SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-6510
MAUI LAND & PINEAPPLE COMPANY, INC.
(Exact name of registrant as specified in its charter)
HAWAII 99-0107542
(State or other jurisdiction (IRS Employer Identification
of incorporation or organization) number)
120 KANE STREET, P. O. BOX 187, KAHULUI, MAUI, HAWAII 96733-6687
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (808) 877-3351
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, without Par Value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value, as of February 2, 1998, of the
voting stock held by nonaffiliates of the registrant:
$52,237,000.
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at February 2, 1998
Common Stock, no par value 1,797,125 shares
Documents incorporated by reference:
Parts I, II and IV -- Portions of the 1997 Annual Report to
Security Holders.
Part III -- Portions of Proxy Statement dated March 27, 1998.
Exhibit Index--pages 19 - 22.
PART I
Item 1. Business
(a) General
Maui Land & Pineapple Company, Inc. is a Hawaii corporation,
the successor to a business organized in 1909. The Company
consists of a landholding and operating parent company as well as
its principal wholly owned subsidiaries, Maui Pineapple Company,
Ltd. and Kapalua Land Company, Ltd. The "Company," as used
herein, refers to the parent and all of its subsidiaries.
The Company also participates in joint ventures that are
accounted for by the equity method. The most significant of
these ventures are Kaahumanu Center Associates, the owner and
operator of a regional shopping center, and Plantation Club
Associates, a developer of residential lots.
The industry segments of the Company are as follows:
(1) Pineapple - includes growing pineapple,
canning pineapple in tinplated steel containers
fabricated by the Company, and marketing canned
pineapple products and fresh whole and fresh cut
pineapple.
(2) Resort - includes the development and sale of
resort real estate, property management and the
operation of recreational and retail facilities
and utility companies at Kapalua, Maui. It also
includes the Company's investment in Plantation
Club Associates and (through 1995) Kaptel
Associates.
(3) Commercial & Property - includes Kaahumanu
Center (investment in Kaahumanu Center Associates,
effective May 1, 1995), the Napili Plaza shopping
center, and non-resort rentals and land sales. It
also includes the Company's land entitlement and
land management activities.
(b) Financial Information About Industry Segments
The information set forth under Note 15 to Consolidated
Financial Statements on page 18 of the Maui Land & Pineapple
Company, Inc. 1997 Annual Report is incorporated herein by
reference.
(c) Narrative Description of Business
(1) Pineapple
Maui Pineapple Company, Ltd. is the operating subsidiary for
the Company's Pineapple segment. It owns and operates fully
integrated facilities for the production of pineapple products.
Pineapple is cultivated on two Company-operated plantations
on Maui that provided approximately 87% of the fruit processed in
1997. The balance of fruit processed was purchased from
independent Maui growers. Two pineapple crops are normally
harvested from each new planting. The first, or plant crop, is
harvested approximately 18 to 23 months after planting, and the
second, or ratoon crop, is harvested 12 to 14 months later.
Harvested pineapple is processed at the Company's cannery in
Kahului, Maui, where a full line of canned pineapple products is
produced, including solid pineapple in various grades and styles,
juice, and juice concentrates. The cannery operates most of the
year; however, over 50% of production volume takes place during
June, July and August. The metal containers used in canning
pineapple are produced in the Company-owned can plant on Maui.
The metal is imported from manufacturers in Japan. A warehouse
is maintained at the cannery site for inventory purposes.
The Company sells canned pineapple products as store-brand
pineapple with 100% HAWAIIAN U.S.A.TM stamped on the can lid.
Its products are sold principally to large grocery chains, other
food processors, wholesale grocers, and to organizations offering
a complete buyers' brand program to affiliated chains and
wholesalers serving both retail and food service outlets. A
substantial volume of the Company's pineapple products is
marketed through food brokers.
The Company also sells fresh whole pineapple to retail and
wholesale grocers in Hawaii and the continental United States.
In 1996 the Company began selling fresh cut pineapple to
customers in Hawaii. In 1997 the Company began test marketing
fresh cut pineapple on the West Coast of the United States.
In 1997 Royal Coast Tropical Fruit Company, Inc. (a wholly
owned subsidiary of Maui Pineapple Company, Ltd.) entered into a
joint venture with an Indonesian pineapple grower and canner.
The joint venture, Premium Tropicals International, LLC, will
market and sell Indonesian canned pineapple in the United States.
Sales through this joint venture began in 1998.
In 1997, approximately 20 domestic customers accounted for
about 56% of the Company's pineapple sales. Export sales,
primarily to Japan, Canada and Western Europe, amounted to
approximately 4.1%, 5.7% and 7.1% of total pineapple sales in
1997, 1996 and 1995, respectively. Sales to the U.S. government
amounted to approximately 12.9%, 12.5% and 13.1% of total
pineapple sales in 1997, 1996 and 1995, respectively. The
Company's pineapple sales office is in Concord, California.
As a service to its customers, the Company maintains
inventories of its products in public warehouses in the
continental United States. The balance of its products is
shipped directly from Hawaii to its customers. The Company's
canned pineapple products are shipped from Hawaii by ocean
transportation. They are then taken by truck or rail to
customers or to public warehouses. Fresh whole and fresh cut
pineapple is shipped by air.
The Company sells its products in competition with both
foreign and U.S. companies. Its principal competitors are two
U.S. companies, Dole Food Company, Inc. and Del Monte Food Co.,
which produce substantial quantities of pineapple products, a
significant portion of which is produced in the Philippines.
Producers of pineapple products in other foreign countries,
particularly Thailand and Indonesia, are also a major source of
competition. Foreign production has the advantage of lower labor
costs. The Company's principal marketing advantages are the high
quality of its fresh and canned pineapple, the relative proximity
to the West Coast United States fresh fruit market and being the
only U.S. canner of pineapple. Other canned fruits and fruit
juices are also a source of competition. Generally, the price of
the Company's products is influenced by supply and demand of
pineapple and other fruits and juices.
