SECOND AMENDED AND RESTATED CREDIT AGREEMENT

 

INDEX OF EXHIBITS

 

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

 

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

 

RECITALS

 

A.          Borrower and Lender entered into a Credit Agreement dated as of May 1, 2000 providing Borrower with certain financial accommodations (the “Original Credit Agreement”).  Said Original Credit Agreement was amended by letter agreement on March 26, 2001 and July 25, 2001 (the “Letter Amendments) and by an Amendment to Credit Agreement dated September 16, 2002 (the “Amendment”).  The Original Credit Agreement, Letter Amendments, and the Amendment are collectively referred to herein as the “Original Amended Credit Agreement”.  The Original Amended Credit Agreement was replaced by an Amended and Restated Credit Agreement dated as of May 1, 2004 (the “Amended and Restated Credit Agreement”). The Amended and Restated Credit Agreement was amended by an Amendment dated August 17, 2004, a Waiver and Amendment dated as of March 15, 2005, and by four additional amendments dated December 27, 2005, July 5, 2007,  March 14, 2008, and April 25, 2008 respectively (collectively the “Amendments to the Amended and Restated Credit Agreement”).  Collectively the Amended and Restated Credit Agreement and the Amendments thereto are referred to herein as the “Restated Credit Agreement”.

 

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

 

C.           Borrower has requested that Lender extend and amend the terms of the credit evidenced by the Restated Credit Agreement and Lender is willing to do so on the terms and conditions set forth herein.

 

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

 

ARTICLE  I.

 

GENERAL TERMS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974 (or any successor legislation thereto), as amended from time to time, and any regulations promulgated thereunder.

 

“ERISA Affiliate” shall mean, with respect to Borrower, any trade or business (whether or not incorporated) under common control with Borrower and which, together with Borrower, are treated as a single employer within the meaning of Section 4001(a) of ERISA.

 

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

 

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

 

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

 

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

 

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

 

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

 

“GAAP” shall mean generally accepted accounting principles in the United States of America as in effect from time to time.

 

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

 

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

 

“Indebtedness” of any Person shall mean all obligations for borrowed money (including the present value of capitalized lease obligations) which, in accordance with GAAP, would be included in determining total liabilities as shown on the liability side of a balance sheet as of the date at which Indebtedness is to be determined, and guarantees, letters of credit (other than letters of credit to support trade payables) and endorsements (other than of notes, bills and checks presented to banks for collection or deposit in the ordinary course of business), in each case to support indebtedness for borrowed money of others, but excluding existing guarantees outstanding on the Closing Date (and extensions or renewals thereof).

 

“Interest Determination Date” shall mean the date, as designated by Borrower pursuant to Section 2.4, Section 2.5 or Section 2.6, on which a portion of the Revolving Advances or a portion of the Term Loan shall begin to bear interest at a Fixed Rate.

 

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“Interest Period” shall mean (a) with respect to any portion of interest on Revolving Advances that Borrower elects to have bear interest at a Fixed Rate, a period beginning on the Interest Determination Date and ending, at Borrower’s election, either one (1) month, two (2) months, three (3) months, or six (6) months thereafter, and (b) with respect to any portion of interest on Term Loan Tranche A that Borrower elects to have bear interest at a Fixed Rate, a period beginning on the Interest Determination Date and ending, at Borrower’s election, either one (1) month, two (2) month, three (3) months, six (6) months, or twelve (12) months thereafter.

 

“Lender” shall mean American AgCredit, PCA.

 

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

 

“Lien” shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Uniform Commercial Code or comparable law of any jurisdiction).

 

“Loan Documents” shall mean this Agreement, the Revolving Loan Promissory Note of even date herewith, the Term Note dated May 1, 2000, the Security Documents, and all other agreements, instruments, documents, and certificates identified in any Schedule of Documents listing documents to be delivered by Borrower to Lender and including all other pledges, powers of attorney, consents, mortgages, assignments, contracts and agreements whether heretofore, now, or hereafter executed by or on behalf of Borrower or any of its Affiliates, or any employee of Borrower or any of its Affiliates, and delivered to Lender in connection with this Agreement, or any previous versions of this Agreement or the transactions contemplated thereby or hereby.

 

“Maintenance Capital Expenditures” shall mean capital expenditures for maintenance and enhancement of MLO’s business operations.

 

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

 

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

 

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

 

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

 

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

 

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“Mortgage” shall mean the mortgage to be delivered to the Lender by the Borrower pursuant to the provisions of Section 3.3 hereof, covering the real property described in Exhibit C attached hereto.

