Business Loan Agreement dated as of October 15, 2007 between Calavo Growers, Inc. and Bank of America, N.A

Exhibit 10.1

BUSINESS LOAN AGREEMENT

     This Agreement dated as of October 15, 2007 is between BANK OF AMERICA, N.A. (the “Bank”) and CALAVO GROWERS, INC. (the “Borrower”).

1. LINE OF CREDIT AMOUNT AND TERMS

1.1 Line of Credit Amount.

(a)		During the availability period described below, the Bank will provide a line of credit to the Borrower. The amount of the line of credit (the “Commitment”) is $10,000,000.
(b)		This is a revolving line of credit. During the availability period, the Borrower may repay principal amounts and reborrow them.
(c)		The Borrower agrees not to permit the principal balance outstanding to exceed the Commitment. If the Borrower exceeds this limit, the Borrower will immediately pay the excess to the Bank upon the Bank’s demand.

1.2 Availability Period. The line of credit is available between the date of this Agreement and July 1, 2009 or such earlier date as the availability may terminate as provided in this Agreement (the “Expiration Date”).

The availability period for this line of credit will be considered renewed if and only if the Bank has sent to the Borrower a written notice of renewal effective as of the Expiration Date for the line of credit (the “Renewal Notice”). If this line of credit is renewed, it will continue to be subject to all the terms and conditions set forth in this Agreement except as modified by the Renewal Notice. The Borrower specifically understands and agrees that the interest rate applicable to this line of credit may be increased upon renewal and that the new interest rate will apply to the entire outstanding principal balance of the line of credit. If this line of credit is renewed, the term “Expiration Date” shall mean the date set forth in the Renewal Notice as the Expiration Date and the same process for renewal will apply to any subsequent renewal of this line of credit. A renewal fee may be charged at the Bank’s option. If so, the amount will be specified in the Renewal Notice.

1.3 Repayment Terms.

(a)

The Borrower will pay interest on October 1, 2007 and then monthly thereafter until payment in full of any principal outstanding under this line of credit.

Any interest period for an optional interest rate (as described below) shall expire no later than the Expiration Date.

(b)

The Borrower will repay in full all principal and any unpaid interest or other charges outstanding under this line of credit no later than the Expiration Date.

1.4 Interest Rate.

(a)		The interest rate is a rate per year equal to the Bank’s Prime Rate.
(b)		The Prime Rate is the rate of interest publicly announced from time to time by the Bank as its Prime Rate. The Prime Rate is set by the Bank based on various factors, including the Bank’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans. The Bank may price loans to its customers at, above, or below the Prime Rate. Any change in the Prime Rate shall take effect at the opening of business on the day specified in the public announcement of a change in the Bank’s Prime Rate.

1.5 Optional Interest Rates. Instead of the interest rate based on the rate stated in the paragraph entitled “Interest Rate” above, the Borrower may elect the optional interest rates listed below for this Commitment during interest periods agreed to by the Bank and the Borrower. The optional interest rates shall be subject to the terms and conditions described later in this Agreement. Any principal amount bearing interest at an optional rate under this Agreement is referred to as a “Portion.” The following optional interest rates are available:

(a)		The LIBOR Rate plus 1.00 percentage point.
(b)		The IBOR Rate plus 1.00 percentage point.

2. OPTIONAL INTEREST RATES

2.1 Optional Rates. Each optional interest rate is a rate per year. Interest will be paid on the first day of each month during the interest period. At the end of any interest period, the interest rate will revert to the rate stated in the paragraph(s) entitled “Interest Rate” above, unless the Borrower has designated another optional interest rate for the Portion. No Portion will be converted to a different interest rate during the applicable interest period. Upon the occurrence of an event of default under this Agreement, the Bank may terminate the availability of optional interest rates for interest periods commencing after the default occurs.

2.2 LIBOR Rate. The election of LIBOR Rates shall be subject to the following terms and requirements:

(a)		The interest period during which the LIBOR Rate will be in effect will be one or two weeks, or one, two, three, four, five, six, seven, eight, nine, ten, eleven, or twelve months. The first day of the interest period must be a day other than a Saturday or a Sunday on which the Bank is open for business in New York and London and dealing in offshore dollars (a “LIBOR Banking Day”). The last day of the interest period and the actual number of days during the interest period will be determined by the Bank using the practices of the London inter-bank market.
(b)		Each LIBOR Rate Portion will be for an amount not less than One Hundred Thousand Dollars ($100,000).
(c)		The “LIBOR Rate” means the interest rate determined by the following formula, rounded upward to the nearest 1/100 of one percent. (All amounts in the calculation will be determined by the Bank as of the first day of the interest period.)

LIBOR Rate =				London Inter-Bank Offered Rate
				(1.00 - Reserve Percentage)

     Where,

	(i)		“London Inter-Bank Offered Rate” means the average per annum interest rate at which U.S. dollar deposits would be offered for the applicable interest period by major banks in the London inter-bank market, as shown on the Telerate Page 3750 (or any successor page) at approximately 11:00 a.m. London time two (2) London Banking Days before the commencement of the interest period. If such rate does not appear on the Telerate Page 3750 (or any successor page), the rate for that interest period will be determined by such alternate method as reasonably selected by the Bank. A “London Banking Day” is a day on which the Bank’s London Banking Center is open for business and dealing in offshore dollars.
	(ii)		“Reserve Percentage” means the total of the maximum reserve percentages for determining the reserves to be maintained by member banks of the Federal Reserve System for Eurocurrency Liabilities, as defined in Federal Reserve Board Regulation D,

rounded upward to the nearest 1/100 of one percent. The percentage will be expressed as a decimal, and will include, but not be limited to, marginal, emergency, supplemental, special, and other reserve percentages.

