on each anniversary of the Funding Date,
Borrower shall pay to Bank an annual loan fee equal to $24,000, which fee shall
be fully-earned and non-refundable when paid.

 

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

 

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

 

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

 

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

 

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

 

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

 

17

 

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

 

(iv)                              “Return”, for any period, means the percentage determined by
dividing (i) the sum of interest and ongoing fees earned by Bank under
this Agreement during such period, by (ii) the average capital Bank is
required to maintain during such period as a result of its being a party to
this Agreement, as determined by such Bank based upon its total capital
requirements and a reasonable attribution formula that takes account of the
Capital Adequacy Rules and L/C Rules, (if applicable) then in effect, costs of
issuing or maintaining any Advance and amounts received or receivable under
this Agreement or the Note with respect to any Advance. Return may be
calculated for each calendar quarter and for the shorter period between the end
of a calendar quarter and the date of termination in whole of this Agreement.

 

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

 

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

 

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

 

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

 

Section 2.9.                                   [Reserved].

 

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

 

18

 

prompt notice after any such Advance pursuant to this Section 2.10
has been made; provided that any failure by Bank to provide such notice
shall not be deemed to be a breach or default by Bank of its obligations
hereunder.

 

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

 

Section 2.12.                             Ex-Im Bank.                              Borrower acknowledges that Bank is willing to make the
Credit Facility available to Borrower because the Ex-Im Bank is willing to
guaranty payment of a significant portion of the Obligations pursuant to the
Master Guarantee.  In the event of any
conflict between the terms of the Borrower Agreement or the documents executed
in connection therewith, on the one hand, and the Loan Documents, on the other
hand, the provision that is more stringent on Borrower shall govern and
control.

 

ARTICLE III

SECURITY INTEREST

 

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

 

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

 

Section 3.2.                                   Financing Statements.  Borrower
authorizes Bank to file from time to time where permitted by law, such
financing statements against collateral described as “all personal property” or
describing specific items of collateral including commercial tort claims as
Bank deems necessary or useful to perfect the Security Interest.  A carbon, photographic or other reproduction
of this Agreement or of any financing statements authorized by Borrower is
sufficient as a financing statement and may be filed as a financing statement
in any state to perfect the security interests granted hereby.  For this purpose, the following information
is set forth:

 

19

 

Name and address of
Debtor:

 

Cal Ex Trading Company

4575 West Main Street

Guadalupe, CA 93434

Federal
Employer Identification No. 77-0528042

Organizational Identification No. 3513748

 

Name and address of
Secured Party:

 

Wells Fargo Bank, National
Association

400 Hamilton Avenue, P.O.
Box 150

Palo Alto, CA  94302

 

ARTICLE IV

CONDITIONS OF LENDING

 

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

 

(a)                                  This Agreement, duly executed by
Borrower.

 

(b)                                 The Note, duly executed by Borrower.

 

(c)                                  The SBA/Ex-Im Bank Joint Application,
duly completed and executed by Borrower.

 

(d)                                 The Borrower Agreement, duly executed by
Borrower and Ex-Im Bank.

 

(e)                                  An Exceptions Approval Letter, duly
executed by Ex-Im Bank.

 

(f)                                    A true and correct copy of any and all
leases pursuant to which Borrower is leasing the Premises, together with a
landlord’s disclaimer and consent with respect to each such lease.

 

(g)                                 A true and correct copy of any and all
mortgages pursuant to which Borrower has mortgaged the Premises, together with
a mortgagee’s disclaimer and consent with respect to each such mortgage.

 

(h)                                 The Life Insurance Assignment (if any),
properly executed by the beneficiary and owner thereof, and the Life Insurance
Policy (if any), together with evidence that such Life Insurance Policy is
subject to no assignments or encumbrances other than the Life Insurance
Assignment.

 

20

 

(i)                                     The Lockbox Agreement, duly executed by
Borrower, Bank and Bank of America, National Association.

 

(j)                                     Control agreements, duly executed by
Borrower and each bank at which Borrower maintains deposit accounts.

 

(k)                                  The Security Agreement.

 

(l)                                     A Guaranty, duly executed by Parent.

 

(m)                               Current searches of appropriate filing
offices showing that (i) no Liens have been filed and remain in effect
against Borrower except Permitted Liens or Liens held by Persons who have
agreed in writing that upon receipt of some of the proceeds of the Advances to
be made on the Closing Date, they will satisfy, release or terminate such Liens
in a manner satisfactory to Bank, and (ii) Bank has duly filed all
financing statements necessary to perfect the Security Interest, to the extent
the Security Interest is capable of being perfected by filing.

 

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

 

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

 

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

 

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

 

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

 

21

 

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

 

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

 

(u)                                 Certificates of the insurance required
hereunder, with all hazard insurance containing a lender’s loss payable
endorsement in Bank’s favor and with all liability insurance naming Bank as an
additional insured.

 

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

 

(w)                               Review and approval by Bank of the
Companies’ internally prepared financial statements for the period ended
May 31, 2004.

 

(x)                                   Review and approval by Bank of Parent’s
consolidating internally prepared financial statements for the period ended
May 31, 2004.

 

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

 

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

 

(aa)                            Review and approval by Bank of all material
agreements, including licensing agreements, royalty agreements, shareholder
debt agreements, the management fee agreement, earn-out agreements, seller
notes, mortgage agreements, grower contracts, and material leases.

 

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

 

(cc)                            True and complete copies of all license
agreements pursuant to which Borrower licenses any Intellectual Property
Rights, together with a consent to assignment to Bank or its nominee from each
licensor thereof.

 

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

 

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

 

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

 

22

 

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

 

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

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES

 

Borrower represents and
warrants to Bank as follows:

 

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

 

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

 

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

 

23

 

require, the creation or imposition of any Lien (other than the Security
Interest) upon or with respect to any of the properties now owned or hereafter
acquired by Borrower.

 

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

 

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

 

Section 5.6.                                   Financial Condition; No Adverse Change. 
Borrower has furnished to Bank the Companies’ audited financial
statements for the fiscal year ended May 31, 2004, and those statements
fairly present in all material respects the Companies’ financial condition on
the dates thereof and the results of their operations and cash flows for the
periods then ended and were prepared in accordance GAAP.  Since the date of the most recent financial
statements, there has been no change in the Companies’ business, properties or
condition (financial or otherwise) which has had a Material Adverse Effect.