For information regarding the antidumping petition and
duties currently imposed on imports of canned pineapple fruit
from Thailand, see Part I, Item 3. (A) of this report.
For further information regarding Pineapple operations see
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
(2) Resort
Kapalua Resort is a master-planned golf resort community on
Maui's northwest coast. The property encompasses 1,650 acres
bordering the ocean with three white sand beaches, and includes
two hotels, seven residential subdivisions, three championship
golf courses, two ten-court tennis facilities, a 22,000 square
foot shopping center and over ten restaurants. Water and waste
transmission utilities are also included in the Resort.
Approximately 766 acres are available for further development
within the Kapalua Resort.
Kapalua Land Company, Ltd. is the developing and operating
subsidiary of the Company's resort segment. The following
additional wholly owned subsidiaries of the Company are included
in the Resort segment: Kapalua Water Company, Ltd. and Kapalua
Waste Treatment Company, Ltd., public utilities providing water
and waste transmission services for the Kapalua resort; Kapalua
Advertising Company, Ltd., an in-house advertising agency;
Kapalua Investment Corp., an investment holding company; and
Kapalua Realty Company, Ltd. (wholly owned by Kapalua Land
Company, Ltd.) a general brokerage real estate company located
within the resort.
The Company, through subsidiaries and joint ventures,
developed the Kapalua Resort, which opened in 1975 with The Bay
Course. At Kapalua, the Company owns three golf courses (The
Bay, The Village and The Plantation Courses), one tennis facility
(The Tennis Garden), the shopping center (The Kapalua Shops), the
land under both hotels (The Ritz-Carlton Kapalua Hotel and
Kapalua Bay Hotel), as well as various on-site administrative and
maintenance facilities.
The Company operates the golf and tennis facilities, the
shopping center, nine retail shops, a vacation rental program
(The Kapalua Villas), and certain services to the resort
including shuttle, security and maintenance of common areas. The
Company is the ground lessor under long-term leases for both
hotels and also receives rental income from certain other
properties. The Company manages the Kapalua Club, a membership
program that provides for certain rights and privileges of its
members within the Resort.
Joint ventures have enabled Kapalua to proceed with some
development projects. Plantation Club Associates, an
unincorporated joint venture between Kapalua Land Company, Ltd.
and Rolfing Partners, was formed in 1988 to finance and develop
The Plantation at Kapalua, comprised of an 18-hole golf course
(The Plantation Course) and two residential development projects
(Plantation Estates Phase I and II). In 1997 the three remaining
lots in Plantation Estates Phase I were sold and the partners
concluded an agreement to liquidate the partnership effective as
of December 31, 1997. For further information regarding
Plantation Club Associates, see Note 3 to Consolidated Financial
Statements.
Kapalua Investment Corp. (KIC) was a general partner in
Kaptel Associates, the partnership that owned The Ritz-Carlton
Kapalua Hotel. In October of 1995, KIC transferred its 25%
interest in Kaptel to the major general partner, NI Hawaii
Resorts, Inc. For further information regarding Kaptel
Associates, see Note 3 to Consolidated Financial Statements.
In 1997 the Company and ERE Yarmouth, owner of the Kapalua
Bay Hotel, formed a 50/50 joint venture, Kapalua Coconut Grove
LLC, to develop the 12-acre parcel adjacent to the hotel.
Yarmouth purchased a one-half interest in the land from the
Company prior to formation of the venture.
The Kapalua Resort faces substantial competition from
alternative visitor destinations throughout the world. Kapalua's
total room inventory accounts for approximately 10% of the units
available in West Maui, and approximately 6% of the total
inventory on Maui.
Kapalua's marketing strategies continue to target upscale
visitors with a focus on golf. Beginning in January 1999,
Kapalua will host the Mercedes Championships, the season opening
event for the PGA Tour. This event replaces the Lincoln-Mercury
Kapalua International and is a major marketing event for Kapalua.
Advertising placements in key publications are also designed to
promote Kapalua through the travel trade, consumer, golf and real
estate media.
For further information regarding Resort operations see
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
(3) Commercial & Property
Kaahumanu Center is the largest retail and entertainment
center on Maui, with a gross leasable area (GLA) of approximately
573,000 square feet. On December 31, 1997, 127 tenants occupied
96% of the available GLA. Kaahumanu Center faces substantial
competition from other retail centers in Kahului and in other
areas of Maui. The Kahului area has approximately 1.7 million
square feet of retail space in use or under construction. The
Center's primary competitors are the Maui Mall and the Maui
Market Place, both located within 3 miles of Kaahumanu Center.
In June of 1993 Kaahumanu Center Associates (KCA) was formed
to finance the expansion and renovation of and to own and operate
the Kaahumanu Center. The expansion and renovation, which was
completed in November of 1994, expanded the Center from
approximately 315,000 to 573,000 square feet of GLA. KCA is a
partnership between the Company, as general partner, and the
Employees' Retirement System of the State of Hawaii (ERS), as a
limited partner. Effective April 30, 1995, the Company and ERS
each have a 50% ownership interest in KCA. Prior to that, the
ownership interests were 99% for the Company and 1% for ERS.
Napili Plaza is a 44,000 square foot retail and commercial
office center located in West Maui. As of December 31, 1997, 21
tenants occupied 82% of the GLA. Napili Plaza faces competition
from several other retail locations in the Napili area, which
have approximately 276,000 total square feet of retail area.
The Company's land entitlement and management activities are
included in the Commercial & Property segment. Land entitlement
is the process of obtaining the required county, state and
federal approvals to proceed with the planned development and use
of a parcel of land, and satisfying all conditions and
restrictions imposed in connection with such governmental
approvals. The Company actively works with regulatory agencies
and legislative bodies at all levels of government to obtain
necessary entitlements.