(d)		The Borrower shall irrevocably request a LIBOR Rate Portion no later than 12:00 noon California time on the LIBOR Banking Day preceding the day on which the London Inter-Bank Offered Rate will be set, as specified above. For example, if there are no Intervening holidays or weekend days in any of the relevant locations, the request must be made at least three days before the LIBOR Rate takes effect.
(e)		The Bank will have no obligation to accept an election for a LIBOR Rate Portion if any of the following described events has occurred and is continuing:

	(i)		Dollar deposits in the principal amount, and for periods equal to the interest period, of a LIBOR Rate Portion are not available in the London inter-bank market; or
	(ii)		the LIBOR Rate does not accurately reflect the cost of a LIBOR Rate Portion.

(f)		Each prepayment of a LIBOR Rate Portion, whether voluntary, by reason of acceleration or otherwise, will be accompanied by the amount of accrued interest on the amount prepaid and a prepayment fee as described below. A “prepayment” is a payment of an amount on a date earlier than the scheduled payment date for such amount as required by this Agreement.
(g)		The prepayment fee shall be in an amount sufficient to compensate the Bank for any loss, cost or expense incurred by it as a result of the prepayment, including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Portion or from fees payable to terminate the deposits from which such funds were obtained. The Borrower shall also pay any customary administrative fees charged by the Bank in connection with the foregoing. For purposes of this paragraph, the Bank shall be deemed to have funded each Portion by a matching deposit or other borrowing in the applicable interbank market, whether or not such Portion was in fact so funded.

2.3 IBOR Rate. The election of IBOR Rates shall be subject to the following terms and requirements:

(a)		The interest period during which the IBOR Rate will be in effect will be no shorter than one (1) day and no longer than one year. The last day of the interest period will be determined by the Bank using the practices of the offshore dollar inter-bank market.
(b)		Each IBOR Rate Portion will be for an amount not less than One Hundred Thousand and 00/100 Dollars ($100,000.00).
(c)		The “IBOR Rate” means the interest rate determined by the following formula, rounded upward to the nearest 1/100 of one percent. (All amounts in the calculation will be determined by the Bank as of the first day of the interest period.)

IBOR Rate =				IBOR Base Rate
				(1.00 - Reserve Percentage)
Where,

	(i)		“IBOR Base Rate” means the interest rate at which the Bank of America’s Grand Cayman Banking Center, Grand Cayman, British West Indies, would offer U.S. dollar deposits for the applicable interest period to other major banks in the offshore dollar inter-bank market.
	(ii)		“Reserve Percentage” means the total of the maximum reserve percentages for

determining the reserves to be maintained by member banks of the Federal Reserved System for Eurocurrency Liabilities, as defined in Federal Reserve Board Regulation D, rounded upward to the nearest 1/100 of one percent. The percentage will be expressed as a decimal, and will include, but not be limited to, marginal, emergency, supplemental, special, and other reserve percentages.

(d)

The Bank will have no obligation to accept an election for an IBOR Rate Portion if any of the following described events has occurred and is continuing:

	(i)		Dollar deposits in the principal amount, and for periods equal to the interest period, of an IBOR Rate Portion are not available in the offshore dollar inter-bank market; or
	(ii)		the IBOR Rate does not accurately reflect the cost of an IBOR Rate Portion.

(e)		Each prepayment of a IBOR Rate Portion, whether voluntary, by reason of acceleration or otherwise, will be accompanied by the amount of accrued interest on the amount prepaid and a prepayment fee as described below. A “prepayment” is a payment of an amount on a date earlier than the scheduled payment date for such amount as required by this Agreement.
(f)		The prepayment fee shall be in an amount sufficient to compensate the Bank for any loss, cost or expense incurred by it as a result of the prepayment, including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Portion or from fees payable to terminate the deposits from which such funds were obtained. The Borrower shall also pay any customary administrative fees charged by the Bank in connection with the foregoing. For purposes of this paragraph, the Bank shall be deemed to have funded each Portion by a matching deposit or other borrowing in the applicable interbank market, whether or not such Portion was in fact so funded.

3. FEES AND EXPENSES

3.1 Fees.

(a)

Unused Commitment Fee. The Borrower agrees to pay a fee on any difference between the Commitment and the amount of credit it actually uses, determined by the average of the daily amount of credit outstanding during the specified period. The fee will be calculated at 0.15% per year.

This fee is due on the first day of the second month following each calendar quarter commencing on October 1, 2007 and continuing until the Expiration Date and on the Expiration Date.

(b)		Waiver Fee. If the Bank, at its discretion, agrees to waive or amend any terms of this Agreement, the Borrower will, at the Bank’s option, pay the Bank a fee for each waiver or amendment in an amount advised by the Bank at the time the Borrower requests the waiver or amendment. Nothing in this paragraph shall imply that the Bank is obligated to agree to any waiver or amendment requested by the Borrower. The Bank may impose additional requirements as a condition to any waiver or amendment.
(c)		Late Fee. To the extent permitted by law, the Borrower agrees to pay a late fee in an amount not to exceed four percent (4%) of any payment that is more than fifteen (15) days late. The imposition and payment of a late fee shall not constitute a waiver of the Bank’s rights with respect to the default.

3.2 Expenses. The Borrower agrees to immediately repay the Bank for expenses that include, but are not limited to, filing, recording and search fees, appraisal fees, title report fees, and documentation fees.

3.3 Reimbursement Costs. The Borrower agrees to reimburse the Bank for any expenses it incurs in the preparation of this Agreement and any agreement or instrument required by this Agreement. Expenses include, but are not limited to, reasonable attorneys’ fees, including any allocated costs of the Bank’s in-house counsel to the extent permitted by applicable law.

