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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
MAY 9, 2000 (MAY 1, 2000)
ML MACADAMIA ORCHARDS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 1-9145 99-0248088
- --------------------------------- ------------ ----------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
828 FORT STREET, HONOLULU, HAWAII 96813
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(Address of Principal Executive Offices) (Zip Code)
808-532-4130
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Registrant's telephone number, including area code
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 1, 2000, the Partnership completed the purchase of 142 acres of
mature macadamia trees and substantially all of the assets used in the macadamia
farming business from Ka'u Agribusiness Company, Inc., Ka'u Sugar, Inc., Mauna
Kea Macadamia Orchards, Inc., and Mauna Kea Agribusiness Company, Inc., all
Hawaii corporations (collectively referred to herein as "Seller").
The acquired assets consist primarily of farming equipment, vehicles, a
husking plant, a well, office buildings, garages and warehouses, office
furniture and equipment and inventories related to macadamia farming. In
addition, the Seller assigned to the Partnership its interest in approximately
16 farm service contracts to farm macadamia orchards owned by other growers. The
Partnership also purchased from Seller approximately 142 tree acres of mature
macadamia orchards, which consist of an ownership interest in the trees and a 45
year leasehold interest in the underlying land. The orchards are all located in
the Ka'u region on the island of Hawaii. The purchase price for all the assets
to be acquired is $9 million in cash. The Partnership used $5 million of its
working capital for the purchase and borrowed the balance of $4 million from
Pacific Coast Farm Credit and Farm Credit Services of Hawaii under a new Credit
Agreement.
The entities comprising the Seller are subsidiaries or affiliates of C.
Brewer and Company, Ltd. ("CBCL"), a Hawaii company. The Partnership's general
partner, ML Resources, Inc. ("MLR" or "Managing Partner"), a Hawaii company, is
also a subsidiary of CBCL. The agreement to purchase the assets of Seller was
negotiated by the Conflicts Committee, independent of the MLR's Board of
Directors. The Conflicts Committee is composed of two persons who are
independent of CBCL and its affiliates. Those directors of the Managing Partner
with conflicts of interest also recused themselves from involvement in
negotiations for Seller.
Prior to the acquisition, Seller was in the business of farming
macadamia orchards mostly for other orchard owners and partly for themselves.
Seller farmed approximately 7,195 acres of macadamia orchards, including 4,027
acres owned by the Partnership. The Partnership will use all the assets involved
in the purchase for the same purpose.
In connection with the acquisition, the Partnership and Seller entered
into various contracts to provide specific services to the other. The
Partnership will provide macadamia farming services to Seller for approximately
700 acres at cost plus 15%. The Partnership will also provide accounting
services to certain subsidiaries and affiliates of Seller for cost plus 15%.
Seller will provide certain management services for Partnership, such as
executive management, legal, land management, human relations and insurance
services for approximately $100,000 per year.
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The Credit Agreement consists of long-term debt of $4 million and a $5
million line of credit for short-term working capital needs, replacing a
previous line of credit. The Credit Agreement permits additional borrowings of
up to 10% of the Partnership's net worth and contains certain covenants that
affect the Partnership. Generally, the Credit Agreement (a) limits outstanding
indebtedness of the Partnership, (b) requires the Partnership to maintain a
minimum net worth and minimum working capital, and (c) limits cumulative cash
distributions to cumulative cash flow plus $3 million.
ITEM 7. EXHIBITS
(c) Exhibits.
2.1 Asset Purchase Agreement including Exhibits dated March 14, 2000
5.1 Legal Opinion of Counsel dated May 1, 2000
10.1 Credit Agreement between Registrant and Pacific Coast Farm Credit
Services, PCA dated May 1, 2000
10.2 Security Agreement between Registrant and Pacific Coast Farm Credit
Services, PCA dated May 1, 2000
10.3 Orchards Farming Lease between Registrant and Ka'u Agribusiness Co.,
Inc.
99.1 Press Release dated May 1, 2000
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ML MACADAMIA ORCHARDS, L.P.
(Registrant)
By ML RESOURCES, INC.
Managing General Partner
DATED: May 8, 2000 By /s/ Gregory A. Sprecher
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GREGORY A. SPRECHER
Senior Vice President and
Chief Financial Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
- ------ ----------- ------
<S> <C>
2.1 Asset Purchase Agreement dated March 14, 2000 5-45
Exhibit O - Farming Services Contract between Registrant and
Ka'u Agribusiness Co. et al 46-56
Exhibit Q - Management Services Agreement between
Registrant and C. Brewer & Company, LTD. 57-59
Exhibit R - Memorandum of Agreement between
Registrant and ILWU Local 142 60-61
5.1 Legal Opinion of Counsel dated May 1, 2000 62-64
10.1 Credit Agreement between Registrant and Pacific Coast Farm
Credit Services, PCA dated May 1, 2000 65-113
10.2 Security Agreement between Registrant and Pacific Coast
Farm Credit Services, PCA dated May 1, 2000 114-135
10.3 Orchards Farming Lease between Registrant and Ka'u
Agribusiness Co., Inc. dated May 1, 2000 136-152
99.1 Press Release dated May 1, 2000 153
</TABLE>
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "CONTRACT") is made and
entered into as of this 14th day of March, 2000, by and among KAU AGRIBUSINESS
CO., INC., a Hawaii corporation, KAU SUGAR, INC., a Hawaii corporation, MAUNA
KEA MACADAMIA ORCHARDS, INC., a Hawaii corporation, and MAUNA KEA AGRIBUSINESS
CO., INC., a Hawaii corporation (collectively referred to herein as "Seller" and
individually referred to herein as "Corporation") and ML MACADAMIA ORCHARDS,
L.P., a Delaware limited partnership (referred to herein as "Purchaser").
R E C I T A L S:
1. Seller and certain Affiliates (hereinafter defined) of
Seller own the Property (hereinafter defined).
2. Seller desires to sell to Purchaser and Purchaser desires
to purchase from Seller the Property and certain related assets on the terms and
subject to the conditions hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Seller and Purchaser
hereby agree as follows:
ARTICLE I
DEFINITIONS
Unless the context otherwise specifies or requires, for the
purposes of this Contract the following terms shall have the meanings set forth
below:
"ACCOUNTANTS" shall mean the accounting firm of
PricewaterhouseCoopers.
"Accounts Receivable" shall have the meaning ascribed to it
in Section 7.2(a).
"AFFILIATE" of a Person shall mean a Person who, directly or
indirectly through one or more intermediaries, owns or controls, is owned or
controlled by, or is under common control or ownership with the Person in
question; provided, however, that Buyco, Inc. and the stockholders of Buyco,
Inc. shall not be considered affiliates.
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"BILL OF SALE" shall mean a bill of sale duly executed by
Seller conveying to Purchaser all of Seller's right, title, and interest in and
to the Tangible Personal Property on the Closing Date, in the form set forth in
EXHIBIT A hereto.
"BOOKS AND RECORDS" shall mean all financial and other books
and records maintained by or for the benefit of Seller, or its Affiliates, as
the case may be, solely in connection with the operation of the Property and all
building plans, specifications and drawings, engineering, soils and farming
reports and other documents prepared solely in connection with the construction,
maintenance, repair, management, farming or operation of any portion of the
Property which are within the possession or control of Seller, or Seller's
Affiliates, agents or representatives.
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S. C. Section 9601
ET SEQ.) and any regulations promulgated thereunder.
"CLOSING" shall mean, with respect to the purchase and sale of
the Property, consummation of its purchase by Purchaser as contemplated by this
Contract.
"CLOSING DATE" shall be the date on which the Closing occurs
and shall be set by the parties after necessary documents have been prepared and
are ready for execution. It is currently contemplated by the parties that the
Closing Date shall be May 1, 2000.
"CLOSING STATEMENTS" shall mean the Preliminary Closing
Statement and the Final Closing Statement.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, and the relevant rules and regulations promulgated thereunder.
"CONFIDENTIAL INFORMATION" shall mean information, including a
formula, pattern, compilation, program, device, method, technique, or process,
that: (i) derives independent economic value, actual or potential, from not
being generally known to the public or to other persons who can obtain economic
value from its disclosure or use; and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
"CONTRACT DATE" means the date specified above in the first
paragraph of this Contract.
6.
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"CONTROL" has the meaning given to such term in the definition
of "Affiliate".
"CORPORATION" means each of the corporations who are the
sellers herein.
"CUT-OFF TIME" shall mean 11:59 p.m. (Hawaii Time) on the day
before the Closing Date.
"DEED" means the Warranty Deed, and any other deed from Seller
or its Affiliates to Purchaser delivered pursuant to SECTION 8.2(a) below.
"EFFECTIVE DATE" shall mean the date that this Contract has
been fully executed by Seller and Purchaser. Purchaser and Seller hereby
acknowledge and stipulate that the Effective Date is and for all purposes shall
be March 14, 2000.
"EMPLOYMENT BENEFITS" shall mean any benefit provided to any
Property Employee by the Seller or its Affiliates whether pursuant to a
collective bargaining agreement, an Employment Contract or any written policy,
procedure or practice of such company.
"EMPLOYMENT CONTRACTS" shall mean all employment contracts
(excluding collective bargaining agreements) relating to Property employees. The
Employment Contracts are listed on EXHIBIT B.
"ENVIRONMENTAL ACTIVITY" means any past, present or future
storage, holding, existence, release, threatened release, emission, discharge,
generation, processing, use, abatement, disposition, handling or transportation
of any Hazardous Substance from, under, into or on the Real Property, or
otherwise relating to the Real Property or the ownership, use, operation or
occupancy thereof, or any threat of such activity.
"ENVIRONMENTAL LAWS" means any and all laws, statutes,
ordinances, rules, regulations, judgments, orders, decrees, permits, licenses,
or other governmental restrictions or requirements relating to health, the
environment, any Hazardous Substance or any Environmental Activity in effect in
any and all jurisdictions in which Seller is or from time to time may be doing
business, or where the Real Property is located, including without limitation
CERCLA, the Hazardous Materials Transportation Act, as amended (49 U.S.C.
Sections 1801 ET SEQ.), the Clean Air Act, as amended (42 U.S.C. Sections 7401
ET SEQ.), the Clean Water Act, as amended (33 U.S.C. Sections 1251 ET SEQ.), and
the regulations adopted pursuant thereto.
7.
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"EQUIPMENT LEASES" shall mean all leases, rental or other
agreements for the use of any of the FF&E, together with all amendments thereto.
Such Equipment Leases are listed on Exhibit C attached hereto.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and the rules and regulations promulgated thereunder.
"ERISA AFFILIATE" shall have the meaning given to such term in
SECTION 5.3(i)(8).
"EXCISE TAX EXEMPTION CERTIFICATE" means the certificate, duly
executed by Purchaser and Seller, in the form set forth on EXHIBIT D and filed
with the appropriate Governmental Authority at Closing.
"FARMING SERVICE CONTRACTS" shall mean any and all existing
farming service contracts for the provision of labor, services, materials or
supplies to or for the benefit of the owners of macadamia orchards (which
contracts are listed on EXHIBIT E), together with all amendments thereto.
"FF&E" shall mean all fixtures, furniture, furnishings,
equipment, machinery, computers, apparatus, appliances, and other articles of
depreciable personal property now owned or leased by Seller and/or its
Affiliates and used or usable in connection with their farming or accounting
services, subject to such depletions and replacements as shall occur and be made
in the normal course of business.
"FINAL CLOSING STATEMENT" shall have the meaning given to such
term in SECTION 7.1.
"GENERAL ASSIGNMENT" shall mean an assignment, duly executed
and acknowledged by Seller and Purchaser, assigning to Purchaser (to the extent
assignable) all of Seller's right, title and interest in and to the Intangible
Personal Property and certain other assets as of 12:01 a.m. (Hawaii Time) on the
Closing Date, in the form set forth in EXHIBIT F attached hereto and made a part
hereof.
GOVERNMENTAL AUTHORITIES" shall mean the federal government,
the applicable governmental authority of the County of Hawaii or State of Hawaii
and any governmental agency connected with any of them which has jurisdiction
over the construction, reconstruction, operation or use of the Property.
8.
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"HAWAII TIME" shall mean Hawaii Standard Time.
"HAZARDOUS SUBSTANCE" means any substance, material or waste
which is regulated by any federal, state or local governmental or
quasi-governmental authority, and includes, without being limited to: (a) any
substance, material or waste defined, used or listed as a "hazardous waste",
"extremely hazardous waste", "restricted hazardous waste", "hazardous
substance", "hazardous material", "toxic substance" or other similar or related
terms as defined, used or listed in any Environmental Laws; (b) any petroleum
products, asbestos or polychlorinated biphenyls; (c) any additional substances
or materials which are now or hereafter hazardous or toxic substances under any
Environmental Laws relating to the Real Property; and (d) as of any date of
determination, any additional substances or materials which are hereafter
incorporated in or added to the definition of "hazardous substance" for purposes
of any Environmental Law.
"IMPROVEMENTS" shall mean all macadamia nut trees, buildings,
structures, irrigation lines, and other improvements, including the orchard
improvements and such fixtures as shall constitute real property, located on the
Land.
"Intangible Personal Property" shall mean all of the Personal
Property which is not Tangible Personal Property, and which is used in the
farming and accounting operations of the Seller. Examples of such Intangible
Personal Property are listed in Exhibit F.
"IRS" shall mean the Internal Revenue Service.
"KEY EMPLOYEES" shall have the meaning given to such term in
EXHIBIT G attached hereto.
"LAND" shall mean the land as more particularly described on
EXHIBIT H attached hereto.
"LEASES" shall mean the leases to be executed between the
Seller and the Purchaser whereby Seller leases the Land or licenses use of the
Land to Purchaser.
"NON-FOREIGN STATUS CERTIFICATE" shall mean a certificate, to
be executed by Seller, in the form set forth in EXHIBIT I attached hereto.
9.
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"OPERATING EQUIPMENT" shall mean all vehicles, both
on-the-road and off-the-road, owned by Seller and/or its Affiliates, whether in
use or held in reserve storage for future use, in connection with the farming or
accounting operations of the Seller, subject to such depreciation as shall be
made in the normal course of business.
"ORCHARD IMPROVEMENTS" shall mean only those trees and other
Improvements located on the Land.
"ORCHARD LAND" shall mean the approximately 142 tree acres
within approximately 232 gross acres of land described in SECTION I of EXHIBIT
J.
"OWN" has the meaning given to such term in the definition of
"Affiliate".
"OWNERSHIP" has the meaning given to such term in the
definition of "Affiliate".
"PERMITS" shall mean all of Seller's and Seller's Affiliates
right, title, and interest in all licenses and permits used or relating to the
ownership or operation of the Property in accordance with its current use.
"PERSON" shall mean any natural person, partnership,
corporation, association, trust or trustee, or any other legal entity.
"PERSONAL PROPERTY" shall mean all of the Property, other than
the Real Property, which is used in the farming and accounting operations of the
Seller.
"Plans" shall have the meaning given to such term in Section
5.3(i)(1).
"PRELIMINARY CLOSING STATEMENT" shall have the meaning given
to such term in SECTION 7.1.
"PROPERTY" shall mean all of the assets and liabilities
comprising the business currently conducted by Seller in performing farming
services for owners of macadamia nut orchards and accounting services for said
owners and the Seller and some of its affiliates.
"PROPERTY EMPLOYEES" shall mean all persons actively employed
by either Corporation, as well as all persons on disability or worker's
compensation or other leave and all persons with recall or reinstatement rights
under any such companies' written policies, procedures and practices, including
Key Employees, but excluding those persons listed on Exhibit K.
10.
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"PURCHASE PRICE" shall have the meaning given such term in
Section 2.2.
"PURCHASER'S DOCUMENTS" shall have the meaning given such term
in SECTION 8.3.
"REAL PROPERTY" shall mean the Land and the Improvements on
the Land.
"RELEASE DOCUMENTS" shall have the meaning given such term in
SECTION 8.2.
"RETAINED LITIGATION" means the litigation matters referred to
in Section 5.3(e) and described in EXHIBIT L attached hereto.
"SELLER'S DOCUMENTS" shall have the meaning given such term in
Section 8.2.
"TANGIBLE PERSONAL PROPERTY" shall mean FF&E, Operating
Equipment, Vehicles, and any other tangible personal property used in the
farming and accounting operations of the Seller and not included in the
definitions of Real Property and Intangible Personal Property. Examples of such
Tangible Personal Property are listed in Exhibit A.
"VEHICLES" shall mean the tractors, automobiles, trucks and
other on-the-road or off-the-road vehicles, described on EXHIBIT M attached
hereto and made a part hereof.
ARTICLE II
PURCHASE AND SALE OF PROPERTY
1.1 PURCHASE AND SALE. On the terms and subject to the conditions of
this Contract, Seller hereby agrees to sell, transfer, convey and deliver the
Property to Purchaser; and Purchaser hereby agrees to purchase the Property from
Seller and to assume certain obligations of Seller arising out of or relating to
the Property, as hereinafter provided.
1.2 PURCHASE PRICE. The total purchase price for all of the Property
shall be Nine Million Dollars ($9,000,000) (the "Purchase Price"), subject,
however, to the adjustments and prorations as provided in ARTICLE VII below. The
Purchase Price shall be wired on the Closing Date to an account designated by
Seller.
1.3 PURCHASE PRICE ALLOCATION. Purchaser and Seller agree to allocate
the Purchase Price among the assets comprising the Property in accordance with
the rules and principles of
11.
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section 1060 of the Code, and the regulations promulgated thereunder. All tax
returns and reports filed by Purchaser and Seller with respect to the
transactions contemplated by this Contract shall be prepared in a manner
consistent with such allocation. Purchaser and Seller shall cooperate with one
another in an effort to agree upon such allocation prior to the Closing. In this
regard, within fifteen (15) days after the Contract Date, Purchaser shall
prepare and submit to Seller for its review Internal Revenue Service Form 8594.
Seller shall have fifteen (15) days to object to the allocation of the Purchase
Price on such Form 8594. If Seller does not object within such fifteen (15) day
period, Seller shall be deemed to have approved the filing of Form 8594 in the
manner proposed by Purchaser. If Seller objects to the Form 8594 proposed by
Purchaser within such fifteen (15) day period, Seller and Purchaser shall
endeavor to mutually determine the proper allocation of the Purchase Price on
such form prior to the Close of Escrow. In the event that Purchaser and Seller
cannot reach agreement as to the proper allocation of the Purchase Price on Form
8594 prior to the Close of Escrow, Accountants shall determine the proper
allocation required by section 1060 of the Code and shall prepare and submit to
Purchaser and Seller Form 8594 consistent therewith. Such Form 8594 shall be
prepared by Accountants concurrently with the preparation of the Final Closing
Statements pursuant to SECTION 7.1. Both Purchaser and Seller hereby agree to be
bound by such allocation, and to file such Form 8594 with their respective tax
returns and to report the transactions contemplated hereby in a manner
consistent with the allocation of the Purchase Price as set forth on such Form
8594.
ARTICLE III
CLOSING DATE
1.4 CLOSING PROCEDURES. The parties hereto agree that this Contract
shall constitute the agreements for the transfer of all of the Property from
Seller to Purchaser.
1.5 CLOSING DATE.
(1) The transaction shall close on the Closing Date. As used
in this Contract, the Closing Date shall mean the time the Leases are filed for
record in the Bureau of Conveyances of the State of Hawaii.
(2) Provided that neither party hereto has received written
notice of the failure of any condition precedent specified in ARTICLE IX hereof
to the obligations of such party, then,
12.
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when Purchaser and Seller are each prepared to execute the documents and
instruments and transfer the funds required thereof by this Contract, they
shall:
(1) prepare closing statements for Purchaser and for
Seller based on the Preliminary Closing Statement and ARTICLE VII of this
Contract;
(2) insert the Closing Date as the date of any
document to be delivered but not theretofore dated:
(3) deliver the Leases to Purchaser by causing them
to be recorded in the Bureau of Conveyances of the State of Hawaii and with the
Assistant Registrar of the Land Court of the State of Hawaii, as the case may
be;
(4) deliver to Purchaser: the Bill of Sale, General
Assignment, Non-Foreign Status Certificate, and any other document required to
be delivered to Purchaser.
(5) deliver to Seller: all sums to be received by
Seller from Purchaser LESS all amounts to be paid by Seller pursuant to SECTION
3.3 for fees and expenses payable by Seller and all amounts required to be paid
in satisfaction of liens and encumbrances on the Real Property pursuant to the
terms of this Contract or otherwise pursuant to the instructions of Seller; the
General Assignment executed, in counterpart, by Purchaser; the Excise Tax
Exemption Certificate executed in counterpart by Purchaser; and any other
document required to be delivered to Seller at the Closing Date;
1.6 COSTS OF TRANSACTION. Costs of the transaction shall be allocated
as follows:
(1) Purchaser shall pay the fees for recording the Leases.
(2) Purchaser shall pay all fees and costs in connection with
Purchaser's financing, if any.
(3) Seller shall pay all conveyance taxes imposed upon the
issuance of the Leases to Purchaser.
1.7 OTHER COSTS. Except as otherwise expressly provided to the contrary
herein, each party shall pay all of its own legal, accounting and consulting
fees and all other costs and expenses incurred in connection with the
transaction contemplated by this Contract.
13.
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ARTICLE IV
SUBMITTALS TO PURCHASER
Seller has heretofore furnished Purchaser with, and Purchaser
hereby acknowledges receipt of, the following:
(1) copies of the Farming Service Contracts, Equipment Leases,
and Employment Contracts, together with the Schedules of Litigation and
Vehicles, shown on EXHIBITS L AND M, respectively;
(2) Operating Statements of the Seller for the periods ending
December 31, 1997, December 31, 1998, and December 31, 1999, copies of which are
attached hereto as EXHIBIT N;
(3) copies of the property tax bills for the Land for the
1999-2000 fiscal year;
Except as expressly provided in ARTICLE V hereof, Purchaser acknowledges that
Seller has made no warranty or representation, either express or implied,
concerning the documents described in this Article IV, or the matters disclosed
therein, including (without limitation) the completeness or accuracy thereof.
If, prior to the Closing Date, Purchaser discovers that any of the items listed
above are inaccurate or any of Seller's representations contained herein are
incorrect or misleading in any materially adverse way then Purchaser shall give
Seller written notice of such fact. Seller shall then have 10 days (and the
Closing Date may be postponed until the end of such 10 day period) to either
cure such matter or elect not to cure in which latter event Purchaser, as its
sole and exclusive remedy, may terminate this Contract by delivering a written
notice to Seller within 5 days thereafter.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS
1.8 PURCHASER'S REPRESENTATIONS AND WARRANTIES. Purchaser hereby
represents and warrants to Seller as follows:
14.
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(1) POWER AND AUTHORITY. Purchaser is a limited partnership,
duly organized, validly existing and in good standing under the laws of the
State of Delaware; Purchaser has the power and authority to enter into this
Contract and the "other documents" required to be executed by Purchaser pursuant
to SECTION 8.3 below, to perform its obligations hereunder and to consummate the
transactions contemplated herein; neither the execution and delivery hereof by
Purchaser nor the performance by Purchaser of Purchaser's obligations hereunder
will violate or constitute an event of default under any material terms or
material provisions of any material agreement, document, instrument judgment,
order or decree to which Purchaser is a party or by which Purchaser is bound.
(2) AUTHORIZATION; VALID OBLIGATION. All actions required to
be taken by or on behalf of Purchaser to authorize Purchaser to make, deliver
and carry out the terms of this Contract have been or will be duly taken prior
to the Closing Date. No consent to the execution, delivery and performance of
this Contract by Purchaser is required from any partner, board of directors,
shareholder, creditor, investor, judicial or administrative body, Governmental
Authority or other Person, other than any such consent which already has been
unconditionally given. This Contract is a valid and binding obligation of
Purchaser, enforceable in accordance with its terms, except as the same may be
affected by bankruptcy, insolvency, moratorium or similar laws, or by legal or
equitable principles relating to or limiting the rights of contracting parties
generally.
(3) AS IS PURCHASE.
(1) Prior to the execution of this Contract,
Purchaser has been afforded access to books and records of Seller relating to
the operation of the Property, the documents referred to in Article IV, and to
other information available to Seller with respect thereto. Seller has made no
representations or warranties as to the accuracy or completeness of such
information except as expressly set forth in SECTION 5.3.
(2) To the extent deemed necessary or desirable by
Purchaser, Purchaser (A) has conducted its own investigation of the Property;
(B) has investigated any applicable restrictions, covenants, easements,
conditions, zoning laws, building codes, environmental matters, and other land
use regulations affecting the Property; (C) has made inquiries, inspections,
tests, audits, studies and analyses in connection with purchasing the Property;
and (D) has approved the results of its investigation (including, without
limitation, any engineering and structural tests, economic feasibility studies,
soils and geological reports, reviews of books and records, environmental and
asbestos reports, financial statements, title
15.
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exceptions, projections relating to the operation of the Property, and other
documents obtained or prepared by or for Purchaser in connection with its
review). Purchaser hereby acknowledges that Seller has not made any
representations and warranties other than those set forth in SECTION 5.3 and
ARTICLE XII. Purchaser has made its own inspections, tests, audits, studies and
investigations conducted in connection with, and on Purchaser's own judgment
with respect to, its purchase of the Property.
(4) FINANCIAL RESOURCES. Purchaser has adequate financial
resources to make timely payment of all sums due from Purchaser hereunder and to
perform all of its obligations hereunder.
(5) SECURITIES LAWS. If Purchaser is raising funds to purchase
the Property, Purchaser has and will continue to comply with all applicable
federal and state securities laws and regulations. Purchaser shall indemnify,
defend, and hold Seller harmless from any and all loss, damage, claim, cost and
expense and any other liability whatsoever (including, without limitation,
reasonable attorneys' fees, charges, and costs) by reason of or arising out of
Purchaser's failure to fully comply with such securities laws and regulations.
This indemnity shall survive the Closing or other termination of this Contract.
1.9 PURCHASER'S COVENANTS. Purchaser hereby covenants with Seller as
follows:
(1) INDEMNIFICATION. Purchaser shall indemnify, defend and
hold harmless Seller from and against any and all loss, damage, claim, cost and
expense and any other liability whatsoever (including, without limitation,
reasonable attorneys' fees, charges and costs) incurred by Seller by reason of
any claim, demand or litigation relating to the Property and arising from acts,
omissions, occurrences or matters that take place after the Cut-off Time, except
to the extent arising from any act, negligence, willful misconduct or omission
of Seller, or any of their respective predecessors, successors, assigns, agents,
representatives or employees. In addition, and without limiting the generality
of the foregoing: (i) Purchaser shall assume and perform all of Seller's,
Seller's Affiliates', or the Corporations' obligations under the Farming Service
Contracts, Equipment Leases, and other property assigned to, or acquired by
Purchaser and any other agreement or with respect to any other right assigned to
Purchaser by Seller, and shall, from and after the Cut-off Time, defend,
indemnify and hold harmless Seller and Seller's Affiliates, from and against any
and all loss, damage, claim, cost and expense and any other liability
whatsoever, except to the extent arising from any act, negligence, willful
misconduct or omission of Seller, Seller's Affiliates, or any of their
respective predecessors, successors, assigns, agents, representatives or
employees: (ii) Purchaser shall from and after the Cut-off Time, defend,
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indemnify and hold harmless Seller and Seller's Affiliates, from and against any
and all loss, damage, claim, cost and expense and any other liability whatsoever
(including, without limitation, reasonable attorneys' fees, charges and costs)
arising from or relating to the Property or any portion thereof at or after the
Cut-off Time, except to the extent arising from any act, negligence, willful
misconduct or omission of Seller or Seller's Affiliates, or any of their
respective predecessors, successors, assigns, agents, representatives or
employees.
(2) CONFIDENTIALITY. Purchaser shall, prior to the Closing
Date, hold as confidential, all Confidential Information concerning Seller
disclosed in connection with this transaction and designated as such by Seller
in writing; and Purchaser shall not, at any time prior to the Closing Date,
release any such information relating to Seller or the Property to third parties
without Seller's prior written consent, except pursuant to a court order
requiring such release or as otherwise may be required by law. Seller hereby
gives its consent to Purchaser's disclosure of information relating to the
Property to (l) its lenders to the extent reasonably necessary in order to
obtain such lenders' participation in the contemplated transaction, (2)
Governmental Authorities, and (3) its directors, officers, employees,
accountants, counsel and other professional consultants, in each instance to the
extent reasonably necessary to verify information given to Purchaser by Seller
or otherwise to carry out the purposes of this Contract.
(3) APPRAISALS AND STUDIES. If this transaction fails to close
by reason of Purchaser's default under the terms of this Contract or by reason
of Purchaser's failure to meet a condition precedent to the Closing, Purchaser
shall, within fifteen (15) days after written request therefor from Seller,
deliver to Seller, at Purchaser's sole cost and expense, copies of all
appraisals, market studies and inspection reports which were prepared by or on
behalf of or otherwise delivered to Purchaser in connection with this
transaction, but only to the extent consented to by the consultants providing
such appraisals, studies or reports.
1.10 SELLER'S REPRESENTATIONS AND WARRANTIES. Seller represents and
warrants to Purchaser as follows:
(1) POWER AND AUTHORITY. Each of the corporations comprising
Seller are corporations, duly organized, validly existing and in good standing
under the laws of the State of Hawaii. Seller has the power and authority to
enter into this Contract, and other documents required to be executed by Seller
at Closing pursuant to SECTION 8.4 hereof, to perform its obligations under this
Contract, and to consummate the transactions contemplated herein. The execution
and delivery hereof and the performance by Seller of its obligations hereunder
will not violate or constitute an event of default under any material terms or
material provisions of any
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agreement, document, instrument, judgment, order or decree to which Seller is a
party or by which Seller is bound other than the provisions of any loan
documents relating to any loans secured by mortgages encumbering the Property
which loans shall be repaid at Closing entirely out of the proceeds of this
sale.
(2) AUTHORIZATION; VALID OBLIGATION. Seller has, or, prior to
the Closing Date, shall have, caused all actions required to be taken by or on
behalf of Seller to authorize Seller to make, deliver and carry out the terms of
this Contract. No consent to the execution, delivery and performance of this
Contract by Seller is required from any partner, board of directors,
shareholder, creditor, investor, judicial or administrative body, Governmental
Authority or other Person, other than any such consent which already has been
unconditionally given. This Contract is a valid and binding obligation of
Seller, enforceable in accordance with its terms, except as the same may be
affected by bankruptcy, insolvency, moratorium or similar laws, or by legal or
equitable principles relating to or limiting the rights of contracting parties
generally.
(3) FARMING SERVICE CONTRACTS, EQUIPMENT LEASES, AND
EMPLOYMENT CONTRACTS. To the best of Seller's knowledge: (1) there are no
written Farming Service Contracts, Equipment Leases or Employment Contracts
which will affect or be obligations of Purchaser or of the Property or any
portion thereof following the Close of Escrow, other than the Farming Service
Contracts, Equipment Leases, and Employment Contracts described on EXHIBITS E,
C, AND B attached hereto or otherwise agreed to in writing by Purchaser; (2)
except as shown on the copies of the Farming Service Contracts, Equipment Leases
or Employment Contracts heretofore delivered or subsequently delivered to
Purchaser prior to the Close of Escrow, there are no amendments to said Farming
Service Contracts, Equipment Leases and Employment Contracts, and (3) each
Farming Service Contract, Equipment Lease and Employment Contract is a valid and
subsisting agreement and is in full force and effect in accordance with the
terms thereof and no default by Seller or, to the best of Seller's knowledge,
any other Person exists under any Farming Service Contract, Equipment Lease, and
Employment Contract.
(4) ACCURACY OF DOCUMENTS. To the best of Seller's knowledge,
the Employment Contracts, Equipment Leases, and Farming Service Contracts
delivered to Purchaser under the terms of this Contract were complete and
correct, in all material respects, on the date of delivery and, subject to the
rights of Seller under this Contract with respect thereto, will be so upon the
Closing..
(5) LITIGATION. There is no pending or, to the best of
Seller's knowledge, threatened litigation which could become a liability of the
Property or any portion thereof
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following the Closing, other than as shown on EXHIBIT L hereto (the "Retained
Litigation"). Pursuant to SECTION 5.4(f) below, Seller shall indemnify Purchaser
against any claims or damages arising from the Retained Litigation.
(6) GOVERNMENT REGULATION. Seller has not received any written
notice from any Governmental Authority that the Property or any portion thereof
is in violation of any law, regulation, ordinance, order or other requirements
materially affecting the Property or any portion thereof or any Corporation,
which notice remains uncured.
(7) CONDEMNATION. Neither Seller nor any Affiliate of Seller
has received any written notice and none of such Persons is otherwise aware that
the Property or any portion thereof is or will be imminently subjected to or
affected by any condemnation, eminent domain or similar proceedings.
(8) OPERATING STATEMENTS. Except as otherwise shown on EXHIBIT
N, the operating statements attached as EXHIBIT N have been prepared in all
material respects, using general accepted accounting principles applied on a
basis consistent with the accounting practices of Seller with respect to the
Property as of December 31, 1997, December 31, 1998, and December 31, 1999. Such
operating statements fairly present the results of operations of the Property
for the indicated periods.
(9) COMPENSATION AND BENEFITS PLANS.
(1) Seller has made available to Purchaser
information with respect to all employee benefit plans (as defined in Section
3(3) of ERISA), all multiemployer plans (as defined in Section 3(37) or Section
4001(a)(3) of ERISA) and all bonus, incentive, deferred compensation,
supplemental retirement, severance, consulting, indemnification or other
contracts or agreements, (i) which are maintained for the benefit of, or
relating to, any current or former employee of any Corporation, (ii) which are
maintained by any Corporation or which any Corporation currently has in effect
or to which any Corporation contributes or (iii) with respect to which any
Corporation has incurred or may incur any liability, including such plans,
agreements and arrangements maintained by any ERISA Affiliate (the "Plans").
(2) Neither Seller, nor any Corporation nor any ERISA
Affiliate nor Purchaser has incurred or expects to incur any withdrawal
liability that has not been satisfied in full with respect to any multiemployer
plan or any liability in connection with the reorganization or termination of
any multiemployer plan.
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(3) Except as disclosed in writing to Purchaser, none
of the Plans provides for the payment of separation, severance, termination or
similar type benefits to any person or obligates Purchaser to pay separation,
severance, termination or similar type benefits solely as a result of the
transaction contemplated by this Agreement.