For further information regarding Commercial & Property
operations see Management's Discussion and Analysis of Financial
Condition and Results of Operations.
(4) Employees
In 1997 the Company employed 2,270 employees. Pineapple
operations employed approximately 580 full-time and 1,160
seasonal or intermittent employees, of which approximately 44%
were covered by collective bargaining agreements. Resort
operations employed approximately 430 employees. Approximately
14% are part-time employees and approximately 22% were covered by
collective bargaining agreements. The Company's Commercial &
Property operations employed approximately 75 employees, and the
balance of the employees was engaged in administrative
activities.
(5) Other Information
The Company's Pineapple segment engages in continuous
research to develop techniques to reduce costs through crop
production and processing innovations and to develop and perfect
new products. Improved production systems have resulted in
increased productivity by the labor force. Research and
development expenses approximated $601,000 in 1997, $543,000 in
1996 and $410,000 in 1995.
The Company has reviewed its compliance with Federal, State
and local provisions that regulate the discharge of materials
into the environment or otherwise relate to the protection of the
environment. The Company does not expect any material future
financial impact as a result of compliance with these laws. For
information concerning certain pending environmental proceedings
see Part I, Item 3. (B) and (C) of this report.
(d) Financial Information About Foreign and Domestic Operations
and Export Sales
Export sales only arise in the Company's Pineapple segment.
Export sales of pineapple products are primarily to Japan,
Western Europe and Canada. For the last three years these sales
did not exceed 10% of total consolidated revenues.
Item 2. PROPERTIES
The Company owns approximately 28,600 acres of land on Maui.
Approximately 8,100 acres are used directly or indirectly in the
Company's operations and the remaining land is primarily in
pasture or forest reserve. This land, most of which was acquired
from 1911 to 1932, is carried on the Company's balance sheet at
cost. The Company believes it has clear and unencumbered
marketable title to all such property except for the following:
(1) a mortgage on the fee and leasehold interest in the 36-acre
Ritz-Carlton Kapalua Hotel site, which secures a loan to the
ground lessee for up to $65 million.;
(2) a perpetual conservation easement granted to the State of
Hawaii on a 13-acre parcel at Kapalua;
(3) certain easements and rights-of-way that do not materially
affect the Company's use of its property;
(4) a mortgage on the three golf courses at Kapalua, which
secures the Company's $15 million revolving credit
arrangement;
(5) a permanent conservation easement granted to The Nature
Conservancy of Hawaii, a non-profit corporation, covering
approximately 8,600 acres of forest reserve land;
(6) a $5,000,000 mortgage on the fee interest in Napili Plaza
shopping center; and
(7) a small percentage of the Company's land in various
locations on which multiple claims exist and for which the
Company has initiated quiet title actions.
Approximately 22,400 acres of the Company's land are located
in West Maui, approximately 6,200 acres are located at its
Haliimaile plantation in Central Maui, and approximately 28 acres
are located in Kahului, Maui.
The 22,400 acres in West Maui comprise a largely contiguous
parcel which extends from the sea to an elevation of
approximately 5,700 feet and includes nine miles of ocean
frontage with approximately 3,300 lineal feet along sandy
beaches, as well as agricultural and grazing lands, gulches and
heavily forested areas. The Haliimaile property is situated at
elevations between 1,000 and 3,000 feet above sea level on the
slopes of Haleakala.
Approximately 6,400 acres of Company-owned land are used
directly or indirectly in pineapple operations and approximately
1,650 acres are designated for the Kapalua Resort. The Kahului
acreage includes offices, a can manufacturing plant and a
pineapple-processing cannery with interconnected warehouses at
the cannery site where finished product is stored.
Approximately 3,000 acres of leased land are used in the
Company's pineapple operations. A major operating lease covering
approximately 1,500 acres of land expires on December 31, 1999.
Eleven leases expiring at various dates through 2012 cover the
balance of the leased property. The aggregate land rental for
all leased land was $519,000 in 1997.
Item 3. LEGAL PROCEEDINGS
A. Antidumping Petition.
In June 1994, Maui Pineapple Company, Ltd. and the
International Longshore and Warehouse Union filed an antidumping
petition with the U.S. International Trade Commission and the
U.S. Department of Commerce. The petition alleged that Thai
producers of canned pineapple were violating U.S. and
international trade laws by selling their products in the United
States at less than fair value, and that such sales were causing
injury to the U.S. industry producing canned pineapple.
On May 30, 1995, the U.S. Department of Commerce completed
its portion of the investigation, concluding that imports of
canned pineapple from Thailand were being sold in the United
States at less than fair value. Thai producers investigated
included Dole Thailand, Ltd., The Thai Pineapple Public Co.,
Ltd., Siam Agro Industry Pineapple and Others Co., Ltd., and
Malee Sampran Factory Public Co., Ltd.
On June 30, 1995, the U.S. International Trade Commission
announced its unanimous determination that the domestic industry
producing canned pineapple was materially injured by reason of
the unfair imports of canned pineapple from Thailand. As a
result of the affirmative findings of both the U.S. Department of
Commerce and the U.S. International Trade Commission, antidumping
duties were imposed on all imports of canned pineapple fruit from
Thailand into the United States, with cash duty deposits ranging
up to 51%.
The Thai respondents appealed the dumping calculations of
the Department of Commerce to the United States Court of
International Trade (USCIT). Maui Pineapple filed a cross appeal
concerning one element of the Department's determination. On
November 8, 1996, the USCIT announced its decision regarding
appeals filed by the Thai respondents. The USCIT remanded
certain issues back to the Department of Commerce for
recalculation. In one of the issues, the USCIT ruled that the
Department of Commerce's reliance on the Thai pineapple
companies' normal accounting records (their allocation ratio
between juice and solid pack) was inconsistent with a higher
court's previous ruling. The Company strongly disagrees with the
USCIT's decision on this issue, which could substantially reduce
the duties being imposed if the USCIT's position is upheld.