4. DISBURSEMENTS, PAYMENTS AND COSTS

4.1 Disbursements and Payments.

(a)		Each payment by the Borrower will be made in immediately available funds by direct debit to a deposit account as specified below or by mail to the address shown on the Borrower’s statement or at one of the Bank’s banking centers in the United States.
(b)		Each disbursement by the Bank and each payment by the Borrower will be evidenced by records kept by the Bank. In addition, the Bank may, at its discretion, require the Borrower to sign one or more promissory notes.

4.2 Telephone and Telefax Authorization.

(a)		The Bank may honor telephone or telefax instructions for advances or repayments given, or purported to be given, by any one of the individuals authorized to sign loan agreements on behalf of the Borrower, or any other individual designated by any one of such authorized signers.
(b)		Advances will be deposited in and repayments will be withdrawn from account number 03724-02990 owned by the Borrower or such other of the Borrower’s accounts with the Bank as designated in writing by the Borrower.
(c)		The Borrower will indemnify and hold the Bank harmless from all liability, loss, and costs in connection with any act resulting from telephone or telefax instructions the Bank reasonably believes are made by any individual authorized by the Borrower to give such instructions. This paragraph will survive this Agreement’s termination, and will benefit the Bank and its officers, employees, and agents.

4.3 Direct Debit.

(a)		The Borrower agrees that interest and principal payments and any fees will be deducted automatically on the due date from account number 03724-02990 owned by Borrower, or such other of the Borrower’s accounts with the Bank as designated in writing by the Borrower.
(b)		The Borrower will maintain sufficient funds in the account on the dates the Bank enters debits authorized by this Agreement. If there are insufficient funds in the account on the date the Bank enters any debit authorized by this Agreement, the Bank may reverse the debit.

4.4 Banking Days. Unless otherwise provided in this Agreement, a banking day is a day other than a Saturday, Sunday or other day on which commercial banks are authorized to close, or are in fact closed, in the state where the Bank’s lending office is located, and, if such day relates to amounts bearing interest at an offshore rate (if any), means any such day on which dealings in dollar deposits are conducted among banks in the offshore dollar interbank market. All payments and disbursements which would be due on a day which is not a banking day will be due on the next banking day. All payments received on a day which is not a banking day will be applied to the credit on the next banking day.

4.5 Interest Calculation. Except as otherwise stated in this Agreement, all interest and fees, if any, will be computed on the basis of a 360-day year and the actual number of days elapsed. This results in more interest or a higher fee than if a 365-day year is used. Installments of principal which are not paid when due under this Agreement shall continue to bear interest until paid.

4.6 Default Rate. Upon the occurrence of any default under this Agreement, all amounts outstanding under this Agreement, including any interest, fees, or costs which are not paid when due, will at the option of the Bank bear interest at a rate which is 2.0 percentage point(s) higher than the rate of interest otherwise provided under this Agreement. This may result in compounding of interest. This will not constitute a waiver of any default.

5. CONDITIONS

The Bank must receive the following items, in form and content acceptable to the Bank, before it is required to extend any credit to the Borrower under this Agreement:

5.1 Conditions to First Extension of Credit. Before the first extension of credit:

(a) Authorizations. If the Borrower or any guarantor is anything other than a natural person, evidence that the execution, delivery and performance by such Borrower and/or such guarantor of this Agreement and any instrument or agreement required under this Agreement have been duly authorized.

(b) Governing Documents. If required by the Bank, a copy of the Borrower’s and any guarantor’s organizational documents; provided that the Borrower shall have 60 days from the date of this Agreement to submit organization documents for the guarantor Calavo Foods, Inc.

(c) Payment of Fees. Payment of all accrued and unpaid expenses incurred by the Bank as required by the paragraph entitled “Reimbursement Costs.”

6. REPRESENTATIONS AND WARRANTIES

When the Borrower signs this Agreement, and until the Bank is repaid in full, the Borrower makes the following representations and warranties. Each request for an extension of credit constitutes a renewal of these representations and warranties as of the date of the request:

6.1 Formation. Borrower and each of its subsidiaries is duly formed and existing under the laws of the state where organized.

6.2 Authorization. This Agreement, and any instrument or agreement required hereunder, are within the Borrower’s (and its subsidiaries’ as the case may be) powers, have been duly authorized, and do not conflict with any of its organizational papers.

6.3 Enforceable Agreement. This Agreement is a legal, valid and binding agreement of the Borrower, enforceable against the Borrower in accordance with its terms, and any instrument or agreement required hereunder, when executed and delivered, will be similarly legal, valid, binding and enforceable (against Borrower or its subsidiaries, as the case may be).

6.4 Good Standing. Each of Borrower and its subsidiaries, with respect to each state in which it does business, it is properly licensed, in good standing, and, where required, in compliance with fictitious name statutes.

6.5 No Conflicts. This Agreement does not conflict with any law, agreement, or obligation by which the Borrower or any of its subsidiaries is bound.

6.6 Financial Information. All financial and other information that has been or will be supplied to the Bank is sufficiently complete to give the Bank accurate knowledge of the Borrower’s and its subsidiaries (and any guarantor’s) financial condition, including all material contingent liabilities. Since the date of the most recent financial statement provided to the Bank, there has been no material adverse change in the business condition (financial or otherwise), operations, properties or prospects of the Borrower or its subsidiaries (or any guarantor).

6.7 Permits, Franchises. The Borrower and each of its subsidiaries possesses all permits, memberships, franchises, contracts and licenses required and all trademark rights, trade name rights, patent rights and fictitious name rights necessary to enable it to conduct the business in which it is now engaged.

6.8 Other Obligations. Neither the Borrower nor any of its subsidiaries is in default on any obligation for borrowed money, any purchase money obligation or any other material lease, commitment, contract, instrument or obligation, except as have been disclosed in writing to the Bank.

6.9 Tax Matters. The Borrower has no knowledge of any pending assessments or adjustments of its income tax for any year and all taxes due have been paid, except as have been disclosed in writing to the Bank.

6.10 No Event of Default. There is no event which is, or with notice or lapse of time or both would be, a default under this Agreement.