 

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

 

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

 

“PACA” shall mean the Perishable Agricultural Commodities Act, 7 U.S.C. § 499e(c) (or any successor legislation thereto), as amended from time to time, and any regulations promulgated thereunder.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Security Documents” shall mean all security agreements, mortgages, assignments, and other similar documents delivered by Borrower to Lender pursuant to which Borrower grants to Lender a security interest in, assignment of, or Lien upon any real or personal property of Borrower, including all amendments, modifications and supplements thereto.

 

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

 

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

 

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

 

1.2          Accounting Terms .  Any accounting term used in this Agreement shall have, unless otherwise specifically provided herein, the meaning customarily given such term in accordance with GAAP, and all financial computations hereunder shall be computed, unless otherwise specifically provided herein, in accordance with GAAP consistently applied.  That certain terms or computations are explicitly modified by the phrase “in accordance with GAAP” shall in no way be construed to limit the foregoing.

 

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

 

ARTICLE  II.

 

AMOUNT AND TERMS OF CREDIT

 

2.1          Revolving Advances .

 

(a)           Revolving Advances To Be Made Available .  Upon and subject to the terms and conditions hereof, Lender agrees to make available, from time to time, until the Revolving Loan Maturity Date, for Borrower’s use and upon the request of Borrower therefore, advances (each, a “Revolving Advance”) that shall not exceed the Maximum Revolving Loan.  The amount of any Revolving Advance shall be not less than Fifty Thousand Dollars ($50,000) and shall be in integral multiples of One Thousand Dollars ($1,000).    The Revolving Loan shall be evidenced by the Revolving Loan Promissory Note to be executed and delivered by Borrower to Lender on the Closing Date.

 

(b)           Requests for Advances .  If Borrower desires to receive a Revolving Advance, Borrower shall deliver a notice (a “Notice of Revolving Advance”) to Lender substantially in the form of Exhibit A no later than 2:00 p.m. (California time) on the Business Day prior to the date of the proposed Revolving Advance.  Lender shall be entitled to rely upon and shall be fully protected under this Agreement in relying upon any Notice of Revolving Advance reasonably believed by Lender to be genuine.  Upon the close of business on the date of the proposed Revolving Advance, Lender shall make the Revolving Advance available to Borrower unless Lender determines that Borrower is not entitled to such Revolving Advance under the terms of this Agreement.  All notices delivered pursuant to this Section 2.1(b) shall be delivered by facsimile to the facsimile number set forth in Section 11.9 or to such other facsimile number as a party hereto shall designate in writing pursuant to the provisions of Section 11.9 ; provided that such notices may also be delivered by electronic mail if approved by Lender.

 

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

 

2.2          Term Loan .

 

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

 

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

 

2.3          Prepayments .

 

(a)           Prepayment in Full .  Borrower shall have the right at any time to voluntarily prepay the entire amount of the outstanding Revolving Loan and the entire amount of the outstanding Term Loan and to terminate this Agreement upon at least three (3) Business Days notice to Lender, without premium or penalty except Borrower shall pay to Lender a prepayment surcharge calculated in accordance with Section 2.3(c).  Prepayment in full shall be accompanied by the payment of all accrued and unpaid interest and all Fees and other remaining Obligations.

 

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

 

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

 

For each portion of the Revolving Loan or the Term Loan bearing interest at a Fixed Rate, the prepayment surcharge shall be equal to any funding losses incurred by Lender as a result of such prepayment, including any loss or unreimbursed expense arising from the redeployment of funds, calculated according to any reasonable methodology established by Lender; and

 

2.4          Interest Rate on Revolving Advances .

 

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

 

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

 

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

 

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2.5          Interest Rate on Term Loan Tranche A .

 

(a)           Base Rate .  Term Loan Tranche A is currently bearing interest at a fixed rate equal to 5.1435% per annum with an Interest Period expiring on May 1, 2009.  Upon expiration of the current interest period Term Loan Tranche A shall bear interest at the Base Rate, unless Borrower elects to convert the interest rate to a Fixed Rate for the period selected by Borrower in accordance with the provisions of Section 2.5(b).

 

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

 

(c)           Margin Applicable to Fixed Rate Elections for Term Loan Tranche A .  The margin applicable to Term Loan Tranche A is two and three quarters percent (2.75%).