(4) Except as disclosed in writing to Purchaser, none
of the Plans provides for or promises retiree medical or life insurance benefits
to any current or former employee of any Corporation.
(5) Each Plan is now and has been operated in all
material respects in compliance with the requirements of all applicable law,
including, without limitation, ERISA and the Code, and all persons who
participate in the operation of such Plans and all Plan fiduciaries (within the
meaning of Section 3(21) of ERISA) have acted in all material respects in
accordance with the provisions of all applicable law, including ERISA and the
Code. All contributions required to be made to any Plan have been made on or
before their due dates. No legal action, suit or claim is pending or threatened
with respect to any Plan (other than claims for benefits in the ordinary course)
and no fact or event exists that could give rise to any such action, suit or
claim.
(6) Each Plan which is intended to be qualified under
Section 401(a) of the Code or Section 401(k) of the Code is so qualified and
each trust established in connection with any Plan which is intended to be so
qualified is exempt from Federal income taxation under Section 501(a) of the
Code and has been determined by the IRS to be so exempt, and no fact or event
has occurred since the date of such determination by the IRS to adversely affect
the qualified status of any such Plan or the exempt status of any such trust.
(7) There has been no prohibited transaction (within
the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to
any Plan which resulted or could result in a material liability to any
Corporation which has not been satisfied in full. Neither Seller, any
Corporation nor any ERISA Affiliate nor the Purchaser has incurred or expects to
incur any liability to the Pension Benefit Guaranty Corporation (the "PBGC") or
other liability under Title IV of ERISA with respect to any Plan subject to
Title IV of ERISA (collectively, "Title IV Plans"). All required premium
payments to the PBGC with respect to Title IV Plans have been made on or before
their due date. No event which could result in the termination of any Title IV
Plan under Section 4041 of ERISA has occurred or is expected to occur with
respect to any Title IV Plan and neither the Seller, any Corporation nor any
ERISA Affiliate nor
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Purchaser has incurred or reasonably expects to incur any liabilities under
Section 4062 of ERISA. Neither the Seller, any Corporation nor any ERISA
Affiliate is required to provide security to any Plan under Section 401(a)(29)
of the Code or Section 307 of ERISA. No Title IV Plan has incurred an
accumulated funding deficiency (within the meaning of Section 302 of ERISA or
Section 412 of the Code), whether or not waived, as of the most recently ended
plan year of such Title IV Plan and none of the assets of Seller, any
Corporation or any ERISA Affiliate nor Purchaser is or will be the subject of
any lien arising under Section 302(f) of ERISA or Section 412(n) of the Code.
(8) For purposes of this SECTION 5.3(i), "ERISA
AFFILIATE" means each entity that is a member of a controlled group or
affiliated service group of which Seller or any Corporation is a member or that
is under common control with Seller or any Corporation (within the meaning of
Sections 414(b), 414(c), 414(m) and 414(o) of the Code). All references to ERISA
and the Code include reference to the applicable rulings and regulations
promulgated thereunder and each reference to any specific section of ERISA or
the Code includes reference to any successor section thereto.
(10) ENVIRONMENTAL ACTIVITY. Seller is in compliance with the
provisions of all Environmental Laws relating to the Property and the ownership,
use, operations and occupancy thereof. Neither Seller nor, to the best of
Seller's knowledge, any other Person has engaged in any Environmental Activity,
nor has any Environmental Activity otherwise occurred, in violation of any
applicable Environmental Laws. Seller has no material liability, absolute or
contingent, in connection with any Environmental Activity. Seller has not
received any notice from any federal, state, county, municipal or other
governmental department, agency or authority concerning nor does Seller have any
knowledge of the existence of any Hazardous Substance discharge or seepage.
(11) BULK SALES LAW. The principal business of Seller is not
the sale of merchandise, including the manufacture of goods sold by Seller.
(12) SERVICEMARKS. There are no federally registered
servicemarks used by Seller and/or its Affiliates exclusively in connection with
the ownership or operation of the Property.
(13) TITLE TO ASSETS. The Seller has good and marketable title
to, or a valid leasehold interest in, the Property free and clear of any
security interests therein or restrictions on transfer except for: (1) lessor's
interests in the Equipment Leases, and (2) required consents to transfers of
certain contracts and leases, all of which have been obtained.
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1.11 SELLER'S COVENANTS. Seller hereby covenants as follows:
(1) OPERATION OF PROPERTY THROUGH THE CLOSE OF ESCROW. Seller
agrees that between the Effective Date and the earlier of the Close of Escrow or
termination of this Contract:
(1) MODIFICATIONS OF LEASES AND AGREEMENTS. The
Farming Service Contracts, Employment Contracts, and Equipment Leases and any
agreements set forth in the exhibits attached hereto will not be amended, no
other leases of or with respect to the Property will be entered into, and no
other agreements affecting the Property or any portion thereof or compensation
and benefit plans affecting the Property employees will be entered into, by
Seller, without the prior written consent of Purchaser (which consent as to
Farming Service Contracts, Employment Contracts and Equipment Leases will not be
unreasonably withheld, delayed or conditioned); excepting, however, Equipment
Leases and Farming Service Contracts, in the ordinary course of business, for
supplies to replenish the normal inventory levels of the businesses operated by
the Seller or required in connection with or necessary for customary services to
be performed prior to or within sixty (60) days after the Closing Date, at price
rates comparable to those previously paid by Seller or at rates paid by
comparable businesses for such supplies and services provided that notice
thereof at least three (3) business days prior to entering into and within one
(1) business day after entering into shall be given to Purchaser.
(2) INSURANCE POLICIES. All existing insurance
policies (or replacements thereof) affecting the Property or any portion thereof
will be kept in full force and effect; provided, however, Seller shall not be in
breach of this subsection if Seller has given Purchaser twenty (20) days written
notice that an existing insurance policy shall expire and a replacement policy
is not available at a reasonably equivalent price and Purchaser shall fail to
notify Seller in writing within said period that Purchaser elects to pay the
cost of the increase in price if the replacement policy is available;
(3) ALTERATIONS. No alterations to the physical
condition of the Land or Improvements costing in excess of an aggregate amount
of Twenty-Five Thousand Dollars ($25,000) will be commenced without the prior
written consent of Purchaser; provided that in the case of any casualty
restoration Seller shall obtain the prior written approval by Purchaser of the
plans and specifications in respect thereof (which approval shall not be
unreasonably withheld);
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(4) REFURBISHMENTS. No refurbishments to the FF&E
costing in excess of an aggregate amount of Ten Thousand Dollars ($10,000) will
be made without the prior written consent of Purchaser, which consent will not
be unreasonably withheld.
(5) OPERATIONS AND SERVICES. The business will be
operated in substantially the manner in which it was operated on the Effective
Date and inventories will be procured and maintained in normal operating
amounts, and all services with respect to the Property that are now required to
be provided will be provided, in order so to operate the business;
(6) RENEWAL OF PERMITS. Due diligence will be used to
keep in full force and effect (or to renew, when necessary) all Permits;
(7) REMOVAL OF FF&E. None of the FF&E will be removed
from the Property except in the ordinary course of business; and
(8) NOTICES OF CERTAIN DEFAULTS. Seller shall
promptly notify Purchaser of any notices from any Governmental Authority
regarding violation or any law relating to the Property or any business being
operated thereon and of any material default by Seller or the Corporations or by
the other party thereto existing on or after the Effective Date and prior to the
Close of Escrow under any of the Employment Contracts, Equipment Leases, or
Farming Service Contracts, and actually known to Seller.
(9) Further, notwithstanding anything in SECTION
5.3(i) above to the contrary, Seller shall use its good faith efforts in
attempting to postpone any definitive substantive renegotiation with respect to
the Employment Contracts and collective bargaining agreements until after the
Closing.
(2) EXCISE TAX. Seller shall pay any general excise tax due on
the sale to Purchaser of any of the Property. In this regard Seller and
Purchaser shall use their mutual good faith efforts to cooperate and shall
finalize, execute and file the Excise Tax Exemption Certificate at Closing so as
to eliminate any general excise tax liability in connection with the sale of the
Property.
(3) CONFIDENTIALITY. Seller shall hold as confidential all
Confidential Information of Purchaser hereby disclosed to Seller by Purchaser in
connection with said transaction; and Seller shall not, at any time, release any
such information to third parties without
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Purchaser's prior written consent, except pursuant to a court order requiring
such release or as otherwise may be required by law. Purchaser hereby gives its
consent to Seller's disclosure of such information to Seller's consultants and
contractors, and to Governmental Authorities, in each instance to the extent
reasonably necessary to verify information given to Seller by Purchaser or
otherwise to carry out the purposes of this Contract.
(4) INDEMNIFICATION. Seller shall indemnify, defend and hold
harmless Purchaser from and against any and all loss, damage, claim, cost or
expense and any other liability whatsoever (including, without limitation,
reasonable attorneys' fees, charges and costs) incurred by Purchaser by reason
of any claims, demands or litigation instituted by or on behalf of a third party
relating to the Property, Seller, Seller's Affiliates, the Corporations, which
arise from acts, occurrences, omissions or matters that take place prior to the
Cut-off Time.
(5) CORPORATIONS. From the Effective Date until the earlier of
the Close of Escrow or termination of this Contract, Seller shall cause the
business operations and corporate affairs of each Corporation to be conducted in
the ordinary course consistent with the respective past practice of each such
Corporation.
1.12 SURVIVAL. Purchaser and Seller each hereby covenants and agrees
with the other that the representations, warranties, covenants and indemnities
of Purchaser and Seller (as the case may be) set forth in, respectively, in
ARTICLES V, VI, VII, XI, XII AND XVI, shall survive the Closing without
limitation as to duration; provided, however the representations and warranties
made by Purchaser and Seller shall survive the Closing for a twelve (12) month
period commencing upon the Closing. Notwithstanding the foregoing, in no event
shall Purchaser have the right to bring any claim or claims against Seller after
the Close of Escrow in connection with the breach or purported breach of any
representation or warranty made by Seller in SECTION 5.3 hereof unless such
claim or claims aggregate in excess of Twenty-Five Thousand Dollars
($25,000.00).
ARTICLE VI
PROPERTY EMPLOYEES
1.13 ASSUMPTION OF COLLECTIVE BARGAINING AGREEMENT. As of the Cut-off
Time, Purchaser shall assume all collective bargaining agreements covering
Property employees and shall fully honor and maintain each such collective
bargaining agreements including all renewals thereof.
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1.14 TERMS OF EMPLOYMENT. At the Cut-off Time, the non-bargaining unit
Property Employees employed by Seller shall be hired by Purchaser at
substantially the same rate of pay and with substantially the same benefits as
provided by Seller.
1.15 SENIORITY. Purchaser shall determine seniority rights in its
discretion except as required by any Employment Contract or collective
bargaining agreements.
1.16 INDEMNITY. Purchaser agrees to, and shall indemnify, defend, and
hold harmless Seller and their Affiliates against all alleged labor or
employment claims, liabilities, Employment Costs, or obligations (including
reasonable attorneys' fees and experts' fees) with respect to the Property
Employees which accrue on or after the Cut-off Time.
Purchaser hereby agrees to defend, indemnify and hold Seller
and their respective Affiliates harmless from and against any and all liability,
loss, claim, demand, cost, expense (including, without limitation, reasonable
attorneys' fees, charges and costs) and any other liability whatsoever which
Seller or any of their Affiliates may incur as a result of Purchaser's complete
or partial withdrawal from a Plan or Purchaser's failure to make a contribution
or a withdrawal liability payment to each such Plan when due.
6.5 ACCRUED VACATIONS. Seller shall use its best efforts to secure from
the Union an agreement that accrued vacations need not be paid in cash at the
Closing, but may be assumed by the Purchaser and honored by Purchaser in
accordance with the collective bargaining agreement. If the Union will not agree
that accrued vacations need not be paid in cash at the Closing, the Seller will
cooperate with the Union in efforts to secure waivers of the requirement to pay
cash from the collective bargaining employees entitled to accrued vacations. If
the Union will not agree to assumption of the accrued vacation liability by the
Purchaser and if the particular employee will not sign a waiver, then Seller
will pay such accrued vacation in cash. Purchaser shall assume all accrued
vacation liability for collective bargaining employees if the Union agrees that
vacation liability need not be paid in cash. If the Union does not so agree,
Purchaser will assume accrued vacation liability for all collective bargaining
employees who sign waivers.
ARTICLE VII
CLOSING STATEMENTS, ADJUSTMENTS AND PRORATIONS
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1.17 PREPARATION OF PRELIMINARY AND FINAL CLOSING STATEMENTS. The
parties hereto shall cooperate with one another, both before and after the
Closing Date, for the purpose of making such inventories, examinations and
audits of the Property, and of the books and records of the Seller, as are
necessary to make the adjustments and prorations required under this ARTICLE
VII, or under any other provisions of this Contract. Based upon such preliminary
audits and inventories, three days prior to the Closing Date Seller will prepare
and deliver to Purchaser a "PRELIMINARY CLOSING STATEMENT" (herein so called),
which will show the net amount due either to Seller or to Purchaser as the
result thereof, and such net amount will be added to or subtracted from the
payment of the cash balance of the Purchase Price to be paid to Seller pursuant
to SECTION 2.2 hereof. Within 90 days following the Closing Date, Seller shall
deliver to each of the parties a "FINAL CLOSING STATEMENT" (herein so called)
setting forth the final determination of all items to be included on the Closing
Statements and an auditors report from Accountants expressing an opinion that
the adjustments and prorations in the Final Closing Statement are presented
fairly, in all material respects, in conformity with this VII Article herein.
The net amount due Seller or Purchaser, if any, by reason of adjustments in the
Preliminary Closing Statement as shown in the Final Closing Statement, shall be
paid in cash by the party obligated therefor within 10 days following that
party's receipt of the Final Closing Statement. The adjustments, prorations and
determinations of the Accountants shall be conclusive and binding on the parties
hereto.
Seller and Purchaser shall have the right to have its representatives
present, both before and after the Closing Date, for the purpose of observing
the taking of any inventories, and such representatives shall be given
reasonable access to the books and records of the Property which are relevant to
the preparation of the Closing Statements. The provisions of this ARTICLE VII
shall survive the Closing.
1.18 ADJUSTMENT AND PRORATIONS. It is the intention of Purchaser and
Seller that adjustments and prorations be made as hereinafter provided in this
SECTION 7.2 with respect to the Property and its operation. Therefore, the
following matters and item shall be apportioned on an accrual basis as of the
Cut-off Time between the parties hereto or, where applicable, credited in total
to a particular party:
(1) ACCOUNTS RECEIVABLE. For purposes of this Contract,
"Accounts RECEIVABLE" shall include all receivables pursuant to farming service
contracts and accounting services as of the Closing Date. Seller shall retain
ownership of such receivables.
(2) TAXES AND ASSESSMENTS. All ad valorem taxes, general
excise taxes, special or general assessments, water and sewer rents, rates and
charges and other municipal
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permit fees owed by or applicable to the Property. If the amount of any such
item is unascertainable on the Closing Date, the credit therefor shall be based
on the most recent available bill. If the actual amount of any such item, when
later determined, and prorated for the applicable period, differs from the
credit given therefor on the Preliminary Closing Statement, the parties shall
promptly make the appropriate adjustment, and the party owing sums by reason of
such adjustment shall promptly remit such sums to the other party.
(3) UTILITY CONTRACTS. Telephone service contracts (but
excluding Equipment Leases and service contracts for telephone equipment) and
contracts for the supply of heat, steam, electric power, gas, lighting and any
other utility service, with Seller receiving a credit for all deposits, if any,
made by Seller as security under any such public service contracts if the same
is transferable and provided such deposit remains on deposit for the benefit of
Purchaser. At Seller's option, cut-off readings will be secured for all
utilities as of the Cut-off Time. (1)
(4) FARMING SERVICE CONTRACTS, EMPLOYMENT CONTRACTS AND
EQUIPMENT LEASES. Any amounts prepaid or payable under any Farming Service
Contracts, Employment Contracts, Equipment Leases. All security deposits held by
Seller shall be transferred to Purchaser and all obligations with respect to
such security deposits shall be assumed by Purchaser.
(5) LICENSE FEES. Fees paid or payable for Permits.
(6) INSURANCE. Seller shall retain all prepaid premiums with
respect to insurance policies whether or not insurance is continued under the
Brewer umbrella or is cancelled at the Closing.
(7) COMPENSATION. Compensation of the staff and other
employees of the Property not covered by the Employment Contracts. The
Compensation of the employees working as of the Cut-off Time will be prorated as
of the end of their respective shifts.
(8) ACCOUNTANTS' FEES. Seller and Purchaser shall each pay
one-half (1/2) of the fees and expenses charged by the Accountants in connection
with the preparation of the Closing Statements and, if applicable, IRS Form
8594.
(9) OTHER. Such items as are provided for in this Contract or
as are normally prorated and adjusted in a sale of this type, including without
limitation, all petty cash funds.
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1.19 ACCOUNTS RECEIVABLE. Purchaser is not purchasing any of the
receivables of the Property, and Seller shall be solely responsible for the
collection of such accounts receivable of the Property (the "ACCOUNTS
RECEIVABLE"). Purchaser agrees to cause the Purchaser's employees to co-operate
with Seller's representative in reviewing such Accounts Receivable, and in
answering any inquiries with respect thereto. Purchaser further agrees to
promptly remit to Seller any funds received by it in payment of such Accounts
Receivable. With regard to any collection made from any person or entity who is
indebted to the Property both with respect to Accounts Receivable accruing prior
to the Closing Date and to the Accounts Receivable accruing subsequent to the
Closing Date, such collection shall be applied as designated, but if there is no
designation, then any such collections received within 90 days after the Closing
Date shall be applied first to the indebtedness accrued prior to the Closing
Date, but thereafter, any such collections shall be applied first to the payment
in full of any amounts due to Purchaser on accounts accruing subsequent to the
Closing Date.
1.20 PAYABLES. Purchaser is not assuming trade payables with respect to
the Property except to the extent that Purchaser receives a credit therefor on
the Closing Statements. Seller shall be responsible for paying all payables
which have accrued prior to the Cut-off Date.
1.21 ACCOUNTING. Unless otherwise specified herein, all accounting
terms used herein shall be interpreted, and all accounting determinations to be
made pursuant to this Contract, and all financial information required to be
delivered hereunder shall be prepared in all material respects using general
accepted accounting principles applied on a basis consistent with the accounting
practices of Seller with respect to the Property as of the Closing Date.
ARTICLE VIII
DELIVERY OF DOCUMENTS
1.22 INFORMATION TO PURCHASER. Seller and Purchaser will cooperate in
familiarizing Purchaser with the operation of the Property and in Purchaser's
preparations to assume ownership thereof on the Closing Date and, in connection
therewith, shall afford Purchaser access to the Property at reasonable times and
in a reasonable manner, provided, however, Purchaser shall provide Seller with
prior notice of Purchaser's intended entry onto the Property and, at the
election of Seller, a representative of Seller shall accompany Purchaser during
each such entry. Subject to the aforementioned notice and other requirements,
Purchaser and Seller agree that it shall be reasonable for Purchaser to have not
more than three (3) of Purchaser's employees, agents or representatives at the
Property during daylight hours prior to the Closing
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Date for such purposes. Purchaser shall assure that its conduct, and that of its
employees, agents and representatives, during such process is at all times
unobtrusive and does not interfere with the operation of the Property by Seller
in the ordinary course of business.
1.23 CLOSING DOCUMENTS TO BE DELIVERED BY SELLER TO PURCHASER.
(1) Seller shall deliver the following original documents to
Purchaser on the Closing Date, each of which shall be executed, and, where
appropriate, acknowledged by Seller, and dated as of the Closing Date:
(1) The Leases;
(2) Three counterparts of the General Assignment;
(3) Three counterparts of the Bill of Sale; (1)
(4) Three counterparts of the Excise Tax Exemption
Certificate;
(5) All documents necessary to transfer title to
Purchaser of all Vehicles owned by Seller and used in the Property business;
(6) Recordable releases of lien or reconveyance
documents with respect to any deeds of trust or mortgages encumbering the
Property (the "RELEASE DOCUMENTS");
(7) Any other documents, reasonably required by
Purchaser to consummate the purchase and sale of the Property.
(2) Seller shall also deliver the proposed Preliminary Closing
Statement to Purchaser prior to the Closing Date.
(3) Seller shall also deliver to Purchaser on the Closing Date
a favorable written opinion of J. Alan Kugle, Esq. dated as of the Closing Date
as to: (i) the power and authority of Seller to execute, deliver and perform
this Contract and the documents described in this Section 8.2 ("SELLER'S
DOCUMENTS"); (ii) the due authorization, execution and delivery by Seller of
Seller's Documents, and (iii) the legality, validity, enforceability and binding
effect as to Seller of the Seller's Documents, except as they may be limited by
(1) laws of general applicability respecting insolvency or creditors' rights,
and (2) the discretion of a court to enforce
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equitable remedies: and (iv) to the best knowledge of said counsel, that the
execution and delivery of Seller's Documents, and the consummation of the
transactions contemplated hereby, does not require the consent or approval of
any Governmental Authority. Such opinion may be subject to such qualifications,
limitations, and exceptions as are customary for legal opinions rendered by
lawyer" in the State of Hawaii in similar transactions.
1.24 CLOSING DOCUMENTS AND FUNDS TO BE DELIVERED BY PURCHASER TO
SELLER.
(1) Purchaser shall deliver to Seller or the Closing Date the
following funds and original documents (each of which shall be executed, and,
where appropriate, acknowledged by Seller, and dated as of the Closing Date;
(1) The Purchase Price plus the amounts described in
ARTICLE VII, in cash or other immediately available federal funds, in the form
and amount required by SECTION 2.2 and ARTICLE VII;
(2) Three counterparts of the General Assignment;
(3) Three counterparts of the Excise Tax Exemption
Certificate, duly executed by Purchaser;
(4) Any other documents, reasonably required by
Seller to consummate the purchase and sale of the Property.
(2) Purchaser shall also deliver to Seller on the Closing
Date, a favorable written opinion of counsel for Purchaser in connection with
the transaction, dated as of the Closing Date, as to: (i) the power and
authority of Purchaser to execute and deliver this Contract and the documents
described in items (2) - (4) above, ("PURCHASER'S DOCUMENTS"); (ii) the due
authorization, execution and delivery by Purchaser of Purchaser's Documents;
(iii) the legality, validity and binding effect of Purchaser's Documents",
except as they may be limited to (1) laws of general applicability respecting
insolvency or creditors' rights, and (2) the discretion of a court to enforce
equitable remedies; and (iv) to the best knowledge of said counsel, that the
execution of the transaction contemplated hereby does not require the consent or
approval of any Governmental Authority. Such opinion may be subject to such
qualifications, limitations, and exceptions as are customary for legal opinions
rendered by lawyers in the State of Hawaii in similar transactions.
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1.25 SELLER'S DELIVERIES TO PURCHASER AT CLOSING. Seller shall deliver
to Purchaser contemporaneously with the Closing original counterparts of the
following documents together with, to the extent obtainable by Seller through
its reasonable efforts, appropriate consents:
(1) Leases;
(2) Equipment Leases;
(3) Farming Service Contracts;
(4) Books and Records;
(5) Permits: and
(6) Keys to all entrance doors, guest rooms, offices, store
rooms and Vehicles.
The documents and keys described in this SECTION 8.4 shall be deemed to
be appropriately delivered if left in the Property in possession of an
authorized representative of Purchaser who has acknowledged in writing receipt
thereof.
ARTICLE IX
CONDITIONS PRECEDENT TO CLOSING
1.26 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS. The obligation of
Purchaser to purchase the Property is subject to the satisfaction, not later
than the Closing Date, of the following conditions:
(1) REPRESENTATIONS AND WARRANTIES OF SELLER. There has been
no material breach of any of Seller's representations, warranties and covenants
in this Contract set forth in SECTION 5.3 and SECTION 5.4 as of the Closing
Date. For purposes of this SECTION 9.1(a) only, a "material" breach shall be a
breach which in the reasonable judgment of Purchaser, exercised in good faith,
exposes Purchaser or the Property to costs, expenses or damages in excess of
Fifty Thousand Dollars ($50,000). If such representations, warranties and
covenant of Seller have been breached prior to the Closing Date and Purchaser
has notified Seller of such breach, but such breach is not "material" then
Purchaser shall have no right to terminate this Contract but, upon specific
written request therefor by Purchaser, a reasonable estimation of such amount
shall
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be withheld from the Purchase Price by the Purchaser pending determination of
the amount of, and Seller shall indemnify, defend and hold Purchaser harmless
from and against all losses, damages, costs and expenses (whether or not they
eventually exceed Fifty Thousand Dollars ($50,000)), including, without
limitation, reasonable attorneys' fees, charges and costs, incurred by Purchaser
by reason of such breach.
(2) NO MATERIAL CHANGES. There shall have been no casualty or
condemnation for which Purchaser has elected to terminate this Contract pursuant
to ARTICLE XIII herein.
(3) SELLER'S DELIVERIES. Seller shall have delivered the items
described in SECTION 8.2 and Purchaser's representative shall have acknowledged
that Seller is prepared to deliver the items described in SECTION 8.4.
The conditions set forth in this SECTION 9.1 are solely for the benefit
of Purchaser and may be waived only by Purchaser. Purchaser shall at all times
have the right to waive any condition. Any such waiver or waivers shall be in
writing and shall be delivered to Seller and Escrow Agent. Neither Seller nor
Purchaser shall act or fail to act for the purpose of permitting or causing any
condition to fail. If any of the conditions in this SECTION 9.1 is not satisfied
or has not been so waived by Purchaser prior to the Closing Date, Purchaser
shall give written notice to Seller describing the condition that has not been
satisfied or waived. If the condition specified in SECTION 9.1 is not satisfied
prior to the Closing Date, either Purchaser or Seller may postpone the Closing
Date, by one or more postponements, in increments of not more than one (1) week
for each postponement, for the purpose of attempting to satisfy such condition,
which postponement shall be effected by giving written notice thereof to Seller
(or Purchaser). If any of the conditions specified in this SECTION 9.1 is not
satisfied prior to the Closing Date, Seller shall be entitled to postpone the
Closing Date, by one or more postponement, to a date not later than thirty (30)
days after the originally scheduled Closing Date, for the purpose of attempting
to satisfy such conditions, which postponements shall be effected by giving
written notice thereof to Purchaser.
1.27 CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS. The Close of Escrow
and Seller's obligations with respect to the transactions contemplated by this
Contract are subject to the satisfaction, not later than the Closing Date of the
following conditions:
(1) FUNDS. Purchaser shall have delivered to Seller on the
Closing Date, all cash or other immediately available funds due from Purchaser
in accordance with SECTION 2.2 of this Contract.
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(2) REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER.
There shall be no material breach of any of Purchaser's representations,
warranties and covenants in this Contract including, but not limited to, those
set forth in SECTIONS 5.1 and 5.2 as of the Closing Date.
(3) PURCHASER'S DELIVERIES. Purchaser shall have delivered to
Purchaser the items described in SECTION 8.3.
The conditions set forth in this SECTION 9.2 are solely for the benefit
of Seller and may be waived only by Seller. Seller shall at all times have the
right to waive any condition. Any such waiver or waivers shall be in writing and
shall be delivered to Purchaser. Neither Purchaser nor Seller shall act or fail
to act for the purpose of permitting or causing any condition to fail.
1.28 FAILURE OF CONDITION. Except as otherwise provided in this
Contract, if the transaction fails to close on or before the Closing Date for
any reason whatsoever (other than a reason for which Purchaser or Seller has the
express right to postpone Closing), including, without limitation, a failure of
a condition precedent set forth in this ARTICLE IX, either Purchaser or Seller,
if not then in default hereunder, may terminate this Contract in accordance with
the provisions of SECTION 10.1 or 10.2, as the case may be; and, thereupon:
(1) each party shall pay its own costs and expenses; and
(2) each party shall be released from all obligations under
this Contract except for the provisions which expressly survive termination of
this Contract.
ARTICLE X
DEFAULTS AND REMEDIES
1.29 SELLER'S DEFAULTS. Seller shall be considered to be in default
hereunder if Seller fails to meet, comply with, or perform any material
covenant, agreement, representation, warranty or obligation on its part required
within the time limits and in the manner required in this Contract, and such
failure was not caused by Purchaser's default.
1.30 PURCHASER'S REMEDIES. If Seller is in default hereunder, Purchaser
may exercise either one of the following as its sole and exclusive remedies:
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(1) Terminate this Contract by written notice delivered to
Seller on or before the Closing Date; or
(2) Enforce specific performance of this Contract against
Seller, in which event Purchaser shall be deemed to have accepted Seller's title
to the Property and waived any breach by Seller of any of its representations
and warranties made hereunder, except for any matters or breaches that were
caused by an act or omission of Seller in violation of this Contract or which
are curable by Seller.
Purchaser hereby waives any right to any damages (whether actual,
incidental, consequential, punitive or otherwise and whether or not the remedy
of specific performance is available) or any other legal or equitable remedies
(other than those specified in (a) and (b) above) which it may otherwise have
for Seller's default.
1.31 PURCHASER'S DEFAULTS. Purchaser shall be considered to be in
default hereunder if Purchaser fails to meet, comply with, or perform any
material covenant, agreement, representation, warranty, or obligation on its
part required within the time limits and in the manner required in this
Contract, and such failure was not caused by Seller's default.
1.32 SELLER'S REMEDY.
(1) If Purchaser is in default hereunder then, as Seller's
sole remedy for such default and upon written notice of termination from Seller
to Purchaser, this contract shall terminate (except for this SECTION 10.4 and
any other provisions which expressly survive termination of this contract). The
parties acknowledge and agree that upon Purchaser's default, Seller will incur
certain costs and other damages in an amount that would be extremely difficult
or impractical to ascertain. Without limiting the generality of the foregoing:
(a) such costs and damages will include administrative costs incurred by Seller
in the processing and review of this contract and other documents relating to
this transaction, and damages suffered by reason of Seller's withdrawing the
Property from the open market; (B) Seller is entering into this contract with
Purchaser in reliance upon Purchaser's commitment to purchase the Property from
Seller on or before the Closing Date and upon the warranty, representation and
covenant which Purchaser hereby makes with respect to this SECTION 10.4, that
this SECTION 10.4 is valid and binding on Purchaser and enforceable in
accordance with its terms and that upon request Purchaser will execute and
deliver to Seller a written acknowledgment by Purchaser of the termination of
this contract, as provided in this SECTION 10.4;
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(2) Purchaser acknowledges and agrees that the sum of Fifty
Thousand Dollars ($50,000) bears a reasonable relationship to the damages which
the parties estimate may be suffered by Seller by reason of failure of the
closing of the Transaction to occur; and
(3) Upon delivery to Purchaser by Seller of a notice of
termination, Purchaser shall pay to Seller, as liquidated damages, the sum of
Fifty Thousand Dollars ($50,000) which damages (except as otherwise provided in
this Section 10.4) shall be Seller's sole monetary remedy hereunder in the event
of such a breach by Purchaser, and shall forthwith return to Seller all
documents and instruments theretofore provided to Purchaser by or on behalf of
Seller.
ARTICLE XI
NOTICE OF NONCOMPLIANCE WITH BULK SALES LAW
In connection with Seller's sale to Purchaser of the Property, Seller
hereby agrees to indemnify, defend and hold Purchaser harmless from any and all
liability Purchaser may incur by reason of Seller's noncompliance with the
Hawaii Bulk Sales Law (Section 490:6-101 ET SEQ. of the Hawaii Revised
Statutes).
ARTICLE XII
BROKER
Seller and Purchaser mutually represent and warrant to each other that
neither Seller nor Purchaser knows of any broker or other Person who has claimed
or may have the right to claim a commission, finder's fee, brokerage fee or
other fee or payment in connection with this transaction.
ARTICLE XIII
CASUALTY
CASUALTY. If any substantial damage to the Property shall occur prior
to the Closing Date by reason of fire, earthquake, lava flow, or other casualty,
Seller will give Purchaser immediate notice of such event. If the cost to repair
and restore the Property exceeds the sum of (i) the insurance proceeds available
for restoration plus (ii) the deductible amount on the applicable insurance
policy, then Purchaser shall have the right to terminate this Contract by
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giving written notice to Seller to such effect by the earlier to occur of (a)
the Closing Date, or (b) five (5) days after Seller has notified Purchaser of
the casualty. If Purchaser does not elect to terminate this Contract, then the
closing of the transaction contemplated hereby shall take place as herein
provided with abatement of the Purchase Price in an amount equal to the cost to
repair or restore the Property that exceeds the amount of proceeds from casualty
insurance paid or payable with respect to the casualty, and at the Closing,
Seller shall pay or assign to Purchaser (by written instrument in the case of
any assignment, but without recourse) any proceeds from all fire and other
casualty insurance paid or payable with respect to the casualty (less sums
theretofore expended, if any, by Seller for temporary repairs or barricades),
and the Seller shall have no liability or obligation with respect to the
condition of the Property as the result of such casualty.
ARTICLE XIV
NOTICES
1.33 NOTICES IN WRITING. Whenever any notice, demand or request is
required or permitted hereunder, such notice, demand or request shall be made in
writing and shall be personally delivered to the individuals listed below, sent
via prepaid courier or overnight courier or telecopier, or deposited in the
United States mail, registered or certified, return receipt requested, postage
prepaid, addressed to the addresses (and individuals) set forth below:
As to Seller: J. Alan Kugle, Esq.
P. O. Box 1826
Papaikou, Hawaii 96781
Telephone Number: (808) 969-8107
Telecopier Number: (808) 969-8151
As to Purchaser: James H. Case, Esq.
Suite 2200, Pacific Tower
1001 Bishop Street
Honolulu, Hawaii 96809
Telephone Number: ( 808) 523-2500
Telecopier Number: ( 808) 523-0842
With a copy to: Mr. Gregory A. Sprecher
ML Resources, Inc.
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808 Fort Street Mall, Suite 205
Honolulu, Hawaii 96813-4321
Telephone Number: (808) 532-4133
Telecopier Number: (808) 532-4131
1.34 RECEIPT. Any notice, demand or request that shall be served upon
any party shall be deemed sufficiently given to and received by such party for
all purposes hereunder, (i) if sent via courier, at the time such notice, demand
or request is delivered, to the address specified by the party to receive such
notice, or (ii) if sent via telecopy, at the time of receipt by such party, or
(iii) if sent via registered or certified mail, three ( 3) days after it is
deposited in the United States mail.
