Promissory Note (2014)Full Document 

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PROMISSORY NOTE

Principal Loan Date Maturity Loan No Call / Coll Account Officer Initials

$10,000,000.00

06-13-2014 06-13-2036 32512028 JFS

References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.

Any item above containing "***" has been omitted due to text length limitations.

Borrower:

Marrone Michigan Manufacturing, LLC, a Delaware limited liability company

Marrone Bio Innovations, Inc., a Delaware corporation

2121 Second Street, Suite B-107

Davis, CA 95618

Lender:

Five Star Bank

Rocklin Office

6810 Five Star Blvd., Suite 100

P.O. Box 779000

Rocklin, CA 95677

Principal Amount: $10,000,000.00 Date of Note: June 13, 2014

PROMISE TO PAY. Marrone Michigan Manufacturing, LLC, a Delaware limited liability company; and Marrone Bio Innovations, Inc., a Delaware corporation ("Borrower") jointly and severally promise to pay to Five Star Bank ("Lender"), or order, in lawful money of the United States of America, the principal amount of Ten Million & 00/100 Dollars ($10,000,000.00), together with interest on the unpaid principal balance from June 13, 2014, until paid in full.

PAYMENT. Subject to any payment changes resulting from changes in the Index, Borrower will pay this loan in 264 payments of $64,389,64 each payment. Borrower’s first payment is due July 13, 2014, and all subsequent payments are due on the same day of each month after that. Borrower’s final payment will be due on June 13, 2036, and will be for all principal and all accrued interest not yet paid. Payments include principal and interest. Unless otherwise agreed or required by applicable law, payments will be applied first to any accrued unpaid interest; then to principal; then to any late charges; and then to any unpaid collection costs. Borrower will pay Lender at Lender’s address shown above or at such other place as Lender may designate in writing. All payments must be made in U.S. dollars and must be received by Lender consistent with any written payment instructions provided by Lender. If a payment is made consistent with Lender’s payment Instructions but received after 4:00 pm Pacific Time, Lender will credit Borrower’s payment on the next business day.

VARIABLE INTEREST RATE. The Interest rate on this Note is subject to change from time to time based on changes in an independent index which is the Prime Rate as published in the West Coast Edition of the Wall Street Journal as quoted on http://www.bankrate.com/rates/interest-rates/prime-rate.aspx?ec_id=m1027770 as of the last business day of the prior month end (the "Index"). The Index is not necessarily the lowest rate charged by Lender on its loans. If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current Index rate upon Borrower’s request. The interest rate change will not occur more often than each quarter. Borrower understands that Lender may make loans based on other rates as well. The Index currently is 3.250% per annum. Interest on the unpaid principal balance of this Note will be calculated as described in the "INTEREST CALCULATION METHOD" paragraph using a rate of 2.000 percentage points over the Index, adjusted if necessary for any minimum and maximum rate limitations described below, resulting in an initial rate of 5.250%. NOTICE: Under no circumstances will the interest rate on this Note be less than 5.250% per annum or more than the maximum rate allowed by applicable law. Whenever increases occur in the interest rate, Lender, at its option, may do one or more of the following: (A) increase Borrower’s payments to ensure Borrower’s loan will pay off by its original final maturity date, (B) increase Borrower’s payments to cover accruing interest, (C) increase the number of Borrower’s payments, and (D) continue Borrower’s payments at the same amount and increase Borrower’s final payment.

INTEREST CALCULATION METHOD. Interest on this Note is computed on a 365/360 basis; that is, by applying the ratio of the interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. All interest payable under this Note is computed using this method. This calculation method results in a higher effective interest rate than the numeric interest rate stated in this Note.