 

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

 

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

 

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

 

24

 

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

 

Section 5.11.                             Intellectual Property Rights.

 

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

 

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

 

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

 

(d)                                 Other Intellectual Property Needed for Business. 
Except for Off-the-shelf Software and as disclosed on Schedule 5.11
(as updated by written notice to Bank from time to time), the Owned
Intellectual Property and the Licensed Intellectual Property constitute all

 

25

 

Intellectual Property Rights used or necessary to conduct Borrower’s
business as it is presently conducted or as Borrower reasonably foresees
conducting it.

 

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

 

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

 

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

 

Section 5.14.                             Environmental Matters.

 

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

 

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

 

26

(c)                                  To Borrower’s best knowledge, there are
not any requests, claims, notices, investigations, demands, administrative
proceedings, hearings or litigation, relating in any way to the Premises or
Borrower, alleging material liability under, violation of, or noncompliance
with any Environmental Law or any license, permit or other authorization issued
pursuant thereto.  To Borrower’s best
knowledge, no such matter is threatened or impending.

 

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

 

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

 

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

 

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

 

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

 

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

 

27

 

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

 

Section 5.19.                             Equipment.  All of the
equipment financed pursuant to the Term Commitment (as defined in the Apio Loan
Agreement) is used or held for use in Apio’s business and is fit for such
purposes (other than any such equipment that is worn out, surplus or obsolete
equipment).

 

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

 

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

 

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

 

Section 5.23.                             Suspension and Debarment, etc. 
On the date of this Agreement neither Borrower nor its principals are
(a) debarred, suspended, proposed for debarment with a final determination
still pending, declared ineligible or voluntarily excluded (as such terms are
defined under any Debarment Regulations) from participating in procurement or
nonprocurement transactions with any United States federal government
department or agency pursuant to any Debarment Regulations, or
(b) indicted, convicted or had a civil judgment rendered against Borrower
or any of its principals for any of the offenses listed in any Debarment
Regulations.  Unless authorized by Ex-Im
Bank, Borrower will not knowingly enter into any transactions in connection
with the Items with any Person who is debarred, suspended, declared ineligible
or voluntarily excluded from participation in procurement or nonprocurement
transactions with any United States federal government department or agency
pursuant to any of the Debarment Regulations. 
Borrower will provide immediate written notice to Bank if at any time it
learns that the certification set forth in this section was erroneous when
made or has become erroneous by reason of changed circumstances.

 

ARTICLE VI

COVENANTS

 

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

 

28

 

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

 

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

 

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

 

(b)                                 Monthly Financial Statements.  As soon as
available and in any event within 30 days after the end of each month, Borrower
will deliver to Bank an unaudited/internal balance sheet and statements of
income and reconciliation of retained earnings of Borrower as at the end of and
for such month and for the year to date period then ended, prepared, if Bank so
requests, on a consolidating and consolidated basis to include any
Subsidiaries, in reasonable detail and stating in comparative form the figures
for the corresponding date and periods in the previous year, all prepared in
accordance with GAAP, subject to year-end audit adjustments and fairly
representing in all material respects Companies’ financial position and the
results of its operations.

 

(c)                                  Collateral Reports.  Borrower
will deliver to Bank the following documents at the following times in form
satisfactory to Bank:

 

	
  Monthly

  	
   

  	
  (i)                           a report of cash collections, sales assignments,
  credit memos/adjustments and deposits which segregates and identifies all
  Eligible Export-Related Accounts Receivable from domestic Accounts (provided
  that the frequency of such reports may be increased to weekly or daily, at
  Bank’s option, during any Default Period),

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii)                        a report of outstanding payable balances, if any,
  owing to all growers,

  

 

29

 

	
  Monthly (not later than
  the 20th day after each fiscal month end)

  	
   

  	
  (iii)                     a detailed calculation of the Borrowing Base
  (including detail regarding those Accounts that are not Eligible
  Export-Related Accounts Receivable),

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

  (v)                       monthly Ex-Im Borrowing Base certificate in the form
  of Exhibit B attached hereto, executed by a financial representative of
  Borrower,

  
	
   

  	
   

  	
   

  
	
   

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Quarterly

  	
   

  	
  (vii)                 internally-prepared consolidating financial statements for Parent
  (not later than the 45th day after each quarter-end),  (viii)a certificate of the chief financial
  Officer of Borrower, substantially in the form of Exhibit C hereto
  stating (i) whether or not such officer has knowledge of the occurrence
  of any Default or Event of Default not theretofore reported and remedied and,
  if so, stating in reasonable detail the facts with respect thereto, and (ii) all
  relevant facts in reasonable detail to evidence, and the computations as to,
  whether or not Borrower is compliance with the Financial Covenants and other
  covenants contained in this Agreement,

  
	
   

  	
   

  	
   

  
	
  Semi-Annually

  	
   

  	
  (ix)                      a detailed list of Borrower’s customers with contact
  names and addresses,

  
	
   

  	
   

  	
   

  
	
  Upon request by Bank

  	
   

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

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

  

 

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

 

30

 

statement of underlying assumptions and such supporting schedules and
information as Bank may in its discretion require.

 

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

 

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

 

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

 

(h)                                 Disputes.  Promptly upon knowledge
thereof, Borrower will deliver to Bank notice of (i) any disputes or
claims by Borrower’s customers  exceeding $100,000 individually or
$500,000 in the aggregate during any fiscal year; (ii) credit memos
exceeding $100,000 for any individual Account Debtor or $500,000 in the
aggregate for all Account Debtors; or (iii) any goods returned to or
recovered by Borrower with a value exceeding $100,000 from any individual
Account Debtor or $500,000 in the aggregate from all Account Debtors.

 

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

 

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

 

31

 

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

 

(l)                                     Intellectual Property.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 6.3.                                   Financial Covenants.