1.35 DEEMED DELIVERY. The inability to deliver any notice, demand or
request because the individual to whom it is properly addressed in accordance
with this ARTICLE XIV refused delivery thereof or no longer can be located at
that address shall constitute delivery thereof to such individual.
1.36 CHANGE OF ADDRESS. Each party hereto shall have the right from
time to time to designate by written notice to the other parties hereto such
other person or persons and such other place or places as said party may desire
written notices to be delivered or sent in accordance herewith.
ARTICLE XV
SUCCESSORS AND ASSIGNS
1.37 TRANSFERS BY SELLER. Seller shall have the right to assign all of
its right, title, and interest in this Contract to any Affiliate of Seller
without the prior written consent of Purchaser, PROVIDED that no transfer or
assignment will be valid unless all of Seller's right, title and interest in the
Contract are held by the same Person who shall have assumed all of the
obligations and liabilities hereunder. Any other transfer or assignment shall
require the written consent of Purchaser which consent may be withheld in
Purchaser's sole and absolute discretion.
1.38 TRANSFERS BY PURCHASER. Purchaser shall have the right to assign
or partially assign all of its right, title and interest in this Contract to a
subsidiary to be formed without the prior written consent of Seller. Any other
transfer or assignment shall require the written consent of Seller which consent
may be withheld in Seller's sole and absolute discretion. No assignment or
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transfer made by Purchaser shall be of any force or effect whatsoever unless and
until Purchaser shall have delivered to Seller a counterpart of such assignment,
duly executed by Purchaser and the assignee, and an assumption agreement with
the respect thereto in favor of Seller, duly executed by Purchaser and the
assignee, both of which documents shall be in form and substance satisfactory to
Seller. Notwithstanding anything to the contrary contained herein, no such
assignment shall relieve the assigning party from its liability under this
Contract. Any assignment made in violation hereof or which does not comply with
the provisions hereof is and shall be null and void.
ARTICLE XVI
MISCELLANEOUS
1.39 APPROVALS. Whenever the approval or consent of either Purchaser or
Seller is called for under the terms of this Contract, such approval or consent
shall not be unreasonably withheld and shall be given or denied within three (3)
business days of receipt of a request by Purchaser or Seller, as the case may
be, for such approval or consent (unless a different period for such approval or
consent is expressly provided for in this Contract). The failure by Purchaser or
Seller to notify the other party of its denial of approval or consent prior to
5:00 p.m. (Hawaii Time) on the third business day (or such different period for
such approval or consent as is expressly provided for in this Contract) after
the day on which such request is received by the party from whom approval or
consent is sought shall be deemed to be approval or consent, as of the end of
said third business day, by the party from whom approval or consent is sought.
1.40 AMENDMENT. No provision of this Contract or of any documents or
instrument entered into, given or made pursuant to this Contract may be amended,
changed, waived, discharged or terminated except by an instrument in writing
signed by the party against whom enforcement of the amendment, change, waiver,
discharge or termination is sought.
1.41 ENTIRE CONTRACT. This Contract together with the exhibits attached
hereto embodies the entire agreement between the parties hereto with relation to
the transactions contemplated hereby, and there have been and are no covenants,
agreements, representations, warranties or restrictions between the parties
hereto with regard thereto other than those set forth herein.
1.42 TIME. Time shall be of the essence of this transaction.
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1.43 PARTIES. The covenants and agreements herein contained shall
extend to and be obligatory upon the heirs, executors, administrators,
successors and assigns of the respective parties hereto.
1.44 NUMBER AND GENDER OF WORDS. Words of any gender used in this
Contract hall be held and construed to include any other gender, and words of a
singular number shall be held to include the plural and vice versa, unless the
context requires otherwise.
1.45 CAPTIONS. The captions used in connection with the Articles and
Sections of this Contract are for convenience only and shall not be deemed to
construe or to limit the meaning of the language of this Contract.
1.46 THIRD PARTIES. Nothing in this Contract, express or implied, is
intended to confer upon any person, other than the parties hereto and their
respective heirs, executors, personal representatives, successors and assigns,
any rights or remedies under or by reason of this Contract.
1.47 KNOWLEDGE. The phrase "to the best of Seller's knowledge" or other
references to Seller's knowledge shall only mean to the knowledge of senior
management and operational personnel in a direct or indirect decision making
capacity employed by Seller.
1.48 FURTHER ASSURANCES. Each of Seller and Purchaser will, at any time
and from time to time after the Closing Date, upon the request of the other,
execute, acknowledge and deliver, or will cause to be done, executed,
acknowledged and delivered all such further acts, deeds, assignments, transfers,
conveyances, powers of attorney and assurances as may reasonably be required to
consummate the transactions described herein.
1.49 GOVERNING LAW. This Contract shall be construed under and be
governed by the laws of the State of Hawaii, and all obligations of the parties
hereto created under this contract shall be performable in Hawaii County,
Hawaii.
1.50 COUNTERPARTS. This Contract may be executed in any number of
counterparts, each of which shall be an original, but such counterparts together
shall constitute one and the same instrument.
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1.51 EXHIBITS. All exhibits described in this Contract and attached
hereto are by this reference incorporated fully herein. The term "this Contract"
shall be considered to include all such exhibits.
1.52 INVALID PROVISIONS. If any provision of this Contract is held to
be illegal, invalid or unenforceable under present or future laws, such
provisions shall be fully severable; the Contract shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of the Contract: and the remaining provisions of the Contract
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance from this Contract.
Furthermore, in lieu of such illegal, invalid or unenforceable provision, there
shall be added automatically as a part of this Contract, a provision as similar
in terms to such illegal, invalid or unenforceable provision as may be possible
and be legal, valid or enforceable.
1.53 ATTORNEYS' FEES. If any dispute between Seller and Purchaser,
relating to the transactions contemplated in this Contract, should result in
litigation, the prevailing party shall be reimbursed for all reasonable costs
incurred in connection therewith, including, without limitation, reasonable
attorneys' fees and court costs. The prevailing party shall be determined by the
court based upon an assessment of which party's major arguments or positions
taken in the proceedings could fairly be said to have prevailed over the other
party's major arguments or positions on major disputed issues.
1.54 INTERPRETATION. The parties agree that each party and its counsel
have reviewed and revised this Contract and that the normal rule of construction
to the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Contract or any amendments
or exhibits thereto.
1.55 NO WAIVER. No failure of any party to exercise any power given
such party hereunder or to insist upon strict compliance by the other party with
its obligations hereunder shall constitute a waiver of any party's right to
demand strict compliance with the terms of this Contract.
1.56 RECORDING. Seller and Purchaser represent, warrant and covenant
that it will not record this Contract (or a memorandum or other evidence of this
Contract) or cause it to be recorded in the public records for the county in
which any of the Property is located or in any other jurisdiction, except that
in the event of a default by Seller of its obligations hereunder,
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Purchaser may record this Contract (or a memorandum or other evidence of this
Contract) or cause the same to be recorded in any such public records.
1.57 ANNOUNCEMENTS. Seller and Purchaser shall consult with each other
with regard to all press releases and other announcements issued at or prior to
the Closing Date concerning this Contract or the transactions contemplated
hereby and, except as may be required by applicable laws or the applicable rules
and regulations of any governmental agency or stock exchange, neither Seller nor
Purchaser shall issue any such press release or other such publicity without the
prior consent of the other party.
1.58 CONSENT TO JURISDICTION. Each party hereto hereby consents to
jurisdiction in the United States District Court for Hawaii and in the Third
Circuit Court in and for the County of Hawaii, State of Hawaii, for purposes of
any litigation to construe or enforce any obligations hereunder, or any other
document or instrument entered into given or made pursuant to this Contract, or
any of them, or any obligation arising therefrom, and each party hereto
expressly covenants and agrees that service of process may be made, and personal
jurisdiction over said party obtained, by serving a copy of the Summons and
Complaint upon said party in accordance with the applicable laws of the State of
Hawaii at such address of said party as may from time to time by specified in
accordance with the notice provisions contained herein or at such other address
as may then be proper under said laws. Nothing contained herein, however, shall
prevent Seller or Purchaser from bringing any action or exercising any rights
against the other within any other competent jurisdiction. The initiation of any
such proceeding or the taking of such action in any other jurisdiction will not,
however, constitute a waiver of the agreement contained herein that the laws of
the State of Hawaii will govern the rights and obligations of the parties hereto
under this Contract.
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1.59 DEFENSE OF CLAIMS. Within twenty (20) days after service of
process on, or other notification to an indemnified party ("INDEMNITEE") with
respect to any matter which could reasonably be expected to result in a loss,
expense, claim, damage or liability for which indemnification or defense may be
sought under this Contract, such indemnified party shall give written notice of
such legal action to the other party hereto ("INDEMNITOR") and Indemnitor shall
have the right to assume control of such legal action and take over the defense
thereof and sole responsibility therefor. If the Indemnitee fails to give such
notice then, if and to the extent the Indemnitor is prejudiced thereby, the
obligations of the Indemnitor to indemnify, defend and hold harmless the
Indemnitee shall abate. In the absence of assumption of defense by the
Indemnitor, the Indemnitee will use its best efforts to defend, and to permit
the Indemnitor to participate fully in the defense of any claim, demand or other
matter to which such party's indemnification under this Contract applies. No
such claim, demand or other matter shall be compromised or settled by the
Indemnitee in any manner which might adversely affect the interest of the
Indemnitor without the prior written consent of the Indemnitor (which consent
shall not be unreasonably withheld, delayed, or conditioned).
1.60 NEGATION OF PARTNERSHIP OR JOINT VENTURE. Nothing in this Contract
contained shall constitute, or be construed to be or create, a partnership,
joint venture or lease (except for the Leases) between Seller and Purchaser.
Seller hereby acknowledges to Purchaser and Purchaser hereby acknowledges to
Seller that neither party owes any fiduciary duty or obligation to the other.
1.61 REPRESENTATION BY COUNSEL. Each party to this Contract
acknowledges to the other that it has been represented at all times by competent
legal counsel in connection with this Contract and the transactions contemplated
hereby.
1.62 SUBMISSION OF CONTRACT. No Contract with respect to the purchase
and sale of the Property shall exist, and this writing shall have no binding
force or effect, until it is executed and delivered by Purchaser and by Seller.
If Seller executes this Contract prior to Purchaser, then this Contract shall be
void, at Seller's sole option, unless Purchaser also executes the Contract and
delivers it to Seller within two (2) business days after the date on which
Seller executed the Contract.
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ARTICLE XVII
POST CLOSING AGREEMENTS
1.63 NEW FARMING SERVICE CONTRACT. Seller now performs farming services
operations for certain macadamia nut orchards which are owned by Seller or its
Affiliates. Effective as of the Closing Date Purchaser will enter into new
farming service contracts with Seller providing that Purchaser will perform
farming services for Seller's orchards in accordance with the terms and
conditions contained in the farming service contract attached hereto as Exhibit
O.
1.64 NEW ACCOUNTING SERVICES CONTRACT. Seller now performs accounting
services for (1) orchards which it farms under Farming Services Contracts, (2)
orchards owned by Seller, and (3) for certain of Seller's Affiliates. Effective
as of the Closing Date, Purchaser will perform accounting services for Seller
and its affiliates of the same type as Seller performed just before the Closing
Date in accordance with the terms and conditions contained in the accounting
services contract attached hereto as Exhibit P. Seller shall have the right to
terminate this contract as of the last day of any month by giving notice of such
termination to Purchaser during the previous month.
1.65 NEW MANAGEMENT SERVICES CONTRACT. Various of Seller's affiliates
now perform executive management, legal, land management, human relations, and
insurance services to Seller. Effective as of the Closing Date, such Seller's
Affiliates will perform management services for Purchaser under the terms and
conditions contained in the management services contract attached hereto as
Exhibit Q..
1.66 EASEMENTS. Seller or Seller's Affiliates will grant Purchaser such
easements over lands owned by Seller or Seller's Affiliates as may be necessary
to allow Purchaser access for its equipment, personnel and irrigation lines to
carry out farming services for Purchaser's own orchards as well as those
orchards which Purchaser will be farming under farming services contracts.
1.67 MULTI-EMPLOYER EMPLOYMENT BENEFITS. Seller and Purchaser will
enter into a multi-employer employment benefits agreement whereby Seller and
Seller's affiliates will continue to provide employment benefits to
non-bargaining unit employees of Purchaser pursuant to an agreement attached
hereto as Exhibit R.
IN WITNESS WHEREOF, Purchaser and Seller have caused this Contract to
be executed as of the day and year first above written.
43.
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PURCHASER:
ML MACADAMIA ORCHARDS, L. P.
a Delaware limited partnership
Date Executed: By ML RESOURCES, INC.
March 14, 2000 Its General Partner
By /s/ Gregory A. Sprecher
----------------------------------
Gregory A. Sprecher
Its Senior Vice President
SELLER:
KAU AGRIBUSINESS, CO., INC.
a Hawaii corporation
Date Executed:
March 14, 2000 By: /s/ J. Alan Kugle
--------------------------------------
Title: Secretary
Printed Name: J. Alan Kugle
MAUNA KEA AGRIBUSINESS CO., INC.,
a Hawaii corporation
Date Executed:
March 14, 2000
By /s/ J. Alan Kugle
--------------------------------------
Title: Secretary
Printed Name: J. Alan Kugle
MAUNA KEA MACADAMIA ORCHARDS,
INC., Hawaii corporation
By /s/ J. Alan Kugle
--------------------------------------
Date Executed: Title: Secretary
March 14, 2000 Printed Name: J. Alan Kugle
KAU SUGAR, INC., a Hawaii corporation
Date Executed: By /s/ J. Alan Kugle
--------------------------------------
March 14, 2000 Title: Secretary
Printed Name: J. Alan Kugle
44.
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LIST OF EXHIBITS
Exhibit A Bill of Sale for Tangible Personal Assets
Exhibit B Employment Contracts
Exhibit C Equipment Leases
Exhibit D Excise Tax Exemption Certificate
Exhibit E Farming Service Contracts
Exhibit F General Assignment
Exhibit G Key Employees
Exhibit H Land
Exhibit I Non-Foreign Status Certificate
Exhibit J Orchard Land
Exhibit K Excluded Property Employees
Exhibit L Retained Litigation
Exhibit M Vehicles
Exhibit N Operating Statements
Exhibit O New Farming Services Contract
Exhibit P New Accounting Services Contract
Exhibit Q New Management Services Contract
Exhibit R Multi-Employer Employment Benefit Agreement
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FARMING CONTRACT
This Farming Contract is entered into on the date set forth below, by and
between Ka'u Agribusiness Co., Inc., Mauna Kea Agribusiness Co., Inc., Mauna Loa
Orchards, L.P. and Mauna Kea Macadamia Orchards, Inc. ("Owner") and M.L.
Macadamia Orchards, L.P. ("Manager").
RECITALS
WHEREAS Owner is the legal owner or Lessor of 699.56 acres improved with
macadamia orchards located at Pahala and Hilo, Hawaii County, State of Hawaii,
further described on Exhibit A attached hereto and hereinafter called "Parcels";
WHEREAS MANAGER IS EXPERIENCED AND CAPABLE IN ALL ASPECTS OF THE BUSINESS OF
FARMING AND HARVESTING MACADAMIA NUTS;
WHEREAS OWNER DESIRES TO ENGAGE THE EXPERT SERVICES OF MANAGER TO FARM, HARVEST
AND HUSK MACADAMIA NUTS FROM OWNER'S TREES ON THE PARCELS AND MANAGER DESIRES TO
PERFORM SUCH SERVICES FOR OWNER AS PROVIDED HEREIN.
NOW THEREFORE, In consideration of the premises and of the mutual covenants and
agreements set forth herein, the parties agree as follows:
1. TERM:
This contract shall commence on May 1, 2000 and shall continue in full force and
effect until December 31, 2005, unless terminated earlier as provided herein.
Upon expiration of the five (5) year eight (8) months period, this Contract will
be automatically renewed each year with cancellation authorized by either Owner
or Manager with at least six (6) month's prior notice. Should either party so
request, at the end of the stated term of this Contract, the parties agree to
negotiate in good faith with a view toward extending this Contract on terms and
conditions that are agreeable to such parties at that time. This Contract may
also be terminated as provided in Section 7.
2. FARMING SERVICES:
(a) Manager will perform all farming services that shall be necessary or
desirable from time to time in order to provide for the economical growth and
yield of the Owner's Macadamia orchards in accordance with proven and sound
agricultural practices. Manager will perform such services to the best of its
skill and ability, and in a manner consistent with the practices employed by
Manager in the planting, cultivation and
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harvesting of other macadamia trees under its management and control. Owner
acknowledges that Manager makes no guarantee as to the future yields from the
orchards and Owner recognizes and assumes the agricultural risks associated with
the cultivation and harvesting of macadamia nuts, and the natural risks in the
area, including but not limited to wind, rain, drought and volcanic risks.
(b) Without limiting the generality of the foregoing description of its
services, Manager will perform the following services: Manager will provide and
maintain all necessary or desirable cultivation, weed and pest control, ground
cover, tree bracing, transplanting, soil and plant tissue analysis,
fertilization, pruning and hedging, replanting, disposal, drainage and erosion
control, harvesting, husking, transportation of nuts to processor, agricultural
research experiments, and related services to include preparing land for
mechanical harvesting. All such services will be performed at Owner's expense as
set forth herein.
(c) Manager will keep the Orchard planted with macadamia trees (and, where
necessary or appropriate, windbreak trees) during the entire term of this
Contract, and will provide such replacement trees as may be necessary from time
to time due to tree damage, disease or mortality. Owner recognizes that, due to
unpredictable climatic conditions and agricultural and natural risks, the amount
of future tree damage, disease and mortality is uncertain and Manager gives no
warranties or guarantees whatsoever concerning future rates thereof. Replacement
trees will be grafted trees of recommended commercial varieties usually procured
from Manager's nursery, and will be ready for field planting. The cost of
replacement trees will be charged to Owner as a direct cost pursuant to Section
6(d) without mark-up over the respective Manager's internal cost; No charge will
be made for replacement trees if replanting is required because of Manager's
negligence.
(d) Owner agrees not to erect a fence upon the parcel without prior written
consent of Manager. Erection of a fence may incur additional operating costs,
tree removals or yield reduction.
(e) The sale of the crop is Owner's responsibility. It is contemplated that
sales will normally be to Mauna Loa Macadamia Nut Corporation. Manager, unless
directed otherwise, will transport husked crop to Mauna Loa Macadamia Nut
Corporation for sale and further processing. If sale is to Mauna Loa, Manager
will receive payment for such production from Mauna Loa, deduct outstanding
farming services fee due Manager and forward remainder to Owner's Representative
at Owner's direction. Should Owner select any other nut purchaser, Owner will be
responsible for so notifying Manager and scheduling pick-up of the crop at a
designated area. Such pick-
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up will be scheduled at the discretion of Manager within the constraints of
Manager's normal production schedule. To facilitate such scheduling, Manager
will notify Owner of the approximate date of harvest when first scheduled and
will further inform Owner not less than 48 hours in advance of scheduled husking
in order to allow Owner time to schedule transportation to receive such husked
production as it drops from the end of the husking line. Additional costs
incurred by Manager to accommodate non-Mauna Loa deliveries will be the
responsibility of Owner.
3. PERSONNEL AND EQUIPMENT:
(a) Manager either now owns or from time to time shall procure in its own name
and at its own expense, the use of all such tools, supplies, materials,
inventory, equipment and trees as shall be necessary or desirable for the
performance of all services required to be performed hereunder by Manager. Title
to and risk of loss of trees shall pass to Owner at the time trees are planted.
(b) Manager shall employ, train and supervise all such personnel as shall be
necessary or desirable for the efficient farming and harvesting of the trees.
Manager may subcontract to others any portion of the work required hereunder.
Owner shall have no obligation to any party under any such subcontract but shall
expressly be made a third party beneficiary of such sub-contracts. Manager shall
at all times remain primarily responsible for the satisfactory performance of
all work and services described herein and may not transfer or assign such
responsibility without the prior written consent of Owner.
(c) Manager shall comply with all requirements of federal and state law with
respect to employment of personnel, including but not limited to, all insurance
coverage required under worker's compensation laws. Manager hereby indemnifies
and agrees to hold Owner harmless from and against any and all claims,
obligations, liabilities or demands with respect to and arising out of the
performance of Manager's obligations under this Contract and the employment of
Manager's personnel and agents at the Orchard.
4. ACCOUNTING AND REPORTS:
(a) Manager shall keep full and accurate records and accounts, showing all
costs, advances, payments, expenditures and liabilities, and all other
information and data which shall be necessary for the computation of the fees to
be paid by Owner hereunder. Manager will provide Owner with any and all
financial or other information relating to this Contract that Owner shall
reasonably request from time to time. To the extent that information is provided
to Owner hereunder and is not otherwise in the
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public domain, Owner agrees to keep such information confidential and not to
disclose the same to any person except as may be required by law or in
connections with any litigation between Manager and Owner. Owner agrees to
return to Manager any copies of trade secrets, proprietary market share
information or test marketing results, within a reasonable time after such
information is provided to Owner. Owner and/or Owner's Representative will have
the right to inspect the books and records of Manager and its affiliates,
insofar as they relate to any dealings with or interest of Owner, at any time
during normal business hours, with the prior approval of Manager.
(b) In order to assist Owner in its financial planning, Manager will provide
Owner with an estimated production and price forecast, as well as an operating
cost budget for the upcoming calendar year no later than November 30 of the
preceding calendar year.
(c) As soon as practicable but in no event later than 120 days after the end of
its accounting year, Manager will provide a written report to Owner describing
in reasonable detail its conduct of operations during such year and any material
plans or developments with respect to the next year. The report shall also
include a statement of all adjustments made to reimbursement payments pursuant
to Section 5 hereof and the balance outstanding at the end of the year. If the
actual amount of the Farming Services Fee is higher than the aggregate amount
paid by Owner in the form of the Quarterly actual payments for such year, Owner
shall forthwith pay to Manager the amount of such excess. If the actual Farming
Services Fee is less than the aggregate amount paid by Owner for such year,
Manager shall, at Manager's election, either pay the difference to Owner or
apply the amount of the difference as a credit against the quarterly payments
next due on the Farming Services Fee.
(d) The statement referred to in (c) above with respect to the Farming Services
Fee for any accounting year shall be conclusive and binding unless Owner shall
object in writing thereto within 120 days after receiving Manager's annual
report containing such statement. Owner shall have the right to engage a
certified public accounting firm of its selection to review the Farming Services
Fee, and the right to assert claims based on such review, at any time during
such 120-day period. If any such review and assertion shall result in a downward
adjustment of the Manager's Costs by an amount in excess of 5% of the initial
computation thereof, Manager shall promptly reimburse Owner all of its expenses
incurred in connection with the engagement of such accounting, firm and the
assertion of such claim.
5. REIMBURSEMENT OF MANAGER'S COSTS:
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(a)(i) Owner shall reimburse Manager on a quarterly basis consistent with
Manager's quarterly accounting periods for Manager's Costs (as defined
below). Payment with respect to each quarter will be made within 30 days
after the billing date. In the event that any payment hereunder is not
made within 30 days after it becomes due, the unpaid amount shall
thereafter bear interest at 1% over the Bank of Hawaii prime rate (but
not to exceed the highest rate permitted by the usury laws of the State
of Hawaii). Manager shall have the right to set off any reimbursement of
Manager's Costs owed by Owner against any amounts owed to Owner by Mauna
Loa or other nut purchasers for the purchase of macadamia nuts. Upon
presentation of such a request, Owner herewith authorizes such nut
purchasers to forward such amounts due directly to Manager, for
Manager's account, to be further distributed as hereinafter described.
Proceeds remaining after withdrawal of accrued costs will be forwarded
to Owner. Owner shall make quarterly disbursements to Manager for costs
incurred but not reimbursed by withholding from Owner's Mauna Loa
proceeds, upon receipt of Manager's invoice.
(ii) The term "Manager's Costs" shall not include any capital expenditures
or any other costs or expenses which are stated in this Contract to be
payable by Manager, nor shall it include any costs which Manager may
incur in order to repair any damage caused by its own negligence.
(Examples of capital expenditures include irrigation systems, road
modification, buildings, orchard floor leveling, etc.) The term
"Manager's Costs" shall include, to the extent that they are actually
incurred by Manager during the relevant year in connection with specific
services or work necessary or desirable under this Contract, direct
costs accrued by Manager for labor, equipment use, materials and
contract services. The term "Manager's Costs" shall also include
overhead costs allocated to operations at the Orchard including, but not
limited to, employee fringe benefits, Manager's administrative overhead
and general field costs such as salaries, expendable tools and supplies,
agricultural research, building and equipment depreciation and repair,
outside professional services and insurance. The term "Manager's Costs"
shall also include the cost of husking Owner's macadamia nuts, if
applicable, and a capital utilization charge of 9% of Manager's net book
value of farming, harvesting and husking equipment used in the
operations prorated to adjust for any use of such equipment otherwise
than for Owner. The Manager's net book value of farming, harvesting and
husking equipment is the historical cost of such equipment as currently
shown on Owner's books before Manager's asset purchase from Owner less
accumulated depreciation and amortization exclusive of any effect of
"step up or down" accounting resulting from changes in the ownership of
Manager, their parent company or any other affiliate. Further, the
Manager's Cost shall be based on the Manager's historical costs
exclusive of the effects of such accounting changes. Manager's
administrative overhead cost consist of all costs related to services
provided to the macadamia farming
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operations by such Manager's corporate staff, including but not limited
to, managerial and administrative personnel, industrial relations,
accounting, industrial engineering and warehouse personnel. Manager's
overhead costs shall also include a proportionate share of service
charges allocated to Manager by C. Brewer and Company, Limited ("C.
Brewer"). Exhibit B sets forth a list of direct costs and overhead cost
centers which comprise the Manager's Costs and procedures for
allocating overhead costs and computing equipment capital recovery
costs.
(iii) In addition to the reimbursement of Manager Costs, Owner shall pay to
Manager, in accordance with the quarterly statements, a Management Fee
as compensation for services rendered hereunder in the amount of 15% of
total Manager's Costs.
(iv) For purposes of this Contract, all payments made by the Owner to the
Manager, including but not limited to the reimbursement of Manager's
Costs, the Management Fee and other fees, shall be increased by the
amount of any applicable Hawaii general excise tax which the Manager is
obligated to pay by reason of such payments.
(b) Unless otherwise provided to the contrary herein, in the event that any
adjustment is made in any amount paid hereunder, whether as a result of revised
estimates, audited figures or otherwise, an appropriate credit or charge shall
be included in the next succeeding reimbursement payment.
(c) Manager may be providing farming services to other parcels under Farming
Contracts. Owner agrees that Manager shall have the right to pool services and
costs and then to assign such costs on a pro rata basis to the parcel. (This
pooling concept shall include harvesting costs and revenues from nut sales as
appropriate.)
6. OWNERSHIP OF LAND:
(a) Except as specifically provided herein, Manager will not be obligated or
liable for matters that are customarily the responsibility of a landowner
including but not limited to payment of taxes and assessments, insurance against
liabilities, and compliance with laws, ordinances and government regulations
relating to the ownership of land. When requested by Owner, Manager shall
cooperate with Owner in the making of any surveys, the processing of any tax
appeals and the procurement of any permits, licenses, insurance coverage and
other items which are necessary or desirable for Owner's proper and lawful
ownership and use of the Orchards.
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(b) Owner, with the assistance of the Manager, but at Owner's expense, will
procure and maintain insurance with respect to the trees in the Orchard, so long
as such insurance is available at commercially reasonable rates, against the
following named perils: fire, lightning, windstorm and volcanic eruption.
7. TERMINATION AND DEFAULT:
(a) The parties may terminate this Contract at any time by mutual agreement in
writing. In the event that any party shall be in default (as defined below), the
non-defaulting party may terminate this Contract at any time by delivering
written notice of such termination to the defaulting party.
(b) A party shall be in "default" under this Contract in the event that (i) a
party files any voluntary proceeding for dissolution under any federal or state
bankruptcy, insolvency, receivership or similar law; (ii) if any such proceeding
is commenced against it involuntarily and is not dismissed with 60 days; (iii)
if it make any composition or assignment for the benefit of its creditors; (iv)
if it enters into any corporate reorganization or acquisition without making
adequate provision for the performance of its obligations under this Contract;
(v) if it fails to perform any of its obligations when due under this Contract
and it fails to correct such non-performance of its obligations when due under
this Contract and it fails to correct such non-performance within thirty (30)
days after written demand for performance is made by the other party or if such
non-performance cannot be corrected within 30 days, it does not state in writing
its intent to cure such default, deliver such written notice to the other party,
and begin immediately to cure said default as soon as reasonably possible; or
(vi) if it repeatedly fails to perform its obligations under this Contract after
receipt of written demand for performance.
(c) In the event of the destruction of any part or the entire Orchard, Owner
shall restore the destroyed property to its initial condition if such
restoration can be performed economically as determined by Owner. If such
restoration is not performed, this Contract shall terminate as to the destroyed
property only. In the event that any part or the entire Orchard is condemned,
this Contract shall terminate as to the condemned property only.
8. NOTICE:
(a) For convenience of operation hereunder, Owner and Manager each shall
designate one representative to serve as the channel of communication,
delivering information to and securing necessary action by its principals. Any
party may change its
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representative from time to time by delivering written notice of such change to
the other party hereto. Until further notice is given, each party's
representative shall be the person listed in the notice address below.
(b) Any and all notices, demands, or other communications (collectively,
"notice") required or desired to be given hereunder by either party shall be in
writing and shall be validly given or made to the other party or his authorized
representative at the addresses set forth below, if served either personally or
if deposited in the United States mail, certified or registered, postage
prepaid, or if sent by fax.
MANAGER: OWNERS REPRESENTATIVE
M.L. Macadamia Orchards, L.P. J.W.A. Buyers
P. O. Box 130 C. Brewer and Company, Limited
Pahala, HI 96777-0130 P. O. Box 1826
Telephone (808) 928-8311 Papaikou, HI 96781-1826
FAX (808) 928-8434 Telephone (808) 969-8107
FAX (808) 969-8152
(c) If such notice is delivered personally, service shall conclusively be deemed
to have been made at the time of such delivery. If such notice is given by mail,
service shall conclusively be deemed to have been made 10 days after deposit
thereof in the mail as provided for above. If such notice is given by FAX,
service shall conclusively be deemed to have been made 24 hours after the
transmission thereof and receipt of the proper response code. Any party may
change its address for the purpose of receiving notices as herein provided by a
written notice given to the other party.
9. FORCE MAJEURE:
Neither of the parties hereto shall be liable or accountable to the other party
for any delay in complying with or any failure to comply with any of the terms,
provisions or conditions of this Contract in the event that such failure shall
have been caused by an act of God, strike, lockout, public enemy, economic
failure of the industry, war, civil commotion, riot, condemnation, judicial or
governmental order or other requirements of law (such as but not limited to,
governmental regulations concerning hazards of marketing or consumption of
macadamia nuts) or the refusal or failure of any governmental office or officer
to grant any permit or order necessary for compliance herewith by either party
hereto, nor shall either of the parties hereto be liable or accountable to the
other party for any damages arising from any such delay or failure.
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Owner is aware of the natural risks such as, but not limited to, earthquakes,
volcanic eruptions, floods, winds, etc., as well as agricultural risks, and
assumes those risks.
10. WAIVER:
The failure of either party hereto to enforce its rights upon any default or
breach of agreement on the part of the other party shall not be construed as a
waiver thereof, nor shall any custom or practice which may grow up between the
parties in the course of administering this Farming Contract be construed to
waive or to lessen the right of either party hereto to demand performance by the
other party of any term, provision or condition hereof, or to exercise any
rights in the event of default. A waiver by either party of a particular breach
or default shall not be deemed to be a waiver of the same or any subsequent
breach or default.
11. ASSIGNMENT:
Neither of the parties hereto may assign any of its rights or obligations
hereunder to any other person or legal entity without the prior written consent
of the other party hereto. Any consent or approval required under this Farming
Contract shall not be unreasonably withheld and no charge for the giving of such
consent or approval shall be made.
12. ARBITRATION:
All claims, demands, disputes, differences, controversies, disagreements and
misunderstandings (hereinafter called "disputes") arising out of, or in
connection with, or in relation to this Farming Contract shall be submitted to
and determined only by an arbitrator selected in the following manner: Either
party shall serve upon the other written notice stating that such party desires
to have the dispute reviewed by an arbitrator. Either party may then ask the
Honolulu office of the American Arbitration Association ("AAA") for a list of
five disinterested arbitrators who AAA believes are capable of deciding this
matter. Each party shall, within five days after receiving the list from AAA,
strike one person from the list, and shall continue to strike one person each
five days thereafter until there is only one remaining, and this person shall be
the arbitrator. If any party fails to strike a person from the AAA list within
the prescribed time limit, the other party may do so on behalf of the defaulting
party.
The decision and award of a majority of the arbitrators, or of such sole
arbitrator, shall be final and binding upon the parties and enforceable in
accordance with the provisions
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of Chapter 6SB, H.R.S., as it may from time to time be amended. Each party shall
pay one-half (1/2) of the arbitrator's fees and expenses and all of its own fees
and expenses.
13. ENTIRE AGREEMENT:
This Contract represents the entire agreement and understanding of the parties
with respect to the subject matter hereof. The parties specifically acknowledge
and agree that no joint venture or lease is created hereby and that neither
party is hereby appointed as the agent of the other party.
14. GOVERNING LAW:
This Contract will primarily be performed in and shall be governed by and
construed in accordance with the laws of the State of Hawaii. Each of the
parties consents to the jurisdiction of the courts of the State of Hawaii or any
federal court sitting in Hawaii and agrees that Hawaii is an appropriate venue
for any action that may be brought under this Contract.
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IN WITNESS WHEREOF:
Owner and Manager caused this Farming Contract to be executed on this 28TH
day of APRIL, 2000.
KA'U AGRIBUSINESS CO., INC.
M.L. MACADAMAMIA ORCHARDS, L.P.
BY /s/ J. ALAN KUGLE
--------------------------------------
ITS SECRETARY
BY /s/ KENT T. LUCIEN
--------------------------------------
ITS PRESIDENT
MAUNA KEA AGRIBUSINESS CO., INC.