In 1997 the Company and the Department of Commerce appealed
the decision by the USCIT to the United States Court of Appeals
for the Federal Circuit. A final decision by that court is not
expected until mid-1998.
The amount of duties on the Thai imports is subject to
periodic reviews by the Department of Commerce. The Company or
the Thai producers can initiate these reviews. If the cost of
production changes relative to the selling price of the product
in the U.S., the duties would be adjusted. Based on results of
the recently finalized first review, there were no significant
adjustments to the duties. Results of the second review, which
covers the period from July 1996 to June 1997, are pending.
B. Occidental Chemical Litigation.
The County of Maui has sued several chemical manufacturers
claiming that they are responsible for the presence of a
nematocide commonly known as "DBCP" in certain water wells that
the County of Maui maintains. One of those chemical
manufacturers, Occidental Chemical Corporation ("OCC"), has
claimed that Maui Land & Pineapple Company, Inc. ("MLP") is
required to indemnify OCC against the County's claims under the
terms of a March 14, 1978 Agreement for Sale of DBCP between MLP
and Occidental Chemical Company. MLP rejected OCC's tender of
this indemnification and, on November 13, 1997, filed a lawsuit
against OCC, Maui Land & Pineapple Company, Inc. v. Occidental
Chemical Corporation, Civil No. 97-0867 (Second Circuit Court,
State of Hawaii), seeking judgment declaring that MLP has no
obligation to indemnify OCC against the County's claims. On
December 9, 1997, OCC removed MLP's lawsuit to the United States
District Court for the District of Hawaii. On December 9, 1997
OCC filed a counterclaim against MLP in that lawsuit seeking
judgment (a) declaring that MLP is obligated to indemnify OCC
against the County's claims, and (b) awarding OCC damages for
MLP's alleged breach of that obligation. OCC has not specified
the amount it seeks to recover from MLP on its counterclaim,
which MLP is contesting. MLP and OCC have each filed their
answer to the other's claim, but have not commenced discovery or
other litigation activity. No settlement negotiations have been
initiated.
MLP tendered the defense and indemnification of OCC's claims
to its insurers, including Hawaiian Insurance & Guaranty Company,
which is being liquidated by the State of Hawaii and is now known
as HUI/Unico in Liquidation, Inc. ("HUI/Unico"). HUI/Unico
agreed to defend MLP against OCC's claims under a reservation of
the right to contest its obligation to do so. On September 2,
1997 HUI/Unico filed a lawsuit against MLP, Reynaldo D. Graulty,
Insurance Commissioner of the State of Hawaii, in his capacity as
Liquidator of HUI/Unico in Liquidation, Inc. v. Maui Land &
Pineapple Company, Inc., Civil No. 97-3571-09 (First Circuit
Court, State of Hawaii), seeking judgment declaring that
HUI/Unico has no obligation to defend and indemnify MLP against
OCC's claims. MLP is contesting HUI/Unico's lawsuit and, on
October 13, 1997, filed a counterclaim against HUI/Unico seeking
judgment declaring that HUI/Unico is obligated to defend and
indemnify MLP against OCC's claims and awarding MLP damages for
HUI/Unico's alleged breach of that obligation. MLP and HUI/Unico
have commenced initial discovery. No settlement negotiations
have been initiated.
C. Cannery Waste Water Citations
In June of 1997, at a total cost of $3.2 million, the
Company completed a system for disposal of cooling and wastewater
from its cannery operation at Kahului. The system transmits the
water from the cannery to an agricultural area in Central Maui
and recycles the water for irrigation purposes. This new system
allowed the Company to discontinue its previous method of
disposing of this water. The Department of Health of the State
of Hawaii (DOH) issued citations to the Company for (1) it's
previous discharge of condenser and can cooling water from the
cannery into Kahului harbor, and (2) it's previous disposal of
effluent from the cannery into an injection well. The Company is
in negotiations with the DOH regarding the potential penalties
that may be imposed on the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information set forth under the caption "Common Stock"
on page 19 of the Maui Land & Pineapple Company, Inc. 1997 Annual
Report is incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA
The information set forth under the caption "Selected
Financial Data" on page 20 of the Maui Land & Pineapple Company,
Inc. 1997 Annual Report is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
"Management's Discussion and Analysis of Financial Condition
and Results of Operations" on pages 21 through 23 of the Maui
Land & Pineapple Company, Inc. 1997 Annual Report is incorporated
herein by reference.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not applicable for 1997.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The "Independent Auditors' Report," "Consolidated Financial
Statements" and "Notes to Consolidated Financial Statements" on
pages 7 through 18 of the Maui Land & Pineapple Company, Inc.
1997 Annual Report are incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the captions "Section 16(a)
Beneficial Ownership Reporting Compliance" and "Election of
Directors" on pages 6 through 8 of the Maui Land & Pineapple
Company, Inc. Proxy Statement, dated March 27, 1998, is
incorporated herein by reference. Below is a list of the names
and ages of the Company's executive officers, indicating their
position with the Company and their principal occupation during
the last five years. The current terms of the executive officers
expire in May of 1998 or at such time as their successors are
elected.
Gary L. Gifford (50) President and Chief Executive Officer
since 1995; Executive Vice
President/Resort from 1987 to 1995.
Paul J. Meyer (50) Executive Vice President/Finance since
1984.
Douglas R. Schenk (45) Executive Vice President/Pineapple since
1995; Vice President/Pineapple from 1993
to 1995; Cannery Manager of Maui
Pineapple Company, Ltd. from 1989 to
1993.
Donald A. Young (50) Executive Vice President/Resort since
1995; Executive Vice
President/Operations of Kapalua Land
Company, Ltd. from 1992 to 1995; Vice
President/Operations of Kapalua Land
Company, Ltd. from 1985 to 1992.