 

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

 

32

 

(b)                                 Minimum Tangible Net
Worth. 
Borrower, together with the other Companies, will maintain, at all
times, Tangible Net Worth, determined as at the end of each fiscal quarter, at
an amount not less than the amount set forth in the table below opposite the
applicable fiscal quarter end:

 

	
  Fiscal Quarter Ending

  	
   

  	
  Minimum Tangible
  Net Worth

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  August 2004

  	
   

  	
  $17,000,000

  	
   

  
	
  November 2004

  	
   

  	
  $18,000,000

  	
   

  
	
  February 2005

  	
   

  	
  $18,500,000

  	
   

  
	
  May 2005

  	
   

  	
  $19,500,000

  	
   

  
	
  August 2005 and each fiscal quarter
  end thereafter

  	
   

  	
  $19,500,000 plus 75% of cumulative Net
  Income realized since May 2005 up to such fiscal quarter end

  	
   

  

 

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

 

	
  Fiscal Year to Date Period Ending

  	
   

  	
  Minimum
  Net Income

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  August 31 of each year

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  November 30 of each year

  	
   

  	
  $

  	
  1,750,000

  	
   

  
	
  February 28 or 29, as applicable,
  of each year

  	
   

  	
  $

  	
  2,150,000

  	
   

  
	
  May 31 of each year

  	
   

  	
  $

  	
  2,900,000

  	
   

  

 

(d)                                 Capital Expenditures.  Borrower
together with the other Companies will not incur financed or unfinanced Capital
Expenditures of more than $6,000,000 in the aggregate during the fiscal year
ending May 2005 or any fiscal year thereafter.

 

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

 

Section 6.4.                                   Permitted Liens;
Financing Statements.

 

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

 

33

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(a)                                  Indebtedness arising hereunder;

 

34

 

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

 

(c)                                  Indebtedness relating to Permitted Liens;

 

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

 

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

 

(f)                                    Other unsecured indebtedness of Borrower
provided the aggregate principal amount of all such indebtedness does not
exceed $500,000.

 

Section 6.6.                                   Guaranties.  Borrower will not assume,
guarantee, endorse or otherwise become directly or contingently liable in
connection with any obligations of any other Person, except:

 

(a)                                  the endorsement of negotiable instruments
by Borrower for deposit or collection or similar transactions in the ordinary
course of business; and

 

(b)                                 guaranties, endorsements and other direct
or contingent liabilities in connection with the obligations of other Persons,
in existence on the date hereof and listed in Schedule 6.5 hereto.

 

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

 

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

 

(b)                                 travel advances or loans to Borrower’s
Officers and employees not exceeding at any one time an aggregate of $10,000;

 

35

 

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

 

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

 

(e)                                  value added joint venture investments;
and

 

(f)                                    crop advances.

 

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

 

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

 

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

 

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

 

36

 

or its employees,
accountants, attorneys or agents, to examine and inspect any Collateral or any
other property of Borrower during ordinary business hours and upon one Business
Day’s advance notice (unless a Default Period exists in which case no notice
shall be required).

 

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

 

Section 6.13.                             Compliance with Laws.

 

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

 

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

 

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

 

Section 6.15.                             Maintenance of
Properties.

 

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

 

37

 

reasonable steps
necessary to protect and maintain its Intellectual Property Rights, other than
Immaterial Intellectual Property Rights.

 

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

 

Section 6.16.                             Insurance.  Borrower will obtain and at
all times maintain insurance with insurers believed by Borrower to be
responsible and reputable, in such amounts and against such risks as may from
time to time be required by Bank, but in all events in such amounts and against
such risks as is usually carried by companies engaged in similar business and
owning similar properties in the same general areas in which Borrower operates.
Without limiting the generality of the foregoing, Borrower will at all times
keep all tangible Collateral insured against risks of fire (including so-called
extended coverage), theft, collision (for Collateral consisting of motor
vehicles) and such other risks and in such amounts as Bank may reasonably
request, with any loss payable to Bank to the extent of its interest, and all
policies of such insurance shall contain a lender’s loss payable endorsement
for Bank’s benefit.  All policies of
liability insurance required hereunder shall name Bank as an additional
insured.

 

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

 

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

 

Section 6.19.                             Sale or Transfer of
Assets; Suspension of Business Operations. 
Borrower will not sell, lease, assign, transfer or otherwise dispose of
(i) the stock of any Subsidiary, (ii) all or a substantial part of
its assets, or (iii) any Collateral or any interest therein (whether in
one transaction or in a series of transactions) to any other Person other than
(v) the sale of Inventory in the ordinary course of business,
(w) dispositions of obsolete, surplus, worn or nonfunctional Equipment,
(x) dispositions of cash or Cash Equivalents not otherwise prohibited
under this Agreement, (y) transfers of Intellectual Property Rights as
permitted under this Section 6.19 and (z) dispositions of other
assets in any given fiscal year in an aggregate amount not to exceed $500,000
or $100,000 for any individual asset. 
Borrower will not liquidate, dissolve or suspend business
operations.  Borrower will not transfer
any part of its ownership interest in any Intellectual Property Rights except
for transfers of Immaterial Intellectual Property Rights and licensing or
sublicensing of Intellectual Property Rights in the ordinary course of
Borrower’s business.  Borrower will not
permit any agreement under which it has licensed Licensed Intellectual
Property, other than Immaterial Intellectual Property Rights, to lapse.  If Borrower transfers any Intellectual
Property Rights for value, other than transfers of Immaterial Intellectual
Property Rights and licensing or sublicensing of Intellectual Property Rights
in the ordinary

 

38

 

course of Borrower’s
business, Borrower will pay over the proceeds to Bank for application to the
Obligations.  Bank hereby agrees that in
the event Borrower licenses or sublicenses any Intellectual Property Rights
pursuant to the terms of this Section 6.19, following written demand of
Borrower, Bank shall execute a form of estoppel reasonably acceptable in form
and substance to Borrower and Bank pursuant to which Bank shall represent that
upon its exercise of any of its rights or remedies hereunder or under any other
Loan Document with respect to the licensed or sublicensed Intellectual Property
Rights, including a foreclosure under any Security Document, so long as there
shall then exist no breach, default, or event of default on the part of the
related licensee or sublicensee, as applicable, which breach, default or event
of default has continued beyond any cure periods provided in the license or
sublicense, Bank shall not extinguish or terminate the interest of the licensee
or sublicensee, as applicable, by reason of such foreclosure.

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 6.26.                             Place of Business; Name.  Borrower
will not transfer its chief executive office or principal place of business, or
move, relocate, close or sell any business location.

 

39

 

Borrower will not permit
any tangible Collateral or any records pertaining to the Collateral to be
located in any state or area in which, in the event of such location, a financing
statement covering such Collateral would be required to be, but has not in fact
been, filed in order to perfect the Security Interest.  Borrower will not change its name or
jurisdiction of organization.