BY /s/ J. ALAN KUGLE
--------------------------------------
ITS SECRETARY
BY /s/ KENT T. LUCIEN
--------------------------------------
ITS PRESIDENT
MAUNA LOA ORCHARDS, L.P.
BY /s/ J. ALAN KUGLE
--------------------------------------
ITS SECRETARY
BY /s/ KENT T. LUCIEN
--------------------------------------
ITS PRESIDENT
MAUNA KEA MACADAMIA ORCHARDS, INC.
BY /s/ J. ALAN KUGLE
--------------------------------------
ITS SECRETARY
BY /s/ KENT T. LUCIEN
--------------------------------------
ITS PRESIDENT
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MANAGEMENT SERVICES CONTRACT
BETWEEN
ML MACADAMIA ORCHARDS, L.P. and
C. BREWER AND COMPANY, LIMITED
This Agreement, dated this 28th day of April, 2000 by and between ML
Macadamia Orchards, L.P. ("MLP"), a master limited partnership, and C. Brewer
and Company, Limited, Inc. ("Brewer"), a Hawaii corporation, each intending to
be legally bound, agree as follows:
WHEREAS, MLP has purchased all of the assets and acquired all of the
employees of Brewer's macadamia farming operation; and
WHEREAS, MLP desires Brewer to provide certain Management Services to
MLP after this acquisition and Brewer is willing to do so.
NOW, THEREFORE, the parties agree as follows:
1. SERVICES - Brewer shall undertake to perform for MLP all of the
following standard services for the fee as set forth in Section 3:
(a) Brewer will make available for consultation with MLP its
Executive Staff including specifically its senior officers who
are on the Board of Directors of ML Resources, Inc.
(b) Insurance and risk management advisory and placement services.
(c) Advice on the labor agreements with the ILWU Local 142,
including assistance in negotiating Union contracts.
(d) Assistance in handling worker's compensation cases.
(e) Human Resources administration including existing health,
welfare and retirement plans, and compensation or incentive
plans administration, consistent with past practices. Such
services to include negotiating rates and terms on behalf of MLP
for the health and welfare plans
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Brewer agrees to perform all the above services in a
professional manner and in accordance with all applicable laws
and government regulations.
2. TERM - This Agreement will be effective May 1, 2000 and will
continue for twelve months and will be automatically renewed for an additional
twelve months, subject to either party giving the other party at least sixty
(60) days prior written notice of termination or cancellation.
3. FEE - MLP shall pay to Brewer a monthly fee of $8,335 payable
on the first day of each month for the services to be performed that month, and
without the necessity of Brewer sending monthly invoices. This fee is solely for
Brewer's Management Services.
4. OTHER EXPENSES - Brewer will provide MLP with a projected
annual budget for professional services such as actuarial or tax and audit, for
MLP's review and approval. MLP agrees to pay invoices for these professional
services directly to the vendor in accordance with the payment terms of each
vendor. If Brewer is required to obligate or expend more than $3,000 of expenses
on behalf of MLP in excess of the individually projected costs in the annual
budget, or for any services not included on the annual budget at any one time,
Brewer must obtain the pre-approval of MLP.
5. INDEMNIFICATION - Brewer shall have no liability to MLP for
any errors or omissions in performing the management services prescribed by this
agreement unless there is willful misconduct or gross negligence in performing
such services. Furthermore, in the absence of willful misconduct or gross
negligence, MLP agrees to indemnify, defend and hold Brewer harmless from any
all claims, expenses, costs (including attorneys' fees and costs), and
liabilities asserted against Brewer with respect to, arising out of or by reason
of performance of said functions. Additionally, if Brewer is permitted by the
State of Hawaii to add MLP to Brewer's self insured authority for workers'
compensation claims, MLP will indemnify Brewer against any costs, claims,
expenses, settlements, and allocations from the Sate of Hawaii or the State's
Special Compensation Fund that Brewer may be forced to pay on behalf of MLP.
6. ARBITRATION - Any controversy or disagreement arising out of
or relating to this agreement or any breach hereof shall be submitted by the
parties to arbitration in Honolulu, Hawaii under the Commercial Arbitration
Rules of the American Arbitration Association. Such arbitration will be
undertaken by a single disinterested arbitrator chosen from a list of five
supplied by each party to the other. The ruling of the arbitrator will be final
and binding upon the parties. Each party shall
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bear its own expenses in connection with such arbitration, but will share
equally in the cost of the arbitrator's services.
7. ASSIGNMENT - Neither party can assign this agreement without
the prior written consent of the other, such consent not to be unreasonably
withheld.
8. ENTIRE AGREEMENT - This agreement embodies the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof, and shall be construed in accordance with and governed by
the laws of the State of Hawaii.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
C. BREWER AND COMPANY, LIMITED MAUNA LOA MACADAMIA
ORCHARDS, L.P.
By: /s/ J. Alan Kugle By: /s/ Gregory A. Sprecher
------------------ ------------------------
Its: Secretary Its: Senior Vice President
By: /s/ Kent T. Lucien By: /s/ Daryle S. Nekoba
------------------- ---------------------
Its: President Its: Secretary
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MEMORANDUM OF AGREEMENT
This Memorandum of Agreement between ML MACADAMIA ORCHARDS, LP (hereinafter
referred to as "Purchasing Employer"), MAUNA KEA MACADAMIA ORCHARDS, INC, KA'U
ORCHARD DIVISION OF KA'U AGRIBUSINESS CO., INC. and KEAAU ORCHARD DIVISION OF
KA'U AGRIBUSIENSS CO., INC. (Jointly referred to as "Selling Employers") and the
ILWU LOCAL 142 (hereinafter called "Union") constitute the basis of settlement
of all issues involved in this negotiations between the parties which were
concluded on April 4, 200 relative to the collective bargaining unit of the
Selling Employers and the Purchasing Employer.
This Memorandum of Agreement shall be effective from May 1, 2000 and shall
remain in effect until April 30, 2001, with the following understanding:
1. That ML Macadamia Orchards, LP shall fully honor and maintain each
collective bargaining agreement made between the ILWU Local 142 and the
Selling Employers to include all renewals thereof.
2. That ML Macadamia Orchards, LP will carry over all earned and accrued
vacation for all employees covered by each collective bargaining agreement.
3. That pension benefits for all covered employees will remain in effect and
with no loss of credits, benefits, and vesting services. Selling Employers
will be responsible for the benefit service accrued through April 30, 2000
and will report the accrued benefit to the Union and to the affected
employees by June 15, 2000. Each Unit employees' benefit at retirement or
termination will be again calculated at that time using the combined
service with Selling Employers and with Purchasing Employer. The combined
benefit will be reduced by Selling Employers' portion with the remainder of
the combined benefit due from Purchasing Employer to the extent that such
crediting of service does not result in duplication of benefits.
4. ML Macadamia Orchards, LP agrees to hire all existing union employees with
the same benefits as they currently have.
5. The parties agree that no severance is due any employees as a direct result
of this transaction as long as Selling Employers have complied with the
State's Dislocated Workers' Act.
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6. All other sections of the collective bargaining agreement that were not
discussed in this negotiations will remain in effect.
IN WITNESS WHEREOF, the parties hereto through their duly authorized
representatives, have executed this Memorandum of agreement of the 28th day of
April, 2000.
ML MACADAMIA ORCHARDS LP ILWU LOCAL 142
By: /s/ Gregory A. Sprecher By:
------------------------------ --------------------------
By: /s/ Daryle S. Nekoba By:
------------------------------ --------------------------
MAUNA KEA MACADAMIA ORCHARDS, INC
KA'U ORCHARD DIVISION OF KA'U AGRIBUSDINESS CO., INC.
KEAAU ORCHARD DIVISION OF KA'U AGRIBUSINESS CO., INC.
Collectively:
By: /s/ J. Alan Kugle
------------------------------
By: /s/ Kent T. Lucien
------------------------------
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J. Alan Kugle, Esq.
P.O. Box 1826
Papaikau, Hawaii 96781
Re: ML MACADAMIA ORCHARDS, L.P. - ACQUISITION OF ASSETS OF KAU
AGRIBUSINESS
CO., INC., KAU SUGAR, INC., MAUNA KEA MACADAMIA ORCHARDS, INC.,
AND MAUNA KEA AGRIBUSINESS CO., INC.
Dear Mr. Kugle:
We refer to the Asset Purchase Agreement dated as of March 14, 2000
(the "Contract") by and among Kau Agribusiness Co., Inc., a Hawaii corporation,
Kau Sugar, Inc., a Hawaii corporation, Mauna Kea Macadamia Orchards, Inc., a
Hawaii corporation, and Mauna Kea Agribusiness Co., Inc., a Hawaii corporation
(collectively referred to herein as "Seller" and individually referred to herein
as "Corporation") and ML Macadamia Orchards, L.P., a Delaware limited
partnership (referred to herein as "Purchaser"). In this letter, capitalized
terms have the same meaning as in the Contract.
Pursuant to the requirement of Section 8.3(b) of the Contract, we as
Purchaser's counsel provide the following opinions to Seller.
1. Purchaser is a Delaware limited partnership, duly registered,
validly existing, and in good standing under the laws of the State of Delaware,
and it has all requisite power and authority to carry on the business it now
carries on and to own the property it now owns. Purchaser's sole general partner
is ML Resources, Inc., a Hawaii corporation. Purchaser through ML Resources,
Inc. has all requisite power and authority to execute and deliver the
Purchaser's Documents and to observe and perform all of the provisions and
conditions thereof.
2. Each of Purchaser's Documents has been duly authorized, executed,
and delivered by Purchaser, through ML Resources, Inc.
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3. The Purchaser's Documents when executed by Purchaser through ML
Resources, Inc. and delivered to Seller will be enforceable in accordance with
their terms and shall constitute the valid and legally binding obligations of
the Purchaser.
4. The execution, delivery, and performance by Purchaser of
Purchaser's Documents do not and will not result in any breach of the
Partnership Agreement of Purchaser.
5. The consummation of the transactions contemplated by the
Purchaser's Documents will not conflict with or result in a breach of any
applicable law, statute, ordinance, regulation, order, writ, injunction, decree
or judgment of any court or governmental instrumentality, domestic or foreign.
6. Except as disclosed in the Contract, to our knowledge no consent,
approval, waiver, authorization, or act of, or the making by Purchaser of any
registration, filing, or declaration with any Governmental Authority is required
for the valid execution and delivery by Purchaser of the Contract or the
consummation of the transactions contemplated thereby.
To render the foregoing opinions, we have relied, as to various
questions of fact material to such opinions, upon the representations made in
Purchaser's Documents and upon the certificates of officers of Purchaser. We
also have examined originals, copies of originals certified to our satisfaction,
of such agreements, documents, certificates, and other statements of government
officials and other instruments, have examined such questions of law and have
satisfied ourselves as to such matters of fact as we have considered relevant
and necessary as a basis for this opinion. We have assumed the authenticity of
all documents submitted to use as originals, the genuineness of all signatures,
the legal capacity of all natural persons, and the conformity with the original
documents of any copies thereof submitted to us for our examination.
This opinion is limited to the federal laws of the United States of
America, the laws of the State of Hawaii, and Delaware limited partnership law.
Any opinion or statement herein expressed to be "to our knowledge" or
is otherwise qualified by words of like import means that the lawyers currently
practicing law with this firm who have had an active
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involvement in negotiating the Contract and without any independent inquiry have
no current conscious awareness of any facts or information contrary to such
opinion or statements.
We assume no obligation to update or supplement this opinion letter to
reflect any facts or circumstances which may hereafter come to our attention
with respect to the opinions expressed above, including any changes in
applicable law which may hereafter occur.
This opinion is being delivered solely for the benefit of the
person(s) to whom it is addressed; accordingly, it may not be quoted, filed with
any governmental authority or other regulatory agency, or otherwise circulated
or used for any other purpose without our prior written consent.
Very truly yours,
CARLSMITH BALL
By
James H. Case
April 28, 2000
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CREDIT AGREEMENT
Dated as of May 1, 2000
among
ML MACADAMIA ORCHARDS, L.P.
ML RESOURCES, INC.
as Borrower
and
PACIFIC COAST FARM CREDIT SERVICES, PCA
as Lender
Loan No. ____________
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INDEX OF EXHIBITS
Exhibit A - Form of Notice of Revolving Advance
Exhibit B - Form of Certification Regarding Compliance
with Financial Covenants
i
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THIS CREDIT AGREEMENT ("Agreement"), dated as of May 1, 2000,
is by and among ML MACADAMIA ORCHARDS, L.P., a Delaware limited partnership, and
ML RESOURCES, INC., a Hawaii corporation (collectively, "Borrower"), and PACIFIC
COAST FARM CREDIT SERVICES, PCA, ("Lender") with respect to the following facts:
RECITALS
1. Borrower has requested that Lender extend to Borrower certain
financial accommodations. 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):
"Acquisition" shall mean the purchase by MLO of certain assets
from Kau Agribusiness Co. Inc, a Hawaii corporation, Kau Sugar, Inc., a Hawaii
corporation, Mauna Kea Macadamia Orchards, Inc., a Hawaii corporation, and Mauna
Kea Agribusiness Co., Inc., a Hawaii corporation, pursuant to that certain Asset
Purchase Agreement dated as of March 14, 2000.
"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.
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"Agreement" shall mean this 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.Section 101, ET
SEQ., as in effect from time to time. "Base Rate" shall mean a floating rate of
interest: (a) with respect to the Revolving Loan, the Prime Rate plus a margin
equal on the Closing Date to zero percent (0.00%), and thereafter to such other
margin as may become applicable under Section 2.4(c); (b) with respect to Term
Loan Tranche A, the Prime Rate plus a margin equal on the Closing Date to zero
percent (0.00%), and thereafter to such other margin as may become applicable
under Section 2.5(c); and (c) with respect to Term Loan Tranche B, the Prime
Rate plus a margin equal to three percent (3.00%).
"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 the date set forth in the preamble
to this Agreement, or such other date on which this Agreement is closed.
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"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 Cash Flow" 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) extraordinary non-cash
losses, (ii) interest expense (including the interest portion of any capitalized
lease obligations), (iii) depletion, depreciation and amortization, and (iv)
losses on asset sales (excluding the cash portion of any loss),; minus (c) the
sum of (i) extraordinary gains, (ii) gains on asset sales (excluding the cash
portion on any gain associated with the sale of property held for investment
purposes), and (iii) Maintenance Capital Expenditures.
"Consolidated Debt Coverage Ratio" shall mean, as at any date
of determination, the ratio of Consolidated Cash Flow for any period to
Consolidated Debt Service for such period.
"Consolidated Debt Service" shall mean, for any period, for
MLO and its Subsidiaries on a consolidated basis, the sum (without duplication)
of the following: (a) interest expense (including the interest portion of any
capitalized lease obligations); and (b) scheduled principal payments (including
the principal portion of capitalized lease obligations).
"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.
"Consolidated Funded Debt" shall mean, as at any date of
determination, for MLO and its Subsidiaries on a consolidated basis, the sum
(without duplication) of: (a) indebtedness for borrowed money or guarantees of
borrowed money, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, including certain contingent obligations such as letter of
credit reimbursement agreements, and (c) obligations under capitalized leases.
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"Consolidated Funded Debt to Consolidated EBITDA Ratio" shall
mean, as at any date of determination, the ratio of Consolidated Funded Debt, as
of such date of determination, to Consolidated EBITDA, as of such date of
determination.
"Consolidated Net Cash Flow" 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) extraordinary non-cash
losses, (ii) depletion, depreciation and amortization, and (iii) losses on asset
sales; minus (c) the sum of (i) extraordinary gains, (ii) gains on asset sales
(excluding the cash portion on any gain associated with the sale of property
held for investment purposes), (iii) principal payments on term debt (including
the interest portion of any capitalized lease obligations), and (iv) Maintenance
Capital Expenditures.
"Consolidated Net Income" shall mean, for any period, on a
consolidated basis, the net income, if any, of MLO, determined in accordance
with GAAP.
"Consolidated Partners Capital" shall mean, as at any date of
determination, the gross book value of the assets of MLO, less (a) reserves
applicable thereto, and (b) all liabilities (including subordinated
liabilities), in each case determined in accordance with GAAP and measured on a
consolidated basis..
"Consolidated Total Capitalization" shall mean, as of any date
of determination, for MLO and its Subsidiaries on a consolidated basis, the sum
(without duplication) of (a) Consolidated Funded Debt, and (b) Consolidated
Partners Capital.
"Current Assets" shall mean, as at any date of determination,
the current assets of MLO determined in accordance with GAAP.
"Current Liabilities" shall mean, as at any date of
determination, the current liabilities 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.
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"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. Sections 9601 ET SEQ.) ("CERCLA");
the Hazardous Material Transportation Act, as amended (49 U.S.C.
Sections 1801 ET SEQ.); the Federal Insecticide, Fungicide, and
Rodenticide Act, as amended (7 U.S.C. Sections 136 ET SEQ.); the
Resource Conservation and Recovery Act, as amended (42 U.S.C. Sections
6901 ET SEQ.) ("RCRA"); the Toxic Substance Control Act, as amended (15 U.S.C.
Sections 2601 ET SEQ.); the Clean Air Act, as amended (42 U.S.C.
Sections 7401 ET SEQ.); the Federal Water Pollution Control Act, as
amended (33 U.S.C. Sections 1251 ET SEQ.); the Occupational Safety and
Health Act, as amended (29 U.S.C. Sections 651 ET SEQ.); and the Safe
Drinking Water Act, as amended (42 U.S.C. Sections 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.
"Farm Credit One-Year Discount Note Rate" shall mean, at any
time, the all-in cost paid by Western Farm Credit Bank on one-year Farm Credit
Discount Notes made available to Western Farm Credit Bank by the Federal Farm
Credit Banks Funding Corporation.
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"Farm Credit Medium Term Note Rate" shall mean, at any time,
the all-in cost paid by Western Farm Credit Bank on Farm Credit Medium Term
Notes for periods of two years, five years, or the period through the Term Loan
Termination Date, as applicable, made available to Western Farm Credit Bank by
the Federal Farm Credit Banks Funding Corporation.
"Fees" shall mean any fees referred to in Section 2.8,
including the Loan Fee and the Unused Commitment Fee, any prepayment surcharge,
and any other fees due to Lender pursuant to the Loan Documents.
"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 one and seventy-five
one hundredths percent (1.75%), and thereafter to such other margin as may
become applicable under Section 2.4(c); (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 one and seventy-five
one hundredths percent (1.75%), and thereafter to such other margin as may
become applicable under Section 2.5(c), and (c) with respect to Term Loan
Tranche B, (i) for Interest Periods of one (1) year, the applicable Farm Credit
One-Year Discount Note Rate plus a margin equal on the Closing Date to two
percent (2.00%), and thereafter to such other margin as may become applicable
under Section 2.6(b), (ii) for Interest Periods of two (2) years or five (5)
years, the applicable Farm Credit Medium Term Note Rate plus a margin equal on
the Closing Date to two percent (2.00%), and thereafter to such other margin as
may become applicable under Section 2.6(b), and (iii) for the Interest Periods
commencing on the Closing Date and expiring on the Term Loan Maturity Date, the
applicable Farm Credit Medium Term Note Rate plus a margin of two percent
(2.00%).
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect from time to time.
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"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. Section 1251 ET SEQ. (33 U.S.C. Section 1321) or listed
pursuant to Section 307 of the Clean Water Act (33 U.S.C. Section 1317), (iv)
defined as a "hazardous waste" pursuant to Section 1004 of the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, ET SEQ. (42 U.S.C.
Section 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. Section 9601, ET SEQ. (42 U.S.C. Section 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.
"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
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one (1) month, two (2) months, three (3) months, six (6) months, or twelve (12)
months thereafter, (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 three (3) months, six (6) months, or twelve (12) months thereafter, and
(c) with respect to interest on Term Loan Tranche B, a period beginning on the
Interest Determination Date and ending, at Borrower's election, either one (1)
year, two (2) years, or five (5) years thereafter or, only with respect to an
election made in connection with the Closing Date, ending on the Maturity Date
for Term Loan Tranche B.
"Lender" shall mean PCFC.
"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
Note of even date herewith, the Term Note of even date herewith, 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, 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.
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"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.
"Maximum Lawful Rate" shall have the meaning assigned to it in
Section 2.7(e).
"Maximum Revolving Loan" shall mean Five Million Dollars
($5,000,000).
"MLO" shall mean ML Macadamia Orchards, L.P., a Delaware
limited partnership.
"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. Section 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,
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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 benefitting 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).
"Prime Rate" shall mean the "Prime" rate as published from
time to time in the Eastern Edition of 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 Eastern
Edition of 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
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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.
"Revolving Loan Maturity Date" shall mean May 1, 2004;
provided, that if the Obligations shall become due and payable in accordance
with Section 10.2 or any other provision of this Agreement, then the Revolving
Loan Maturity Date shall be the date on which the Obligations become due and
payable.
"Security Documents" shall mean all security agreements,
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 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.
"Working Capital" shall mean Current Assets less Current
Liabilities.
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
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certain terms or computations are explicitly modified by the phrase "in
accordance with GAAP" shall in no way be construed to limit the foregoing.
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
1.4 REVOLVING ADVANCES.
(1) 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 therefor, 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.
(2) 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.
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(3) 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.
1.5 TERM LOAN.
(1) ADVANCE OF TERM LOAN. Upon and subject to the terms and
conditions hereof, Lender shall advance the Term Loan to Borrower on the Closing
Date. The Term Loan shall be evidenced by the Term Loan Promissory Note to be
executed and delivered by Borrower to Lender on the Closing Date.
(2) PRINCIPAL PAYMENTS -- TERM LOAN TRANCHE A. With respect to
Term Loan Tranche A, Borrower shall pay to Lender annual principal installments
of Two Hundred Thousand Dollars ($200,000) commencing on May 1, 2001 and
continuing on the first day of May in each year thereafter through and including
May 1, 2005; 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.
(3) PRINCIPAL PAYMENTS -- TERM LOAN TRANCHE B. With respect to
Term Loan Tranche B, Borrower shall pay to Lender, annual principal installments
of Two Hundred Thousand Dollars ($200,000) commencing on May 1, 2001 and
continuing on the first day of May in each year thereafter through and including
May 1, 2005. Thereafter, Borrower shall pay to Lender, annual principal
installments of Four Hundred Thousand Dollars ($400,000) commencing on May 1,
2006 and continuing on the first day of May in each 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.
1.6 PREPAYMENTS.
(1) 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.
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(2) 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, shall be applied in
inverse order of maturity, and shall not reduce the amount of any installment
payments to Lender.
(3) PREPAYMENT SURCHARGE. At the time that 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:
(1) For each portion of the Revolving Loan or the
Term Loan bearing interest at a Fixed Rate calculated with respect to the LIBO
Rate or the Farm Credit One-Year Discount Note 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) For each portion of the Term Loan bearing
interest at a Fixed Rate calculated with respect to the Farm Credit Medium Term
Note Rate, the prepayment surcharge shall be equal to the present value of any
loss of earnings 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.
1.7 INTEREST RATE ON REVOLVING ADVANCES.
(1) 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).
(2) 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
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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 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.
(3) ADJUSTMENT IN MARGIN APPLICABLE TO BASE RATE AND TO FIXED
RATE ELECTIONS FOR REVOLVING LOAN. With respect to the Revolving Loan, the
margin applicable to the Base Rate and the Fixed Rate shall be adjusted on an
annual basis in the manner and to the extent provided in this Section 2.4(c).
If, as of the end of any Fiscal Year, Borrower's Consolidated Funded Debt to
Consolidated EBITDA Ratio, for the period of such Fiscal Year falls within any
of the levels listed below, then the margin applicable to the Base Rate and the
Fixed Rate for the next Fiscal Year shall be adjusted, in the manner set forth
below, to the applicable margin for such level listed below:
<TABLE>
<CAPTION>
Consolidated Funded Debt Applicable Margin Applicable Margin
to Consolidated EBITDA Ratio Level Fixed Rate Base Rate
- ---------------------------------- ---------- ---------
<S> <C> <C>
1.25:1 or greater 2.00% 0.25%
Less than 1.25:1 but equal to or greater than 0.75:1 1.75% 0.00%
Less than 0.75:1 1.50% 0.00%
</TABLE>
Any change to the applicable margin shall become effective as of the first (1st)
day of the month after Borrower's delivery to Lender of the financial statements
required to be delivered to Lender pursuant to Section 6.1(b) demonstrating to
Lender's reasonable satisfaction that a change in the margin should occur;
provided that a change in the margin shall not change the Fixed Rate applicable
to an Interest Period that commenced prior to the date on which the margin
changes. Notwithstanding anything to the contrary in the foregoing, if a Default
or Event of Default shall have occurred and be continuing on either the date
that Borrower elects to convert a portion of the Revolving Loan to a Fixed Rate
or upon the Interest Determination Date, then Borrower shall have no right to
elect a Fixed Rate.
1.8 INTEREST RATE ON TERM LOAN TRANCHE A.
(1) BASE RATE. 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).
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(2) DESIGNATION OF FIXED RATES. 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 Two Hundred Fifty Thousand Dollars ($250,000) and any
amounts in excess thereof shall be in integral multiples of Fifty Thousand
Dollars ($50,000). 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 Term Loan Tranche A Base Rate.
(3) ADJUSTMENT IN MARGIN APPLICABLE TO BASE RATE AND TO FIXED
RATE ELECTIONS FOR TERM LOAN TRANCHE A. With respect to Term Loan Tranche A, the
margin applicable to the Base Rate and the Fixed Rate shall be adjusted on an
annual basis in the manner and to the extent provided in this Section 2.5(c).
If, as of the end of any Fiscal Year, Borrower's Consolidated Funded Debt to
Consolidated EBITDA Ratio, for the period of such Fiscal Year falls within any
of the levels listed below, then the margin applicable to the Base Rate and the
Fixed Rate for the next Fiscal Year shall be adjusted, in the manner set forth
below, to the applicable margin for such level listed below:
<TABLE>
<CAPTION>
Consolidated Funded Debt Applicable Margin Applicable Margin
to Consolidated EBITDA Ratio Level Fixed Rate Base Rate
- ---------------------------------- ---------- ---------
<S> <C> <C>
1.25:1 or greater 2.00% 0.25%
Less than 1.25:1 but equal to or greater than 0.75:1 1.75% 0.00%
Less than 0.75:1 1.50% 0.00%
</TABLE>
Any change to the applicable margin shall become effective as of the first (1st)
day of the month after Borrower's delivery to Lender of the financial statements
required to be delivered to Lender pursuant to Section 6.1(b) demonstrating to
Lender's reasonable satisfaction that a change in the margin should occur;
provided that a change in the margin shall not change the Fixed Rate applicable
to an Interest Period that commenced prior to the date on which the margin
changes. Notwithstanding anything to the
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contrary in the foregoing, if a Default or Event of Default shall have occurred
and be continuing on either the date that Borrower elects to convert a portion
of Term Loan Tranche A to a Fixed Rate or upon the Interest Determination Date,
then Borrower shall have no right to elect a Fixed Rate.
1.9 INTEREST RATE ON TERM LOAN TRANCHE B.
(1) DESIGNATION OF FIXED RATES. Borrower shall, from time to
time, designate a Fixed Rate to be applicable to all or a portion of Term Loan
Trance B; 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 designation, the requested Interest Determination Date, the
amount of Term Loan Tranche B so designated, and the requested Interest Period
for the amount so designated, (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 interest rate tranches of Term Loan Tranche B, (iv) the last day of
the Interest Period chosen by Borrower shall not extend beyond the Term Loan
Maturity Date, and (v) the amount so designated shall be not less than Five
Hundred Thousand Dollars ($500,000) and any amounts in excess thereof shall be
in integral multiples of Five Thousand Dollars ($5,000). Any designation by
Borrower pursuant to this Section 2.6(a) shall be irrevocable during the
Interest Period designated by Borrower, and that portion of Term Loan Tranche B
so designated shall bear interest at the applicable Fixed Rate until the
expiration of the applicable Interest Period. Borrower's failure to designate a
new Interest Period upon the expiration of a previous Interest Period shall
constitute an Event of Default and the portion of Term Loan Tranche B not
subject to a designated Interest Period shall bear interest at the Default Rate.
(2) ADJUSTMENT IN MARGIN APPLICABLE TO FIXED RATE DESIGNATIONS
FOR TERM LOAN TRANCHE B. With respect to Term Loan Tranche B, the margin
applicable to the Fixed Rate shall be adjusted on an annual basis in the manner
and to the extent provided in this Section 2.6(b). If, as of the end of any
Fiscal Year, Borrower's Consolidated Funded Debt to Consolidated EBITDA Ratio,
for the period of such Fiscal Year falls within any of the levels listed below,
then the margin applicable to the Fixed Rate for the next Fiscal Year shall be
adjusted, in the manner set forth below, to the applicable margin for such level
listed below:
<TABLE>
<CAPTION>
Consolidated Funded Debt Applicable Margin
to Consolidated EBITDA Ratio Level Fixed Rate
- ---------------------------------- ----------
<S> <C>
1.25:1 or greater 2.25%
Less than 1.25:1 but equal to or greater than 0.75:1 2.00%
Less than 0.75:1 1.75%
</TABLE>
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Any change to the applicable margin shall become effective as of the first (1st)
day of the month after Borrower's delivery to Lender of the financial statements
required to be delivered to Lender pursuant to Section 6.1(b) demonstrating to
Lender's reasonable satisfaction that a change in the margin should occur;
provided that a change in the margin shall not change the Fixed Rate applicable
to an Interest Period that commenced prior to the date on which the margin
changes. Notwithstanding anything to the contrary in the foregoing, if a Default
or Event of Default shall have occurred and be continuing on either the date
that Borrower elects to convert a portion of Term Loan Tranche B to a Fixed Rate
or upon the Interest Determination Date, then Borrower shall have no right to
elect a Fixed Rate and such portion of Term Loan Tranche B shall thereafter bear
interest at the Default Rate.
1.10 OTHER INTEREST PROVISIONS.
(1) 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.
(2) 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 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.
(3) 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 Farm Credit One-Year Discount Note Rate,
the Farm Credit Medium Term Note Rate, or at 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
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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.
(4) DEFAULT RATE. Any overdue principal of 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.
(5) 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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(6) 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:
(1) 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
(2) 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
(3) 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.
1.11 FEES. In addition to the other Fees listed in this Agreement,
Borrower shall pay to Lender the following Fees:
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(1) LOAN FEE. Upon the Closing Date, Borrower shall pay to
Lender a loan fee in the amount of Thirty Thousand Dollars ($30,000).
(2) UNUSED COMMITMENT FEE. In consideration of the commitment
made by Lender under this Agreement, commencing on April 1, 2001 and continuing
until the Revolving Loan Maturity Date, Borrower shall pay to Lender, a
quarterly unused commitment fee (the "Unused Commitment Fee") equal to
one-quarter of one percent (.25%) per annum of the average daily amount by which
the Maximum Revolving Loan exceeds the outstanding balance of the Revolving
Loan; PROVIDED, that the Unused Commitment Fee shall be subject to adjustment as
provided below. If, as of the end of any Fiscal Year, Borrower's Consolidated
Funded Debt to Consolidated EBITDA Ratio, for the period of such Fiscal Year
falls within any of the levels listed below, then the Unused Commitment Fee
applicable for the next Fiscal Year shall be adjusted, in the manner set forth
below, to the applicable Unused Commitment Fee for such level listed below:
<TABLE>
<CAPTION>
Consolidated Funded Debt Applicable Unused
to Consolidated EBITDA Ratio Commitment Fee
- ---------------------------- --------------
<S> <C>
1.25:1 or greater .250%
Less than 1.25:1 but equal to or greater than 0.75:1 .200%
Less than 0.75:1 .175%
</TABLE>
Any change to the applicable Unused Commitment Fee shall become effective as of
the first (1st) day of the month after Borrower's delivery to Lender of the
financial statements required to be delivered to Lender pursuant to Section
6.1(b) demonstrating to Lender's reasonable satisfaction that a change in the
Unused Commitment Fee should occur. Notwithstanding anything to the contrary in
the foregoing, if a Default or Event of Default shall have occurred and be
continuing on the date that the Commitment Fee would otherwise adjust, then the
Unused Commitment Fee shall remain or become two and one-half tenths of one
percent (.25%) per annum. The Unused Commitment Fee shall be paid to Lender on
(i) the first day of each calendar quarter with respect to the previous calendar
quarter, and (ii) the Revolving Loan Maturity Date, with respect to the period
from the last full calendar quarter through the Revolving Loan Maturity Date.
1.12 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.
1.13 PURCHASE OF FARM CREDIT STOCK. On the Closing Date, Borrower shall
purchase One Thousand Dollars ($1,000) of stock in PCFC and shall execute and
deliver to PCFC such documents as may be required to consummate such purchase.
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1.14 RECEIPT OF PAYMENTS. Borrower shall make each payment under this
Agreement not later than 10:30 A.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.
1.15 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 a 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 a 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.
1.16 TAXES.
(1) Any and all payments by Borrower hereunder or under the
Revolving Notes or Term Notes 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
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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.
(2) 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 other agreements and instruments contemplated thereby
(hereinafter referred to as "Other Taxes").
(3) Borrower shall indemnify each Lender for the full amount
of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section 2.13) paid by Lender and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. This indemnification shall be made within thirty (30) days
from the date Lender makes written demand therefor.
(4) Within thirty (30) days after the date of any payment of
Taxes, Borrower shall furnish to each Lender the original or a certified copy of
a receipt evidencing payment thereof.
(5) Without prejudice to the survival of any other agreement
of Borrower hereunder, the agreements and obligations of Borrower contained in
this Section 2.13 shall survive the payment in full of all Obligations and the
Termination Date.
1.17 CAPITAL ADEQUACY.
(1) Borrower shall pay to Lender from time to time on written
request such amounts as Lender may reasonably determine to be necessary to
compensate Lender for any increased costs to Lender that it reasonably
determines are attributable to any law or regulation, or any interpretation,
directive, or request (whether or not having the force of law and whether or not
failure to comply therewith would be unlawful) of any court or governmental or
monetary authority (i) following any Regulatory Change or (ii) implementing
after the Closing Date any risk-based capital guideline or other capital
requirement (whether or not having the force of law and whether or not the
failure to comply therewith would be unlawful) heretofore or hereafter issued by
any Governmental Authority in respect of Lender's Percentage of the Revolving
Loan or Term Loan (such compensation to include an amount equal to any reduction
of the rate of return on assets or equity of Lender to a level below that which
Lender could have achieved but
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for such law, regulation, interpretation, directive or request); PROVIDED that
with respect to this Section 2.14, each Lender shall treat Borrower as Lender
generally treats its other similarly situated borrowers.