6.11 Insurance. The Borrower and each of its subsidiaries has obtained, and maintained in effect, the insurance coverage required in the “Covenants” section of this Agreement.

6.12 Location of Borrower. The Borrower’s place of business (or, if the Borrower has more than one place of business, its chief executive office) is located at the address listed under the Borrower’s signature on this Agreement.

7. COVENANTS

The Borrower agrees, so long as credit is available under this Agreement and until the Bank is repaid in full:

7.1 Use of Proceeds. To use the proceeds of the Commitment only for working capital purposes.

7.2 Financial Information. To provide the following financial information and statements in form and content acceptable to the Bank, and such additional information as requested by the Bank from time to time:

(a)		Within 90 days of the fiscal year end, the annual financial statements of the Borrower and its subsidiaries, certified and dated by an authorized financial officer. These financial statements must be audited (with an opinion satisfactory to the Bank) by a Certified Public Accountant acceptable to the Bank. The statements shall be prepared on a consolidated basis and shall be accompanied by Borrower prepared consolidating statements, certified and dated by an authorized financial officer.
(b)		Within 45 days of the period’s end (excluding the last period in each fiscal year), quarterly financial statements of the Borrower and its subsidiaries, certified and dated by an authorized financial officer. These financial statements may be company-prepared. The statements shall be prepared on a consolidated basis.
(c)		By January 1 of each year, commencing January 1, 2007, Borrower’s annual forecast of crop and projected processing expenses for such year.

7.3 Other Debts. Not, and not permit its subsidiaries, to have outstanding or incur any direct or contingent liabilities or capital lease obligations (other than those to the Bank), or become liable for the liabilities of others, without the Bank’s written consent. This does not prohibit:

(a)		Acquiring goods, supplies, or merchandise on normal trade credit.
(b)		Endorsing negotiable instruments received in the usual course of business.

(c)		Obtaining surety bonds in the usual course of business.
(d)		Liabilities, lines of credit and leases in existence on the date of this Agreement disclosed in writing to the Bank, including that certain $20,000,000 line of credit with Cooperative Bank, which line of credit shall be on terms no more restrictive than the terms of this Agreement,
(e)		Additional debts for the acquisition of assets, to the extent permitted elsewhere in this Agreement.
(f)		Funded debt not to exceed $14,000,000 incurred for the purpose of acquiring approximately 15% of the equity interests in Limoneira Company, a Delaware corporation (“Limoneira”).

7.4 Other Liens. Not, and not permit its subsidiaries, to create, assume, or allow any security interest or lien (including judicial liens) on property the Borrower now or later owns, except:

(a)		Liens and security interests in favor of the Bank.
(b)		Liens for taxes not yet due.
(c)		Liens outstanding on the date of this Agreement disclosed in writing to the Bank.
(d)		Additional purchase money security interests in assets acquired after the date of this Agreement, if the total principal amount of debts secured by such liens does not exceed Five Hundred Thousand Dollars ($500,000).
(e)		Liens arising by operation of law and in the ordinary course of the Borrower’s business securing amounts the Borrower owes to growers of agricultural products purchased by the Borrower for resale, processing, or use in producing the Borrower’s inventory, provided such obligations are not past due.

7.5 Maintenance of Assets.

(a)		Not, and not permit its subsidiaries, to sell, assign, lease, transfer or otherwise dispose of any part of the Borrower’s (or such subsidiary’s) business or the Borrower’s assets except in the ordinary course of the Borrower’s business.
(b)		Not, and not permit its subsidiaries, to sell, assign, lease, transfer or otherwise dispose of any assets for less than fair market value, or enter into any agreement to do so.
(c)		Not, and not permit its subsidiaries, to enter into any sale and leaseback agreement covering any of its fixed assets.
(d)		To, and cause each subsidiary to, maintain and preserve all rights, privileges, and franchises the Borrower or such subsidiary now has.
(e)		To, and cause each subsidiary to, make any repairs, renewals, or replacements to keep the Borrower’s or such subsidiary’s properties in good working condition.

7.6 Investments. Not, and not permit its subsidiaries, to have any existing, or make any new, investments in any individual or entity, or make any capital contributions or other transfers of assets to any individual or entity, except for:

(a)		Existing investments disclosed to the Bank in writing.
(b)		Investments in the Borrower’s current subsidiaries.

(c)

Investments in any of the following:

	(i)		certificates of deposit;
	(ii)		U.S. treasury bills and other obligations of the federal government; and
	(iii)		readily marketable securities (Including commercial paper, but excluding restricted stock and stock subject to the provisions of Rule 144 of the Securities and Exchange Commission).

(d)		Investment in equity interests of Limoneira in an amount not exceeding $14,000,000.
(e)		Investment by the Borrower in Maui Fresh International LLC.
(f)		Additional investments not exceeding $500,000 in total amount.

7.7 Loans. Not, and not permit its subsidiaries, to make any loans, advances or other extensions of credit to any individual or entity, except for:

(a)		Existing extensions of credit disclosed to the Bank in writing.
(b)		Extensions of credit to the Borrower’s current subsidiaries.
(c)		Extensions of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or services in the ordinary course of business to non-affiliated entities.
(d)		Extensions of credit to the Borrower’s officers, employees and directors under the terms and conditions of the Borrower’s Stock Purchase Award Plan and Director’s Stock Option Plan, as each is in effect as of the date of this Agreement.
(e)		Extensions of credit to growers of agricultural products in an aggregate amount not to exceed $10,000,000.

7.8 Guaranties. Will deliver to Bank a guaranty of Borrower’s indebtedness under this Agreement by Calavo Foods, Inc. within 60 days of the date of this Agreement, which guaranty shall be in form and substance acceptable to Bank.

7.9 [Intentionally left blank.]