 

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

 

Section 6.28.                             Transactions With
Affiliates. 
Borrower will not directly or indirectly enter into or permit to exist
any transaction with any Affiliate of Borrower except for transactions that are
in the ordinary course of Borrower’s business, upon fair and reasonable terms,
that are fully disclosed to Bank, and that are no less favorable to Borrower
than would be obtained in an arm’s length transaction with a non-Affiliate.

 

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

 

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

 

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

 

Section 6.32.                             Maintenance of Accounts with Bank. 
Borrower shall, and shall cause each of the other Companies to, at all
times during the period commencing 90 days after the Closing Date and ending on
the Termination Date, maintain its primary depository and investment accounts
with Bank, including, without limitation, the Loan Account and the Lockbox
Account, pursuant to account agreements and terms mutually acceptably to
Borrower and Bank; provided, however, that until such time that
Borrower and the other Companies shall maintain such accounts with Bank,
Borrower shall, and shall cause each of the other Companies, to enter into one
or more control agreements with Bank and each other bank or financial
institution at which Borrower or any other Company maintains such accounts.

 

40

 

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

 

Section 6.34.                             Performance by Bank.  If Borrower
at any time fails to perform or observe any of the foregoing covenants
contained in this Article VI or elsewhere herein, and if such failure
shall continue for a period of ten calendar days after Bank gives Borrower
written notice thereof (or in the case of the agreements contained in
Sections 6.14 and 6.16, immediately upon the occurrence of such failure,
without notice or lapse of time), Bank may, but need not, perform or observe such
covenant or covenants on behalf and in the name, place and stead of Borrower
(or, at Bank’s option, in Bank’s name) and may, but need not, take any and all
other actions which Bank may reasonably deem necessary to cure or correct such
failure (including the payment of taxes, the satisfaction of Liens, the
performance of obligations owed to Account Debtors or other obligors, the
procurement and maintenance of insurance, the execution of assignments,
security agreements and financing statements, and the endorsement of
instruments); and Borrower shall thereupon pay to Bank on demand the amount of
all monies expended and all costs and expenses (including reasonable attorneys’
fees and legal expenses) incurred by Bank in connection with or as a result of
the performance or observance of such agreements or the taking of such action
by Bank, together with interest thereon from the date expended or incurred at
the Default Rate applicable to Line of Credit Advances.  To facilitate Bank’s performance or
observance of such covenants of Borrower, Borrower hereby irrevocably appoints
Bank, or Bank’s delegate, acting alone, as Borrower’s attorney in fact (which
appointment is coupled with an interest) with the right (but not the duty) from
time to time to create, prepare, complete, execute, deliver, endorse or file in
the name and on behalf of Borrower any and all instruments, documents,
assignments, security agreements, financing statements, applications for
insurance and other agreements and writings required to be obtained, executed,
delivered or endorsed by Borrower under this Section 6.34.

 

ARTICLE VII

EVENTS OF DEFAULT, RIGHTS AND REMEDIES

 

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

 

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

 

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

 

41

 

(c)                                  A Change of Control shall occur;

 

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

 

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

 

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

 

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

 

(h)                                 A notice of Lien, levy, or assessment is
filed of record with respect to any of Borrower’s or any Guarantor’s assets by
the United States, or any department, agency, or instrumentality thereof, or by
any state, county, municipal, or governmental agency, or if any taxes or debts
owing at any time hereafter to any one or more of such entities becomes a Lien,
whether choate or otherwise, upon any of Borrower’s or any Guarantor’s assets
valued in excess of $250,000 and the same is not paid before such payment is
delinquent; provided that Bank may at any time that any such Lien exists
reserve against the Borrowing Base in the amount of such Lien;

 

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

 

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

 

(k)                                  Any representation or warranty made by
Borrower in this Agreement or in any other Loan Document, by any Guarantor in
any guaranty delivered to Bank, or by Borrower (or

 

42

 

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

 

(l)                                     The rendering against Borrower of an
arbitration award, final judgment, decree or order for the payment of money in
excess of $500,000 over applicable insurance coverage and the continuance of
such arbitration award, judgment, decree or order unsatisfied and in effect for
any period of 60 consecutive days without a stay of execution;

 

(m)                               A default under any bond, debenture, note
or other evidence of material Indebtedness of Borrower owed to any Person other
than Bank, or under any indenture or other instrument under which any such
evidence of Indebtedness has been issued or by which it is governed, or under
any material lease or other contract, and the expiration of the applicable
period of grace, if any, specified in such evidence of Indebtedness, indenture,
other instrument, lease or contract, and the effect of such failure, event or
condition is to cause, or permit the holder or holders thereof to cause,
Indebtedness of Borrower (other than the Obligations) (in an aggregate amount
exceeding $500,000 in the event that such Indebtedness is unsecured) to become
redeemable, due or otherwise payable (whether at scheduled maturity, by
required prepayment, upon acceleration or otherwise);

 

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

 

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

 

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

 

(q)                                 Default in the payment of any amount owed
by Borrower to Bank other than any Indebtedness arising hereunder;

 

43

 

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

 

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

 

(t)                                    An Event of Default shall occur under the
Apio Loan Agreement;

 

(u)                                 The Ex-Im Bank shall repudiate, purport
to revoke or fail to perform any of its obligations under the Master Guarantee;
provided that any such event described in this clause (w) shall not
be an Event of Default so long as (i) such circumstances are not the
result of any act or omission by the Borrower, and (ii) if reasonably
requested by Bank, Borrower is diligently assisting Bank, as determined by Bank
in its sole and absolute discretion, in correcting the applicable problem; or

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

44

 

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

 

(g)                                 without notice to Borrower (such notice
being expressly waived), and without constituting a retention of any collateral
in satisfaction of an obligation (within the meaning of the UCC), Bank may set
off and apply to the Obligations any and all (i) balances and deposits of
Borrower held by Bank (including any amounts received in the Lockbox), or
(ii) Indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

45

 

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

 

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

 

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

 

(p)                                 [Reserved];

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 7.6.                                   Borrower to Cooperate.  Upon the
exercise by Bank of any power, right, privilege, or remedy pursuant to this
Agreement which requires any consent, approval, registration, qualification, or
authorization of any Governmental Authority, Borrower agrees to execute and
deliver, or will cause the execution and delivery of, all applications,
certificates,

 

46

 

instruments, assignments,
and other documents and papers that Bank or any purchaser of the Collateral may
be required to obtain for such governmental consent, approval, registration,
qualification, or authorization.