(2) Lender will furnish to Borrower a certificate setting
forth the basis and amount of each request by Lender for compensation under this
Section 2.14. Determinations and allocations by Lender for purposes of this
Section 2.14 of the effect of any Regulatory Change pursuant to or of capital
maintained pursuant to this Section 2.14, on its costs or rate of return of
maintaining Revolving Advances or the Term Loan and or its commitment to make
Revolving Advances or the Term Loan, and of the amounts required to compensate
Lender under this Section 2.14, shall be conclusive absent manifest error or bad
faith.
(3) As used in this Section 2.14, "Regulatory Change" shall
mean any change after the Closing Date in federal, state, or foreign law or
regulations (including Regulation D) or the adoption or making after such date
of any interpretation, directive or request applying to a class of lenders
including Lender of or under any Federal, state, or foreign law or regulations
(whether or not having the force of law and whether or not failure to comply
therewith would be unlawful) by any court or governmental or monetary authority
charged with the interpretation or administration thereof.
ARTICLE III.
COLLATERAL
1.18 BORROWER'S OBLIGATIONS. The Obligations of Borrower to pay all
sums due to Lender and to perform all other covenants and agreements under this
Agreement and the other Loan Documents to which Borrower is a party, shall be
secured by all Collateral to the extent provided in the Security Documents.
1.19 ASSURANCES. Borrower shall, at its sole cost and expense, execute
and deliver to Lender all such further documents, instruments, and agreements
and to perform all such other acts which may be reasonably required in the
opinion of Lender to enable Lender to perfect, protect, exercise, or enforce
their respective rights as the secured parties or beneficiaries under the
Security Documents. To the extent permitted by applicable law, Borrower hereby
authorizes Lender to file financing statements and continuation statements with
respect to the security interests granted under the Security Documents in favor
of Lender and to execute such financing statements and continuation statements
on behalf of Borrower and hereby grants Lender with a limited power-of-attorney
to do so. Such power-of-attorney is coupled with an interest and is irrevocable.
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ARTICLE IV.
CONDITIONS PRECEDENT
1.20 CONDITIONS PRECEDENT TO CLOSING DATE. Notwithstanding any other
provision of this Agreement and without affecting in any manner the rights of
Lender hereunder, the Closing Date shall not occur until and unless each and
every one of the following conditions has been satisfied or waived, in Lender's
sole discretion:
(1) Borrower shall have delivered to Lender all documents
required by Lender to be delivered on or before the Closing Date.
(2) Lender shall have received from Borrower all financial
statements and from Borrower all agreements, documents, and schedules that
Lender shall consider necessary or appropriate in connection with this
Agreement;
(3) Borrower shall concurrently consummate the Acquisition;
(4) No Material Adverse Effect shall have occurred or shall
exist; and
(5) No Default or Event of Default shall have occurred and be
continuing.
1.21 CONDITIONS PRECEDENT TO EACH REVOLVING ADVANCE AND THE TERM LOAN.
It shall be a condition to the funding of the initial and each subsequent
Revolving Advance and the Term Loan that the following statements shall be true
on the date of each such funding or advance:
(1) All of Borrower's representations and warranties contained
herein or in any of the Loan Documents shall be true and correct in all material
respects on and as of the Closing Date and the date of each such Revolving
Advance is incurred as though made on and as of such date, except to the extent
that any such representation or warranty expressly relates to an earlier date
and for changes therein permitted or contemplated by this Agreement.
(2) No event shall have occurred and be continuing, or would
result from the funding of any Revolving Advance or the Term Loan, which (i)
constitutes or would constitute a Default or an Event of Default, or (ii) which
has a Material Adverse Effect.
(3) After giving effect to each Revolving Advance, the
aggregate principal amount of the Revolving Loan shall not exceed the Maximum
Revolving Loan.
The acceptance by Borrower of the proceeds of (i) any Revolving Advance or (ii)
the Term Loan, shall be deemed to constitute, as of the date of such acceptance,
a
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representation and warranty by Borrower that the conditions in this Section 4.2
have been satisfied.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Revolving Loan and Term Loan, as
herein provided for, Borrower makes the following representations and warranties
to Lender, each and all of which shall be true and correct as of the date of
execution and delivery of this Agreement, and shall survive the execution and
delivery of this Agreement:
1.22 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. MLO is a limited
partnership duly organized, validly existing, and in good standing under the
laws of the State of Delaware. ML Resources, Inc. is the managing general
partner of MLO. ML Resources, Inc. is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Neither
Borrower has any Subsidiaries. Each Borrower (i) is duly qualified as a foreign
corporation or limited partnership and is in good standing under the laws of
each jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification (except for jurisdictions in which such
failure to so qualify or to be in good standing would not have a Material
Adverse Effect); (ii) has the requisite corporate power and authority and the
legal right to own, pledge, mortgage or otherwise encumber and operate all real
property that it owns, to lease the real property it operates under lease, and
to conduct its business as now, heretofore, and proposed to be conducted; (iii)
has all material licenses, permits, consents, or approvals from or by, and has
made all material filings with, and has given all material notices to, all
Governmental Authorities having jurisdiction, to the extent required for such
ownership, operation, and conduct; (iv) is in compliance with its certificate of
incorporation and by-laws, or its agreement of limited partnership, as
applicable; and (v) is in compliance with all applicable provisions of law where
the failure to comply would have a Material Adverse Effect.
1.23 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
execution, delivery, and performance by Borrower of the Loan Documents to which
it is a party, and all instruments and documents required to be delivered by
Borrower under any of the Loan Documents, and the creation of all Liens provided
for in any Loan Documents: (i) are within Borrower's corporate or partnership
power; (ii) have been duly authorized by all necessary or proper corporate or
partnership action; (iii) are not in contravention of any provision of
Borrower's certificate of incorporation or by-laws or agreement of limited
partnership, as applicable; (iv) will not violate any law or regulation, or any
order or decree of any court or governmental instrumentality; (v) will not
conflict with or result in the breach or termination of, constitute a default
under or accelerate any performance required by, any material indenture,
mortgage, deed of trust, lease, agreement or other instrument to which Borrower
is a party or by
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which Borrower or any of its property is bound; (vi) will not result in the
creation or imposition of any Lien upon any of the property of Borrower other
than those in favor of Lender, all pursuant to the Loan Documents; and (vii) do
not require the consent or approval of any Governmental Authority or any other
Person, except for consents or approvals which have been duly obtained or
specifically waived in writing by Lender. At or prior to the Closing Date, each
of the Loan Documents required hereunder to be delivered at or prior to the
Closing Date shall have been duly executed and delivered on behalf of Borrower
and each shall then constitute a legal, valid, and binding obligation of
Borrower, to the extent it is a party thereto, enforceable against it in
accordance with its terms except for general principles of equity and the effect
of bankruptcy, insolvency, and other laws affecting the rights of creditors
generally.
1.24 ACQUISITION; SOLVENCY; PROJECTIONS. The Acquisition has been duly
consummated in accordance with its terms, neither Borrower nor any other party
are in default thereunder, and all of the transactions engaged in by Borrower as
part of such agreement were legal and valid and in compliance with all
applicable law. True and correct copies of all documents relating thereto were
delivered to Lender. Borrower is solvent and will be solvent after completion of
such acquisition and after giving effect to the initial advance hereunder. All
budget forecasts and projections of Borrower delivered to Lender are based upon
reasonable estimates and assumptions, all of which are fair in light of current
conditions, have been prepared on the basis of the assumptions stated therein,
and reflect the reasonable estimate of Borrower of the results of operations and
other information projected therein.
1.25 OWNERSHIP OF PROPERTY; LIENS. None of the properties and assets of
Borrower are subject to any Liens, except Permitted Encumbrances and the Lien in
favor of Lender pursuant to the Security Documents. All real property owned or
leased by Borrower on the Closing Date is set forth on Parts (A) and (B) of the
Disclosure Schedule. Neither Borrower nor any other party to any such lease is
in default of its obligations thereunder, except for any default which would not
have a Material Adverse Effect. All permits required to have been issued to
enable the real property owned or leased by Borrower to be lawfully occupied and
used for all of the purposes for which they are currently occupied and used,
have been lawfully issued and are, as of the date hereof, in full force and
effect, except for any permit for which the failure of such permit to be issued
and in full force and effect would not have a Material Adverse Effect. Borrower
has not received any notice, and to Borrower's knowledge does not have, any
pending, threatened, or contemplated condemnation proceeding affecting any real
property owned or leased by Borrower or any part thereof, or of any sale or
other disposition of any real property owned or leased by Borrower or any part
thereof in lieu of condemnation.
1.26 NO DEFAULT. Borrower is not in default, and to Borrower's
knowledge no third party is in default, under or with respect to any contract,
agreement, lease or other instrument to which it is a party which default in
each case or in the aggregate would have a Material Adverse Effect. No Default
or Event of Default has occurred and is continuing.
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1.27 BURDENSOME RESTRICTIONS. No contract, lease, agreement, or other
instrument to which Borrower is a party or is bound and no provision of
applicable law or governmental regulation has a Material Adverse Effect, or
insofar as Borrower can reasonably foresee, may have a Material Adverse Effect.
1.28 LABOR MATTERS. There are no strikes or other labor disputes
against Borrower that are pending or, to Borrower's knowledge, threatened which
would have a Material Adverse Effect. Hours worked by and payment made to
employees of Borrower have not been in violation of the Fair Labor Standards Act
or any other applicable law dealing with such matters which would have a
Material Adverse Effect. All payments due from Borrower on account of employee
health and welfare insurance which would have a Material Adverse Effect if not
paid have been paid or accrued as a liability on the books of Borrower.
1.29 OTHER VENTURES. Except as set forth in Part (C) of the Disclosure
Schedule, Borrower is not engaged in any joint venture or partnership with any
other Person.
1.30 INVESTMENT COMPANY ACT. Borrower is not an "investment company" or
an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended. The making of the Revolving Loan and Term Loan by Lender, the
application of the proceeds and repayment thereof by Borrower and the
consummation of the transactions contemplated by this Agreement and the other
Loan Documents will not violate any provision of such Act or any rule,
regulation, or order issued by the Securities and Exchange Commission
thereunder.
1.31 MARGIN REGULATIONS. Borrower does not own any "margin security",
as that term is defined in Regulations U of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"). The Revolving Advances and
Term Loan will not be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security, for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry any
margin security or for any other purpose which might cause any of the loans
under this Agreement to be considered a "purpose credit" within the meaning of
Regulation T, U, or X of the Federal Reserve Board.
1.32 TAXES. All federal, state, local, and foreign tax returns,
reports, and statements, including information returns required to be filed by
Borrower, have been filed with the appropriate Governmental Authority and all
Charges and other impositions shown thereon to be due and payable have been paid
prior to the date on which any fine, penalty, interest, or late charge may be
added thereto for nonpayment thereof, or any such fine, penalty, interest, late
charge, or loss has been paid. Borrower has paid when due and payable all
Charges required to be paid by it. Proper and accurate amounts have been
withheld by Borrower from their respective employees for all periods in full and
complete compliance with the tax, social security, and unemployment withholding
provisions of applicable federal, state, local and foreign law and
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such withholdings have been timely paid to the respective governmental agencies.
None of Borrower's tax returns with respect to Borrower's corporate income are
currently being audited by the Internal Revenue Service or any other applicable
Governmental Authority.
1.33 ERISA. Each "Plan" (as defined below) is in compliance in all
material respects with the applicable provisions of ERISA and the Internal
Revenue Code ("IRC") and with respect to each Plan, other than a Qualified Plan,
all required contributions and benefits have been paid in accordance with the
provisions of each such Plan to the extent that the failure to pay any such
contribution or benefit would have a Material Adverse Effect. There are no
pending or, to Borrower's knowledge, threatened claims, actions or lawsuits
(other than claims for benefits in the normal course), asserted or instituted
against Borrower or any Plan or its assets. Neither Borrower nor any ERISA
Affiliate of either has incurred or reasonably expects to incur any Withdrawal
Liability under Section 4201 of ERISA as a result of a complete or partial
withdrawal from a Multiemployer Plan. Borrower has not engaged in a prohibited
transaction, as defined in Section 4975 of the IRC or Section 406 of ERISA, in
connection with any Plan, which would subject Borrower (after giving effect to
any exemption) to a material tax on prohibited transactions imposed by Section
4975 of the IRC or any other material liability. As used above, the term "Plan"
means, with respect to Borrower or any ERISA Affiliate of either, at any time,
an employee benefit plan, as defined in Section 3(3) of ERISA, which Borrower
maintains, contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them. The terms "Qualified Plan"
and "Multiemployer Plan" shall have the meaning given them in ERISA.
1.34 NO LITIGATION. Except as set forth in Part (D) of the Disclosure
Schedule, no action, claim or proceeding is now pending or, to Borrower's
Knowledge, threatened against Borrower, at law, in equity or otherwise, before
any court, board, commission, agency, or instrumentality of any federal, state,
or local government or of any agency or subdivision thereof, or before any
arbitrator or panel of arbitrators, which, if determined adversely, could have a
Material Adverse Effect, nor to Borrower's knowledge does a state of facts exist
which is reasonably likely to give rise to such proceedings. None of the matters
set forth in Part (D) of the Disclosure Schedule questions the validity of any
of the Loan Documents or any action taken or to be taken pursuant thereto, or
would have either individually or in the aggregate a Material Adverse Effect.
1.35 BROKERS. No broker or finder acting on behalf of Borrower brought
about the obtaining, making, or closing of the loans made pursuant to this
Agreement or the transactions contemplated by the Loan Documents and has no
obligation to any Person in respect of any finder's or brokerage fees in
connection therewith.
1.36 PATENTS, TRADEMARKS, COPYRIGHTS, AND LICENSES. Borrower owns or
possess all licenses, permits, franchises, authorizations, patents, copyrights,
service marks, trademarks and trade names, or rights thereto, that individually
or in the aggregate are necessary to the conduct of
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Borrower's business, without known conflict with the rights of others. To the
best knowledge of Borrower, no product of Borrower infringes in any material
respect any license, permit, franchise, authorization, patent, copyright,
service mark, trademark and trade name or other right owned by any other Person.
To the best knowledge of Borrower, there is no material violation by any Person
of any right of Borrower with respect to any patent, copyright, service mark,
trademark and trade name or other right owned by Borrower.
1.37 FULL DISCLOSURE. To Borrower's Knowledge, no information contained
in this Agreement, the other Loan Documents, any budget forecasts or
projections, the financial statements delivered to Lender, or any written
statement furnished by or on behalf of Borrower pursuant to the terms of this
Agreement, which has previously been delivered to Lender, contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading in light of the
circumstances under which made.
1.38 ENVIRONMENTAL MATTERS. Borrower is and has been in compliance with
all Environmental Laws, except for such noncompliance which would not result in
Environmental Liabilities which could reasonably be expected to exceed $100,000.
Borrower has obtained, and is in compliance with, all environmental permits
required by Environmental Laws for the operations of its business, except where
the failure to so obtain or comply with such environmental permits would not
result in Environmental Liabilities that could reasonably be expected to exceed
$100,000, and all such Environmental Permits are valid, uncontested and in good
standing. Borrower is not involved in operations and does not know of any facts,
circumstances or conditions, including any releases of Hazardous Materials, that
are likely to result in any Environmental Liabilities of Borrower that could
reasonably be expected to exceed $100,000. There is no litigation arising under
or related to any Environmental Laws, environmental permits or Hazardous
Material that seeks damages, penalties, fines, costs or expenses in excess of
$50,000 or injunctive relief against, or that alleges criminal misconduct by,
Borrower. No notice has been received by Borrower identifying it as a
"potentially responsible party" or requesting information under CERCLA or
analogous state statutes, and to the knowledge of Borrower, there are no facts,
circumstances or conditions that may result in Borrower being identified as a
"potentially responsible party" under CERCLA or analogous state statutes.
1.39 INSURANCE POLICIES. Borrower has disclosed to Lender in writing
all insurance of any nature maintained for current occurrences by Borrower, as
well as a summary of the terms of such insurance. Borrower shall maintain "All
Risk" physical damage insurance on all of Borrower's tangible real and personal
property and assets, wherever located, and covers, without limitation, fire and
extended coverage, boiler and machinery coverage, liquids, theft, burglary,
explosion, collapse, and all other hazards and risks ordinarily insured against
by owners or users of such properties in similar businesses. All policies of
insurance on such real and personal property contain an endorsement, in form and
substance acceptable to Lender, showing loss
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payable to Lender (Form 438 BFU or its equivalent) and extra expense and
business interruption endorsements. Such endorsement, or an independent
instrument furnished to Lender, provides that the insurance companies will give
Lender at least thirty (30) days prior written notice before any such policy or
policies of insurance shall be altered or canceled and that no act or default of
Borrower or any other Person shall affect the right of Lender to recover under
such policy or policies of insurance in case of loss or damage. In addition,
Borrower shall maintain the following types of insurance coverage, in such
amounts as may be approved by Lender: (a) comprehensive general liability
insurance on an "occurrence basis" against claims for personal injury, bodily
injury and property damage, including premises/operations, broad form
contractual liability, underground, explosion and collapse hazard, independent
contractors, broad form property coverage, products and completed operations
liability; (b) statutory limits of worker's compensation insurance, (c)
automobile liability insurance for all owned, non-owned or hired automobiles
against claims for personal injury, bodily injury, and property damage; and (d)
umbrella insurance. All of such policies are in full force and effect and in
form and with insurers recognized as adequate by Lender, and provide coverage of
such risks and for such amounts as are customarily maintained for businesses of
the scope and size of Borrower's and as otherwise acceptable to Lender. Each
insurance policy contains a clause which provides that Lender's interest under
such policy shall not be invalidated by any act or omission to act of, or any
breach of warranty by, the insured, or by any change in the title, ownership or
possession of the insured property, or by the use of the property for purposes
more hazardous than is permitted in such policy. Borrower has delivered to
Lender a certificate of insurance that evidences the existence of each policy of
insurance, payment of all premiums therefor and compliance with all provisions
of this Agreement.
1.40 PACA. Borrower is not a "dealer," "commission merchant," or
"broker" under PACA, and Borrower's assets are not subject to the trust
provisions provided for under PACA.
ARTICLE VI.
FINANCIAL STATEMENTS AND INFORMATION
1.41 REPORTS AND NOTICES. Borrower covenants and agrees that it shall
deliver to each Lender:
(1) Within forty-five (45) days after the end of each Fiscal
Quarter, (i) financial and other information requested by Lender, including an
internally-prepared statement of income and cash flow, balance sheet, and
management letter, each of which would provide comparisons to the prior year's
equivalent period and to the budgets provided to Lender, (ii) the certification
of the chief financial officer of Borrower that all such financial statements
and schedules are complete and correct and present fairly in accordance with
GAAP (subject to normal year-end adjustments), the financial position, the
results of operations and the statements of cash flows of Borrower as at the end
of such month and for the period then ended, that there
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was no Default or Event of Default in existence as of such time; (iii) a
certificate in the form attached hereto as Exhibit B, containing the
certification of Borrower's chief financial officer that Borrower has complied
with all of the covenants set forth in Section 8.12 as of the end of such Fiscal
Quarter;
(2) Within ninety (90) days after the end of each Fiscal Year,
audited financial statements, consisting of balance sheets and statements of
income and retained earnings and cash flows, setting forth in comparative form
in each case the figures for the previous Fiscal Year, which financial
statements shall be prepared in accordance with GAAP, certified without
qualification by a firm of independent certified public accountants of
recognized national standing selected by Borrower and acceptable to Lender, and
accompanied by (i) a report from such accountants to the effect that in
connection with their audit examination, nothing has come to their attention to
cause them to believe that a Default or Event of Default had occurred and that,
to the best of their knowledge, Borrower was in compliance with all the
covenants set forth in Section 8.12 as of the end of such Fiscal Year, (ii) the
annual letter from Borrower's chief financial officer to such accountants in
connection with their audit examination detailing Borrower's contingent
liabilities and material litigation matters involving Borrower, (iii) a
certification of the chief financial officer of Borrower that all such financial
statements are complete and correct and present fairly in accordance with GAAP
the financial position, the results of operations and the statements of cash
flow of Borrower as at the end of such year and for the period then ended and
that there was no Default or Event of Default in existence as of such time, and
(iv) a certificate in the form attached hereto as Exhibit B, containing the
certification of Borrower's chief financial officer that Borrower has complied
with all of the covenants set forth in Section 8.12 as of the end of such Fiscal
Year;
(3) Within ninety (90) days after the start of any Fiscal
Year, an annual budget and forecast for such Fiscal Year, substantially in the
form provided to Lender prior to the Closing Date, and containing such
information as Lender shall request;
(4) Within ninety (90) days after completion of crop
harvesting, an annual crop production report containing such information as
Lender shall request;
(5) As soon as practicable, but in any event within one (1)
Business Day after Borrower becomes aware of the existence of any Default or
Event of Default, or any development or other information which would have a
Material Adverse Effect, telephonic notice specifying the nature of such Default
or Event of Default or development or information, including the anticipated
effect thereof, which notice shall be promptly confirmed in writing within three
(3) Business Days;
(6) Copies of all federal, state, local and foreign tax
returns, information returns and reports in respect of income, franchise or
other taxes on or measured by income (excluding sales, use or like taxes) filed
by Borrower; and
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(7) Such other information respecting Borrower's business,
financial condition or prospects as Lender may, from time to time, reasonably
request.
1.42 COMMUNICATION WITH ACCOUNTANTS. Lender is authorized to
communicate directly with Borrower's independent certified public accountants
and tax advisors, and such accountants and tax advisors are hereby authorized to
disclose directly to Lender any and all financial information requested by
Lender.
ARTICLE VII.
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, unless Lender shall have
otherwise consented, Borrower shall comply with and observe each of the
following covenants.
1.43 MAINTENANCE OF EXISTENCE; CONDUCT OF BUSINESS. Borrower shall: (a)
do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate or partnership existence and its rights and franchises;
(b) continue to conduct its business substantially as now conducted or as
otherwise permitted hereunder; and (c) maintain all of its property that is
necessary or useful in the proper conduct of its business in good working
condition (taking into consideration ordinary wear and tear).
1.44 PAYMENT OF OBLIGATIONS. Borrower shall pay and discharge or cause
to be paid and discharged promptly all Charges imposed upon it, its income, and
profits, or any of its property, and lawful claims for labor, materials,
supplies, and services or otherwise before any thereof shall become in default,
except for those that are being contested in good faith by proper legal actions
or proceedings.
1.45 BOOKS AND RECORDS. Borrower shall keep adequate records and books
of account with respect to its business activities, in which proper entries,
reflecting all of its financial transactions, are made in accordance with GAAP
and on a basis consistent with the financial statements delivered to Lender.
1.46 LITIGATION. Borrower shall notify Lender in writing, promptly upon
learning thereof, of any litigation commenced or threatened against Borrower,
and of the institution against it of any suit or administrative proceeding that
(a) may involve an amount in excess of One Hundred Thousand Dollars ($100,000)
or (b) may have a Material Adverse Effect if adversely determined.
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1.47 INSURANCE. Borrower shall, at its sole cost and expense, maintain
the policies of insurance described in Section 5.18 in form and with insurers
recognized as adequate by Lender, and all such policies shall be in such amounts
as may be reasonably satisfactory to Lender. In addition, Borrower shall notify
Lender promptly of any occurrence causing a material loss or decline in value of
any real or personal property and the estimated (or actual, if available) amount
of such loss or decline. Borrower hereby directs all present and future insurers
under its "All Risk" policies of insurance to pay all proceeds payable
thereunder directly to Lender. Borrower irrevocably makes, constitutes and
appoints Lender (and all officers, employees, or agents designated by Lender) as
Borrower's true and lawful agent and attorney-in-fact for the purpose of making,
settling, and adjusting claims under the "All Risk" policies of insurance,
endorsing the name of Borrower on any check, draft, instrument or other item of
payment for the proceeds of such "All Risk" policies of insurance, and for
making all determinations and decisions with respect to such "All Risk" policies
of insurance; provided Lender agrees that it shall not exercise its right to
settle or adjust any claim unless an Event of Default has occurred and is
continuing. In the event Borrower at any time or times hereafter shall fail to
obtain or maintain any of the policies of insurance required above or to pay any
premium in whole or in part relating thereto, Lender, without waiving or
releasing any Obligations or Default or Event of Default hereunder, may at any
time or times thereafter (but shall not be obligated to) obtain and maintain
such policies of insurance and pay such premium and take any other action with
respect thereto which Lender deems advisable. All sums so disbursed by Lender,
including reasonable attorneys' fees, court costs, expenses and other charges
relating thereto, shall be payable, on demand, by Borrower to Lender and shall
be additional Obligations hereunder secured by the Collateral. Lender reserves
the right at any time, upon review of Borrower's risk profile, to require
additional forms and limits of insurance to, in Lender's reasonable judgment,
after consultation with Borrower, adequately protect Lender's interests.
1.48 COMPLIANCE WITH LAWS AND AGREEMENTS. Borrower shall comply in all
material respects with all federal, state and local laws and regulations
applicable to it. Borrower shall perform, within all required time periods, all
of its obligations and enforce all of its rights under each material agreement
to which it is a party.
1.49 ENVIRONMENTAL MATTERS. Borrower shall (i) comply in all material
respects with the Environmental Laws applicable to it, (ii) notify Lender
promptly after knowledge in the event of any spill or release which is
reportable to any Governmental Authority upon any premises owned or occupied by
it, and (iii) promptly forward to Lender a copy of any order, notice, permit,
application, or any other communication or report received by Borrower in
connection with any matter relating to the Environmental Laws that may
materially affect such premises.
1.50 INTEREST RATE PROTECTION. Borrower shall provide evidence to
Lender, within thirty (30) days after the Closing Date, that Borrower shall have
fixed or hedged interest rates for not less than sixty-five percent (65%) of
Term Loan Tranche B for a period of not less than two (2) years.
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ARTICLE VIII.
NEGATIVE COVENANTS
Borrower covenants and agrees that, unless Lender shall have
otherwise consented, Borrower shall comply with and observe each of the
following covenants.
1.51 MERGERS, ETC.; CHANGE OF BUSINESS. Borrower shall not, directly or
indirectly, by operation of law or otherwise, merge with, consolidate with,
acquire all or substantially all of the assets or capital stock of, or otherwise
combine with, any Person or form any Subsidiary. Borrower shall not engage in
any business other than those businesses in which Borrower is engaged on the
Closing Date.
1.52 CAPITAL STRUCTURE. Borrower shall not make any material changes in
its capital structure or amend its certificate of incorporation, by-laws,
limited partnership agreement without the prior written consent of Lender, which
consent will not be unreasonably withheld.
1.53 INVESTMENTS; LOANS AND ADVANCES. Borrower shall not make any
investment in, or make or accrue loans or advances of money to any Person,
through the direct or indirect holding of securities or otherwise; provided,
that Borrower may: (a) make and maintain investments in cash equivalents, (b)
make and maintain loans or advances to, any of its wholly-owned Subsidiaries
(provided that the creation of such wholly-owned Subsidiary has been approved by
Lender and has guaranteed all Obligations and secured such guarantee by a first
priority security interest in all of such Subsidiary's assets), (c) loans to
employees to the extent disclosed to an approved by Lender, (d) investments
existing on the Closing Date to the extent approved by Lender.
1.54 INDEBTEDNESS. Except as otherwise expressly permitted by this
Agreement, Borrower shall not create, incur, assume, or permit to exist any
Indebtedness, except (a) Indebtedness secured by Permitted Encumbrances, (b) the
Revolving Loan, (c) the Term Loan, (d) all unfunded pension fund and other
employee benefit plan obligations and liabilities but only to the extent they
are permitted to remain unfunded under applicable law, (e) Indebtedness under
Capital Leases to the extent permitted under this Agreement, but not to exceed
One Million Two Hundred Thousand Dollars ($1,200,000) at any time outstanding,
(f) Indebtedness secured by property of Borrower other than the Collateral in an
aggregate amount not to exceed Five Hundred Thousand Dollars ($500,000), (g)
unsecured Indebtedness in an aggregate amount not to exceed Six Million Dollars
($6,000,000), and (h) purchase money indebtedness with respect to the
acquisition of new capital assets so long as such Indebtedness is secured only
by the particular asset being acquired.
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1.55 TRANSACTIONS WITH AFFILIATES. Borrower shall not enter into or be
a party to any transaction with (including the purchase from, sale to, or
exchange of property with, or the rendering of any service by or for) any
Affiliate of Borrower, except in the ordinary course of and pursuant to the
reasonable requirements of Borrower's business and upon fair and reasonable
terms that are fully disclosed to Lender and are no less favorable to Borrower
than would be obtained in a comparable arm's-length transaction with a Person
not an Affiliate of Borrower; provided, that MLO may reimburse ML Resources,
Inc. for reasonable management expenses.
1.56 LIENS. Borrower shall not create or permit any Lien on any of its
properties or assets except the Lien of Lender under the Loan Documents and
Permitted Encumbrances.
1.57 SALES OF ASSETS. Borrower shall not sell, transfer (including any
consensual transfer such as the execution of a deed in lieu of foreclosure),
convey, assign, or otherwise dispose of any of its assets or properties involved
in Borrower's macadamia operations; provided, that the foregoing shall not
prohibit (i) the sale of inventory in the ordinary course of business, (ii)
disposal of worn out or obsolete assets, (iii) the sale or other disposal of
used equipment which is being replaced by equipment having a similar value or
serving a similar function, and (iv) sale of other assets in an aggregate amount
not to exceed One Million Dollars ($1,000,000) from and after the Closing Date.
1.58 CANCELLATION OF CLAIMS. Borrower shall not cancel any claim or
debt owing to it, except for reasonable consideration or in the ordinary course
of business.
1.59 RESTRICTED PAYMENTS. Borrower shall not make any Restricted
Payments; provided, that so long as no Default or Event of Default then exists,
has occurred within the twelve (12) months immediately preceding such proposed
Restricted Payment, or would result from such Restricted Payment, Borrower may
make Restricted Payments if all of the following requirements are fulfilled: (a)
the making of such Restricted Payment, if it had been made in the preceding
Fiscal Quarter, would not have caused Borrower to breach any of the financial
covenants set forth in Section 8.12, (b) after giving effect to such Restricted
Payment, MLO's Working Capital would not be less than Two Million Five Hundred
Thousand Dollars ($2,5000,000), (c) after giving effect to such Restricted
Payment, the ratio of MLO's Current Assets to Current Liabilities shall not be
less than one and one-half to one (1.5:1.0); (d) the aggregate amount of all
Restricted Payments made during the period from and after January 1, 2000 to and
including the date of the Restricted Payment in question shall not have exceeded
the sum of (i) Three Million Dollars ($3,000,000), plus (ii) the aggregate
amount of MLO's Consolidated Net Cash Flow, on a cumulative basis, from January
1, 2000 to and including the last day of the most recently completed Fiscal
Quarter.
1.60 ENVIRONMENTAL COMPLIANCE. Borrower shall not and shall not
knowingly permit any other Person within the control of Borrower to cause or
permit the presence, use, generation,
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manufacture, installation, release, discharge, storage or disposal of any
Hazardous Materials on, under, in or about any of its real estate or the
transportation of any Hazardous Materials to or from any real estate where such
presence, use, generation, manufacture, installation, release, discharge,
storage or disposal would violate any Environmental Laws, the violation of which
would have a Material Adverse Effect.
1.61 PACA LICENSE. Borrower shall not obtain or attempt to obtain a
dealer license under PACA.
1.62 FINANCIAL COVENANTS.
(1) MINIMUM TANGIBLE NET WORTH. MLO shall not permit its
Tangible Net Worth, as of the last day of any Fiscal Quarter to be less than the
applicable "Minimum Tangible Net Worth Amount." The Minimum Tangible Net Worth
Amount shall initially be Fifty-Seven Million Five Hundred Thousand Dollars
($57,500,000) and shall be reduced dollar for dollar on by the amount (to the
extent positive) that (i) the aggregate amount of all Restricted Payments made
by MLO after the Closing Date (but only if such Restricted Payments were
permitted by the terms of this Agreement at the time they were made), exceeds
(ii) the cumulative amount of Consolidated Net Income achieved by MLO after the
Closing Date.
(2) CAPITALIZATION RATIO. Borrower shall not permit the ratio
of (i) Consolidated Funded Debt, to (ii) Consolidated Total Capitalization, as
of the last day of any Fiscal Quarter, to exceed twenty percent (20%).
(3) DEBT COVERAGE RATIO. Commencing with the first full Fiscal
Quarter following the Closing Date, Borrower shall not permit the Consolidated
Debt Coverage Ratio for the four Fiscal Quarters immediately preceding each
measurement date, as of the last day of each Fiscal Quarter to be less than two
and one half to one (2.5:1.0).
ARTICLE IX.
INDEMNITY
1.63 INDEMNIFICATION. Borrower shall indemnify and hold Lender and
Lender's affiliates, subsidiaries, officers, directors, employees, attorneys,
and agents (each, an "Indemnified Person"), harmless from and against any and
all suits, actions, proceedings, claims, damages, losses, liabilities and
expenses (including reasonable attorneys' fees and disbursements (including
allocated costs of internal counsel) and other costs of investigations or
defense, including those incurred upon any appeal) which may be instituted or
asserted against or incurred by such Indemnified Person as a result of credit
having been extended under this Agreement and
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the other Loan Documents or in connection with Lender's interest in any
Collateral; provided, that Borrower shall not be liable for any indemnification
to such Indemnified Person to the extent that any such suit, action, proceeding,
claim, damage, loss, liability or expense was the result of any action by such
Indemnified Person or results from such Indemnified Person's gross negligence or
willful misconduct. NEITHER LENDER NOR ANY OTHER INDEMNIFIED PERSON SHALL BE
RESPONSIBLE OR LIABLE TO BORROWER, ANY OTHER PERSON, ANY SUCCESSOR, ASSIGNEE, OR
THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS
DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY, OR
CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN
EXTENDED UNDER THE LOAN DOCUMENTS.