Scott A. Crockford (42) Vice President/Retail Property since
1995; General Manager of Kaahumanu
Center from 1989 to 1995.
Warren A. Suzuki (45) Vice President/Land Management since
October 1995; Vice
President/Construction & Planning of
Kapalua Land Company, Ltd. from May 1995
to October 1995; Director of Project
Coordination of Kapalua Land Company,
Ltd. from 1988 to 1995.
Item 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Executive
Compensation" on pages 9 through 14 and under the subcaption
"Directors' Meetings and Committees" on page 8 of the Maui Land &
Pineapple Company, Inc. Proxy Statement dated March 27, 1998 is
incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information set forth under the caption "Security
Ownership of Certain Beneficial Owners and Management" on pages 4
through 6 of the Maui Land & Pineapple Company, Inc. Proxy
Statement dated March 27, 1998 is incorporated herein by
reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Compensation
Committee Interlocks and Insider Participation" on page 14 of the
Maui Land & Pineapple Company, Inc. Proxy Statement dated March
27, 1998 is incorporated herein by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements
The following Financial Statements and Supplementary Data of
Maui Land & Pineapple Company, Inc. and subsidiaries and the
Independent Auditors' Report are included in Item 8 of this
report:
Consolidated Balance Sheets, December 31, 1997 and 1996
Consolidated Statements of Operations and Retained Earnings
for the Years
Ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
(a) 2. Financial Statement Schedules
The following Financial Statement Schedule of Maui Land &
Pineapple Company, Inc. and subsidiaries and the Independent
Auditors' Report are filed herewith:
II. Valuation and Qualifying Accounts.
The Financial Statements of Kaahumanu Center Associates for
the Years Ended December 31, 1997, 1996 and 1995 are filed as
exhibits.
(a) 3. Exhibits
Exhibits are listed in the "Index to Exhibits" found on
pages 19 to 22 of this Form 10-K.
(b) 3. Reports on Form 8-K
There were no reports on Form 8-K filed for the period
covered by this report.
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Directors of
Maui Land & Pineapple Company, Inc.:
We have audited the consolidated financial statements of Maui
Land & Pineapple Company, Inc. and its subsidiaries as of
December 31, 1997 and 1996 and for each of the three years in the
period ended December 31, 1997, and have issued our report
thereon dated February 6, 1998; such consolidated financial
statements and report are included in your 1997 Annual Report and
are incorporated herein by reference. Our audits also included
the financial statement schedule of Maui Land & Pineapple
Company, Inc. listed in Item 14. This financial statement
schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
/S/ DELOITTE & TOUCHE LLP
Honolulu, Hawaii
February 6, 1998
SCHEDULE II
<TABLE>
MAUI LAND & PINEAPPLE COMPANY, INC.
AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
ADDITIONS
ADDITIONS CHARGED
BALANCE AT CHARGED TO TO OTHER BALANCE
BEGINNING COSTS AND ACCOUNTS DEDUCTIONS AT END
DESCRIPTION OF PERIOD EXPENSES describe describe (b) OF PERIOD
(Dollars in Thousands)
Allowance for
Doubtful Accounts
<S> <C> <C> <C> <C> <C>
1997 $ 698 $ 47 $(a) 13 $(191) $ 567
1996 573 440 -- (315) 698
1995 $ 422 $ 385 $(c) (101) $(133) $ 573
</TABLE>
(a) Recoveries.
(b) Write off of uncollectible accounts.
(c) Adjustment as of 4/30/95 for the exclusion of formerly
consolidated amounts resulting from the conversion to
the equity method of accounting for Kaahumanu Center
Associates. See Note 3 to Consolidated Financial
Statements.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MAUI LAND & PINEAPPLE COMPANY, INC.
March 26, 1998 By /S/ GARY L. GIFFORD
Gary L. Gifford
President & Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
By /S/ MARY C. SANFORD Date March 26, 1998
Mary C. Sanford
Chairman of the Board
By /S/ RICHARD H. CAMERON Date March 26, 1998
Richard H. Cameron
Vice Chairman of the Board
By /S/ PAUL J. MEYER Date March 26, 1998
Paul J. Meyer
Executive Vice President/Finance
(Principal Financial Officer)
By /S/ TED PROCTOR Date March 26, 1998
Ted Proctor
Controller & Assistant Treasurer
(Principal Accounting Officer)
By /S/ PETER D. BALDWIN Date March 26, 1998
Peter D. Baldwin
Director
By /S/ SAMUEL K. HIMMELRICH, SR. Date March 26, 1998
Samuel K. Himmelrich, Sr.
Director
By /S/ RANDOLPH G. MOORE Date March 26, 1998
Randolph G. Moore
Director
By /S/ FRED E. TROTTER III Date March 26, 1998
Fred E. Trotter III
Director
INDEX TO EXHIBITS
The exhibits designated by an asterisk (*) are filed herewith.
The exhibits not so designated are incorporated by reference to
the indicated filing. All previous exhibits were filed with the
Securities and Exchange Commission in Washington D. C. under file
number 0-6510.
3. Articles of Incorporation and By-laws
3 (i) Articles of Incorporation (Amended as of 4/19/79).
Exhibit 3 to Form 10-K for the year ended December 31,
1980.
3 (ii) By Laws (Amended as of 2/26/88). Exhibit (3ii) to
Form 10-Q for the quarter ended September 30, 1994.
10. Material Contracts
10.1 (i) Amended and Restated Revolving Credit and Term
Loan Agreement, dated as of December 4, 1996. Exhibit
10.1(i) to Form 10-K for the year ended December 31,
1996.
(ii)* First Loan Modification Agreement, dated
December 31, 1997.
(iii)* Second Loan Modification Agreement, dated
March 17, 1998.