7.10		Additional Negative Covenants. Not, and not permit its subsidiaries, to, without the Bank’s written consent:
(a)		(i) Enter into any consolidation, merger, or other combination, or (ii) become a partner in a partnership, a member of a joint venture, or a member of a limited liability company where the aggregate amount invested exceeds One Million Dollars ($1,000,000).
(b)		Acquire or purchase a business or its assets.
(c)		Engage in any business activities substantially different from the Borrower’s or such subsidiary’s present business.
(d)		Liquidate or dissolve the Borrower’s or such subsidiary’s business.
7.11		Notices to Bank. To promptly notify the Bank in writing of:

(a)		Any lawsuit over One Million Dollars ($1,000,000) against the Borrower or any subsidiary (or any guarantor).
(b)		Any substantial dispute between any governmental authority and the Borrower or any subsidiary (or any guarantor).
(c)		Any event of default under this Agreement, or any event which, with notice or lapse of time or both, would constitute an event of default.
(d)		Any material adverse change in the Borrower’s or any subsidiary’s (or any guarantor’s) business condition (financial or otherwise), operations, properties or prospects, or ability to repay the credit.
(e)		Any change in the Borrower’s or any subsidiary’s name, legal structure, place of business, or chief executive office if the Borrower or such subsidiary has more than one place of business.
(f)		Any actual contingent liabilities of the Borrower or any subsidiary (or any guarantor), and any such contingent liabilities which are reasonably foreseeable, in excess of One Million Dollars ($1,000,000).

7.12 Insurance.

(a)		General Business Insurance. To, and to cause each subsidiary to, maintain insurance as is usual for the business it is in.
(b)		Evidence of Insurance. Upon the request of the Bank, to, and to cause each subsidiary to, deliver to the Bank a copy of each insurance policy, or, if permitted by the Bank, a certificate of insurance listing all insurance in force.

7.13 Compliance with Laws. To, and to cause each subsidiary to, comply with the laws (including any fictitious name statute), regulations, and orders of any government body with authority over the Borrower’s business.

7.14 ERISA Plans. Promptly during each year, to pay and cause any subsidiaries to pay contributions adequate to meet at least the minimum funding standards under ERISA with respect to each and every Plan; file each annual report required to be filed pursuant to ERISA in connection with each Plan for each year; and notify the Bank within ten (10) days of the occurrence of any Reportable Event that might constitute grounds for termination of any capital Plan by the Pension Benefit Guaranty Corporation or for the appointment by the appropriate United States District Court of a trustee to administer any Plan. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time. Capitalized terms in this paragraph shall have the meanings defined within ERISA.

7.15 Books and Records. To, and to cause each subsidiary to, maintain adequate books and records.

7.16 Audits. To, and to cause each subsidiary to, allow the Bank and its agents to inspect the Borrower’s and its subsidiaries’ properties and examine, audit, and make copies of books and records at any reasonable time. If any of the Borrower’s properties, books or records are in the possession of a third party, the Borrower authorizes that third party to permit the Bank or its agents to have access to perform inspections or audits and to respond to the Bank’s requests for information concerning such properties, books and records.

7.17 Cooperation. To, and to cause each subsidiary to, take any action reasonably requested by the Bank to carry out the intent of this Agreement.

7.18 Working Capital. To maintain on a consolidated basis current assets in excess of current liabilities by at least $15,000,000, measured on a quarterly basis. For purposes of calculating current

liabilities all advances outstanding under this Agreement shall be included.

7.19 Tangible Net Worth. To maintain on a consolidated basis Tangible Net Worth equal to at least Fifty Million Dollars ($50,000,000), measured on a quarterly basis.

“Tangible Net Worth” means the value of total assets (including leaseholds and leasehold improvements and reserves against assets but excluding goodwill, patents, trademarks, trade names, organization expense, unamortized debt discount and expense, capitalized or deferred research and development costs, deferred marketing expenses, and other like intangibles, and monies due from affiliates, officers, directors, employees, shareholders, members or managers) less total liabilities, including but not limited to accrued and deferred income taxes, but excluding the non-current portion of Subordinated Liabilities.

“Subordinated Liabilities” means liabilities subordinated to the Borrower’s obligations to the Bank in a manner acceptable to the Bank in its sole discretion.

7.20 Out of Debt Period. To reduce the amount of advances outstanding under this any and all revolving lines of credit between Borrower and Bank to not more than Five Million Dollars ($5,000,000) for a period of at least thirty (30) consecutive days in each Line-Year. “Line-Year” means the period between the date of this Agreement and July 1, 2008, and each subsequent one-year period (if any).

7.21 EBITDA. To maintain EBITDA of at least Seven Million Five Hundred Thousand Dollars ($7,500,000), “EBITDA” means net income, less income or plus loss from discontinued operations and extraordinary items, plus income taxes, plus interest expense, plus depreciation, depletion, and amortization. This covenant will be calculated at the end of each reporting period for which the Bank requires financial statements, using the results of the twelve-month period ending with that reporting period.

7.22 Other Agreements. Borrower shall not enter into any agreement (other than this Agreement) that contains terms more restrictive than those contained herein.

8. DEFAULT AND REMEDIES

If any of the following events of default occurs, the Bank may do one or more of the following: declare the Borrower in default, stop making any additional credit available to the Borrower, and require the Borrower to repay its entire debt immediately and without prior notice. In addition, if any event of default occurs, the Bank shall have all rights, powers and remedies available under any instruments and agreements required by or executed in connection with this Agreement, as well as all rights and remedies available at law or in equity. If an event of default occurs under the paragraph entitled “Bankruptcy,” below, with respect to the Borrower, then the entire debt outstanding under this Agreement will automatically be due immediately.