ARTICLE X.
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
1.64 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder:
(1) FAILURE TO PAY PRINCIPAL. Borrower shall fail to make any
payment of principal owing with respect to the Revolving Loan or any regularly
scheduled payment of principal owing with respect to the Term Loan when due and
payable and such failure shall remain uncured for a period of two (2) Business
Days; provided that the failure to make such payment may only be cured by paying
the amount due together with interest on such amount at the Default Rate.
(2) FAILURE TO PAY INTEREST OR OTHER AMOUNTS OTHER THAN
EXPENSES. Borrower shall fail to make any payment of interest on the Revolving
Loan, the Term Loan, or any other amount (other than expenses payable under any
Loan Document) owing with respect to the Revolving Loan, the Term Loan or any of
the other Obligations when due and payable or declared due and payable and such
failure shall remain uncured for a period of two (2) Business Days; provided
that the failure to make such payment may only be cured by paying the amount due
together with interest on such amount at the Default Rate.
(3) FAILURE TO PAY EXPENSES. Borrower shall fail to make any
payment of any expenses payable under any Loan Document, and such failure shall
have remained uncured for a period of ten (10) days after Borrower has received
notice of such failure from Lender; provided that the failure to make such
payment may only be cured by paying the amount due together with interest on
such amount at the Default Rate.
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(4) BREACH OF COVENANTS OR OTHER PROVISIONS OF THIS AGREEMENT.
Borrower shall fail or neglect to perform, keep, or observe any other provision
of this Agreement or of any of the other Loan Documents, and the same is by its
nature incapable of being cured or shall remain unremedied for a period ending
on the first to occur of twenty (20) days after Borrower shall receive written
notice of any such failure from Lender or thirty (30) days after Borrower shall
become aware thereof. A breach by Borrower of the financial covenants set forth
in Section 8.12 are incapable of being cured.
(5) DEFAULT UNDER OTHER INDEBTEDNESS. A default shall occur
under any other agreement, document, or instrument to which Borrower is a party
or by which Borrower or Borrower's property is bound and such default involves
the failure to make any payment (whether of principal, interest, or otherwise)
due (whether by scheduled maturity, required prepayment, acceleration, demand,
or otherwise, but only after expiration of any cure periods provided by the
underlying agreement, document, or instrument) in respect of any Indebtedness of
Borrower in excess of One Hundred Thousand Dollars ($100,000).
(6) BREACH OF REPRESENTATION OR WARRANTY. Any material
representation or warranty herein or in any Loan Document or in any written
statement pursuant thereto or hereto, report, financial statement, or
certificate made or delivered to Lender by Borrower shall be untrue or
incorrect, as of the date when made or deemed made (including those made or
deemed made pursuant to Section 4.2) and the same is by its nature incapable of
being cured or shall remain unremedied for a period ending on the first to occur
of twenty (20) days after Borrower shall receive written notice of any such
failure from Lender or thirty (30) days after Borrower shall become aware
thereof.
(7) LOSS OF ASSETS. (i) Any of the assets of Borrower shall be
attached, seized, levied upon, or subjected to a writ or distress warrant, or
come within the possession of any receiver, trustee, custodian, or assignee for
the benefit of creditors of Borrower and shall remain unstayed or undismissed
for thirty (30) consecutive days, (ii) any Person other than Borrower shall
apply for the appointment of a receiver, trustee or custodian for any of
Borrower's assets and such application shall remain unstayed or undismissed for
thirty (30) consecutive days, or (iii) Borrower shall have concealed, removed,
or permitted to be concealed or removed, any part of its property, with intent
to hinder, delay, or defraud its creditors or any of them or made or suffered a
transfer of any of its property or the incurring of an obligation which may be
fraudulent under any bankruptcy, fraudulent conveyance or other similar law.
(8) INVOLUNTARY INSOLVENCY ACTIONS. A case or proceeding shall
have been commenced against Borrower in a court having competent jurisdiction
seeking a decree or order (i) under the Bankruptcy Code, or any other applicable
federal, state, or foreign bankruptcy or other similar law, (ii) appointing a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar
official) of Borrower or of any substantial part of its properties, or (iii)
ordering the winding-up or liquidation of the affairs of Borrower and such case
or
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proceeding shall remain undismissed or unstayed for thirty (30) consecutive days
or such court shall enter a decree or order granting the relief sought in such
case or proceeding.
(9) VOLUNTARY INSOLVENCY ACTIONS. Borrower shall (i) file a
petition seeking relief under the Bankruptcy Code, or any other applicable
federal, state or foreign bankruptcy or other similar law, (ii) consent to the
institution of proceedings thereunder or to the filing of any such petition or
to the appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, or sequestrator (or similar official) of Borrower or of any
substantial part of its properties, (iii) fail generally to pay its debts as
such debts become due, or (iv) take any corporate action in furtherance of any
such action.
(10) JUDGMENTS. Final judgment or judgments for the payment of
money in excess of Fifty Thousand Dollars ($50,000) in the aggregate shall be
rendered against Borrower and the same shall not be (i) fully covered by
insurance, or (ii) vacated, stayed, bonded, paid, or discharged for a period of
thirty (30) days.
(11) MATERIAL ADVERSE EFFECT. There shall occur any event or
circumstance that constitutes a Material Adverse Effect.
1.65 ACCELERATION; REMEDIES.
(1) AUTOMATIC ACCELERATION; EXERCISE OF REMEDIES. If an Event
of Default shall occur and be continuing: (i) all Obligations and any
indebtedness of Borrower under any of the Loan Documents, any term thereof to
the contrary notwithstanding, shall at Lender's option and without notice be
accelerated and become immediately due and payable without presentment, demand,
protest, or notice of dishonor, all of which are hereby expressly waived by
Borrower; and (ii) the obligation, if any, of Lender to make further Revolving
Advances shall immediately cease and terminate. Lender shall have all rights,
powers, and remedies available under each of the Loan Documents, including the
right to resort to any or all Collateral for any Obligations and to exercise any
or all of the rights of a beneficiary or secured party with respect to the
Collateral pursuant to applicable law. All rights, powers and remedies of Lender
in connection with each of the Loan Documents (x) may be exercised at any time
and from time to time after the occurrence and during the continuation of an
Event of Default, (y) are cumulative and not exclusive, and (z) shall be in
addition to any other rights, powers or remedies provided by law or equity.
Without limiting the foregoing, Lender may, as provided in the Farm Credit Act
of 1971, as amended, retire and cancel all or any portion of Borrower's stock or
other equities in Lender and apply the proceeds thereof to the Obligations. In
addition, Lender may hold, set off, sell, and/or apply against Borrower's
indebtedness any and all cash, accounts, securities, instruments, documents, or
other property in Lender's possession or under its control.
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(2) PAYMENTS TO THIRD PARTIES. At its sole discretion and
without any obligation to do so, Lender may pay any amount to any Person as
Lender deems reasonably necessary to preserve the value of, avoid loss of or
damage to, or prevent foreclosure, sale, or forfeiture of any of the Collateral,
including bidding at or redeeming from any sale of Collateral. Any amounts paid
or expended by Lender in connection herewith shall constitute Obligations which
shall be payable on demand and which shall bear interest at the Default Rate
from the date paid by Lender.
(3) APPOINTMENT OF RECEIVER. After the occurrence of an Event
of Default, Lender may (but shall not be obligated to) seek to obtain the
appointment of a receiver who shall be vested with any and all such powers and
rights as Lender may request of the court, including the right (i) to sell the
Collateral at one or more private or public sales, (ii) to undertake
cultivation, harvest, purchasing, processing, sales, collections, or other work
in connection with any Collateral (or any portion thereof) in accordance with
this Agreement and the other Loan Documents (or any other plan of cultivation,
harvest, processing, preservation or maintenance approved by Lender and the
receiver or the court), and (iii) to exercise any or all such rights, powers or
privileges as Borrower or Lender might exercise on its own behalf.
1.66 DISTRIBUTION AND APPLICATION OF AMOUNTS RECEIVED AFTER AN EVENT OF
DEFAULT. Any amounts received by Lender on account of the Obligations after an
Event of Default, whether from voluntary payment by Borrower, from a foreclosure
sale, or from some other source shall be distributed against such portions of
the Obligations and in such order as Lender, in its sole discretion, shall
determine. Borrower irrevocably waives the right to direct the application of
any and all payments at any time or times hereafter received by Lender from or
on behalf of Borrower, and Borrower irrevocably agrees that Lender shall have
the continuing exclusive right to apply any and all such payments against the
then due and payable Obligations of Borrower as Lender may deem advisable.
1.67 WAIVERS BY BORROWER. Except as otherwise provided for in this
Agreement, Borrower waives (i) presentment, demand and protest and notice of
presentment, dishonor, notice of intent to accelerate, notice of acceleration,
protest, default, nonpayment, maturity, release, compromise, settlement,
extension, or renewal of any or all commercial paper, accounts, contract rights,
documents, instruments, chattel paper and guaranties at any time held by Lender
on which Borrower may in any way be liable and hereby ratifies and confirms
whatever Lender may do in this regard, (ii) all rights to notice and a hearing
prior to Lender's taking possession or control of, or to Lender's replevy,
attachment or levy upon, the Collateral or any bond or security which might be
required by any court prior to allowing Lender to exercise any of its remedies,
and (iii) the benefit of all valuation, appraisal, and exemption laws.
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ARTICLE XI.
MISCELLANEOUS
1.68 SUCCESSORS AND ASSIGNS. This Agreement and the other Loan
Documents shall be binding on and shall inure to the benefit of Borrower and
Lender and their respective successors and assigns, except as otherwise provided
herein or therein. Borrower may not assign, transfer, hypothecate, or otherwise
convey its rights, benefits, obligations, or duties hereunder or thereunder
without the prior express written consent of Lender. Any purported assignment,
transfer, hypothecation, or other conveyance by Borrower without the prior
express written consent of all of Lender shall be void. Lender may sell, assign,
transfer, grant a participation in, or otherwise dispose of all or any portion
of its interest in this Agreement at any time without consent of Borrower. In
connection therewith, Lender shall be entitled to provide to any assignee or
participant or prospective assignee or participant such information pertaining
to Borrower as Lender may deem appropriate or such assignee or participant or
prospective assignee or participant may request; provided, that such assignee or
participant or prospective assignee or participant shall agree (a) to treat in
confidence such information, and (b) not to make use of such information for
purposes of transactions other than contemplated by such assignment or
participation.
1.69 COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT; CONSENTS AND
WAIVERS. The Loan Documents constitute the complete agreement between the
parties with respect to the subject matter hereof and may not be modified,
altered, or amended except by an agreement in writing executed by Borrower and
Lender. No amendment or waiver of any provision of this Agreement or any Loan
Document, nor consent to any departure by Borrower therefrom, shall in any event
be effective unless the same shall be in writing and executed by Lender.
1.70 FEES AND EXPENSES. Borrower shall reimburse Lender for all
reasonable fees, costs, and expenses incurred in connection with: (a) the
preparation and negotiation of the Loan Documents (including the reasonable fees
and expenses of internal counsel, and appraisers and consultants, retained in
connection with the Loan Documents and the transactions contemplated thereby and
advice in connection therewith); (b) any amendment, modification, or waiver of,
or consent with respect to, any of the Loan Documents; (c) any advice in
connection with the administration of the Revolving Loan, the Term Loan, this
Agreement, any Loan Document, or the Collateral; (d) any litigation, contest,
dispute, suit, proceeding, or action (whether instituted by Lender, Borrower or
any other Person) in any way relating to the Collateral, any of the Loan
Documents or any other agreements to be executed or delivered in connection
therewith or herewith, including any litigation, contest, dispute, suit, case,
proceeding or action, and any appeal or review thereof, in connection with a
case commenced by or against Borrower or any other Person that may be obligated
to Lender by virtue of this Agreement, or the other Loan Documents, under the
Bankruptcy Code, or any other applicable federal, state or foreign bankruptcy or
other similar law (including the seeking of relief from the automatic stay or
proposal of opposition to a plan of reorganization); (e) any attempt to enforce
any rights of Lender against Borrower or any other Person that may be obligated
to Lender by virtue of any of
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the Loan Documents; or (f) any attempt to (i) monitor the Revolving Loan or Term
Loan, (ii) evaluate, observe, assess Borrower or its affairs, and (iii) verify,
protect, evaluate, assess, appraise, collect, sell, liquidate or otherwise
dispose of the Collateral, including and field inspections; then, in any such
event, the reasonable attorneys' and other professional and service providers'
fees (including internally-allocated costs of in-house counsel) arising from
such services, including those of any appellate proceedings, and all expenses,
costs, charges, and other fees incurred by such counsel and others in any way or
respect arising in connection with or relating to any of the events or actions
described in this Section 11.3, shall be payable, on demand, by Borrower to
Lender and shall be additional Obligations secured under this Agreement and the
other Loan Documents by all of the Collateral.
1.71 ACCESS. Borrower shall provide access to Lender, exercisable as
frequently as Lender reasonably determines to be appropriate, upon reasonable
advance notice (unless an Event of Default shall have occurred and be
continuing, in which event no notice shall be required and Lender shall have
access at any and all times), during normal business hours (or at such other
times as may reasonably be requested by Lender), to inspect the properties and
facilities of Borrower and to inspect, audit, and make extracts from all of
Borrower's records, files, and books of account and Borrower shall make such
items available to Lender.
1.72 NO WAIVER BY LENDER. Lender's failure, at any time or times, to
require strict performance by Borrower of any provision of this Agreement and
any of the other Loan Documents shall not waive, affect, or diminish any right
of Lender thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by Lender of an Event of Default by Borrower under the Loan
Documents shall not suspend, waive, or affect any other Event of Default by
Borrower under this Agreement and any of the other Loan Documents whether the
same is prior or subsequent thereto and whether of the same or of a different
type. None of the undertakings, agreements, warranties, covenants, and
representations of Borrower contained in this Agreement or any of the other Loan
Documents and no Default or Event of Default by Borrower under this Agreement
and no defaults by Borrower under any of the other Loan Documents shall be
deemed to have been suspended or waived by Lender, unless such suspension or
waiver is by an instrument in writing signed by an officer of Lender, and
directed to Borrower specifying such suspension or waiver.
1.73 SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
1.74 PARTIES. This Agreement and the other Loan Documents shall be
binding upon, and inure to the benefit of, the successors of Borrower, each
Lender and the assigns, transferees and endorsees of each Lender..
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1.75 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH
STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND
ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. BORROWER HEREBY CONSENTS
AND AGREES THAT THE SUPERIOR COURTS OF SAN FRANCISCO COUNTY, CALIFORNIA, OR, AT
LENDER'S OPTION, THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
CALIFORNIA, SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO THIS AGREEMENT OR
TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. BORROWER EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND BORROWER HEREBY WAIVES ANY OBJECTION WHICH
BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR
FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING FOR SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. BORROWER HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT, AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE
ADDRESS SET FORTH IN SECTION 11.9 OF THIS AGREEMENT AND THAT SERVICE SO MADE
SHALL BE DEEMED COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL RECEIPT THEREOF
OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LENDER FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION.
1.76 NOTICES. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval,
declaration, or other communication shall or may be given or delivered to or
served upon any of the parties by another, or whenever any of the parties
desires to give or deliver or serve upon another any communication with respect
to this Agreement, each such notice, demand, request, consent, approval,
declaration, or other communication shall be in writing, shall be addressed to
the addresses set forth below, or such other or additional address as the
parties may notify each other of in writing, and shall be deemed to have been
sent, delivered, or given and received upon the earlier of: (a) if by facsimile,
upon transmission if transmission occurs between 8:00 a.m. and 5:00 p.m. on any
Business Day; (b) if by Federal Express or other overnight or one-day mail or
delivery service, on the next Business
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Day following deposit with such delivery service; (c) if by personal delivery,
upon completion of delivery; or (d) if by mail, three (3) Business Days after
deposit in the U.S. Mail, first class, postage prepaid :
(1) If to Lender, at:
Pacific Coast Farm Credit Services
5560 South Broadway
Eureka, California 95503
Attention: Account Officer - ML Macadamia Orchards
Facsimile: (707) 442-1268
Pacific Coast Farm Credit Services
200 Concourse Boulevard
Santa Rosa, California 95403
Attention: Account Officer - ML Macadamia Orchards
Facsimile: (707) 545-9400
(2) If to Borrower, at:
ML Macadamia Orchards, L.P.
ML Resources, Inc.
827 Fort Street
Honolulu, Hawaii 96813
Attention: _____________
Facsimile: _____________
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Failure or delay in delivering
copies of any notice, demand, request, consent, approval, declaration, or other
communication to the persons designated above to receive copies shall in no way
adversely affect the effectiveness of such notice, demand, request, consent,
approval, declaration, or other communication.
1.77 SURVIVAL. The representations and warranties of Borrower in this
Agreement shall survive the execution, delivery and acceptance hereof by the
parties hereto and the closing of the transactions described herein or related
hereto.
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1.78 SECTION TITLES. The Section titles and Table of Contents contained
in this Agreement are and shall be without substantive meaning or content of any
kind whatsoever and are not a part of the agreement between the parties hereto.
1.79 COUNTERPARTS. This Agreement may be executed in any number of
separate counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute one and the same instrument.
1.80 PERFORMANCE ALWAYS DUE ON BUSINESS DAY. To the extent that any
date under this Agreement is not a Business Day, then the payment or performance
due on such day shall be due on the next Business Day.
1.81 MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES
DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.
THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL
SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
1.82 TIME OF THE ESSENCE. Time is of the essence in every provision of
this Agreement.
1.83 NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered
into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other Person shall be a
third party beneficiary of, or have any direct or indirect cause of action or
claim in connection with, this Agreement or any other Loan Document.
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IN WITNESS WHEREOF, this Agreement has been duly executed as
of the date first written above.
ML MACADAMIA ORCHARDS, L.P., a Delaware
limited partnership
By: ML RESOURCES, INC., a Hawaii
corporation, its managing general partner
By: s/s Gregory A. Sprecher
-----------------------
Name:Gregory A. Sprecher
-------------------
Title:Senior Vice President
---------------------
ML RESOURCES, INC., a Hawaii corporation, as
Borrower
By: s/s Gregory A. Sprecher
-----------------------
Name:Gregory A. Sprecher
-------------------
Title:Senior Vice President
---------------------
PACIFIC COAST FARM CREDIT SERVICES, PCA
By:______________________________
Name:____________________________
Title:___________________________
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Security Agreement"), dated as
of May 1, 2000, is made by ML MACADAMIA ORCHARDS, L.P., a Delaware limited
partnership, and ML RESOURCES, INC., a Hawaii corporation ("Grantor"), in favor
of PACIFIC COAST FARM CREDIT SERVICES, ACA, ("Lender").
RECITALS
A. Pursuant to that certain Credit Agreement dated as of May 1, 2000,
by and among Grantor, as borrower, and Lender, Lender is agreeing to extend
financial accommodations to Borrower on the terms set forth therein. Lender is
willing to do so, but only upon the condition, among others, that Grantor shall
execute this Security Agreement.
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and in order to induce
Lender to make the Loan pursuant to the Credit Agreement, Grantor agrees, for
the benefit of Lender, as follows:
AGREEMENT
1. DEFINED TERMS. Unless otherwise defined herein, (i) terms
defined in the Credit Agreement are used herein as therein defined except that
the defined terms that refer to the "Borrower" shall refer herein to Grantor,
and (ii) the following terms shall have the following meanings (such meanings
being equally applicable to both the singular and plural forms of the terms
defined):
"ACCOUNT DEBTOR" means any "account debtor," as such term is
defined in the UCC.
"ACCOUNTS" has the meaning assigned to it in Exhibit A hereto.
"CHATTEL PAPER" has the meaning assigned to it in Exhibit A
hereto.
"COLLATERAL" has the meaning assigned to it in Section 2 of
this Security Agreement.
"CONTRACTS" has the meaning assigned to it in Exhibit A
hereto.
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"DOCUMENTS" has the meaning assigned to it in Exhibit A
hereto.
"EQUIPMENT" has the meaning assigned to it in Exhibit A
hereto.
"FARM PRODUCTS" has the meaning assigned to it in Exhibit A
hereto.
"FIXTURES" has the meaning assigned to it in Exhibit A hereto.
"GENERAL INTANGIBLES" has the meaning assigned to it in
Exhibit A hereto.
"GRANTOR" means ML Macadamia Orchards, L.P., a Delaware
limited partnership, and ML Resources, Inc., a Hawaii corporation.
"HEREBY," "HEREIN," "HEREOF," AND "HEREUNDER" and words of
similar import refer to this Security Agreement as a whole (including
any amendments, attachments, and schedules hereto) and not merely to
the specific section, paragraph or clause in which the respective word
appears.
"INSTRUMENTS" has the meaning assigned to it in Exhibit A
hereto.
"INVENTORY" has the meaning assigned to it in Exhibit A
hereto.
"INVESTMENT PROPERTY" has the meaning assigned to it in
Exhibit A hereto.
"LENDER" has the meaning assigned to them in the preamble
hereto.
"LICENSE" means any Patent License, Trademark License or other
license of rights or interests now held or hereafter acquired by
Grantor.
"LOAN" has the meaning assigned to it in Recital A.
"PATENT LICENSE" means rights under any written agreement now
owned or hereafter acquired by Grantor granting any right with respect
to any invention on which a Patent is in existence.
"PATENTS" means all of the following in which Grantor now
holds or hereafter acquires any interest: (i) all letters patent of the
United States or any other country, all registrations and recordings
thereof, and all
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applications for letters patent of the United States or any other
country, including registrations, recordings and applications in the
United States Patent and Trademark Office or in any similar office or
agency of the United States, any State or Territory thereof, or any
other country, and (ii) all reissues, continuations,
continuations-in-part or extensions thereof.
"PROCEEDS" has the meaning assigned to it in Exhibit A hereto.
"CREDIT AGREEMENT" has the meaning assigned to it in Recital
A.
"SECURED OBLIGATIONS" means all obligations of Grantor to
Lender under the Credit Agreement or any other Loan Document.
"SECURITY AGREEMENT" means this Security Agreement, as the
same may from time to time be amended, modified or supplemented.
"TRADEMARK LICENSE" means rights under any written agreement
now owned or hereafter acquired by Grantor granting any right to use
any Trademark or Trademark registration.
"TRADEMARKS" means all of the following now owned or hereafter
acquired by Grantor: (i) all trademarks, trade names, corporate names,
business names, trade styles, service marks, logos, other source or
business identifiers, prints and labels on which any of the foregoing
have appeared or appear, designs and general intangibles of like
nature, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in
connection therewith, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State or Territory
thereof, or any other country or any political subdivision thereof, and
(ii) all reissues, extensions or renewals thereof.
"UCC" means the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of California; PROVIDED,
HOWEVER, in the event that, by reason of mandatory provisions of law,
any or all of the attachment, perfection or priority of Lender's
security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of
California, the term "UCC" shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof
relating
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to such attachment, perfection or priority and for purposes of
definitions related to such provisions.
2. GRANT OF SECURITY INTEREST.
a. To secure the prompt and complete payment and
performance when due (whether at stated maturity, by acceleration or otherwise)
of all the Secured Obligations, and to induce Lender to enter into the Credit
Agreement and to make the Loan in accordance with the terms thereof, Grantor
hereby grants to Lender, a lien on and security interest in all of the property
described on EXHIBIT A hereto, whether now owned by or owing to, or hereafter
acquired by or arising in favor of Grantor (including under any trade names,
styles or divisions thereof), and whether owned or consigned by, or leased to
Grantor, and regardless of where located, together with any and all
replacements, remedies, or accessions thereto and all proceeds and products
thereof (all of which being hereinafter collectively referred to as the
"Collateral"); PROVIDED, HOWEVER, that notwithstanding any provision to the
contrary contained in this Security Agreement, Grantor does not grant, and
Lender has not taken, a lien against or security interest in (i) any Hazardous
Materials in which Grantor may now or hereafter acquire any interest, or which
Grantor may now or hereafter possess, manage or control, any (ii) any of
Grantor's governmental licenses and permits that if included in the Collateral
would violate any mandatory requirements of such licenses and permits or
applicable law prohibiting the creation of security interests therein.
b. In addition, to secure the prompt and complete
payment when due of the Secured Obligations and in order to induce Lender to
enter into the Credit Agreement and to make the Loan in accordance with the
terms thereof, Grantor hereby grants to Lenders a security interest in all other
personal property of Grantor, including all property of every description now or
hereafter in the possession or custody of, or in transit to, Lender for any
purpose, including safekeeping, collection or pledge, for the account of
Grantor, or as to which Grantor may have any right or power.
3. LENDER'S RIGHTS; LIMITATIONS ON LENDER'S OBLIGATIONS.
a. GRANTOR REMAINS LIABLE UNDER CONTRACTS AND
LICENSES. Grantor agrees that, anything herein to the contrary notwithstanding,
Grantor shall remain liable under each of its Contracts and each of its Licenses
to observe and perform all the conditions and obligations to be observed and
performed by it thereunder and Grantor shall perform all of its duties and
obligations thereunder, all in accordance with and pursuant to the terms and
provisions of each such Contract or License.
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Lender shall not have any obligation or liability under any Contract or License
by reason of or arising out of this Security Agreement or the granting herein of
a security interest therein or the receipt by Lender of any payment relating to
any Contract or License pursuant hereto, nor shall Lender be required or
obligated in any manner to perform or fulfill any of the obligations of Grantor
under or pursuant to any Contract or License, or to make any payment, or to make
any inquiry as to the nature or the sufficiency of any payment received by it or
the sufficiency of any performance by any party under any Contract or License,
or to present or file any claim, or to take any action to collect or enforce any
performance or the payment of any amounts which may have been assigned to it or
to which it may be entitled at any time or times.
b. NOTICE OF ASSIGNMENT OF COLLATERAL TO LENDER.
Lender may at any time after the occurrence and during the continuance of an
Event of Default notify Account Debtors of Grantor, parties to the Contracts of
Grantor, and obligors in respect of Instruments and Investment Property of
Grantor that the Accounts and the right, title and interest of Grantor in and
under such Contracts, Instruments, and Investment Property have been assigned to
Lender and that payments shall be made directly to Lender. Upon the request of
Lender, Grantor shall so notify such Account Debtors, parties to such Contracts,
and obligors in respect of such Instruments and Investment Property. Lender may
at any time after the occurrence and during the continuance of an Event of
Default notify obligors in respect of Chattel Paper of Grantor that the right,
title and interest of Grantor in and under such Chattel Paper has been assigned
to Lender and that payments shall be made directly to Lender.
c. VERIFICATION OF COLLATERAL. Upon reasonable prior
notice to Grantor (unless an Event of Default has occurred and is continuing, in
which case no notice is necessary), Lender shall have the right to make test
verifications of the Accounts and physical verifications and appraisals of the
Inventory and other Collateral in any manner and through any medium that it
considers advisable, and Grantor agrees to furnish all such assistance and
information as Lender may require in connection therewith.
4. REPRESENTATIONS AND WARRANTIES. Grantor hereby represents
and warrants that:
a. AUTHORITY; EXECUTION. Grantor has the right and
power and is duly authorized and empowered to enter into, execute, deliver and
perform this Security Agreement, and any other agreements, documents or
instruments executed in connection herewith or therewith. Grantor's execution
and performance of this Security Agreement will not constitute, cause or result
in any breach or violation of any provision of the partnership
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agreement, articles of incorporation or by-laws of Grantor, any law or any
contractual obligation of Grantor and does not conflict with, constitute a
default or require any consent under (other than consents that if not obtained
would not have a Material Adverse Effect) or result in the creation of any Lien
that would not be a Permitted Encumbrance upon any property or assets of Grantor
pursuant to any contractual obligation of Grantor. Upon execution, this Security
Agreement will constitute a valid, binding obligation of Grantor to Lender that
is enforceable according to its terms, except as the enforceability of this
Security Agreement may be subject to or limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws relating to or
affecting the rights of creditors generally and except as the availability of
equitable remedies are subject to the application of equitable principles. No
further consent, ratification or approval is required for this Security
Agreement to be effective.
b. TITLE TO COLLATERAL. Except for the security
interest granted to Lender under this Security Agreement and the other Permitted
Encumbrances, Grantor is the sole owner of each item of the Collateral in which
it purports to grant a security interest hereunder, having good and marketable
title thereto free and clear of any and all liens, security interests or other
encumbrances.
c. NO OTHER LIENS. No effective security agreement,
financing statement, equivalent security or lien instrument or continuation
statement covering all or any part of the Collateral is on file or of record in
any public office, except such as may have been filed by Grantor in favor of
Lender pursuant to this Security Agreement or such as relate to other Permitted
Encumbrances or protective filings with respect to equipment leases.
d. PERFECTION AND PRIORITY OF SECURITY INTEREST IN
THE COLLATERAL. The security interest granted to Lender in the Collateral under
this Security Agreement is a duly perfected security interest in favor of Lender
to secure the Secured Obligations, and is senior in priority to all other Liens
against and security interests in all or any part of the Collateral, except for
the Permitted Encumbrances.
e. ACCOUNTS. Subject to reasonable reserves therefor
on the books of Grantor, each Account of Grantor is, or when it comes into
existence will be, a statement of an indebtedness incurred by the obligor
thereunder to Grantor in the amount shown thereon. All Accounts are, or will be
when they come into existence, bona fide transactions completed in accordance
with the terms and provisions contained in any documents related thereto.
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f. CHANGE OF NAME. Grantor did not and has not done
within the last five years business under any trade name or style other than as
disclosed on EXHIBIT C hereto.
g. LOCATIONS OF OFFICES AND COLLATERAL; FEDERAL
TAXPAYER IDENTIFICATION. Grantor's chief executive office, principal place of
business, corporate offices, all warehouses and premises within which Collateral
is stored or located, and the locations of all of its records concerning the
Collateral are set forth on EXHIBIT C hereto, and Grantor shall not change such
chief executive office, principal place of business, corporate offices, or
warehouses or Collateral premises, or remove such records unless it has taken
such action as is necessary to cause the Lien of Lender in the Collateral to
continue to be perfected. Grantor shall not change its chief executive office,
principal place of business, corporate offices, or warehouses or Collateral
premises, or the location of its records concerning the Collateral, or its
federal taxpayer identification number, without giving thirty (30) days' prior
written notice thereof to Lender. Grantor's federal taxpayer identification
number is as set forth on EXHIBIT C hereto.
h. REGISTERED PATENTS, TRADEMARKS, AND COPYRIGHTS.
Grantor does not own or have any interest in any Patents, Trademarks, or
Copyrights that have been registered or otherwise recorded with any governmental
office, except as set forth on EXHIBIT C hereto.
i. FARMING OPERATIONS. Grantor does not own or have
any interest in any real property other than the real property described in
EXHIBIT B hereto.
5. COVENANTS. Grantor covenants and agrees with Lender that
from and after the date of this Security Agreement and until the Secured
Obligations are fully satisfied:
a. FURTHER ASSURANCES; PLEDGE OF INSTRUMENTS. At any
time and from time to time, upon the written request of Lender, and at the sole
expense of Grantor, Grantor shall promptly and duly execute and deliver any and
all such further instruments and documents and take such further action as
Lender may reasonably deem desirable to obtain the full benefits of this
Security Agreement and of the rights and powers herein granted, including (i)
filing any financing or continuation statements under the UCC with respect to
the liens and security interests granted hereunder or under any other Loan
Document and (ii) transferring Collateral to Lender's possession (if such
Collateral consists of Chattel Paper or if a security interest in such
Collateral can be perfected only by possession, or, if requested by Lender).
Grantor also hereby authorizes Lender to file any such financing or continuation
statement without the signature of Grantor to the extent permitted by applicable
law.
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If any amount payable under or in connection with any of the Collateral is or
shall become evidenced by any Instrument, such Instrument, other than checks and
notes received in the ordinary course of business, shall be duly endorsed in a
manner satisfactory to Lender and delivered to Lender immediately upon Grantor's
receipt thereof.
b. MAINTENANCE OF RECORDS. Grantor shall keep and
maintain, at its own cost and expense, satisfactory and complete records of the
Collateral, including a record of any and all payments received and any and all
credits granted with respect to the Collateral and all other dealings with the
Collateral. Upon the request of Lender, Grantor shall mark its books and records
pertaining to the Collateral to evidence this Security Agreement and the
security interests granted hereby. All Chattel Paper shall be marked with the
following legend: "This writing and the obligations evidenced or secured hereby
are subject to the security interest of Pacific Coast Farm Credit Services,
PCA." For Lender's further security, Grantor agrees that Lender shall have a
special property interest in all of Grantor's books and records pertaining to
the Collateral and, upon the occurrence and during the continuation of any Event
of Default, Grantor shall deliver and turn over any such books and records to
Lender or to its representatives at any time on demand of Lender. Prior to the
occurrence of an Event of Default and upon reasonable notice from Lender,
Grantor shall permit any representative of Lender to inspect such books and
records and shall provide photocopies thereof to Lender as more specifically set
forth in Section 5(i) below.
c. DELIVERY OF NOTES, DOCUMENTS AND CHATTEL PAPER.