10.2 (i) Limited Partnership Agreement of Kaahumanu Center
Associates, dated June 18, 1993. Exhibit (10)A to Form
10-Q for the quarter ended June 30, 1993.
(ii) Cost Overrun Guaranty Agreement, dated June 28,
1993. Exhibit (10)B of Form 10-Q for the quarter ended
June 30, 1993.
(iii) Environmental Indemnity Agreement, dated June
28, 1993. Exhibit (10)C to Form 10-Q for the quarter
ended June 30, 1993.
(iv) Indemnity Agreement, dated June 28, 1993. Exhibit
(10)D to Form 10-Q for the quarter ended June 30, 1993.
(v) Direct Liability Agreement, dated June 28, 1993.
Exhibit (10)E to Form 10-Q for the quarter ended June
30, 1993.
(vi) Amendment No. 1 to Limited Partnership Agreement
of Kaahumanu Center Associates. Exhibit (10)B to Form
8-K, dated as of April 30, 1995.
(vii) Conversion Agreement, dated April 27, 1995.
Exhibit (10)C to Form 8-K, dated as of April 30, 1995.
(viii) Indemnity Agreement, dated April 27, 1995.
Exhibit (10)D to Form 8-K, dated as of April 30, 1995.
10.3 (i) Note Purchase Agreement between John Hancock
Mutual Life Insurance Company and Maui Land & Pineapple
Company, Inc., dated September 9, 1993. Exhibit (10)A
to Form 10-Q for the quarter ended September 30, 1993.
(ii) First Amendment to Note Purchase Agreement dated
as of March 30, 1994. Exhibit (10)A to Form 10-Q for
the quarter ended March 31, 1994.
(iii) Second Amendment to Note Purchase Agreement,
dated as of November 13, 1995. Exhibit 10.3(iii) to
Form 10-K for the year ended December 31, 1995.
(iv) Waiver To Note Purchase Agreement, dated as of
December 31, 1996. Exhibit 10.3(iv) to Form 10-K for
the year ended December 31, 1996.
(v) Third Amendment to Note Purchase Agreement,
(between John Hancock Mutual Life Insurance Company and
Maui Land & Pineapple Company, Inc.) issued as of March
31, 1997. Exhibit (10)A to Form 10-Q for the quarter
ended March 31, 1997.
10.4(i) The following relate to The Ritz-Carlton Kapalua
Hotel: Partnership Agreement; Development Agreement;
Operating Agreement; Hotel Ground Lease; Supplemental
Agreement; Construction Loan Agreement; Promissory
Note; Real Property Mortgage; Leasehold Mortgage.
Exhibit (10)A-I to Form 10-Q for the quarter ended
September 30, 1990.
(ii) Dissolution Agreement, dated October 31, 1995.
Exhibit (10)A to Form 10-Q for the quarter ended
September 30, 1995.
(iii) First Mortgage, Security Agreement, Financing
Statement and Assignment of Rentals covering the fee
simple interest and the leasehold interest, securing a
loan of $65,000,000, dated February 24, 1996. Exhibit
10.4(iii) to Form 10-K for the year ended December 31,
1995.
(iv) Subordination, Nondisturbance and Attornment
Agreement (Ground Lessor), dated February 24, 1996.
Exhibit 10.4(iv) to Form 10-K for the year ended
December 31, 1995.
(v) Hotel Ground Lease by and between Maui Land &
Pineapple Company, Inc. (Lessor) and NI Hawaii Resort,
Inc. (Lessee), effective January 1, 1996. Exhibit
10.4(v) to Form 10-K for the year ended December 31,
1995.
(vi) Amendment Relating to Off-Site Loan, dated January
9, 1996 and Effective January 1, 1995. Exhibit
10.4(vi) to Form 10-K for the year ended December 31,
1995.
(vii) Letter Agreement, dated January 1, 1996, Re:
Nonrecourse Open Account For Off-Site Improvements.
Exhibit 10.4(vii) to Form 10-K for the year ended
December 31, 1995.
(viii) Agreement with NI Hawaii Resort, Inc. (Ground
Lease), dated January 9, 1996. Exhibit 10.4(viii) to
Form 10-K for the year ended December 31, 1995.
(ix) Amendment and Restatement of Tennis Operating
Agreement by and between Kapalua Land Company, Ltd.
(Operator) and NI Hawaii Resort, Inc. (Owner), dated
January 9, 1996. Exhibit 10.4(ix) to Form 10-K for the
year ended December 31, 1995.
(x) Assignment Agreement (Assignment of Amended and
Restated Tennis Operating Agreement), dated January 9,
1996. Exhibit 10.4(x) to Form 10-K for the year ended
December 31, 1995.
(xi) Golf Course Use Agreement by and between Maui Land
& Pineapple Company, Inc. and NI Hawaii Resort, Inc.
dated, January 9, 1996. Exhibit 10.4(xi) to Form 10-K
for the year ended December 31, 1995.
(xii) Memorandum of Understanding between Maui
Hotels, Kapalua Investment Corp. and NI Hawaii Resort,
Inc., effective October 31, 1995. Exhibit 10.4(xii) to
Form 10-K for the year ended December 31, 1995.
(xiii) Supplemental Agreement, entered into among
Maui Hotels, Kapalua Investment Corp. and NI Hawaii
Resort, Inc. as of February 15, 1996. Exhibit
10.4(xiii) to Form 10-K for the year ended December 31,
1995.
(xiv) Release of Real Property Mortgage, Security
Agreement and Financing Statement, dated March 12,
1996. Exhibit 10.4(xiv) to Form 10-K for the year
ended December 31, 1995.
10.5 (i) Partnership Agreement of Plantation Club
Associates, dated November 10, 1988. Exhibit (10)A to
Form 10-K for the year ended December 31, 1988.