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE VIII

MISCELLANEOUS

 

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

 

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

 

47

 

Section 8.3.                                   Addresses for Notices; Requests for Accounting. 
Except as otherwise expressly provided herein, all notices, requests,
demands and other communications provided for under the Loan Documents shall be
in writing and shall be (a) personally delivered, (b) sent by first
class United States mail, (c) sent by overnight courier of national
reputation, or (d) transmitted by telecopy, in each case addressed or
telecopied to the party to whom notice is being given at its address or
telecopier number as set forth below next to its signature or, as to each
party, at such other address or telecopier number as may hereafter be designated
by such party in a written notice to the other party complying as to delivery
with the terms of this Section.  All
such notices, requests, demands and other communications shall be deemed to
have been given on (a) the date received if personally delivered,
(b) when deposited in the mail if delivered by mail, (c) the date
sent if sent by overnight courier, or (d) the date of transmission if
delivered by telecopy, except that notices or requests to Bank pursuant to any
of the provisions of Article II shall not be effective until received by
Bank.  All requests under
Section 9210 of the UCC (i) shall be made in a writing signed by a
person authorized under Section 2.1(d), (ii) shall be personally
delivered, sent by registered or certified mail, return receipt requested, or
by overnight courier of national reputation (iii) shall be deemed to be
sent when received by Bank and (iv) shall otherwise comply with the
requirements of Section 9210. 
Borrower requests that Bank respond to each such request which on its
face appears to come from an authorized individual and releases Bank from any
liability for so responding.  Borrower
shall pay Bank the maximum amount allowed by law for responding to such
requests.

 

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

 

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

 

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

 

48

 

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

 

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

 

(iii)                               any and all other liabilities, losses, damages,
penalties, judgments, suits, claims, costs and expenses of any kind or nature
whatsoever (including the reasonable fees and disbursements of counsel) in
connection with the foregoing and any other investigative, administrative or
judicial proceedings, whether or not such Indemnitee shall be designated a
party thereto, which may be imposed on, incurred by or asserted against any
such Indemnitee, in any manner related to or arising out of or in connection
with the Credit Facility and the Loan Documents or the use or intended use of the
proceeds of the Line of Credit.

 

If any
investigative, judicial or administrative proceeding arising from any of the
foregoing is brought against any Indemnitee, upon such Indemnitee’s request,
Borrower, or counsel designated by Borrower and satisfactory to the Indemnitee,
will resist and defend such action, suit or proceeding to the extent and in the
manner directed by the Indemnitee, at Borrower’s sole costs and expense.  Each Indemnitee will use its best efforts to
cooperate in the defense of any such action, suit or proceeding.  If the foregoing undertaking to indemnify,
defend and hold harmless may be held to be unenforceable because it violates
any law or public policy, Borrower shall nevertheless make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.  Borrower’s obligation under this
Section 8.6 shall survive the termination of this Agreement and the
discharge of Borrower’s other obligations hereunder.  If Ex-Im Bank makes payment of a claim to Bank under the Master
Guaranty in connection with the Credit Facility, Ex-Im Bank may assume all
rights and remedies of Bank under the Loan Documents and may enforce any such
rights and remedies against Borrower, the Collateral and any Guarantors.  Borrower shall hold Ex-Im Bank and Bank
harmless from and indemnify them against any and all liabilities, damages,
claims, costs and losses incurred or suffered by either of them resulting from
(a) any materially incorrect certification or statement knowingly made by
Borrower or its agents to Ex-Im Bank or Bank in connection with the Credit
Facility, this Agreement, the Loan Authorization Notice or any other Loan
Documents, or (b) any material breach by Borrower of the terms and conditions
of this Agreement, the Loan Authorization Notice or any of the other Loan
Documents.  Borrower also acknowledges
that any statement, certification or representation made by Borrower in
connection with the Credit Facility is subject to the penalties provided in
Article 19 U.S.C. Section 1001.

 

Section 8.7.                                   Participants.  Borrower
hereby authorizes Bank to disclose to any assignee  or any participant (either,
a “Transferee”)
and any prospective Transferee any and all financial information in Bank’s possession
concerning Borrower which has been delivered to Bank by Borrower pursuant to
this Agreement or which has been delivered to Bank by Borrower in connection
with Bank’s credit evaluation prior to entering into this Agreement.  Bank and its participants, if any, are not
partners or joint venturers, and Bank shall not have any liability or

 

49

 

responsibility for any
obligation, act or omission of any of its participants.  All rights and powers specifically conferred
upon Bank may be transferred or delegated to any of Bank’s participants,
successors or assigns.

 

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

 

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

 

Section 8.10.                             Retention of Borrower’s Records. 
Bank shall have no obligation to maintain any electronic records or any
documents, schedules, invoices, agings, or other papers delivered to Bank by
Borrower or in connection with the Loan Documents for more than twelve months
after receipt by Bank; provided, however, that Borrower shall not
have any obligation to provide Bank with duplicate records and documents after
the same have been destroyed by Bank.

 

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

 

50

 

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

 

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

 

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

 

Section 8.15.                             GOVERNING
LAW. 
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (EXCEPT AS OTHERWISE
SPECIFIED THEREIN), AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO, SHALL BE
CONSTRUED AND DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA.

 

Section 8.16.                             SUBMISSION
TO JURISDICTION.  SUBJECT TO SECTION 8.17:  (I) ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT SOLELY IN
THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN
DISTRICT OF CALIFORNIA, AND, BY EXECUTION AND DELIVERY HEREOF, EACH OF BORROWER,
APIO AND BANK CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
JURISDICTION OF THOSE COURTS; (II) EACH OF BORROWER, APIO AND BANK
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO.  EACH OF BORROWER, APIO AND BANK WAIVES
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE
BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW.