PREPAYMENT FEE. Upon prepayment of this Note, Lender is entitled to the following prepayment fee: Twenty percent (20%) of the outstanding principal loan balance may be prepaid in each year without penalty. The maximum amount of prepayment allowed in any penalty year will be calculated as of the Note Date and each anniversary date thereafter. For sums prepaid anytime during the year following the Note or anniversary date amounts exceeding 20%, the following penalties will be charged. 1. Year one, ten percent (10%) of the prepaid amount. 2. Year two, nine percent (9%) of the prepaid amount. 3. Year three, eight percent (8%) of the prepaid amount. 4. Year four, seven percent (7%) of the prepaid amount. 5. Year five, six percent (6%) of the prepaid amount. 6. Year six, five percent (5%) of the prepaid amount. 7. Year seven, four percent (4%) of the prepaid amount. 8. Year eight, three percent (3%) of the prepaid amount. 9. Year nine, two percent (2%) of the prepaid amount. 10. Year ten, one percent (1%) of the prepaid amount. Any partial prepayment will not excuse any later scheduled payments until I pay in full. Except for the foregoing, Borrower may pay all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower’s obligation to continue to make payments under the payment schedule. Rather, early payments will reduce the principal balance due and may result in Borrower’s making fewer payments. Borrower agrees not to send Lender payments marked "paid in full", "without recourse", or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender’s rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment Instrument that indicates that the payment constitutes "payment in full" of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: Five Star Bank, Rocklin Office, 6810 Five Star Blvd., Suite 100, P.O. Box 779000, Rocklin, CA 95677.

LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled payment.

INTEREST AFTER DEFAULT. Upon default, the interest rate on this Note shall, if permitted under applicable law, immediately become 18.000%.

DEFAULT. Each of the following shall constitute an event of default ("Event of Default") under this Note:

Payment Default. Borrower fails to make any payment when due under this Note.

Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the Related Documents.

Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower’s property or Borrower’s ability to repay this Note or perform Borrower’s obligations under this Note or any of the related documents.

False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this Note or the related documents is false or misleading in any material respect, either now or at the time made or furnished.

Insolvency. The dissolution or termination of Borrower’s existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower’s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan. This includes a garnishment of any of Borrower’s accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.

Events Affecting Guarantor. Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of the indebtedness or any guarantor, endorser, surely, or accommodation party dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note.


Change In Ownership. Any Change of Control.

Adverse Change. A material adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performance of this Note is impaired.

Right to Cure. Except in respect of an Event of Default described in the Payment Default or insolvency subsections, Borrower may cure any other Event of Default within fifteen (15) days after notice of the Event of Default from Lender; provided, that if such Event of Default cannot be cured within such fifteen (15) day time period but is susceptible to cure within ninety (90) days, within ninety (90) days after notice of the Event of Default from Lender if Borrower commences action deemed by Lender in its sole discretion to be sufficient to cure the Event of Default within such fifteen (15) day time period and diligently pursues such cure sufficient to produce compliance as soon as reasonably possible and in no event later than ninety (90) days after notice of the Event of Default from Lender.

LENDER’S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance under this Note and all accrued unpaid interest immediately due, and then Borrower will pay that amount.

ATTORNEYS’ FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender that amount. This includes, subject to any limits under applicable law, Lender’s attorneys’ fees and Lender’s legal expenses, whether or not there is a lawsuit, including attorneys’ fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. Borrower also will pay any court costs, in addition to all other sums provided by law.

GOVERNING LAW. This Note will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of California without regard to its conflicts of law provisions. This Note has been accepted by Lender in the State of California.

CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of Sacramento County, State of California.

COLLATERAL. Borrower acknowledges this Note is secured by the following collateral described in the security instruments listed herein:

(A) a Mortgage dated June 13, 2014, to Lender on real property located in Van Buren County, State of Michigan.

(B) inventory, chattel paper, accounts, equipment and general intangibles described in a Commercial Security Agreement dated June 13, 2014.

(C) deposit accounts with Lender described in a Commercial Security Agreement dated June 13, 2014.

DISPUTE RESOLUTION. Borrower and Lender desire to resolve quickly and efficiently any disputes that might arise between them. For any controversy, claim or judicial action arising from or relating to this Note or any related agreement, transaction or conduct, whether sounding in contract, tort or otherwise:

Judicial Reference. Where an action is pending before a court of any judicial district of the State of California, Borrower and Lender shall each have the right to require that all questions of fact or law be submitted to general reference pursuant to California Code of Civil Procedure Section 638 et seq., and any successor statutes thereto.

(1) A single referee who is a retired superior court judge shall be appointed by the court pursuant to Code of Civil Procedure 640 and shall preside over the reference proceeding. If Borrower and Lender do not agree upon the referee, each of them may submit to the court up to three nominees who are retired superior court judges.