8.1 Failure to Pay. The Borrower fails to make a payment under this Agreement when due.

8.2 Other Bank Agreements. The Borrower (or any Obligor) or any of the Borrower’s related entities or affiliates fails to meet the conditions of, or fails to perform any obligation under any other agreement the Borrower (or any Obligor) or any of the Borrower’s related entities or affiliates has with the Bank or any affiliate of the Bank. For purposes of this Agreement, “Obligor” shall mean any guarantor, any party pledging collateral to the Bank, and any subsidiary of the Borrower (whether or not such subsidiary is obligated in respect of this Agreement.

8.3 Cross-default. Any default occurs under any agreement in connection with any credit the Borrower (or any Obligor) or any of the Borrower’s related entities or affiliates has obtained from anyone else or which the Borrower (or any Obligor) or any of the Borrower’s related entities or affiliates has guaranteed.

8.4 False Information. The Borrower or any Obligor has given the Bank false or misleading information or representations.

8.5 Bankruptcy. The Borrower, any Obligor, or any general partner of the Borrower or of any Obligor files a bankruptcy petition, a bankruptcy petition is filed against any of the foregoing parties, or the Borrower, any Obligor, or any general partner of the Borrower or of any Obligor makes a general assignment for the benefit of creditors.

8.6 Receivers. A receiver or similar official is appointed for a substantial portion of the Borrower’s or any Obligor’s business, or the business is terminated, or, if any Obligor is anything other than a natural person, such Obligor is liquidated or dissolved.

8.7 Lawsuits. Any lawsuit or lawsuits are filed on behalf of one or more trade creditors against the Borrower or any Obligor in an aggregate amount of One Million Dollars ($1,000,000) or more in excess of any insurance coverage.

8.8 Judgments. Any judgments or arbitration awards are entered against the Borrower or any Obligor, or the Borrower or any Obligor enters into any settlement agreements with respect to any litigation or arbitration, in an aggregate amount of One Million Dollars ($1,000,000) or more in excess of any insurance coverage.

8.9 Material Adverse Change. A material adverse change occurs, or is reasonably likely to occur, in the Borrower’s (or any Obligor’s) business condition (financial or otherwise), operations, properties or prospects, or ability to repay the credit.

8.10 Government Action. Any government authority takes action that the Bank believes materially adversely affects the Borrower’s or any Obligor’s financial condition or ability to repay.

8.11 Default under Related Documents. Any default occurs under any guaranty, subordination agreement, security agreement, deed of trust, mortgage, or other document required by or delivered in connection with this Agreement or any such document is no longer in effect, or any guarantor purports to revoke or disavow the guaranty.

8.12 ERISA Plans. Any one or more of the following events occurs with respect to a Plan of the Borrower subject to Title IV of ERISA, provided such event or events could reasonably be expected, in the judgment of the Bank, to subject the Borrower to any tax, penalty or liability (or any combination of the foregoing) which, in the aggregate, could have a material adverse effect on the financial condition of the Borrower:

(a)		A reportable event shall occur under Section 4043(c) of ERISA with respect to a Plan.
(b)		Any Plan termination (or commencement of proceedings to terminate a Plan) or the full or partial withdrawal from a Plan by the Borrower or any ERISA Affiliate.

8.13 Other Breach Under Agreement. The Borrower fails to meet the conditions of, or fails to perform any obligation under, any term of this Agreement not specifically referred to in this Article. This includes any failure or anticipated failure by the Borrower to comply with any financial covenants set forth in this Agreement, whether such failure is evidenced by financial statements delivered to the Bank or is otherwise known to the Borrower or the Bank.

8.14 Breach Under Other Agreements. The Borrower fails to meet the conditions of, or fails to perform any obligation under, any terms of any agreement between the Borrower and any third party.

9. ENFORCING THIS AGREEMENT; MISCELLANEOUS

9.1 GAAP. Except as otherwise stated in this Agreement, all financial information provided to the Bank and all financial covenants will be made under generally accepted accounting principles, consistently applied.

9.2 California Law. This Agreement is governed by California law.

9.3 Successors and Assigns. This Agreement is binding on the Borrower’s and the Bank’s successors and assignees. The Borrower agrees that it may not assign this Agreement without the Bank’s prior consent. The Bank may sell participations in or assign this loan, and may exchange financial information about the Borrower with actual or potential participants or assignees. If a participation is sold or the loan is assigned, the purchaser will have the right of set-off against the Borrower.

9.4 Dispute Resolution Provision.

This paragraph, including the subparagraphs below, is referred to as the “Dispute Resolution Provision.” This Dispute Resolution Provision is a material inducement for the parties entering into this agreement.

(a)		This Dispute Resolution Provision concerns the resolution of any controversies or claims between the parties, whether arising in contract, tort or by statute, including but not limited to controversies or claims that arise out of or relate to: (i) this agreement (including any renewals, extensions or modifications); or (ii) any document related to this agreement (collectively a “Claim”). For the purposes of this Dispute Resolution Provision only, the term “parties” shall include any parent corporation, subsidiary or affiliate of the Bank involved in the servicing, management or administration of any obligation described or evidenced by this agreement.
(b)		At the request of any party to this agreement, any Claim shall be resolved by binding arbitration in accordance with the Federal Arbitration Act (Title 9, U.S. Code) (the “Act”). The Act will apply even though this agreement provides that it is governed by the law of a specified state.
(c)		Arbitration proceedings will be determined in accordance with the Act, the then-current rules and procedures for the arbitration of financial services disputes of the American Arbitration Association or any successor thereof (“AAA”), and the terms of this Dispute Resolution Provision. In the event of any inconsistency, the terms of this Dispute Resolution Provision shall control. If AAA is unwilling or unable to (i) serve as the provider of arbitration or (ii) enforce any provision of this arbitration clause, the Bank may designate another arbitration organization with similar procedures to serve as the provider of arbitration.
(d)		The arbitration shall be administered by AAA and conducted, unless otherwise required by law, in any U.S. state where real or tangible personal property collateral for this credit is located or if there is no such collateral, in the state specified in the governing law section of this agreement. All Claims shall be determined by one arbitrator; however, if Claims exceed Five Million Dollars ($5,000,000), upon the request of any party, the Claims shall be decided by three arbitrators. All arbitration hearings shall commence within ninety (90) days of the demand for arbitration and close within ninety (90) days of commencement and the award of the arbitrator(s) shall be issued within thirty (30) days of the close of the hearing. However, the arbitrator(s), upon a showing of good cause, may extend the commencement of the hearing for up to an additional sixty (60) days. The arbitrator(s) shall provide a concise written statement of reasons for the award. The arbitration award may be submitted to any court having jurisdiction to be confirmed and have judgment entered and enforced,
(e)		The arbitrator(s) will give effect to statutes of limitation in determining any Claim and may dismiss the arbitration on the basis that the Claim is barred. For purposes of the application of any statutes of limitation, the service on AAA under applicable AAA rules of a notice of Claim is the