 

2.6          Interest Rate on Term Loan Tranche B .

 

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

 

2.7          Other Interest Provisions .

 

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

 

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

 

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

 

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

 

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

 

(e)           Interest Not to Exceed Maximum Lawful Rate .  Notwithstanding anything to the contrary set forth in this Agreement, if at any time until payment in full of all of the Obligations, the rate of interest payable hereunder exceeds the highest rate of interest permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto (the “Maximum Lawful Rate”), then in such event and so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable hereunder shall be equal to the Maximum Lawful Rate; provided , that if at any time thereafter the rate of interest payable hereunder is less than the Maximum Lawful Rate, Borrower shall continue to pay interest hereunder at the Maximum Lawful Rate until such time as the total interest received by Lender hereunder, is equal to the total interest which Lender would have received had the interest rate payable hereunder been (but for the operation of this Section 2.7(e)) the interest rate payable since the Closing Date.  Thereafter, the interest rate payable hereunder shall be the rate of interest set forth herein, unless and until the rate of interest again exceeds the Maximum Lawful Rate, in which event this paragraph shall again apply.  In no event shall the total interest received by Lender pursuant to the terms hereof exceed the amount which Lender could lawfully have received had the interest due hereunder been calculated for the full term hereof at the Maximum Lawful Rate.  In the event the Maximum Lawful Rate is calculated pursuant to this Section 2.7(e), such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which such calculation is made.  In the event that a court of competent jurisdiction, notwithstanding the provisions of this Section 2.7(e), shall make a final determination that Lender has received interest hereunder or under any of the Loan Documents in excess of the Maximum Lawful Rate, Lender shall to the extent permitted by applicable law, promptly apply such excess first to any interest due and not yet paid under the Revolving Loan and the Term Loan, then to the outstanding principal of the Revolving Loan, and the Term Loan (without premium or penalty), and then to Fees and any other unpaid Obligations and thereafter shall refund any excess to Borrower or as a court of competent jurisdiction may otherwise order.

 

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

 

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

 

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

 

(iii)          shall impose on Lender any other condition; and the result of any of the foregoing is to increase the cost to Lender of making, renewing, or maintaining any portion of the Revolving Loan or Term Loan with interest rates tied to the LIBO Rate and/or to reduce any amount receivable by Lender in connection therewith; then in any such case, Borrower shall pay to Lender, immediately upon demand, such amount or amounts as may be necessary to compensate Lender for any additional costs incurred by Lender and/or reductions in amounts received by Lender which are attributable to LIBO Rates made available to Borrower hereunder.  In determining which costs incurred by a Lender and/or reductions in amounts received by a Lender are attributable to such LIBO Rates, any reasonable allocation made by Lender among its operations shall be conclusive and binding upon Borrower; provided , that Lender’s determination under this Section 2.7(f) as to Borrower is in accordance with its treatment of other borrowers under commercial loans generally.

 

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

 

2.9          Fees Cumulative and Non-Refundable .  All Fees payable under any Loan Document shall be cumulative and all Fees shall be considered fully earned on the date of payment and shall not be refundable under any circumstances.

 

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

 

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2.11        Receipt of Payments .  Borrower shall make each payment under this Agreement not later than 12:00 P.M. (California time) on the day when due in lawful money of the United States of America by wire transfer of immediately available funds to the Collection Account.  Borrower shall have advised Lender in writing of each payment being made by Borrower no later than 2:00 p.m. (California time) on the Business Day prior to the date of making of such payment.  For purposes of computing interest and fees and determining the amount of funds available for borrowing by Borrower pursuant to Article II, payments of immediately available funds by wire transfer deposited in the Collection Account not later than 10:30 a.m. (California time) (and for which Lender has received notice prior to the making of such payment) shall be deemed received by Lender upon that Business Day.  If payment shall be deposited later than 10:30 a.m. (California time) on any particular Business Day (or if Lender was not given prior notice of the payment by 2:00 p.m. (California time) on the Business Day preceding the date of payment), such payment shall be deemed received on the following Business Day.  If Lender, in its sole discretion, determines to accept from Borrower payment by checks, drafts, or similar non-cash items, payment shall be deemed received by Lender two (2) Business Days after notice to Lender and deposit of such payment in the Collection Account.

 

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

 

2.13        Taxes .

 

(a)           Any and all payments by Borrower hereunder or under the Loan Documents shall be made, in accordance with this Section 2.13, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, Charges, or withholdings, and all liabilities with respect thereto, excluding taxes imposed on or measured by the net income of Lender by the jurisdiction under the laws of which Lender is organized or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, Charges, withholdings and liabilities being hereinafter referred to as “Taxes”).  If Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Revolving Note or Term Note to Lender, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.13) Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrower shall make such deductions, and (iii) Borrower shall pay the full amount deducted to the relevant taxing or other authority in accordance with applicable law.

 

(b)           In addition, Borrower agrees to pay any present or future stamp or documentary taxes or any other sales, transfer, excise, mortgage recording, or property taxes, Charges or similar levies that arise from any payment made hereunder or under the Revolving Notes, Term Notes, or from the execution, sale, transfer, delivery or registration of, or otherwise with respect to, this Agreement or the Revolving Notes, Term Notes, the Loan Documents and any o