 

Section 8.17.                             WAIVER
OF JURY TRIAL.  EACH OF BORROWER, APIO AND BANK, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT
TO A TRAIL BY JURY IN ANY ACTION, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION
IN ANY WAY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS OR EVENTS REFERENCED HEREIN OR THEREIN OR
CONTEMPLATED HEREBY OR THEREBY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS OR OTHERWISE.  THIS WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS,

 

51

 

RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT OR ANY OTHER OF THE LOAN DOCUMENTS.  A COPY OF THIS SECTION 8.17 MAY BE
FILED WITH ANY COURT AS WRITTEN EVIDENCE OF THE WAIVER OF THE RIGHT TO TRIAL BY
JURY AND THE CONSENT TO TRIAL BY COURT.

 

Section 8.18.                             Confidentiality.  Bank shall
hold all confidential non-public information obtained by Bank in accordance
with Bank’s customary procedures for handling confidential information of this
nature; provided, however, Bank may disclose such confidential
information (i) to its examiners, Affiliates, outside auditors, counsel
and other professional advisors on a need to know basis, (ii) to any
prospective participant or transferee of Bank’s rights or obligations
hereunder, provided such participant or transferee agrees, prior to the
disclosure of such information by Bank, to be bound by the terms of this
Section 8.18 with respect to such information and (iii) as required
or requested by any Governmental Authority or representative thereof or
pursuant to legal process; provided  further that this duty shall
expire if such information becomes publicly available through no breach of this
Section 8.18 by Bank; provided  further that unless
specifically prohibited by applicable law or court order, Bank shall use
commercially reasonable efforts, prior to disclosure thereof, to notify Borrower
of the request for disclosure of such non-public information (A) by a
Governmental Authority or representative thereof or (B) pursuant to legal
process.  Notwithstanding anything
herein to the contrary, Bank may disclose to any and all Persons, without
limitation of any kind, any information with respect to the “tax treatment” and
“tax structure” (in each case, within the meaning of Treasury Regulation
Section 1.6011-4) of the transactions contemplated hereby and all
materials of any kind (including opinions or other tax analyses) that are
provided Bank relating to such tax treatment and tax structure; provided,
however, that with respect to any document or similar item that in
either case contains information concerning the tax treatment or tax structure
of the transaction as well as other information, this sentence shall only apply
to such portions of the document or similar item that relate to the tax
treatment or tax structure of the transactions contemplated hereby.

 

ARTICLE IX

JOINT AND SEVERAL LIABILITY

 

Section 9.1.                                   Joint and Several Liability.  Apio agrees
that it is jointly and severally, directly and primarily liable to Bank for
payment, performance and satisfaction in full of the Obligations and that such
liability is independent of the duties, obligations, and liabilities of
Borrower.  Bank may bring a separate
action or actions on each, any, or all of the obligations of Borrower hereunder
or the obligations of Apio hereunder, whether action is brought against
Borrower or whether Borrower is joined in such action.  In the event that Borrower fails to make any
payment of any obligation hereunder on or before the due date thereof, Apio
immediately shall cause such payment to be made or each of such obligations to
be made or each of such obligations to be performed, kept, observed, or
fulfilled.

 

Section 9.2.                                   Primary Obligation; Waiver of Marshalling. 
The obligations of Borrower under the Loan Documents are a primary and
original obligation of Apio, are not the creation of a surety relationship, and
are an absolute, unconditional, and continuing promise of payment and
performance which shall remain in full force and effect without respect to
future changes in

 

52

 

conditions, including any
change of law or any invalidity or irregularity with respect to the Loan
Documents.  Apio agrees that its
liability under the Loan Documents shall be immediate and shall not be
contingent upon the exercise or enforcement by Bank of whatever remedies they
may have against Borrower, or the enforcement of any lien or realization upon
any security Bank may at any time possess. 
Apio consents and agrees that Bank shall be under no obligation to
marshal any assets of Borrower against or in payment of any or all of the Obligations.

 

Section 9.3.                                   Financial Condition of Borrower. 
Apio acknowledges that it is presently informed as to the financial
condition of Borrower and of all other circumstances which a diligent inquiry
would reveal and which bear upon the risk of nonpayment of the
Obligations.  Apio hereby covenants that
it will continue to keep informed as to the financial condition of Borrower,
the status of Borrower and of all circumstances which bear upon the risk of
nonpayment of the Obligations.  Absent a
written request from Apio to Bank for information, Apio hereby waives any and
all rights it may have to require Bank to disclose to Apio any information
which Bank may now or hereafter acquire concerning the condition or
circumstances of Borrower and the Obligations.

 

Section 9.4.                                   Continuing Liability.  The
liability of Apio hereunder includes the obligations of Borrower hereunder
arising under successive transactions continuing, compromising, extending,
increasing, modifying, releasing, or renewing the such obligations, changing
the interest rate, payment terms, or other terms and conditions thereof, or
creating new or additional obligations after prior obligations have been
satisfied in whole or in part.  To the
maximum extent permitted by law, Apio hereby waives any right to revoke its
liability under this Agreement and the Loan Documents as to future
indebtedness, and in connection therewith, Apio hereby waives any rights it may
have under Section 2815 of the California Civil Code.

 

Section 9.5.                                   Additional Waivers.  Apio
absolutely, unconditionally, knowingly, and expressly waives:

 

(a)                                  (1) notice of acceptance hereof;
(2) notice of any loans or other financial accommodations made or extended
under the Loan Documents or the creation or existence of any obligations under
this Agreement; (3) notice of the amount of the Obligations, subject,
however, to Apio’s right to make inquiry of Bank to ascertain the amount of
such obligations at any reasonable time; (4) notice of any adverse change
in the financial condition of Borrower or of any other fact that might increase
Apio’s risk hereunder; (5) notice of presentment for payment, demand,
protest, and notice thereof as to any instruments among the Loan Documents;
(6) notice of any “Default” or “Event of Default” under the Loan
Documents; and (7) all other notices (except if such notice is
specifically required to be given to Apio hereunder or under the other Loan
Documents) and demands to which Apio might otherwise be entitled;

 

(b)                                 its right, under Sections 2845 or
2850 of the California Civil Code, or otherwise, to require Bank to institute
suit against, or to exhaust any rights and remedies which Bank has or may have
against, Borrower or any third party, or against any collateral for the
Obligations provided by Borrower, or any third party.  Apio further waives any defense arising by reason of any
disability or other defense (other than the defense that the Obligations shall
have been fully

 

53

 

and finally performed and
indefeasibly paid) of Borrower or by reason of the cessation from any cause
whatsoever of the liability of Borrower in respect thereof;

 