(ii) Partnership Redemption Agreement Among Plantation
Club Associates, Rolfing Partners and Kapalua Land
Company, Ltd, dated September 30, 1997. Exhibit (10)A
to Form 10-Q for the quarter ended September 30, 1997.
10.6 Mortgage, Security Agreement and Financing
Statement, dated November 27, 1996. Exhibit 10.6 to
Form 10-K for the year ended December 31, 1996.
10.7 Compensatory plans or arrangements
(i) Executive Deferred Compensation Plan (revised as
of 8/16/91). Exhibit (10)A to Form 10-Q for the
quarter ended September 30, 1994.
(ii) Executive Insurance Plan (Amended). Exhibit (10)A
to Form 10-K for the year ended December 31, 1980.
(iii) Supplemental Executive Retirement Plan
(effective as of January 1, 1988). Exhibit (10)B to
Form 10-K for the year ended December 31, 1988.
(iv)* Executive Change-In-Control Severance
Agreement (Gary L. Gifford, President/CEO), dated as of
March 13, 1998.
(v)* Executive Change-In-Control Severance Agreement
(Paul J. Meyer, Executive Vice President/Finance),
dated as of March 13, 1998.
(vi)* Executive Change-In-Control Severance
Agreement (Donald A. Young, Executive Vice
President/Resort), dated as of March 13, 1998.
(vii)* Executive Change-In-Control Severance
Agreement (Douglas R. Schenk, Executive Vice
President/Pineapple), dated as of March 16, 1998.
(viii)* Change-In-Control Severance Agreement (Warren
A. Suzuki, Vice President/Land Management), dated as of
March 16, 1998.
(ix)* Change-In-Control Severance Agreement (Scott
A. Crockford, Vice President/Retail Property), dated as
of March 13, 1998.
(x)* Executive Severance Plan, effective as of March 5,1998.
10.8 (i) Hotel Ground Lease between Maui Land & Pineapple
Company, Inc. and The KBH Company. Exhibit (10)B to
Form 10-Q for the quarter ended September 30, 1985.
(ii) Third Amendment of Hotel Ground Lease, dated and
effective as of September 5, 1996. Exhibit (10)A to
Form 10-Q for the quarter ended September 30, 1996.
10.9 (i) Letter to Mr. Darrell D. Friedman from Mary
Cameron Sanford dated April 29, 1996. Exhibit (10)A to
Form 10-Q for the quarter ended March 31, 1996.
(ii) Letter to Mary Cameron Sanford from Darrell D.
Friedman dated April 30, 1996. Exhibit (10)B to Form
10-Q for the quarter ended March 31, 1996.
10.10 (i) Loan Agreement Between Pacific Coast Farm Credit
Services, ACA and Maui Land & Pineapple Company, Inc.,
dated as of April 18, 1997. Exhibit (10)B to Form 10-Q
for the quarter ended March 31, 1997.
11. Statement re computation of per share earnings:
Net Income (Loss) divided by weighted Average Common
Shares Outstanding equals Net Income (Loss) Per Common
Share.
13.* Annual Report to Security Holders: Maui Land &
Pineapple Company, Inc. 1997 Annual Report.
21. Subsidiaries of registrant:
All of the following were incorporated in the
State of Hawaii:
Maui Pineapple Company, Ltd.
Kapalua Land Company, Ltd.
Kapalua Investment Corp.
Kapalua Water Company, Ltd.
Kapalua Waste Treatment Company, Ltd.
Honolua Plantation Land Company, Inc.
27.* Financial Data Schedule. As of December 31, 1997
and for the year then ended.
99. Additional Exhibits.
99.1* Financial Statements of Kaahumanu Center
Associates for the years ended December 31, 1997, 1996
and 1995.
FIRST LOAN MODIFICATION AGREEMENT
FIRST LOAN MODIFICATION AGREEMENT, dated December
31, 1997 (the "Amendment"), by and among MAUI LAND &
PINEAPPLE COMPANY, INC. (the "Borrower") and BANK OF HAWAII,
a Hawaii banking corporation ("BKOH"), FIRST HAWAIIAN BANK, a
Hawaii banking corporation ("FHB"), CENTRAL PACIFIC BANK, a
Hawaii banking corporation ("CPB" and, together, with BKOH,
and FHB, the "Lenders") and BANK OF HAWAII, as Agent for the
Lenders (in such capacity, together with its successors in
such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, Lenders and Agent are
parties to that certain Amended and Restated Revolving and
Term Loan Agreement, dated as of December 4, 1996 (the "Loan
Agreement"), pursuant to which the Lenders have made Loans to
the Borrower on the terms and conditions stated therein; and
WHEREAS, the Borrower, Lenders and Agent have
agreed to amend the Loan Agreement and the other Loan
Documents (as such term is defined in the Loan Agreement) for
the purposes of, among other things, (i) providing that the
rate per annum at which the Loans bear interest shall be, at
the option of the Borrower, either the Base Rate or LIBOR
(for one, two, three or six-month interest periods), plus (a)
during the Revolving Loan Period, two and one-quarter
percentage points (2.25%) and (b) during the period
commencing on the Expiry Date and ending on the Maturity
Date, two and one-half percentage points (2.50%), (ii)
extending the maturity date of the Notes and amending and
(iii) restating certain covenants of the Borrower set forth
in the Loan Agreement, all as set forth in this Amendment;
NOW, THEREFORE, in consideration of the premises
and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, each of the Borrower,
Lenders and Agent agree as follows:
SECTION 1. Definitions. Capitalized terms used
herein and not otherwise defined herein shall have the mean
ings ascribed to them in the Loan Agreement.
SECTION 2. Amendments to Loan Agreement.
(a) Effective on and after the Effective Date (as
such term is defined in Section 5 of this Amendment), Section
1.11 of the Loan Agreement is amended and restated in its
entirety to read as follows:
"1.11 "Expiry Date" means December 31, 1999."