		equivalent of the filing of a lawsuit. Any dispute concerning this arbitration provision or whether a Claim is arbitrable shall be determined by the arbitrator(s), except as set forth at subparagraph (j) of this Dispute Resolution Provision. The arbitrator(s) shall have the power to award legal fees pursuant to the terms of this agreement.
(f)		The procedure described above will not apply if the Claim, at the time of the proposed submission to arbitration, arises from or relates to an obligation to the Bank secured by real property. In this case, all of the parties to this agreement must consent to submission of the Claim to arbitration.
(g)		To the extent any Claims are not arbitrated, to the extent permitted by law the Claims shall be resolved in court by a judge without a jury, except any Claims which are brought in California state court shall be determined by judicial reference as described below.
(h)		Any Claim which is not arbitrated and which is brought in California state court will be resolved by a general reference to a referee (or a panel of referees) as provided in California Code of Civil Procedure Section 638. The referee (or presiding referee of the panel) shall be a retired Judge or Justice. The referee (or panel of referees) shall be selected by mutual written agreement of the parties. If the parties do not agree, the referee shall be selected by the Presiding Judge of the Court (or his or her representative) as provided in California Code of Civil Procedure Section 638 and the following related sections. The referee shall determine all issues in accordance with existing California law and the California rules of evidence and civil procedure. The referee shall be empowered to enter equitable as well as legal relief, provide all temporary or provisional remedies, enter equitable orders that will be binding on the parties and rule on any motion which would be authorized in a trial, including without limitation motions for summary judgment or summary adjudication. The award that results from the decision of the referee(s) will be entered as a judgment in the court that appointed the referee, in accordance with the provisions of California Code of Civil Procedure Sections 644(a) and 645. The parties reserve the right to seek appellate review of any judgment or order, including but not limited to, orders pertaining to class certification, to the same extent permitted in a court of law.
(i)		This Dispute Resolution Provision does not limit the right of any party to: (i) exercise self-help remedies, such as but not limited to, setoff; (ii) initiate judicial or non-judicial foreclosure against any real or personal property collateral; (iii) exercise any judicial or power of sale rights, or (iv) act in a court of law to obtain an interim remedy, such as but not limited to, injunctive relief, writ of possession or appointment of a receiver, or additional or supplementary remedies. The filing of a court action is not intended to constitute a waiver of the right of any party, including the suing party, thereafter to require submittal of the Claim to arbitration or judicial reference.
(j)		Any arbitration, judicial reference or trial by a judge of any Claim will take place on an individual basis without resort to any form of class or representative action (the “Class Action Waiver”). Regardless of anything else in this Dispute Resolution Provision, the validity and effect of the Class Action Waiver may be determined only by a court or referee and not by an arbitrator. The parties to this Agreement acknowledge that the Class Action Waiver is material and essential to the arbitration of any disputes between the parties and is nonseverable from the agreement to arbitrate Claims. If the Class Action Waiver is limited, voided or found unenforceable, then the parties’ agreement to arbitrate shall be null and void with respect to such proceeding, subject to the right to appeal the limitation or invalidation of the Class Action Waiver. The Parties acknowledge and agree that under no circumstances will a class action be arbitrated.
(k)		By agreeing to binding arbitration or judicial reference, the parties irrevocably and voluntarily waive any right they may have to a trial by jury as permitted by law in respect of any Claim. Furthermore, without intending in any way to limit this Dispute Resolution Provision, to the extent any Claim is not arbitrated or submitted to judicial reference, the parties irrevocably and voluntarily waive any right they may have to a trial by jury to the extent permitted by law in respect of such Claim. This waiver of jury trial shall remain in effect even if the Class Action Waiver is limited, voided or found unenforceable. WHETHER THE CLAIM IS DECIDED BY ARBITRATION, BY JUDICIAL

REFERENCE, OR BY TRIAL BY A JUDGE, THE PARTIES AGREE AND UNDERSTAND THAT THE EFFECT OF THIS AGREEMENT IS THAT THEY ARE GIVING UP THE RIGHT TO TRIAL BY JURY TO THE EXTENT PERMITTED BY LAW.

9.5 Severability; Waivers. If any part of this Agreement is not enforceable, the rest of the Agreement may be enforced. The Bank retains all rights, even if it makes a loan after default. If the Bank waives a default, it may enforce a later default. Any consent or waiver under this Agreement must be in writing.

9.6 Attorneys’ Fees. The Borrower shall reimburse the Bank for any reasonable costs and attorneys’ fees incurred by the Bank in connection with the enforcement or preservation of any rights or remedies under this Agreement and any other documents executed in connection with this Agreement, and in connection with any amendment, waiver, “workout” or restructuring under this Agreement. In the event of a lawsuit or arbitration proceeding, the prevailing party is entitled to recover costs and reasonable attorneys’ fees incurred in connection with the lawsuit or arbitration proceeding, as determined by the court or arbitrator. In the event that any case is commenced by or against the Borrower under the Bankruptcy Code (Title 11, United States Code) or any similar or successor statute, the Bank is entitled to recover costs and reasonable attorneys’ fees incurred by the Bank related to the preservation, protection, or enforcement of any rights of the Bank in such a case. As used in this paragraph, “attorneys’ fees” includes the allocated costs of the Bank’s in-house counsel.