Grantor shall deliver to Lender or its designee all now existing or hereafter
created or arising (i) original promissory notes payable to Grantor, assigned to
Grantor, pledged to Grantor or otherwise held by Grantor, together with all
corresponding documents including deeds of trust, security agreements and title
insurance policies, with such endorsements thereto as Lender may reasonably
require, (ii) Instruments (except for checks which are deposited in the ordinary
course of Grantor's business), (iii) negotiable warehouse receipts, and (iv)
Chattel Paper, promptly upon the execution of this Security Agreement or
Grantor's receipt of any such item, as the case may be.
d. FURTHER IDENTIFICATION OF COLLATERAL. Grantor
shall, if so requested by Lender, furnish to Lender, as often as Lender
reasonably requests, statements and schedules further identifying and describing
the Collateral and such other reports in connection with the Collateral as
Lender may reasonably request, all in reasonable detail.
e. LIMITATION ON LIENS ON COLLATERAL. Grantor shall
not create, permit or suffer to exist, and shall defend the Collateral against
and take such other action as is necessary to
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remove, any Lien on the Collateral except Permitted Encumbrances. Grantor shall
further defend the right, title and interest of Lender in and to any of
Grantor's rights under the Collateral, including, the Accounts, Chattel Paper,
Contracts, Documents, Equipment, Farm Products, Fixtures, General Intangibles,
Instruments, Investment Property, and Inventory and in and to the Proceeds
thereof against the claims and demands of all Persons whomsoever except the
holders of Permitted Encumbrances.
f. NOTICES. Grantor shall advise Lender, in
reasonable detail, promptly, within five (5) Business Days of after it becomes
aware of: (i) any material Lien, other than Permitted Encumbrances, attaching to
or asserted against any of the Collateral, (ii) any material change in the
composition of the Collateral (iii) any destruction of or substantial damage to
any of the Collateral in excess of $100,000 and (iv) the occurrence of any other
event which would have a Material Adverse Effect upon the Collateral and/or
Lender's Lien.
g. LIMITATIONS ON MODIFICATIONS OF ACCOUNTS. Subject
to the terms of the Credit Agreement, upon the occurrence and during the
continuation of any Event of Default, Grantor shall not, without Lender's prior
written consent, (i) grant any extension of the time of payment of any of the
Accounts, Chattel Paper, Instruments or amounts due under any Contract; (ii)
compromise or settle the same for less than the full amount thereof; (iii)
release, in whole or in part, any Person liable for the payment thereof; or (iv)
allow any credit or discount whatsoever thereon other than trade discounts
granted in the ordinary course of business of Grantor.
h. CONTINUOUS PERFECTION. Grantor shall not change
its name, identity or corporate structure in any manner which might make any
financing or continuation statement filed in connection herewith seriously
misleading within the meaning of section 9-402(7) of the UCC or any other then
applicable provision of the UCC unless Grantor shall have given Lender at least
thirty (30) days' prior written notice thereof and shall have taken all action
(or made arrangements to take such action substantially simultaneously with such
change if it is impossible to take such action in advance) necessary or
reasonably requested by Lender to amend such financing statement or continuation
statement so that it is not seriously misleading.
i. RIGHT OF INSPECTION. Upon reasonable notice to
Grantor (unless an Event of Default has occurred and is continuing, in which
case no notice is necessary), Lender shall at all times have full and free
access during normal business hours to all the books and records and
correspondence of Grantor, and Lender or its representatives may examine the
same, take extracts therefrom and make photocopies thereof, and Grantor agrees
to render to Lender, at Grantor's cost and expense, such clerical and other
assistance as may be reasonably requested with
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regard thereto. Upon reasonable notice to Grantor (unless an Event of Default
has occurred and is continuing, in which case no notice is necessary), Lender
and its representatives shall also have the right to enter into and upon any
premises where any of the Inventory is located for the purpose of inspecting the
same, observing its use or otherwise protectings Lender's interests in the
Collateral.
j. INDEMNIFICATION. In any suit, proceeding or
action brought by Lender relating to any Account, Chattel Paper, Contract,
General Intangible, Instrument or Document for any sum owing thereunder, or to
enforce any provision of any Account, Chattel Paper, Contract, General
Intangible, Instrument, or Document, Grantor shall save, indemnify and keep
Lender harmless from and against all expense, loss or damage suffered by reason
of any defense, setoff, counterclaim, recoupment or reduction of liability
whatsoever of the obligor thereunder arising out of a breach by Grantor of any
obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing to, or in favor of, such obligor or its successors
from Grantor, and all such obligations of Grantor shall be and remain
enforceable against, and only against, Grantor and shall not be enforceable
against Lender.
k. COMPLIANCE WITH TERMS OF ACCOUNTS, ETC. In all
material respects, Grantor shall perform and comply with all obligations in
respect of (i) Accounts, (ii) material Chattel Paper, Contracts, Licenses,
Instruments and Documents, and (iii) all other material agreements to which it
is a party or by which it is bound.
l. NOTIFICATION PRIOR TO REGISTRATION OF PATENTS,
TRADEMARKS, AND COPYRIGHTS. Grantor shall not register any interest in any
Patents, Trademarks, or Copyrights nor shall Grantor permit any in any Patents,
Trademarks, or Copyrights in which Grantor has an interest to become registered
with any governmental office, unless Grantor has provided Lender with fifteen
(15) days prior notice of Grantor's intent to do so and Grantor shall provide
Lender prior to effecting or permitting any such registration with such
additional security documents as Lender shall request.
m. FARMING OPERATIONS. Grantor shall not undertake
any farming operations on any real property unless Grantor shall have provided
Lender with thirty (30) days prior notice of Grantor's intent to do so, which
notice shall be accompanied by a detailed description of the real property on
which the crops are grown, and Grantor shall have provided Lender with a
supplement to this Security Agreement and such financing statement amendments
and other documents as Lender shall request.
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6. LENDER'S APPOINTMENT AS ATTORNEY-IN-FACT.
a. Grantor hereby irrevocably constitutes and
appoints Lender and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of Grantor and in the name of Grantor
or in its own name, and hereby grants to Lender, in Lender's discretion, the
power and right, on behalf of Grantor, without notice to or assent by Grantor,
and at any time prior to or after the occurrence of an Event of Default, to do
the following:
(i) to take any and all appropriate action
and to execute and deliver any and all documents and instruments which
may be necessary or desirable to continue any insurance existing
pursuant to the terms of the Credit Agreement, and pay all or any part
of the premiums therefor and the costs thereof; and
(ii) to file any financing or continuation
statements under the UCC with respect to the Liens and security
interests granted hereunder or under any other Loan Document.
b. Grantor hereby irrevocably constitutes and
appoints Lender and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of Grantor and in the name of Grantor
or in its own name, from time to time in Lender's discretion, for the purpose of
carrying out the terms of this Security Agreement, to take any and all
appropriate action and to execute and deliver any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Security Agreement and, without limiting the generality of the foregoing,
hereby grants to Lender the power and right, on behalf of Grantor, without
notice to or assent by Grantor, upon the occurrence and during the continuation
of an Event of Default, to do the following:
(i) ask, demand, collect, receive and give
acquittances and receipts for any and all money due or to become due
under any Collateral, and take ownership and control of any and all
lock boxes and other depository accounts by written notice to any bank
or other institution maintaining such lock boxes or other depository
accounts;
(ii) in the name of Grantor, in its own name
or otherwise, endorse and receive payment of any checks, drafts, notes,
acceptances, or other Instruments for the payment of monies due under
any Collateral;
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(iii) receive payment of any and all monies,
claims, and other amounts due or to become due at any time arising out
of or in respect of any Collateral;
(iv) pay or discharge taxes, liens, security
interest, or other encumbrances levied or placed on or threatened
against the Collateral;
(v) effect any repairs or obtain any
insurance called for by the terms of this Security Agreement and pay
all or any part of the premiums therefor and costs thereof;
(vi) direct any party liable for any payment
under or in respect of any of the Collateral to make payment of any and
all monies due or to become due thereunder, directly to Lender or as
Lender shall direct;
(vii) sign and endorse any invoices, freight
or express bills, bills of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications, and notices in
connection with accounts and other documents constituting or related to
the Collateral;
(viii) settle, compromise or adjust any
suit, action, or proceeding described above and, in connection
therewith, give such discharges or releases as Lender may deem
appropriate;
(ix) file any claim or take or commence any
other action or proceeding in any court of law or equity or otherwise
deemed appropriate by Lender for the purpose of collecting any and all
such monies due under any Collateral whenever payable;
(x) commence and prosecute any suits,
actions or proceedings of law or equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and to
enforce any other right in respect of any Collateral;
(xi) defend any suit, action or proceeding
brought against Grantor with respect to any Collateral if Grantor does
not defend such suit, action or proceeding or if Lender believes that
Grantor is not pursuing such defense in a manner that will maximize the
recovery with respect to such Collateral;
(xii) license or, to the extent permitted by
an applicable license, sublicense whether general, specific or
otherwise, and whether on an exclusive or non-exclusive
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basis, any Patent or Trademark throughout the world for such term or
terms on such conditions and in such manner as Lender shall, in its
sole discretion, determine;
(xiii) sell, transfer, pledge, make any
agreement with respect to, or otherwise deal with any of the Collateral
as fully and completely as though Lender were the absolute owner
thereof for all purposes, and to do, at Lender's option and Grantor's
expense, at any time, or from time to time, all acts and things which
Lender reasonably deems necessary to perfect, preserve, or realize upon
the Collateral and Lender's Lien therein in order to effect the intent
of this Security Agreement, all as fully and effectively as Grantor
might do; and
(xiv) contact, make any agreement with, or
otherwise deal with any governmental or regulatory agency in connection
with the operation of Grantor's business or the possession or
liquidation of any or all of the Collateral.
c. Grantor hereby ratifies, to the extent permitted
by law, all that said attorneys shall lawfully do or cause to be done by virtue
hereof. The power of attorney granted pursuant to this Section 6 is a power
coupled with an interest and shall be irrevocable until the Secured Obligations
are paid or otherwise satisfied in full.
d. The powers conferred on Lender hereunder are
solely to protect Lender's interests in the Collateral and shall not impose any
duty upon Lender to exercise any such powers. Lender shall be accountable only
for amounts that it actually receives as a result of the exercise of such powers
and neither it nor any of its officers, directors, employees, agents or
representatives shall be responsible to Grantor for any act or failure to act,
except for their own gross negligence or willful misconduct.
e. Grantor also authorizes Lender to execute, in
connection with the sale provided for in Section 8 hereof, any endorsements,
assignments or other instruments of conveyance or transfer with respect to the
Collateral.
7. PERFORMANCE BY LENDER OF GRANTOR'S OBLIGATION. If Grantor
fails to perform or comply with any of its agreements contained herein or in any
other Loan Document, and Lender, as provided for by the terms of this Security
Agreement, or in any other Loan Document, shall itself perform or comply, or
otherwise cause performance of or compliance with such agreement, the reasonable
expenses, including attorneys' fees, of Lender incurred in connection with such
performance or compliance, together with interest thereon at the Base Rate then
in effect in respect of the Revolving Loan, shall be payable by Grantor to
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Lender on demand and shall constitute Secured Obligations secured hereby.
8. REMEDIES, RIGHTS UPON DEFAULT.
a. If any Event of Default shall occur and be
continuing, Lender may exercise in addition to all other rights and remedies
granted to it under this Security Agreement, the Credit Agreement, the other
Loan Documents and under any other instrument or agreement securing, evidencing
or relating to the Secured Obligations, all rights and remedies of a secured
party under the UCC. Without limiting the generality of the foregoing, Grantor
expressly agrees that in any such event Lender, without demand of performance or
other demand, advertisement or notice of any kind (except the notice specified
below of time and place of public or private sale) to or upon Grantor or any
other Person (all and each of which demands, advertisements and notices are
hereby expressly waived to the maximum extent permitted by the UCC and other
applicable law), may forthwith enter upon the premises of Grantor where any
Collateral is located through self-help, without judicial process, without first
obtaining a final judgment or giving Grantor notice and opportunity for a
hearing on Lender's claim or action, and without paying rent to Grantor, and
collect, receive, assemble, process, appropriate and realize upon the
Collateral, or any part thereof, and may forthwith sell, lease, assign, give an
option or options to purchase, or sell or otherwise dispose of and deliver said
Collateral (or contract to do so), or any part thereof, in one or more parcels
at public or private sale or sales, at any exchange or broker's board or at any
of Lender's offices or elsewhere at such prices as it may deem best, for cash or
on credit or for future delivery without assumption of any credit risk. Lender
shall have the right upon any such public sale or sales, and, to the extent
permitted by law, upon any such private sale or sales, to purchase for the
benefit of Lender the whole or any part of said Collateral so sold, free of any
right or equity of redemption, which equity of redemption Grantor hereby
releases. Such sales may be adjourned and continued from time to time with or
without notice. Lender shall have the right to conduct such sales on Grantor's
premises or elsewhere and shall have the right to use Grantor's premises without
charge for such sales for such time or times as Lender deems necessary or
advisable.
b. Grantor further agrees, at Lender's request, to
assemble the Collateral and make it available to Lender at places which Lender
shall reasonably select, whether at Grantor's premises or elsewhere. Until
Lender is able to effect a sale, lease, or other disposition of Collateral,
Lender shall have the right to use or operate Collateral on behalf of Lender, or
any part thereof, to the extent that it deems appropriate for the purpose of
preserving Collateral or its value or for any other purpose deemed appropriate
by Lender. Lender shall have no
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obligation to Grantor to maintain or preserve the rights of Grantor as against
third parties with respect to Collateral while Collateral is in the possession
of Lender. Lender may, if it so elects, seek the appointment of a receiver or
keeper to take possession of Collateral and to enforce any of Lender's remedies
with respect to such appointment without prior notice or hearing. Lender shall
apply the net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, as provided in Section 8(e) hereof, such Grantor remaining
liable for any deficiency remaining unpaid after such application, and only
after so paying over such net proceeds and after the payment by Lender of any
other amount required by any provision of law, including section 9-504(1)(c) of
the UCC (but only after Lender has received what Lender considers reasonable
proof of a subordinate party's security interest), need Lender account for the
surplus, if any, to Grantor. To the maximum extent permitted by applicable law,
Grantor waives all claims, damages, and demands against Lender arising out of
the repossession, retention or sale of the Collateral except such as arise out
of the gross negligence or wilful misconduct of such party. Grantor agrees that
five (5) days' prior notice by Lender of the time and place of any public sale
or of the time after which a private sale may take place is reasonable
notification of such matters. Grantor shall remain liable for any deficiency if
the proceeds of any sale or disposition of the Collateral are insufficient to
pay all amounts to which Lender is entitled, Grantor also being liable for any
attorneys' fees incurred by Lender to collect such deficiency.
c. Grantor agrees to pay any and all costs of Lender,
including, reasonable attorneys' fees, incurred in connection with the
enforcement of any of its rights and remedies hereunder.
d. Except as otherwise specifically provided herein,
Grantor hereby waives presentment, demand, protest or any notice (to the maximum
extent permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.
e. The proceeds of any sale, disposition or other
realization upon all or any part of the Collateral shall be distributed by
Lender, upon receipt, in accordance with the provisions of the Credit Agreement.
f. From and after the occurrence and during the
continuation of an Event of Default, Lender may, at its sole discretion, contact
any and all Federal, state, or other governmental or regulatory agencies with
any jurisdiction over Grantor, with respect to the possibility that Lender may
take over the operation of any Grantor's business, or the possibility
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that Lender may take possession of or liquidate any or all of the Collateral.
g. Grantor acknowledges that Lender shall be entitled
to independently, but without duplication, exercise the rights and remedies of
Lender exercisable for their benefit under this Security Agreement.
9. INDEMNITY AND EXPENSES.
a. Grantor agrees to indemnify Lender from and
against any and all claims, losses and liabilities growing out of or resulting
from this Security Agreement (including, enforcement of this Security
Agreement), except claims, losses or liabilities resulting from such indemnified
party's gross negligence or wilful misconduct.
b. Grantor will upon demand pay to Lender the amount
of any and all reasonable out-of-pocket expenses, including the reasonable fees
and disbursements of counsel and of any experts and agents, which Lender may
incur in connection with (i) the administration of this Security Agreement, (ii)
the custody, preservation, use or operation of, or the sale of, collection from,
or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of Lender hereunder, or (iv) the failure by
Grantor to perform or observe any of the provisions hereof.
10. GRANT OF LICENSE TO USE PATENT AND TRADEMARK COLLATERAL.
For the purpose of enabling Lender to exercise rights and remedies under Section
8 hereof (including, without limiting the terms of Section 8 hereof, in order to
take possession of, hold, preserve, process, assemble, prepare for sale, market
for sale, sell or otherwise dispose of Collateral) at such time as Lender shall
be lawfully entitled to exercise such rights and remedies, Grantor hereby grants
to Lender an irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to Grantor) to use, transfer, license or
sublicense any Patent, Trademark, trade secret, or copyright now owned or
hereafter acquired by Grantor, and wherever the same may be located, and
including in such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer and automatic
machinery software and programs used for the compilation or printout thereof.
11. LIMITATION ON LENDER'S DUTY IN RESPECT OF COLLATERAL.
Lender shall use reasonable care with respect to the Collateral in its
possession or under its control. Lender shall have no other duty as to any
Collateral in its possession or control or in the possession or control of any
agent or nominee of such party, or any income thereon or as to the preservation
of
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rights against prior parties or any other rights pertaining thereto.
12. REINSTATEMENT. This Security Agreement shall remain in
full force and effect and continue to be effective should any petition be filed
by or against Grantor for liquidation or reorganization, should Grantor become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of Grantor's
assets, and shall continue to be effective or be reinstated, as the case may be,
if at any time payment and performance of the Secured Obligations, or any part
thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Secured Obligations,
whether as a "voidable preference," "fraudulent conveyance," or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Secured Obligations shall be reinstated and deemed reduced only by such amount
paid and not so rescinded, reduced, restored or returned.
13. NOTICES. Except as otherwise provided herein, whenever it
is provided herein that any notice, demand, request, consent, approval,
declaration, or other communication shall or may be given or delivered to or
served upon any of the parties by another, or whenever any of the parties
desires to give or deliver or serve upon another any communication with respect
to this Security Agreement, each such notice, demand, request, consent,
approval, declaration, or other communication shall be in writing, shall be
addressed to the addresses set forth below, or such other or additional address
as the parties may notify each other of in writing, and shall be deemed to have
been sent, delivered, or given and received upon the earlier of: (a) if by
facsimile, upon transmission if transmission occurs between 8:00 a.m. and 5:00
p.m. on any Business Day; (b) if by Federal Express or other overnight or
one-day mail or delivery service, on the next Business Day following deposit
with such delivery service; (c) if by personal delivery, upon completion of
delivery; or (d) if by mail, three (3) Business Days after deposit in the U.S.
Mail, first class, postage prepaid:
(a) If to Pacific Coast, at:
Pacific Coast Farm Credit Services, ACA
5560 South Broadway
Eureka, California 95503
Attention: Account Officer -- ML Macadamia Orchards
Facsimile: (707) 442-1268
Pacific Coast Farm Credit Services, ACA
200 Concourse Blvd.
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P.O. Box 1120
Santa Rosa, CA 95402-1120
Attn: Account Officer --ML Macadamia Orchards
Facsimile: (707) 521-6105
(b) If to Grantor, at:
ML Macadamia Orchards, L.P.
ML Resources, Inc.
827 Fort Street
Honolulu, Hawaii 96813
Attention: _____________
Facsimile: _____________
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Failure or delay in delivering
copies of any notice, demand, request, consent, approval, declaration, or other
communication to the persons designated above to receive copies shall in no way
adversely affect the effectiveness of such notice, demand, request, consent,
approval, declaration, or other communication.
14 SEVERABILITY. Any provision of this Security Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
15 NO WAIVER; CUMULATIVE REMEDIES. Lender shall not by any
act, delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
Lender, and then only to the extent therein set forth. A waiver by Lender of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which Lender would otherwise have had on any future
occasion. No failure to exercise nor any delay in exercising on the part of
Lender, any right, power or privilege hereunder, shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
hereunder provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law. None of the
terms or provisions of this Security Agreement may be waived, altered, modified
or
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amended except by an instrument in writing, duly executed by Lender and Grantor
affected by such waiver.
16 LIMITATION BY LAW. All rights, remedies and powers provided
in this Security Agreement may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of law, and all the provisions
of this Security Agreement are intended to be subject to all applicable
mandatory provisions of law that may be controlling and to be limited to the
extent necessary so that they shall not render this Security Agreement invalid,
unenforceable, in whole or in part, or not entitled to be recorded, registered,
or filed under the provisions of any applicable law.
17 TERMINATION OF THIS SECURITY AGREEMENT. Subject to Section
12 hereof, this Security Agreement shall terminate upon full and final payment
and performance of all of the Secured Obligations.
18 SUCCESSOR AND ASSIGNS. This Security Agreement and all
obligations of Grantor hereunder shall be binding upon the successors and
assigns of Grantor, and shall, together with the rights and remedies of Lender
hereunder, inure to the benefit of Lender and its successors and assigns, as
permitted pursuant to the terms of the Credit Agreement. No sales of
participations, other sales, assignments, transfers or other dispositions of any
agreement governing or instrument evidencing the Secured Obligations or any
portion thereof or interest therein, as permitted pursuant to the terms of the
Credit Agreement, shall in any manner affect the security interest granted to
Lender hereunder. Grantor may not assign, sell or otherwise transfer an interest
in this Security Agreement except as provided by the Credit Agreement.
19 FURTHER INDEMNIFICATION. Grantor agrees to pay, and to hold
Lender harmless from, any and all liabilities with respect to, or resulting from
any delay in paying, any and all excise, sales, or other similar taxes which may
be payable or determined to be payable with respect to any of the Collateral or
in connection with any of the transactions contemplated by this Security
Agreement.
20 ENTIRE AGREEMENT. The execution of this Security Agreement
supersedes all the negotiations or stipulations concerning matters thereof which
preceded or accompanied the execution and delivery of this Security Agreement.
This Security Agreement is intended by the parties hereto to be a complete and
exclusive statement of the terms and conditions hereof.
21 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS
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SECURITY AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT
REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA. GRANTOR HEREBY CONSENTS AND AGREES THAT
THE SUPERIOR COURTS OF SAN FRANCISCO COUNTY, CALIFORNIA, OR, AT LENDERS OPTION,
THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA, SHALL
HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
BETWEEN GRANTOR AND LENDER PERTAINING TO THIS SECURITY AGREEMENT OR TO ANY
MATTER ARISING OUT OF OR RELATED TO THIS SECURITY AGREEMENT. GRANTOR EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND GRANTOR HEREBY WAIVES ANY OBJECTION WHICH
GRANTOR MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR
FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING FOR SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. GRANTOR HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT, AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO GRANTOR AT THE
ADDRESS SET FORTH IN SECTION 13 OF THIS SECURITY AGREEMENT AND THAT SERVICE SO
MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF GRANTOR'S ACTUAL RECEIPT
THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE
PREPAID. NOTHING IN THIS SECURITY AGREEMENT SHALL BE DEEMED OR OPERATE TO
PRECLUDE LENDER OR GRANTOR FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN
ANY OTHER JURISDICTION.
22 MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES
DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.
THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL
SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER THIS SECURITY AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
23 AMENDMENTS; ETC. No amendment to or waiver of any provision
of this Security Agreement nor consent to any departure by Grantor from any
provision of the Security Agreement, shall in any event be effective unless the
same shall be in writing and signed by Lender, and then such waiver or consent
shall be
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effective only in the specific instance and for the specific purpose for which
given.
24 INTERPRETATION. No provision of this Security Agreement
shall be construed against or interpreted to the disadvantage of any party
hereto by any court or other governmental or judicial authority by reason of
such party's having or being deemed to have structured, drafted or dictated such
provision.
25 SECTION TITLES. The section titles contained in this
Security Agreement are and shall be without substantive meaning or content of
any kind whatsoever and are not a part of the agreement between the parties
hereto.
26 COUNTERPARTS. This Security Agreement may be executed in
any number of identical counterparts, each of which shall be an original, but
all of which shall constitute one and the same agreement. This Security
Agreement shall become effective when Lender shall have received all original
executed counterparts
27 FURTHER ASSURANCES. Grantor agrees, upon the written
request of Lender, to execute and deliver to Lender, from time to time, any
additional instruments or documents reasonably considered necessary by Lender to
cause this Security Agreement and the Secured Obligations to be, become, or
remain valid and effective, and to cause Lender's security interest in the
pledged Collateral to be, become, or remain duly perfected.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Security Agreement to be executed and delivered by its duly authorized officer
on the date first set forth above.
ML MACADAMIA ORCHARDS, L.P., a
Delaware limited partnership
By: ML RESOURCES, INC., a Hawaii
corporation, its managing
general partner
By: s/s Gregory A. Sprecher
------------------------
Name:Gregory A. Sprecher
-------------------
Title: Senior Vice President
---------------------
ML RESOURCES, INC., a Hawaii
corporation
By: s/s Gregory A. Sprecher
------------------------
Name:Gregory A. Sprecher
-------------------
Title: Senior Vice President
---------------------
ACCEPTED:
PACIFIC COAST FARM CREDIT SERVICES, PCA
By:__________________________________
Name:________________________________
Title:_______________________________
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KA'U ORCHARDS YEAR 2000 FARMING LEASE
THIS LEASE is made as of the 1st day of May 2000, and
effective May 1, 2000, by and between:
KA'U AGRIBUSINESS CO., INC., a Hawaii corporation, with place
of business at 96-3207 Maile Street, Pahala, Hawaii 96777, and post office
address at P.O. Box 130, Pahala, Hawaii 96777, hereinafter called the "Landlord,
and
ML MACADAMIA ORCHARDS, L.P., a Delaware limited partnership,
with place of business at 828 Fort Street, Suite 205, Honolulu, Hawaii, 96813,
hereinafter called the "Tenant".
WITNESSETH
For the term, at the rents, and on the covenants, conditions
and provisions hereinafter set forth, Landlord hereby demises and leases, and
Tenant hereby accepts and rents, those certain parcels of land (or undivided
interests therein) situate at Ka'u in the County and State of Hawaii, as more
particularly described in Exhibit A attached hereto and made a part hereof,
subject, however, to the encumbrances described in said Exhibit A.
TO HAVE AND TO HOLD the same, together with all improvements
(excepting the Garage, Administration Building and Macadamia Nut Husking Plant
and all macadamia trees which are already owned by Tenant), rights, easements,
privileges and appurtenances thereunto belonging or appertaining, including
rights of access to the demised premises over Landlord's land, unto Tenant for a
term of forty-five years and two months commencing May 1, 2000, and ending June
30, 2045, unless sooner terminated as provided below.
Tenant hereby covenants and agrees to pay to Landlord, net
over and above all taxes, assessments and other charges hereunder payable by
Tenant, rent as set out in the Rent Schedule attached hereto and made a part
hereof.
AND LANDLORD hereby covenants with Tenant that upon payment by
Tenant of the rent as aforesaid and upon observance and performance of the
covenants by Tenant hereinafter contained, Tenant shall peaceably hold and enjoy
said premises for the term hereby demised without hindrance or interruption by
Landlord or any other person or persons lawfully claiming by, through or under
Landlord, except as herein expressly provided.
AND TENANT hereby covenants with Landlord as follows:
1. PAYMENT OF RENT. Tenant will pay said rent in lawful money
of the United States of America at the times and in the manner aforesaid,
without any deduction and without notice or demand, at the office of Landlord in
Pahala.
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2. TAXES AND OTHER CHARGES. Tenant will also pay to Landlord
at least ten (10) days before the same become delinquent all taxes, assessments,
rates, charges and other outgoings of every description (but not including
interest and penalties if Landlord makes late payment after receiving timely
remittance from Tenant) to which said premises or any part thereof or any
improvement thereon, or Landlord or Tenant in respect thereof, are now or may
during said term be assessed or become liable, whether made by governmental
authority, by any utility company or by any public or community service company;
provided, however, that with respect to any assessment made under any betterment
or improvement law which may be payable in installments, Tenant shall be
required to pay only such installments together with interest as shall become
due and payable during said term, and real property taxes shall be prorated
between Landlord and Tenant as of the dates of commencement and expiration
respectively of said term, and provided that Tenant's share of the real property
taxes for the land shall be proportionate to any undivided interests in the land
demised by this Lease and that Tenant shall be responsible for all real property
taxes attributable to trees and other improvements used or owned by Tenant on
the premises.
Tenant will also pay to Landlord with each installment of
rent, real property taxes and assessments and other charges hereunder payable by
Tenant the amount of all Hawaii general excise or similar taxes payable by
Landlord with respect thereto, whether actually or constructively received. If
at any time during said term there shall be assessed against the demised land or
any part thereof or any improvement thereon or any rents payable to Landlord
therefor or against Landlord in respect thereof, any new taxes (other than
federal or state net income, franchise, corporation, capital stock or excess
profits taxes or any other taxes existing at the commencement of said term)
which are in substitution for real property taxes or are in lieu of increases
thereof, Tenant will also pay to Landlord as additional rent, at least ten (10)
days before the same become delinquent, Tenant's proportionate share of all such
new taxes. Tenant will pay all Hawaii conveyance taxes, if any, payable with
respect to this Lease and any subleases hereunder.
3. IMPROVEMENTS REQUIRED BY LAW. Tenant will at Tenant's own
expense during the whole of said term make, build, maintain and repair all
fences, sewers, drains and roads which may be required by law to be made, built,
maintained and repaired upon or adjoining or in connection with or for the use
of the premises used or occupied by Tenant or any part thereof and will bear the
pro rata cost of all such features or facilities used by both Tenant and
Landlord, corresponding to the proportionate usage of the same by Tenant or
persons acting under Tenant.
4. REPAIR. Tenant will at Tenant's own expense from time to
time and at all times during said term repair, maintain and keep all of Tenant's
buildings and other improvements now or hereafter built on the demised land with
all necessary
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reparations and amendments whatsoever in good and safe repair, order and
condition, except for reasonable wear and use thereof and damage by unavoidable
casualty other than fire and extended coverage risks. If Tenant or any person
claiming by, through or under Tenant shall damage any private roadway giving
access to said premises, Tenant shall immediately upon written notice by
Landlord repair such roadway to the condition that existed prior to such damage,
and if Tenant shall fail to do so Landlord may accomplish such repair at
Tenant's expense. Tenant will also, at all times during said term at Tenant's
own expense, maintain in good order and condition all boundary monuments (if
any) now or hereafter constructed on the demised land. Landlord represents that
no major repairs that would be required pursuant to the terms of this paragraph
are necessary as of the date of this Lease.
5. OBSERVANCE OF LAWS. Tenant will at all times during said
term keep said premises in a safe condition and observe and perform all laws,
ordinances, rules and regulations now or hereafter made by any governmental
authority for the time being applicable to said premises or any improvement
thereon or use thereof.
6. INSPECTION. Tenant will permit Landlord and Landlord's
agents at all reasonable times during said term to enter said premises and
examine the state of repair and condition thereof, and will repair and make good
all defects required by the terms of this Lease to be repaired by Tenant of
which notice shall be given by Landlord or Landlord's agents within thirty (30)
days after the giving of such notice or such further time as may be required to
complete such repair with due diligence.
7. USE. Tenant will use said premises solely for the
cultivation and harvesting of macadamia nuts and for accessory buildings and
other improvements useful for or incidental to said purpose. Tenant will not
make or suffer any strip or waste or unlawful, improper or offensive use of said
premises or any part thereof.
8. GOOD HUSBANDRY. Tenant will in the use of the portions of
said premises used or occupied by Tenant follow approved methods of husbandry
practiced on lands similarly situated or subject to similar conditions. Tenant
will keep said premises in a good cultivated condition reasonably free from
weeds and other noxious growth. Tenant will seek the guidance of appropriate
governmental agencies on the matter of erosion control and will by proper
construction and use of drainage ditches and otherwise, take all reasonable
precautions to prevent or arrest loss of soil by erosion. Any buffer strip
required by Tenant for the protection of Tenant's agricultural crops on said
premises shall be provided by Tenant at Tenant's own expense within the land
hereby demised, and Tenant will not demand any contribution whatsoever for the
cost of providing or maintaining any such strip from Landlord or Landlord's
tenants of any land adjoining areas used by Tenant. Tenant understands and
agrees that neither Landlord nor Landlord's tenants shall be required to perform
any crop or weed control on any land adjoining said premises.
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9. REPORTS. Tenant will furnish to Landlord on or before the
expiration of sixty (60) days after the end of each calendar year during said
term a complete written statement stating in reasonable detail (a) the quantity
of macadamia nuts produced on or derived from the demised land which were sold
during such year, (b) a list of every sublease, tenancy and cropping agreement
effective at any time during such year with respect to any part of said premises
specifying the area, location and term thereof and the rent reserved thereunder,
(c) the extent of construction and maintenance of buildings and other
improvements on and general character and condition of the demised land, and (d)
the number of acres of the demised land cleared and planted with macadamia nut
trees and the location thereof.
10. FIRE INSURANCE. Tenant will at Tenant's own expense at all
times during said term keep all buildings now or hereafter erected on the
demised land used by Tenant exceeding $1,000 in actual value insured against
loss or damage by fire with extended coverage in an insurance company authorized
to do business in Hawaii in a sum not less than 80% of the value thereof, in the
joint names of Landlord, Tenant and any mortgagee as their interests may appear,
and will pay all premiums thereon when due, and will, whenever requested by
Landlord, deposit promptly with Landlord the current policies of such insurance
or certificates thereof. In every case of loss or damage to said buildings all
proceeds of such insurance shall be used with all reasonable speed by Tenant for
rebuilding, repairing or otherwise reinstating the same buildings in a good and
substantial manner according to the plan and elevation of the buildings so
destroyed or damaged or such modified plan as shall first be approved in writing
by Landlord; provided, however, that in lieu of such restoration Tenant may at
Tenant's option remove all debris and remains of such damaged buildings and
restore the site thereof to good condition and even grade, and all insurance
proceeds then remaining after the costs of restoration and debris removal shall
be payable to Tenant and any mortgagee as their interests may appear, except
that such remaining proceeds shall be payable to Landlord if there shall be
fewer than three (3) years remaining on the term of this Lease (not including
any extension options).
11. LIENS AND BONDS. Tenant will not commit or suffer any act
or neglect whereby said premises or any improvement thereon or the estate of
Tenant therein shall at any time during said term become subject to any
attachment, judgment, lien, charge or encumbrance whatsoever, and will indemnify
and hold Landlord harmless from and against all loss, cost and expense,
including reasonable attorneys' fees, with respect thereto. Tenant will, before
commencing construction of any improvements on said premises, deposit with
Landlord a fully-executed copy of the contract therefor and a copy of the
contractor's performance bond and labor and material payment bond naming
Landlord as an obligee, in an amount equal to the cost of such construction in
form and with surety satisfactory to Landlord, guaranteeing the completion of
such work free and clear of all mechanics' and materialmen's lien.