(c)                                  (1) any rights to assert against
Bank any defense (legal and equitable), set-off, counterclaim, or claim which
Apio may now or at any time hereafter have against Borrower or any other party
liable to Bank; (2) any defense, set-off, counterclaim, or claim, of any
kind or nature, arising directly or indirectly from the present or future lack
of perfection, sufficiency, validity, or enforceability of the Obligations or
any security therefor; (3) any defense Apio has to performance hereunder,
and any right Apio has to be exonerated provided by Sections 2819, 2822,
or 2825 of the California Civil Code, or otherwise, arising by reason of:  the impairment or suspension of Bank’s
rights or remedies against Borrower; the alteration by Bank of the Obligations;
any discharge of Borrower’s obligations to Bank by operation of law as a result
of Bank’s intervention or omission; or the acceptance by Bank of anything in
partial satisfaction of the Obligations; and (4) the benefit of any
statute of limitations affecting Apio’s liability hereunder or the enforcement
thereof, and any act which shall defer or delay the operation of any statute of
limitations applicable to the Obligations shall similarly operate to defer or
delay the operation of such statute of limitations applicable to Apio’s
liability hereunder;

 

(d)                                 any defense arising by reason of or
deriving from (i) any claim or defense based upon an election of remedies
by Bank including any defense based upon an election of remedies by Bank under
the provisions of Sections 580a, 580b, 580d, and 726 of the California
Code of Civil Procedure or any similar law of California or any other jurisdiction;
or (ii) any election by Bank under Section 1111(b) of the Bankruptcy
Code to limit the amount of, or any collateral securing, its claim against
Apio.  Pursuant to California Civil Code
Section 2856(b):

 

APIO WAIVES ALL RIGHTS
AND DEFENSES ARISING OUT OF AN ELECTION OF REMEDIES BY BANK, EVEN THOUGH THAT
ELECTION OF REMEDIES, SUCH AS A NONJUDICIAL FORECLOSURE WITH RESPECT TO
SECURITY FOR A GUARANTEED OBLIGATION, HAS DESTROYED APIO’S RIGHTS OF
SUBROGATION AND REIMBURSEMENT AGAINST BORROWER BY THE OPERATION OF
SECTION 580(D) OF THE CALIFORNIA CODE OF CIVIL PROCEDURE OR OTHERWISE;

 

(e)                                  all rights and defenses that Apio may
have because the Obligations.  This
means, among other things: 
(1) Bank may collect from Apio without first foreclosing on any real
or personal property collateral pledged by Borrower; and (2) if Bank
forecloses on any real property collateral pledged by Borrower:  (A) the amount of the Obligations may
be reduced only by the price for which that collateral is sold at the
foreclosure sale, even if the collateral is worth more than the sale price; and
(B) Bank may collect from Apio even if Bank, by foreclosing on the real
property collateral, has destroyed any right Apio may have to collect from
Borrower.  This is an unconditional and irrevocable
waiver of any rights and defenses Apio may have because the Obligations.  These rights and defenses include, but are
not limited to, any rights or defenses based upon Section 580a, 580b,
580d, or 726 of the California Code of Civil Procedure;

 

(f)                                    (i) any right of subrogation Apio
has or may have as against Borrower with respect to the Obligations;
(ii) any right to proceed against Borrower or any other Person, now or
hereafter, for contribution, indemnity, reimbursement, or any other suretyship
rights and claims,

 

54

 

whether direct or
indirect, liquidated or contingent, whether arising under express or implied
contract or by operation of law, which Apio may now have or hereafter have as
against Borrower with respect to the Obligations; and (iii) any right to
proceed or seek recourse against or with respect to any property or asset of
Borrower; and

 

(g)                                 WITHOUT LIMITING THE GENERALITY OF ANY
OTHER WAIVER OR OTHER PROVISION SET FORTH IN THIS AGREEMENT, APIO HEREBY
ABSOLUTELY, KNOWINGLY, UNCONDITIONALLY, AND EXPRESSLY WAIVES AND AGREES NOT TO
ASSERT ANY AND ALL BENEFITS OR DEFENSES ARISING DIRECTLY OR INDIRECTLY UNDER
ANY ONE OR MORE OF CALIFORNIA CIVIL CODE SECTIONS 2799, 2808, 2809, 2810,
2815, 2819, 2820, 2821, 2822, 2825, 2839, 2845, 2848, 2849, AND 2850,
CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 580A, 580B, 580C, 580D, AND
726, CALIFORNIA UNIFORM COMMERCIAL CODE SECTIONS 3116, 3118, 3119, 3419,
AND 3605, AND CHAPTER 2 OF TITLE 14 OF PART 4 OF DIVISION 3
OF THE CALIFORNIA CIVIL CODE.

 

Section 9.6.                                   Settlement or Releases.  Apio
consents and agrees that without notice to or by Apio, and without affecting or
impairing the liability of Apio hereunder, Bank may, by action or inaction:

 

(a)                                  compromise, settle, extend the duration
or the time for the payment of, or discharge the performance of, or may refuse
to or otherwise not enforce the Loan Documents, or any part thereof, with
respect to Borrower or any guarantor under this Agreement;

 

(b)                                 release Borrower or any guarantor under
this Agreement or grant other indulgences to Borrower or any guarantor under
this Agreement in respect thereof;

 

(c)                                  amend or modify in any manner and at any
time (or from time to time) any of the Loan Documents; or

 

(d)                                 release or substitute any guarantor under
this Agreement, if any, of the obligations hereunder, or enforce, exchange,
release, or waive any security for the such obligations or any other guaranty
of such obligations, or any portion thereof.

 

Section 9.7.                                   No Election.  Bank shall
have the right to seek recourse against Apio to the fullest extent provided for
herein, and no election by Bank to proceed in one form of action or proceeding,
or against any party, or on any obligation, shall constitute a waiver of Bank’s
right to proceed in any other form of action or proceeding or against other
parties unless Bank has expressly waived such right in writing.  Specifically, but without limiting the
generality of the foregoing, no action or proceeding by Bank under the Loan
Documents shall serve to diminish the liability of Apio under the Loan
Documents except to the extent that Bank finally and unconditionally shall have
realized indefeasible payment if full by such action or proceeding.

