(7) SHORT-TERM AND LONG-TERM DEBT

Short-Term Debt - Revolving Credit Facility

Pursuant to the Fourth Amended and Restated Credit Agreement, dated July 15, 2010, by and between the Partnership and American AgCredit, PCA (“AgCredit”), the Partnership has a $5.0 million revolving credit facility (the “Credit Agreement”). On March 7, 2011, the Credit Agreement was amended by the First Amendment to Fourth Amended and Restated Credit Agreement to maintain the revolving credit facility at $5.0 million through July 13, 2012. On July 12, 2012, the Partnership and AgCredit, executed the Second Amendment to Fourth Amended and Restated Credit Agreement to extend the maturity date of its $5.0 million revolving credit facility from July 13, 2012 to May 1, 2014. On August 27, 2013, the Partnership executed the Third Amendment to Fourth Amended and Restated Credit Agreement to increase its revolving credit facility from $5.0 million to $7.0 million until December 31, 2013, at which time the revolving credit facility was to be reduced to $5.0 million and any balance in excess of that amount must be repaid. On December 26, 2013, the Partnership executed a Fourth Amendment to Fourth Amended and Restated Credit Agreement, which extended the date by which the revolving credit facility was required to be reduced to $5.0 million from December 31, 2013 to February 14, 2014. As of December 31, 2013, $5.9 million was outstanding on the revolving credit facility. On February 14, 2014, the Partnership made payments on the revolving line of credit to reduce the balance to $4.9 million.

Advances under the $5.0 million revolving credit facility bear interest at the base rate of 4.0% or the prime rate as published in the Wall Street Journal plus 1%, whichever is higher. At December 31, 2013 and 2012, the interest at the base rate on advances under the $5.0 million revolving credit facility was 4.25% per annum. From and after the first anniversary date, the Partnership is required to pay a facility fee of 0.30% to 0.375% per annum, depending on certain financial ratios on the daily unused portion of credit. The interest rate on any outstanding balance of the additional $2.0 million revolving line of credit was subject to a rate 50 basis points higher than the rate on the first $5.0 million and was 4.75% per annum at December 31, 2013. There was no fee on the unused portion of the $2.0 million. The Partnership, at its option, may make prepayments without penalty.

The Partnership had $5.9 million and $2.4 million outstanding on the revolving credit facility as of December 31, 2013 and 2012, respectively. On February 14, 2014, the Partnership made payments on the revolving line of credit to reduce the balance to $4.9 million. Because the maturity date on the revolving credit facility is May 1, 2014, the loan is classified as short term debt.

Long-Term Debt - Term Loan

On June 30, 2009, the Partnership executed a term loan promissory note for $600,000 with AgCredit. On August 4, 2010, the Partnership and AgCredit executed an amendment to the credit agreement which provided for a term loan of $10.5 million and bears fixed interest at 6.5% per annum and matures on July 1, 2020. At December 31, 2013 and 2012 the outstanding balance on the $10.5 million term loan was $6.8 million and $7.9 million, respectively.

At December 31, 2013 and 2012, the Partnership’s long-term debt was comprised of the following (in thousands):

	2013		2012
Term debt	$	6,825	$	7,875
Less: current portion	1,050		1,050
Non-current debt	$	5,775	$	6,825

The estimated fair values of the Partnership’s financial instruments have been determined through a discounted cash flow using an estimated market rate of 4.25% in 2013 and 2012 with similar terms and remaining maturities to that of the current financial instruments. The Partnership has not considered the lender fees in determining the estimated fair value.

The estimated fair values of the Partnership’s financial instrument are as follows at December 31, 2013 and 2012 (in thousands):

	2013				2012
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Long-term debt	$	6,825	$	7,286	$	7,875	$	8,479
Revolving credit facility	$	5,900	$	5,900	$	2,400	$	2,400

The inputs used in determining the fair value of the long-term debt and revolving credit facility are classified as Level 3 within the fair value measurement hierarchy.

Both the revolving credit loan and the term debt are collateralized by all personal and real property assets of the Partnership. The credit agreement contains certain restrictions associated with partner distributions, further indebtedness, sales of assets, and maintenance of certain financial minimums. Significant restrictive financial covenants consist of the following:

1. No restricted payments shall be declared or made without prior lender approval.

2. Minimum Tangible Net Worth (defined as the gross book value of the assets of the Partnership (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 (adjusted to eliminate the effect of deferred income taxes)) effective as of December 31, 2010, shall not be below $41.0 million and shall be increased dollar for dollar by the amount of positive Consolidated Net Income achieved by the Partnership, beginning January 1, 2010 and thereafter. For December 31, 2013, the Tangible Net Worth definition was amended to include all proceeds from the Partnership’s subscription rights offering as if the proceeds had been received on December 31, 2013. As of December 31, 2013, the minimum Tangible Net Worth was required to be $41,562,000. The Partnership’s Tangible Net Worth as of December 31, 2013, was $48,011,000.

3. The minimum quarterly consolidated trailing twelve month EBITDA shall not be less than $1.5 million at the end of each quarter commencing in June 30, 2010. The minimum EBITDA covenant requirement was waived for the reporting twelve-month period ended December 31, 2013.

At December 31, 2013, the Partnership’s working capital was $155,000 and its current ratio was 1.02 to 1 as compared to the Partnership’s working capital of $2.0 million and its current ratio of 1.35 to 1 at December 31, 2012.

The Partnership was in compliance with the terms and conditions of the Credit Agreement at December 31, 2013 and 2012.

Land Leases

The Partnership leases the land underlying 1,911 acres of its orchards under long-term operating leases and one month-to-month lease, which expire through various dates ending 2045. Operating leases provide for changes in minimum rent based on fair value at certain points in time. Some of the land leases provide for additional lease payments based on USDA-reported macadamia nut price levels. As the USDA has not provided a final report for crop year ended June 30, 2013, the Partnership had not issued additional lease payments, but has accrued the amounts based on a nut price provided in a preliminary USDA report of $0.80 per pound. The Partnership has accrued additional rent for the periods July 1, 2012 through December 31, 2012 and the year ended 2013 of $22,000 and $51,000, respectively. Additional payments resulting from the USDA farm price for nuts were made to lessors in the aggregate amount of $47,000 and $40,000 in 2012 and 2011, respectively. Total lease rent recorded for all land operating leases was $244,000 in 2013, $181,000 in 2012 and $177,000 in 2011. Two leases, which terminate in 2034, allow the lessor to purchase the trees from the Partnership in 2019, and if exercised, the leases would terminate.

Contractual obligations as of December 31, 2013, for the Partnership are detailed in the following table (in thousands):

Contractual Obligations	Total		2014		2015		2016		2017		2018		Remaining
Long-term debt	$	6,825	$	1,050	$	1,050	$	1,050	$	1,050	$	1,050	$	1,575
Line of credit	5,900		5,900		—		—		—		—		—
Operating leases	2,887		214		214		214		214		166		1,865
Total	$	15,612	$	7,164	$	1,264	$	1,264	$	1,264	$	1,216	$	3,440