9.7 One Agreement. This Agreement and any related security or other agreements required by this Agreement, collectively:

(a)		represent the sum of the understandings and agreements between the Bank and the Borrower concerning this credit;
(b)		replace any prior oral or written agreements between the Bank and the Borrower concerning this credit; and
(c)		are intended by the Bank and the Borrower as the final, complete and exclusive statement of the terms agreed to by them.

In the event of any conflict between this Agreement and any other agreements required by this Agreement, this Agreement will prevail. Any reference in any related document to a “promissory note” or a “note” executed by the Borrower and dated as of the date of this Agreement shall be deemed to refer to this Agreement, as now in effect or as hereafter amended, renewed, or restated.

9.8 Indemnification. The Borrower will indemnify and hold the Bank harmless from any loss, liability, damages, judgments, and costs of any kind relating to or arising directly or indirectly out of (a) this Agreement or any document required hereunder, (b) any credit extended or committed by the Bank to the Borrower hereunder, and (c) any litigation or proceeding related to or arising out of this Agreement, any such document, or any such credit. This Indemnity includes but is not limited to attorneys’ fees (including the allocated cost of in-house counsel). This indemnity extends to the Bank, its parent, subsidiaries and all of their directors, officers, employees, agents, successors, attorneys, and assigns. This indemnity will survive repayment of the Borrower’s obligations to the Bank. All sums due to the Bank hereunder shall be obligations of the Borrower, due and payable immediately without demand.

9.9 Notices. Unless otherwise provided in this Agreement or in another agreement between the Bank and the Borrower, all notices required under this Agreement shall be personally delivered or sent by first class mail, postage prepaid, or by overnight courier, to the addresses on the signature page of this Agreement, or sent by facsimile to the fax numbers listed on the signature page, or to such other addresses as the Bank and the Borrower may specify from time to time in writing. Notices and other communications shall be effective (i) if mailed, upon the earlier of receipt or five (5) days after deposit in the U.S. mail, first class, postage prepaid, (ii) if telecopied, when transmitted, or (iii) if hand-delivered, by courier or otherwise (including telegram, lettergram or mallgram), when delivered.

9.10 Headings. Article and paragraph headings are for reference only and shall not affect the interpretation or meaning of any provisions of this Agreement.

9.11 Counterparts. This Agreement may be executed in as many counterparts as necessary or convenient, and by the different parties on separate counterparts each of which, when so executed, shall be deemed an original but all such counterparts shall constitute but one and the same agreement.

9.12 Prior Agreement Superseded. This Agreement supersedes the Business Loan Agreement entered into as of January 30, 2004, between the Bank and the Borrower, and any credit outstanding thereunder shall be deemed to be outstanding under this Agreement.

     This Agreement is executed as of the date stated at the top of the first page.

Bank of America, N.A.			Calavo Growers, Inc.
By	/s/ Susan Moinpour		By	/s/ Arthur J. Bruno
	Authorized Signer		Typed Name Arthur J. Bruno
			Title COO, VP Finance Corp. Secretary
			By:	/s/ Scott H. Runge
			Typed Name Scott H. Runge
			Title Treasurer
Address where notices to			Address where notices to
the Bank are to be sent:			the Borrower are to be sent:
Pasadena — Attn: Notice Desk			1141A Cummings Road
101 S. Marengo Avenue, 5th Floor			Santa Paula, CA 93060
Pasadena, CA 91101-2428			Telephone: 805 ###-###-####
Telephone: 626 ###-###-####			Facsimile:  ###-###-####
Facsimile: 626 ###-###-####
			Borrower’s place of business (or chief executive office, if more than one place of business), if different from address listed above:

BANK OF AMERICA		AMENDMENT TO AUTOBORROWED SERVICE AGREEMENT
Bank of America, N.A.

Pursuant to the “Amendments” paragraph in the Bank AutoBorrow Services Agreement (the “Agreement”) executed by the parties hereto on, the following amendments to the Agreement have been requested by (“Customer”) and agreed to by Bank of America, N.A., which changes shall be effective within ten business days of the date of Bank’s acceptance and acknowledgment:

1. Borrowing Increment Amount: For purposes of the Agreement, the Borrowing Increment Amount shall be $no change. Customer Initials SHR.

2. Repaying Increment Amount: For purposes of the Agreement, the Repaying Increment Amount shall be $no change. Customer Initials SHR.

3. Line of Credit: The Line of Credit subject to the Agreement shall be that credit facility extended in the maximum principal amount of $10,000,000, as Evidenced by Loan Agreement dated: October 15, 2007. Customer Initials SHR.

4. Borrowing Target: For purposes of the Agreement, the Borrowing Target shall be $no change. Customer Initials SHR.

5. Repaying Target: For purposes of the Agreement, the Repaying Target shall be $no change Customer Initials SHR.

6. Checking Account that Service is attached to: For purposes of the Agreement, the customer requests that the checking account that AutoBorrow is attached to be changed from                  No Change                      to               No Change              .

Current checking account number

New checking account number

Customer Initials SHR

Customer’s Name (type or print)
Calavo Growers, Inc.

ATTEST: If Corporation or Partnership:
By:		/s/ Scott H. Runge
Title: Treasurer

Bank of America, N.A.

Accepted and acknowledged by Bank of America, N.A. this day 15^th of, 2007 October

Bank of America, N.A.
/s/ Susan Moinpur   By
AVP
Title