 

Section 9.8.                                   Indefeasible Payment.  The
obligations under this Agreement shall not be considered indefeasibly paid
unless and until all payments to Bank are no longer subject to any right on the
part of any Person, including Borrower, Borrower as a debtor in possession, or
any trustee (whether appointed pursuant to the Bankruptcy Code, or otherwise)
of any of Borrower’s assets to invalidate or set aside such payments or to seek
to recoup the amount of such payments

 

55

 

or any portion thereof,
or to declare same to be fraudulent or preferential.  Upon such full and final performance and indefeasible payment of
the obligations under this Agreement, Bank shall have no obligation whatsoever
to transfer or assign its interest in this Agreement and the Loan Documents to
Apio.  In the event that, for any
reason, any portion of such payments to Bank is set aside or restored, whether
voluntarily or involuntarily, after the making thereof, then the obligation intended
to be satisfied thereby shall be revived and continued in full force and effect
as if said payment or payments had not been made, and Apio shall be liable for
the full amount Bank is required to repay plus any and all costs and expenses
(including attorneys’ fees and attorneys’ fees incurred in proceedings brought
under the Bankruptcy Code) paid by Bank in connection therewith.

 

Section 9.9.                                   Single Loan Account.  At the
request of Borrower and Apio, to facilitate and expedite the administration and
accounting processes and procedures of the Credits and the Apio Line of Credit,
Bank has agreed, in lieu of maintaining separate loan accounts on Bank’s books
in the name of Borrower and Apio, that Bank may maintain a single loan account
under the name of all of both Borrower and Apio (the “Loan Account”).  The Credits and the Apio Line of Credit
shall be made jointly and severally to Borrower and Apio and shall be charged
to the Loan Account, together with all interest and other charges as permitted
under and pursuant to this Agreement and the Apio Loan Agreement.  The Loan Account shall be credited with all
repayments of Obligations and obligations under the Apio Loan Agreement
received by Bank, on behalf of Borrower and Apio, from Borrower and Apio
pursuant to the terms of this Agreement and the Apio Loan Agreement.

 

Section 9.10.                             Apportionment of Proceeds of Loans. 
Borrower and Apio expressly agree and acknowledge that Bank shall have
no responsibility to inquire into the correctness of the apportionment or
allocation of or any disposition by either Borrower or Apio of (a) the
Advances or the Apio Line of Credit, or (b) any of the expenses and other
items charged to the Loan Account pursuant to this Agreement and the Apio Loan
Agreement.  The Advances and the Apio
Line of Credit and all such expenses and other items shall be made for the
collective, joint, and several account of Borrower and Apio and shall be
charged to the Loan Account.

 

Section 9.11                                Bank Held Harmless.  Borrower and
Apio agree and acknowledge that the administration of this Agreement and the
Apio Loan Agreement on a combined basis, as set forth herein, is being done as
an accommodation to Borrower and Apio, and at their request, and that Bank
shall incur no liability to Borrower or Apio as a result thereof.  To induce Bank to do so, and in
consideration thereof, Borrower and Apio hereby agree to indemnify and hold
Bank harmless from and against any and all liability, expense, loss, damage,
claim of damage, or injury, made against Bank by Borrower, Apio or any other
person or entity, arising from or incurred by reason of such administration of
this Agreement and the Apio Loan Agreement.

 

Section 9.12.                             Borrower and Apio’s Integrated Operations. 
Borrower and Apio represent and warrant to Bank that the collective
administration of the Advances and the Apio Line of Credit is being undertaken
by Bank pursuant to this Agreement because Borrower and Apio are integrated in
their operation and administration and require financing on a basis permitting
the availability of credit from time to time to each of them.  Borrower will derive benefit, directly and
indirectly, from such collective administration and credit availability

 

56

 

because the successful
operation of Borrower is enhanced by the continued successful performance of
the integrated group.

 

 

[Signatures on Next Page]

 

57

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

 

	
  Cal Ex Trading Company

  	
  CAL EX TRADING COMPANY

  
	
  4575 West Main Street

  	
   

  
	
  Guadalupe, CA 93434

  	
   

  
	
  Telecopier: (805) 249-6257

  	
  By:

  	
   

  	
   

  
	
  Attention: Kathleen Morgan

  	
  Gregory
  S. Skinner

  
	
  e-mail:
  kmorgan@apioinc.com

  	
  Chief
  Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  Apio, Inc.

  	
  APIO, INC.

  
	
  4575 West Main Street

  	
   

  
	
  Guadalupe, CA 93434

  	
   

  
	
  Telecopier: (805) 249-6257

  	
  By:

  	
   

  	
   

  
	
  Attention: Kathleen Morgan

  	
  Gregory
  S. Skinner

  
	
  e-mail:
  kmorgan@apioinc.com

  	
  Chief
  Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  Wells Fargo Bank, N.A.

  	
  WELLS FARGO BANK, NATIONAL
  ASSOCIATION

  
	
  Peninsula RCBO

  	
   

  
	
  400 Hamilton Avenue, P.O.
  Box 150

  	
   

  
	
  Palo Alto, CA 94302

  	
  By:

  	
   

  	
   

  
	
  Telecopier: (650) 328-0814

  	
  Jill
  B. Ta

  
	
  Attention: Jill Ta

  	
  Senior
  Vice President

  
	
  e-mail:
  tajillb@wellsfargo.com

  	
   

  
						

 

 

Table of Exhibits and Schedules

 

	
  Exhibit A

  	
   

  	
  Form of Line of Credit
  Note

  
	
   

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  Form of Ex-Im Borrowing
  Base Certificate

  
	
   

  	
   

  	
   

  
	
  Exhibit C

  	
   

  	
  Form of Compliance
  Certificate

  
	
   

  	
   

  	
   

  
	
  Exhibit D

  	
   

  	
  Premises

  
	
   

  	
   

  	
   

  
	
  Schedule 5.1

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Schedule 5.2

  	
   

  	
  Capitalization and
  Organizational Chart

  
	
   

  	
   

  	
   

  
	
  Schedule 5.5

  	
   

  	
  Subsidiaries

  
	
   

  	
   

  	
   

  
	
  Schedule 5.11

  	
   

  	
  Intellectual Property
  Disclosures

  
	
   

  	
   

  	
   

  
	
  Schedule 6.3

  	
   

  	
  Permitted Liens

  
	
   

  	
   

  	
   

  
	
  Schedule 6.4

  	
   

  	
  Permitted Indebtedness
  and Guaranties

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00071-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00071-of-00352.parquet"}]]