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12. INDEMNITY AND LIABILITY INSURANCE. Except as to injury,
death or property, damage resulting solely from the negligence of Landlord,
Tenant will indemnify and hold Landlord harmless from and against all claims and
demands for loss or damage, including property damage, personal injury and
wrongful death, arising out of or in connection with the use or occupancy of
said premises, or any road giving access to the premises, by Tenant or any
person claiming by, through or under Tenant, or any accident or fire on said
premises, or any nuisance made or suffered thereon, or any failure by Tenant to
keep said premises or, any adjoining land as set forth in paragraph 14 hereof in
a safe condition, or to perform any of the covenants herein contained, and will
reimburse Landlord for all costs and expenses, including reasonable attorneys'
fees, incurred by Landlord in connection with the defense of any such claims,
and will hold all goods, materials, furniture, fixtures, equipment, machinery,
livestock and other property whatsoever on said premises at the sole risk of
Tenant and hold Landlord harmless from any loss or damage thereto by any cause
whatsoever. Tenant will at Tenant's own expense effect and maintain during the
whole of said term comprehensive general liability insurance with respect to
said premises in an insurance company authorized to do business in Hawaii,
naming Landlord as an additional assured, with minimum limits of not less than
$1,000,000 for injury to one or more persons in any one accident or occurrence
and not less than $100,000 for property damage, or such higher limits as
Landlord may from time to time establish with due regard to the then prudent
business practice in the State of Hawaii as reasonably adequate for Landlord's
protection, and will from time to time deposit promptly with Landlord current
certificates of such insurance. Except as to injury, death or property damage
resulting solely from the negligence of Tenant, Landlord will indemnify and hold
Tenant harmless from and against all claims and demands for loss or damage,
including property damage, personal injury and wrongful death, arising out of or
in connection with the use or occupancy by Landlord or any person claiming by,
through or under Landlord, of the land represented by the undivided interest not
demised by this Lease, or out of or in connection with any accident or fire on
said land of Landlord not used or occupied by Tenant or persons claiming under
Tenant, or any nuisance made or suffered thereon (unless caused by Tenant), and
will reimburse Tenant for all costs and expenses, including reasonable
attorneys' fees, incurred by Tenant in connection with the defense of any such
claims for which Tenant and those claiming under Tenant shall be found to be
without fault.
13. OVERHANGING TREES. Tenant will not during said term plant,
cultivate or maintain on the demised land any trees whatsoever so close to any
boundary thereof as to overhang an adjoining lot, road or trail, and if
necessary to comply with this covenant will remove any trees or branches thereof
which at any time shall overhang an adjoining lot, road or trail.
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14. LAND ADJOINING ROAD. Tenant will at all times during said
term maintain and keep any adjoining land lying between the established road and
any parts of said premises used or occupied by Tenant or persons claiming under
Tenant along such road in a safe, neat and orderly condition free from all
brush, weeds and debris of every kind, and will also maintain and keep any ditch
now or hereafter existing within such adjoining land free from all boulders and
other obstructions whatsoever to flood waters.
15. ASSIGNMENT AND SUBLETTING Landlord and Tenant shall each
have the right to assign this Lease with the prior written consent of the other,
which consent shall not be unreasonably withheld. In the event of assignment of
this Lease by Tenant, Landlord shall have the right to condition its consent on
satisfactory proof of the financial strength of Tenant's assignee. Tenant may
sublet any part or parts of said land used or occupied by Tenant to others on
the express condition that such sublease shall incorporate all terms and
provisions herein contained pertaining to such land and that such sublease shall
be properly accounted for in detail in each annual report by Tenant herein
required to be furnished to Landlord. Landlord shall not unreasonably withhold
any such consent nor require the payment of any moneys or other consideration
for the giving of such consent other than a reasonable fee as hereinafter
provided in paragraph 16.
16. EXPENSES OF LANDLORD. Tenant will pay to Landlord on
demand (a) all costs and expenses, including reasonable attorneys' fees, paid or
incurred by Landlord in enforcing any of the covenants herein contained, in
remedying any breach by Tenant of said covenants, in recovering possession of
said premises or any part thereof, in collecting or causing to be paid any
delinquent rent, taxes or other charges hereunder payable by Tenant, or in
connection with any litigation (other than condemnation proceedings) commenced
by or against Tenant to which Landlord shall without fault be made a party, and
(b) a reasonable fee for reviewing and processing any request by Tenant for
Landlord's consent or approval, which fee shall be a flat-rate service charge as
established by the policy of Landlord then in effect or a sum equal to all costs
and expenses paid or incurred by Landlord, including without limitation
reasonable fees of attorneys and other consultants retained by Landlord and the
costs of Landlord's regular salaried staff in connection therewith, whichever is
greater.
17. CONDITION OF PREMISES. Tenant has examined and accepts
said premises in the existing condition thereof and shall be solely responsible
for the adequate design, construction and repair of all improvements now or
hereafter made on or in connection with the areas occupied or used by Tenant or
persons claiming under Tenant in respect of any undivided land interests demised
by this Lease, and for obtaining all necessary utility services and connections,
and Tenant agrees that Landlord shall have no liability whatsoever for such
condition or any further
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improvement or development thereof or any repair of any private roads serving
said areas.
18. CONSTRUCTION OF BUILDINGS. Tenant will not at any time
erect, place or maintain on said land any buildings or structures other than
fences, walls and water facilities, nor make or suffer any additions to or
alterations of the basic structure of any buildings thereon, except in
accordance with plans, specifications and plot plans therefor first approved in
writing by Landlord. Landlord shall not unreasonably withhold any such approval.
19. DEDICATION OF LAND. Tenant may, at Tenant's option at any
time during said term, petition the Director of Finance of the County of Hawaii
for dedication for agricultural uses of all or such portion of the land hereby
demised and actually used or occupied by Tenant and as shall qualify therefor
under the provisions of Section 19-55 of the Hawaii County Code, as amended. If
all or a portion of said land is now or hereafter to be developed as an orchard,
Tenant may also, at Tenant's option at any time during said term, apply to the
Board of Agriculture of the Department of Agriculture, State of Hawaii, for
classification of such land as orchard property under the provisions of Section
154-2, Hawaii Revised Statutes, as amended. If at any time after such dedication
or classification Tenant shall fail to observe the restrictions on the use of
such land or shall cancel or cause such dedication or classification to be
cancelled for any reason whatsoever, Tenant will promptly pay or cause to be
paid to Landlord all taxes, penalties and other charges imposed by the County of
Hawaii or the State of Hawaii on account of such cancellation, together with the
amount of all Hawaii general excise or similar taxes payable thereon by
Landlord, whether actually or constructively received.
20. SURRENDER. At the end of said term or other sooner
determination of this Lease, Tenant will peaceably deliver up to Landlord
possession of the land hereby demised, together with all improvements,
including, but not limited to fences, roads, bridges, underground sewers,
drains, buildings including administration building, field office and the
macadamia nut husking plant, and all macadamia nut trees and other trees upon or
belonging to the same, the buildings in "as is" condition and the remaining
improvements in good order and condition, unless Landlord shall advise Tenant in
writing of Landlord's decision to require removal, in which latter case Tenant
shall remove the same and promptly repair to Landlord's satisfaction all damage
caused by such removal. If not then in default hereunder, Tenant shall have the
right, upon written notice to Landlord, to remove from said premises prior to
the end of said term all or any number of the orchard trees thereon, promtly
repairing to Landlords's satisfaction all damage caused by such
removal;provided, however, if a growing orchard or other crop shall be in
existence on the last day of said term, Tenant shall have the right upon written
notice to Landlord to extend said term only for the continued cultivation and
harvest at maturity of such growing crop and removal of
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such trees as hereinbefore provided, but in no event for more than six (6)
months after the last harvest preceding expiration of said term, at the same
rent as was payable for the last full calendar year of said term, and Tenant's
right of removal of such trees shall continue during such period of extension..
21. INTEREST ON PAST DUE AMOUNTS. Any rent or other sums
payable Tenant to Landlord under this Lease which are not paid when due shall
bear interest from the date the same became due until paid at the greater of the
maximum rate then permitted to be contracted for by written contract under the
laws of the State of Hawaii, or in the absence of such maximum rate, at the rate
of one percent (1%) per month.
22. LANDLORD'S AGRICULTURAL OPERATING RIGHTS. Landlord
reserves and shall have the unrestricted right, appurtenant to its remaining
undivided interests in the demised premises and appurtenant to lands located
adjacent to or in the vicinity of the demised premises and now owned or used or
hereafter used by Landlord and its successors or assigns or lessees in
agricultural operations, to engage in any type of farming operation, including
but not limited to open burning, percolating, evaporating, fertilizing, milling,
power generation, water diversion, plowing, grading, storing, hauling, herbicide
and pesticide spraying, irrigating, crop dusting, and all other activities
incidental to the planting, farming, harvesting and processing of agricultural
products and by-products, which operations may from time to time cause noxious
emissions such as noise, smoke, dust, light, heat, vapor, odor, chemicals,
vibration and other nuisances to be discharged or emitted over and upon the
demised premises. Landlord and its successors and assigns shall not be
responsible or liable to Tenant or its successors or assigns for the
consequences from the creation and discharge of such noxious emissions. Tenant
and its assigns from time to time shall indemnify and hold Landlord and its
successors and assigns harmless from any liability or expense resulting from the
Tenant's or such assigns' claims, as the case may be, arising from such noxious
emissions.
23. LANDLORD'S EASEMENT RIGHTS. Landlord reserves, and shall
have appurtenant to its remaining undivided interest in the demised premises, if
any, and appurtenant to lands located adjacent to or in the vicinity of the
demised premises, the non-exclusive right to use all of the demised premises
which the Landlord, in its sole discretion, may require or deem necessary or
desirable for roads, trails, easements or rights-of-way which Landlord, in its
sole discretion may require or deem necessary or desirable for access,
utilities, pole and wire lines, flumes, ditches, pipelines and other water
courses, and the right to grant such rights to third parties; together with the
right to enter the demised premises for the construction, installation,
maintenance, repair, alteration or replacement of any such improvements. The
Landlord shall exercise its rights under this paragraph in such a manner to
cause the least practicable interference with the growing of macadamia nuts on
the demised land and shall compensate the Tenant fully for the lost value all
macadamia nut trees damaged or destroyed by the
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Landlord's exercise of such rights; provided however, that Landlord shall not be
liable for any consequential or other damages.
AND IT IS HEREBY MUTUALLY AGREED by and between the parties
hereto as follows:
A. CONDEMNATION. In case at any time or times during said term
said premises or any part thereof shall be required, taken or condemned by any
authority having the power of eminent domain, then and in every such case the
estate and interest of Tenant in the premises so required, taken or condemned
shall at once cease and determine, and Tenant shall not by reason thereof be
entitled to any claim against Landlord or others for compensation, or indemnity
for leasehold interest, and all compensation and damages payable for or on
account of any land, water and improvements thereon shall be payable to and be
the sole property of Landlord; provided, however, that all compensation and
damages for or on account of any buildings, sheds, drying platforms, water
tanks, surface pipelines and any trees and crops on the demised land shall be
payable to and be the sole property of Tenant; provided, further, that in case
only part of the land hereby demised shall be so required, taken or condemned,
the base rent hereunder payable for the remainder of said term shall be reduced
(calculated to the nearest dollar) in the proportion that the area of land in
macadamia nut cultivation so required, taken or condemned bears to the total
area of land in macadamia nut cultivation hereby demised, and Landlord shall
refund to Tenant any unearned rent therefor paid in advance prior to such date.
In case one-half or more of the total area of the land in macadamia nut
cultivation hereby demised shall be so required, taken or condemned, thereby
rendering use of the remaining portion of the land in macadamia nut cultivation
to be economically unsound, Tenant shall have the option within one hundred
twenty (120) days after such taking to surrender this Lease and be relieved of
further performance hereunder. Condemnation of any leasehold interest in said
premises or any part thereof shall not terminate this Lease nor excuse Tenant
from full performance of Tenant's covenants for the payment of money or any
other obligations hereunder capable of performance by Tenant, but in such case
Tenant may claim and recover from the condemning authority all compensation and
damages payable on account of Tenant's leasehold interest.
B. CONSENT TO MORTGAGE. Tenant may from time to time without
further consent of Landlord assign this Lease by way of mortgage to any bank,
insurance company or other established lending institution as mortgagee,
provided that Tenant shall upon execution of such mortgage promptly deliver a
true copy thereof to Landlord. The mortgagee or its assigns may enforce such
mortgage and acquire title to the leasehold estate in any lawful way, and
pending foreclosure of such mortgage may take possession of and rent said
premises, and upon foreclosure thereof may without further consent of Landlord
sell and assign the leasehold estate by assignment in which the assignee shall
expressly assume and agree to observe and perform all the covenants
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of Tenant herein contained, and such assignee may make a purchase money mortgage
of this Lease to the assignor, provided that upon execution of any such
assignment or mortgage a true copy thereof shall be delivered promptly to
Landlord and that no other or further assignment of this Lease for which any
provision hereof requires the written consent of Landlord shall be made without
such consent. The mortgagee or its assigns of such mortgage shall be liable to
perform the obligations herein imposed on Tenant only during the period such
person has possession or ownership of the leasehold estate. Nothing contained in
such mortgage shall release or be deemed to relieve Tenant from the full and
faithful observance and performance of Tenant's covenants herein contained or
from any liability for the nonobservance or nonperformance thereof, nor be
deemed to constitute a waiver of any rights of Landlord hereunder, and the
terms, covenants and conditions of this Lease shall control in case of any
conflict with the provisions of such mortgage.
C. PROTECTION OF MORTGAGE. During the continuance in effect of
any authorized mortgage of this Lease, Landlord will not terminate this Lease
because of any default on the part of Tenant to observe or perform any of the
covenants or conditions herein contained if the mortgagee or its assigns, within
one hundred twenty (120) days after Landlord has mailed to the mortgagee or its
assigns at the last known address thereof a written notice of intention to
terminate this Lease for such cause, shall cure such default, if the same can be
cured by the payment of money or, if such is not the case, shall undertake in
writing to perform and shall thereafter perform all the covenants of this Lease
capable of performance by the mortgagee or its assigns until such time as this
Lease shall be sold upon foreclosure, of such mortgage commenced promptly and
completed with due diligence, and upon foreclosure sale of this Lease, the time
for performance of any obligation of Tenant then in default other than payment
of money shall be extended by the time reasonably necessary to complete such
performance with due diligence. Any default consisting of Tenant's failure
promptly to discharge any lien, charge or encumbrance against said premises
junior in priority to such mortgage shall be deemed to be duly cured if such
mortgage shall be foreclosed by appropriate action instituted within said
120-day period and thereafter prosecuted in a diligent and timely manner.
Ownership by or for the same person of both the fee and leasehold estates in
said premises shall not effect the merger thereof without the prior written
consent of any mortgagee to such merger.
D. DESTRUCTION OF LAND. In case at any time or times during
said term any part or parts of, the demised land in macadamia nut cultivation
shall be rendered unfit for the cultivation of macadamia nuts by volcanic action
or other act of God, the base rent hereunder payable for the remainder of said
term shall be reduced in the ratio that the area of the land in macadamia nut
cultivation so affected bears to the total area of land in macadamia nut
cultivation hereby demised, and if a major portion of the land in macadamia nut
cultivation hereby demised shall be rendered unfit for said use by such act of
God thereby rendering the continuance of operations on the remainder of
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the land to be economically unsound, Tenant may at Tenant's option surrender
this Lease by giving written notice thereof to Landlord within thirty (30) days
after such casualty and thereby be relieved of any further obligations
hereunder.
E. DEFEASANCE. This demise is upon the express condition, that
if Tenant shall fail to pay said rent or any part thereof within thirty (30)
days after the same becomes due, whether the same shall or shall not have been
legally demanded, or shall fail to observe or perform any of the other covenants
herein contained and on the part of Tenant to be observed and performed and such
default shall continue for thirty (30) days after written notice thereof given
to Tenant at the address provided below, specifying said default in detail, or
if Tenant then owning this Lease shall make any assignment for the benefit of
creditors or abandon said premises, or if this Lease or any estate or interest
of Tenant hereunder shall be sold under any attachment or execution, Landlord
may in any such case at once re-enter said premises or any part thereof in the
name of the whole and, upon or without such entry, at Landlord's option
terminate this Lease without service of notice or legal process, and may expel
and remove from said premises Tenant and all persons claiming under Tenant and
their effects without being deemed guilty of any trespass or becoming liable for
any loss or damage occasioned thereby, and may bring an action for summary
possession of said premises, all without prejudice to any other remedy or right
of action which Landlord may have for arrears of rent or for any preceding or
other breach of contract. If this Lease or a memorandum thereof is recorded in
the Hawaii Bureau of Conveyances, such termination may but need not necessarily
be made effective by recording in such place an affidavit thereof by Landlord or
a judgment thereof by a court of competent jurisdiction.
F. NONWAIVER. Acceptance of rent by Landlord or its agent
shall not be deemed to be a waiver by Landlord of any breach by Tenant of any
covenant herein contained or of Landlord's right to re-enter or terminate for
breach of condition. Waiver by Landlord of any breach by Tenant shall not
operate to extinguish the term, covenant or condition the breach of which has
been waived nor be deemed to be a waiver of Landlord's right to declare a
forfeiture or termination for any other breach thereof.
G. NOTICES. Any notice or demand to Landlord or Tenant
provided for or permitted by this Lease may be given sufficiently for all
purposes in writing either (1) mailed as registered or certified mail, addressed
as follows:
If to Tenant, at 828 Fort Street Mall Suite 205
Honolulu, Hawaii 96813
If to Landlord, at P.O. Box 130
Pahala, Hawaii 96777
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With a copy to Alan Kugle
C. Brewer
P.O. Box 1826
Papaikou, Hawaii 96781-1826
or at the last address designated by such party in writing to the other, or (2)
delivered personally within the State of Hawaii to Landlord or Tenant or any
officer of Tenant if Tenant is a corporation or any general partner of Tenant if
Tenant is a partnership, as the case may be, and shall be deemed conclusively to
have been given on the date of such mailing or personal delivery.
H. NEGATION OF PARTNERSHIP. Nothing in this Lease shall be
construed to render Landlord in any way or for any purpose a partner, joint
venturer, or associate in any relationship with Tenant.
I. DEFINITIONS. The terms "Premises," "land" and "demised
land" herein shall be deemed or taken to include (except where such meaning
would be clearly repugnant to the context) all buildings and other improvements
now or hereafter built on the land hereby demised. The term "Landlord" herein
shall mean and include Landlord, its successors and assigns. The term "Tenant"
herein or any pronoun used in place thereof shall mean and include the masculine
or feminine, the singular or plural number, and jointly and severally
individuals, firms and corporations, and their and each of their respective
heirs, successors, personal representatives and permitted assigns, according to
the context hereof. The headings of paragraphs herein are inserted only for
convenience and reference and shall in no way define, expand or limit the scope
or intent of any provision of this Lease.
J. STATE LAND: 9-6-2-55. The parties acknowledge that Landlord
has specifically disclosed to Tenant that there is a twelve acre parcel owned by
the State of Hawaii and licensed to Landlord under a thirty day revocable permit
included in the demised premises. After this transaction closes Landlord will
seek to have the permit transferred to Tenant. Landlord discloses that it has
been farming the macadamia nut orchard on this twelve acre parcel since 1982 and
further discloses that this twelve acre parcel was given a separate Tax Map Key
number in 1997.
K. MAINTENANCE OF ROADS AND OTHER AREAS USED BY BOTH LANDLORD
AND TENANT. Landlord and Tenant agree to work cooperatively and share the
expense of maintenance for those roads and other areas used jointly by Landlord
and Tenant for which each has rights of possession in the Ka'u District of the
island of Hawaii. The expense of maintenance shall be shared based on the use by
each party and the damage occasioned by that use.
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L. SUBDIVISIONS. Landlord shall have the right from time to
time to subdivide any part or all of the demised premises or to use part or all
of the demised premises in a parcel consolidation and resubdivision so long as
any such action does not unreasonably interfere with Tenant's use of the
premises.
M. LAND DEMISED BUT NOT NEEDED BY TENANT. Any areas of land
demised hereunder which are not needed by Tenant, including but not limited to
approximately five acres of the macadamia nut husking plant parcel, and/or any
office space in any of the buildings on the demised premises which is not needed
by Tenant, which Landlord desires to use, will be licensed to Landlord under a
long term license at no cost other than a pro rata share of real property taxes.
N. FIELD OFFICE 9-6-16-11. The field office parcel except for
the offices of Landlord's Ka'u Land Manager and his assistant is included in
this lease. Landlord's employees shall have the right to use the two offices,
the conference room, bathroom, and their parking spaces for the term of this
lease at no charge. Landlord shall pay Tenant a monthly fee for Landlord's use
of Tenant's water, utilities, copy machines, fax machines, microwave,
refrigerator and maintenance. This fee is presently set at $100 per month and
will be reviewed annually.
O. GARAGE AND ADMIN OFFICES PARCEL: 9-6-5-36. The Clubhouse,
presently licensed to Huliau O Ka'u, a self-help farming cooperative, the ILWU
Hall, presently licensed to Bay Clinic for a health and exercise facility, the
Cooler Room and the two bays adjacent to the cooler, which will be used by
Landlord or Landlord's lessees, are specifically excluded from this lease;
provided, however, that if either Landlord or Tenant deem it necessary Tenant
will license to Landlord these areas under a separate license at no charge.
P. PERMIT TO OPERATE THE SISAL WELL. Tenant is hereby granted
permission to enter on TMK parcel 9-6-3-22 for the purpose of operating the
Sisal Well for the term of the Lease. Tenant agrees to pay all of the costs of
operating the Sisal Well and to indemnify and hold harmless Landlord from any
and all costs or damages associated with the Sisal Well during the term of this
lease.
Q. ADDITIONAL ACCESS RIGHTS. In addition to the access rights
demised under this Lease Landlord hereby grants to Tenant such additional access
rights as reasonably necessary for Tenant to farm the macadamia nut trees owned
by Tenant in Ka'u. The term "reasonably necessary" shall be determined by past
practice of farming any specific macadamia nut orchard; provided, however,
Landlord shall have no obligation hereunder if the grant of such access would
unreasonably interfere with Landlord's use or plans for the property to be
encumbered.
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IN WITNESS WHEREOF, the parties hereto have executed these
presents as of the day and year first above written
KA`U AGRIBUSINESS CO., INC. ML MACADAMIA ORCHARDS, L.P.
a Delaware limited partnership
By s/s Kent T. Lucien By ML Resources, Inc.
------------------- Its General Partner
Its President
By s/s J. Alan Kugle By s/s Gregory A. Sprecher
------------------ ------------------------
Its Secretary Its Senior Vice President
By s/s Daryle S. Nekoba
--------------------
Its Secretary
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KA`U RENT SCHEDULE
Rents under the foregoing Lease shall be determined and
payable as follows:
A. YEARS 1 THROUGH 10.
i. BASE RENT. For and during each of the first ten
(10) fiscal years (July 1 through June 30) of the term, Tenant shall pay to
Landlord a base annual macadamia rent of TEN THOUSAND TWO HUNDRED NINE DOLLARS
($10,209.00, a rate of $72 per tree acre x 141.79 tree acres), and a base annual
ancillary land rent for the land used for roads, water drainage, windbreak
trees, storage, and offices (the difference between the TMK acres and the number
of tree acres, 89.98) of EIGHT HUNDRED NINETY-NINE DOLLARS ($899.00, a rate of
$10 per acre per year) both base rents payable in equal installments
semiannually in advance on January 1 and July 1 of each year with the first
payment to include additional payments of $1701.50 for base mac rent and $150
for base ancillary rent for the months of May and June 2000.
ii. ADDITIONAL RENT. For each of the first ten (10)
fiscal years of the term, Tenant shall pay to Landlord additional rent of ONE
HUNDRED FORTY ONE DOLLARS AND SEVENTY NINE CENTS ($141.79) for every one cent
(1CENTS) by which the average annual "Farm Price" for "Net" pounds of macadamia
nuts in the State of Hawaii for that year, as reported by the Hawaii
Agricultural Statistics Service, exceeds seventy two cents (72CENTS) per pound.
An example of such a publication is attached hereto as Exhibit B and made a part
hereof. Such additional rent shall be payable within thirty (30) days after the
final report of such average annual price per pound, published as stated above,
is available. If the Hawaii Agricultural Statistics Service shall discontinue
issuing such reports, Landlord and Tenant shall mutually agree on what reports
shall be substituted therefor.
B. YEARS 11 THROUGH 45.
i. BASE RENT. For and during each year of the three
(3) ten-year periods succeeding the tenth fiscal year of the term and for one
five-year period following the last of said ten-year periods, Tenant shall pay
to Landlord base annual macadamia rent and base ancillary land rent in a sum
equal to the then fair market rental of the demised land for the operation of
macadamia orchards (or for any higher and better use then being made of the
land), and for ancillary land use, determined by mutual agreement of Landlord
and Tenant based upon the factors that would be considered by the appraisers as
described in paragraph D below, as of the commencement of the respective
ten-year or five-year rental period, as the case may be, payable in equal
installments semiannually in advance on January 1 and July 1 of each year.
ii. ADDITIONAL RENT. For and during each year of the
three (3) ten-year periods succeeding the tenth fiscal year of the term and for
one five-year period following the last of said ten-year periods, Tenant shall
pay to Landlord additional rent determined pursuant to the following formula:
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Additional Rent - (Annual Average "Farm Price" for
"Net" pounds of Macadamia Nuts in the State of Hawaii, as reported by the Hawaii
Agricultural Statistics Service, for the year under consideration) divided by
(Annual Average "Farm Price" for "Net" pounds of Macadamia Nuts in the State of
Hawaii, as reported by the Hawaii Agricultural Statistics Service, for the year
immediately preceding the commencement of such ten-year or five-year period, as
the case may be) x (Annual Base Rent for the year under consideration) - (Annual
Base Rent for the year under consideration). Such additional rent shall be
payable within thirty (30) days after the final report of such average annual
price per pound, published as stated above, is available. If the Hawaii
Agricultural Statistics Service shall discontinue issuing such reports, Landlord
and Tenant shall mutually agree on what reports shall be substituted therefor.
For example, if (a) the Annual Base Rent for Year 11
is $15,000, and (b) the average annual "Farm Price" for Years 10 and 11 are $.90
and $.95, respectively, then the additional rent for year 11 would be ($.95)
divided by ($.90) x ($15,000) - ($15,000), or $833.33.
iii. COMMON PROVISIONS. If Landlord and Tenant are
unable to agree upon such fair market rental or the means of determining
additional rent, the same shall be determined by an arbitrator or arbitrators
appointed as provided below, who shall ascertain the fair market rental or the
manner of determining additional rent, or both, as of the commencement of the
ten-year or five-year period for which rent is sought to be determined. Such
annual base rent, whether determined by agreement or arbitration, shall in no
event be less than the average annual total rent (base and additional rent)
payable for the immediately preceding ten-year period.
C. ARBITRATION. If Landlord and Tenant shall not have agreed
upon the fair market rental of the demised land or upon the means of determining
additional rent, or both, at least ninety (90) days prior to the commencement of
a ten-year or five-year period for which rent is to be determined, either party
may give to the other written notice of a desire to have an arbitration to
determine such fair market rental or such additional rent formula, or both,
pursuant to chapter 658, Hawaii Revised Statutes, as the same may be amended or
reenacted. If the parties agree upon a single arbitrator, such arbitrator shall
determine such fair market rental or such additional rent formula, or both, and
his decision shall be final, conclusive and binding upon both parties, subject
to the minimum limitation stated above. If the parties fail to agree upon a
single arbitrator or if either party prefers not to have an arbitration by a
single arbitrator, there shall be an arbitration by three (3) appraisers, in
which case either party shall name one of the appraisers by written notice to
the other party, whereupon the other party shall, within ten (10) days after
receipt of such notice, name a second appraiser, and in case of
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failure to do so, the party who has already named an appraiser may have the
second appraiser selected or appointed by a judge of the First Circuit Court of
the State of Hawaii; and the two appraisers so appointed, in either manner,
shall select and appoint a third appraiser, and if the two appraisers so
appointed shall fail to appoint the third appraiser within ten (10) days after
the naming of the second appraiser, either party may have the third appraiser
selected or appointed by such judge; and the three appraisers so appointed shall
thereupon proceed to determine such fair market rental or such additional rent
formula, or both, as herein provided, and the decision and award of any two of
them shall be final, conclusive and binding upon both parties for the particular
ten-year or five-year rental period then under consideration, subject to the
minimum limitation stated above, unless such decision and award shall be
vacated, modified or corrected, all as provided in chapter 658. The appraisers
so selected shall be reputable persons experienced in valuing macadamia nut
orchards and shall not be regularly employed by or have any material interest in
either Landlord' or Tenant or in any affiliate of either (or in the outcome of
the appraisal proceedings). Such appraisers shall have all of the powers and
duties prescribed by chapter 658; and judgment may be entered upon any such
decision and award as therein provided.
In all cases of arbitration, Landlord and Tenant shall each
pay the expense of its own appointee and its own attorneys' and witnesses' fees;
and all other expenses of arbitration shall be divided equally between Landlord
and Tenant.
If and whenever the fixing of such fair market rental or such
additional rent formula, or both, is under arbitration, Tenant, pending the
determination thereof, shall continue to pay rent on the same terms in effect
during the last preceding rental period and shall promptly pay the deficiency,
if any, upon the conclusion of the arbitration proceedings plus interest at the
rate of one percent (A) per month on the amount of such deficiency computed from
the date or dates when the amount of such deficiency would have been payable but
for the pendency of the arbitration.
Exhibit A
The land included under this lease is set forth in this table:
<TABLE>
<CAPTION>
- ----------------------- --------------------- -------------------- --------------------- --------------------
TMK TMK ACRES TREE ACRES FIELD NO MISC INFO
- ----------------------- --------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
- ----------------------- --------------------- -------------------- --------------------- --------------------
9-6-2-44 15.121 0.42 N425 Husking Plant
parcel
- ----------------------- --------------------- -------------------- --------------------- --------------------
9-6-2-55 12.0 11.47 E410 E415 State parcel--30
day permit
- ----------------------- --------------------- -------------------- --------------------- --------------------
9-6-3-9 4.6 2.0 G110 Formerly P80A,
then F80A
- ----------------------- --------------------- -------------------- --------------------- --------------------
9-6-4-8 7.8 12.2 N275 Formerly F75A and
9-6-4-16 4.13 F75B
- ----------------------- --------------------- -------------------- --------------------- --------------------
9-6-4-15 3.0 3.93 N284 Formerly 84 1 aka
P84A
- ----------------------- --------------------- -------------------- --------------------- --------------------
9-6-5-16 11.722 7.45 G430 Formerly P79C
- ----------------------- --------------------- -------------------- --------------------- --------------------
9-6-5-36 25.35 Garage and office
parcel
- ----------------------- --------------------- -------------------- --------------------- --------------------
9-6-12-1 44.360 24.09 K551 Anderson
- ----------------------- --------------------- -------------------- --------------------- --------------------
9-6-12-19 26.733 17.65 B725 Nakazono
- ----------------------- --------------------- -------------------- --------------------- --------------------
9-6-12-23 76.2 62.58 K552 Anderson
- ----------------------- --------------------- -------------------- --------------------- --------------------
9-6-16-11 0.75 Field office
- ----------------------- --------------------- -------------------- --------------------- --------------------
- ----------------------- --------------------- -------------------- --------------------- --------------------
Total 231.77 141.79
- ----------------------- --------------------- -------------------- --------------------- --------------------
- ----------------------- --------------------- -------------------- --------------------- --------------------
</TABLE>
The metes and bounds descriptions which are available are attached hereto.
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FOR IMMEDIATE RELEASE CONTACT: GREGORY A. SPRECHER
SENIOR VICE PRESIDENT
MONDAY, MAY 1, 2000 TELEPHONE: (808) 532-4133
ML MACADAMIA ORCHARDS, L.P.
COMPLETES MACADAMIA FARMING PURCHASE
& REPORTS 1ST QUARTER 2000 EARNINGS
Honolulu, Hawaii -- ML Macadamia Orchards, L.P.
(NYSE: NUT), a publicly traded partnership which is the world's largest grower
of macadamia nuts, announced that it completed today the purchase of the
macadamia farming operations of Ka'u Agribusiness Company, Inc., a subsidiary of
C. Brewer and Company, Ltd. The acquired assets consist of 142 acres of
macadamia orchards, farming contracts, farming equipment, vehicles, a husking
plant, irrigation well, office buildings, garages and warehouses, office
furniture and equipment and material inventories related to macadamia farming.
All the assets and operations are located on the island of Hawaii.
The purchase price for all assets including the macadamia
orchards was $9 million. The Partnership will now be performing all the farming
operations for its own 4,169 acres and for approximately 3,000 additional acres
owned by other growers. The entire workforce of 370 regular and seasonal
employees have all been retained. Negotiations for ML Macadamia Orchards, L.P.
were led by Jim Case, Director and Chairman of the Conflicts Committee of ML
Resources, Inc., the Partnership's general partner.
In connection with the purchase, the Partnership closed a new
credit facility with Pacific Coast Farm Credit and Farm Credit Services of
Hawaii. The credit facility consists of a $4 million term loan and a new $5
million line of credit, replacing an existing line of credit, which is used for
seasonal working capital needs.
For the first quarter 2000, macadamia nut production was 2.6
million wet-in-shell pounds, compared to the first quarter 1999 harvest of 5.4
million pounds. The first quarter 1999 harvest was unusually heavy compared with
a more normal harvest in the first quarter 2000. Revenues were $1.5 million and
net income was $65, 000, or $0.01 per Class A Unit, compared to revenues of $3.4
million and net income of $541,000, or $0.07 per Class A Unit, for the first
quarter 1999.
The Partnership received $0.58 per pound for its macadamia nut
production in the first quarter 2000, compared to $0.64 in the first quarter
1999. The price that the Partnership receives for its nuts is based 50% on the
current year processing and marketing results of Mauna Loa Macadamia Nut
Corporation ("Mauna Loa"), its exclusive purchaser, and 50% on USDA-reported
macadamia nut prices for the two preceding years. The USDA portion for the
current year is lower by 7% while the Mauna Loa portion is estimated to be lower
by 6%. Nut prices are subject to subsequent adjustment based on Mauna Loa's
actual full year performance. For the full year 1999, the actual average nut
price received was $0.62.
This press release contains forward-looking statements
regarding future events and future performance of the Partnership that involve
risks and uncertainties that could cause actual results to differ materially
from those expressed or implied by such statements. These include statements,
among others, regarding the Partnership's future nut prices, which are based on
certain assumptions and forecasts. The Partnership files documents with the
Securities and Exchange Commission, such as Form 10-K, Form 10-Q and Form 8-K
reports, which contain a description of these and other risks and uncertainties
that could cause actual results to differ from current expectations and the
forward-looking statements contained in this press release.
# # #
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