(2) If Borrower and Lender do not agree on how the payment of the referee’s fees and expenses will be shared, the court may apportion such fees and expenses between Borrower and Lender in a fair and reasonable manner that is consistent with Code of Civil Procedure Section 645.1.

(3) Borrower and Lender shall be entitled to discovery, and the referee shall oversee discovery and may enforce all discovery orders in the same manner as any trial court judge.

(4) The referee’s statement of decision shall contain written findings of fact and conclusions of law, and the court shall enter judgment thereon pursuant to Code of Civil Procedure Sections 644(a) and 645. The decision of the referee shall then be appealable as if made by the court.

No provision of this section shall limit the right of any party to exercise self-help remedies, to foreclose against or sell any real or personal property collateral or to obtain provisional or ancillary remedies, such as injunctive relief or appointment of a receiver, from a court of competent jurisdiction before, after, or during the pendency of any reference proceeding. The exercise of a remedy does not waive the right of either party to resort to reference.

Jury Trial Waiver. In any action pending before any court of any jurisdiction, Borrower waives, and Lender shall not have, any right to a jury trial.

FINANCIAL STATEMENTS AND TAX RETURNS. Borrower and/or Guarantor hereby agrees to furnish Lender with tax returns and other related information at such frequencies and in such detail as Lender may reasonably request. Borrower and/or Guarantor hereby understands that if Borrower and/or Guarantor does not provide Lender with requested information within 60 days from date of Lender’s request, Lender shall change the loan rate to the default rate as stated in your Promissory Note and the earning rate of the loan shall remain at the default rate until such time that Lender has received any and all items requested. Borrower hereby agrees to furnish Lender with (a) as soon as available, but in any event not later than 90 days after the end of each fiscal year, a copy of the annual audited consolidated balance sheet of Borrower and Guarantor, as applicable, as of the end of such year ending, and the related consolidated statements of operations and retained earnings, comprehensive income and cash flows for such year; the Borrower’s financial statements shall be accompanied by the unqualified opinion (or, if qualified, of a non-material nature (e.g. FASB changes of accounting principles) or nothing indicative of going concern or material misrepresentation nature) and a copy of the management letter, if any, of Borrower’s independent public accounting firm which provided Borrower’s audit that year; and (b) as soon as available, but not later than 60 days after the close of each of the first three quarterly periods, a copy of the unaudited consolidated balance sheet of the Borrower as of the end of such quarter and the related consolidated statements of operations and retained earnings, comprehensive income and cash flows for the period commencing on the first day and ending on the last day of such period certified by the chief executive officer, secretary or chief financial officer of Borrower as fairly presenting in all material respects, in accordance with GAAP (subject to normal and recurring year-end audit adjustments), the consolidated financial position of the Borrower at the end of such periods and the results of their operations and their cash flows. Borrower shall have been deemed to comply with its obligation to provide financial statements under this paragraph if it provides Lender with the financial statements within the relevant time period in this paragraph Borrower discloses in compliance with the Exchange Act so long as Borrower is a reporting company under the Exchange Act.

SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and upon Borrower’s heirs, personal representatives, successors and assigns, and shall inure to the benefit of Lender and its successors and assigns.

NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES. Borrower may notify Lender if Lender reports any inaccurate information about Borrower’s account(s) to a consumer reporting agency. Borrower’s written notice describing the specific inaccuracy(ies) should be sent to Lender at the following address: Five Star Bank Note Department P.O. Box 779000 Rocklin, CA 95677.

GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will not affect the rest of the Note. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Each Borrower understands and agrees that, with or without notice to Borrower, Lender may with respect to any other Borrower (a) make one or more additional secured or unsecured loans or otherwise extend additional credit; (b) after, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of any indebtedness, including increases and decreases of the rate of interest on the indebtedness; (c) exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any security, with or without the substitution of new collateral; (d) apply such security and direct the order or manner of sale thereof, including without limitation, any non-judicial sale permitted by the terms of the controlling security agreements, as Lender in its discretion may determine; (e) release, substitute, agree not to sue, or deal with any one or more of Borrower’s sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; and (f) determine how, when and what application of payments and credits shall be made on any other indebtedness owing by such other Borrower. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive any applicable statute of limitations, presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker,

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