(b) Effective on and after the Effective Date,
Section 1.25 of the Loan Agreement is amended and restated in
its entirety to read as follows:
"1.25 "Maturity Date" means December 31, 2002."
(c) Effective on and after the Effective Date,
Article I of the Loan Agreement is amended to add thereto
certain definitions as Sections 1.40 through 1.50 which shall
read as follows:
"1.40 'Eurodollar Day' means a Business Day which
is also a day for trading by and between banks in U.S.
dollar deposits in the London interbank Eurodollar
market."
"1.41 'Eurodollar Reserve Requirement' means the
then maximum effective rates per annum (expressed as a
percentage), as determined solely by the Agent (which
determination shall be final, conclusive and binding on
all of the parties hereto, absent manifest error), of
the reserve requirements imposed pursuant to Regulation
D by the Board of Governors of the Federal Reserve
System on $1,000,000 'Eurocurrency Liabilities' of the
Agent, having a maturity equal to the term of the
applicable LIBOR Interest Period."
"1.42 'Interest Period' means and includes any
LIBOR Interest Period and any period for which interest
in respect of the Loans is calculated on the basis of
the Base Rate and determined in accordance with this
Amendment and Restatement."
"1.43 'LIBOR' means, for each LIBOR Interest
Period, a rate computed pursuant to the following
formula and adjusted as of the date of any change in the
Eurodollar Reserve Requirements:
Interbank Eurodollar Index Rate X 100
100% - Eurodollar Reserve Requirement
'Interbank Eurodollar Index Rate' means
the rate per annum (expressed as a percentage) at
which leading banks, as determined by the Agent,
are offered deposits in United States Dollars in
the London interbank Eurodollar market as of 11:00
a.m., London time, on the day three (3) Eurodollar
Days prior to the beginning of such LIBOR Interest
Period; for delivery in immediately available funds
on the first day of such LIBOR Interest Period, in
an amount equal or comparable to the principal
amount of the applicable LIBOR Loan to be
outstanding and for a period equal to the term of
such LIBOR Interest Period."
"1.44 'LIBOR Loan' means any Loan during any period
during which such Loan is bearing interest at a rate
based upon LIBOR, as provided in Section 2.07(a)(4)(ii)
or Section 2.07(b)(ii) of this Amendment and
Restatement, as the case may be."
"1.45 'LIBOR Interest Period' means, with respect
to each LIBOR Loan, an Interest Period consisting of one
(1) month, two (2) months, three (3) months or six (6)
months, as designated by the Borrower in accordance with
Section 2.07(a)(4) or Section 2.07(b) of this Amendment
and Restatement, as the case may be."
"1.46 'Notice of Conversion' shall have the
meaning provided in Section 2.07(d) of this Amendment
and Restatement."
"1.47 'Type' means either a Base Rate Loan or a
LIBOR Loan."
"1.48 'Base Rate Loan' means a Loan which bears
interest at a rate per annum determined in accordance
with Section 2.07(a)(4)(i) or Section 2.07(b)(i) of this
Amendment and Restatement."
"1.49 'Borrowing' means the draw down at any one
time of the proceeds of a Loan pursuant to this
Amendment and Restatement.
"1.50 'Regulation D means Regulation D of the
Board of Governors of the Federal Reserve System as from
time to time in effect or any successor to all or a
portion thereof establishing reserve requirements."
(d) Effective on and after the Effective Date,
Section 2.05(c) of the Loan Agreement is amended and restated
in its entirety to read as follows:
"(c) Extension Fee. For and in respect of the
extension of the Revolving Period effected by this
Amendment and Restatement, the Borrower shall also pay
to the Agent on or before the Effective Date for pro
rata distribution to each Lender, an extension fee in
the aggregate principal amount of $10,000."
(e) Effective on and after the Effective Date,
Section 2.06(B) of the Loan Agreement is amended and restated
in its entirety to read as follows:
"B. Voluntary Reduction. The Borrower shall
have the right, at any time and from time to time, upon
not less than one full calendar month's prior written
notice to the Agent, to voluntarily reduce the amount of
the Aggregate Loan Commitment, in any integral multiple
of $1,000,000. Contemporaneously with each such
voluntary reduction, the Borrower shall repay or prepay
to the Lenders, through the Agent, the amount, if any,
by which the then outstanding aggregate principal
balance of the Loans exceeds the Aggregate Loan
Commitment as so reduced. Notwithstanding any provision
in this Amendment and Restatement to the contrary, in no
event shall any such voluntary reduction which results
in a prepayment of any LIBOR Loan occur on any day other
than the last day of the LIBOR Interest Period
applicable to such LIBOR Loan."
(f) Effective on and after the Effective Date,
Section 2.07 of the Loan Agreement is amended and restated in
its entirety to read as follows:
"2.07 Interest Rates and Payments of
Interest. Interest on the principal balance of the
Loans shall accrue and be paid at the rates, at the
times and in the manner stated in the Notes and as
follows:
(a) Revolving Period. Outstanding balances
of principal of the Revolving Loans shall bear interest
at the following rates per annum:
(1) During the period commencing on the
date of initial disbursement of proceeds of the
Revolving Loans, to and including December 31, 1993, a
floating rate equal to the Base Rate in effect from time
to time;
(2) During the period commencing on
January 1, 1994 to and including May 15, 1995, a
floating rate equal to one-half of one percentage point
(0.5%), plus the Base Rate in effect from time to time;
(3) During the period commencing on May
15, 1995, to and including December 31, 1997, a floating
rate equal to one-quarter of one percentage point
(0.25%), plus the Base Rate in effect from time to time;
and
(4) During the period (the "Remaining
Revolving Period") commencing on January 1, 1998, to and
including the Expiry Date, at the option of the Borrower
initially either (i) a floating rate equal to the Base
Rate in effect from time to time or (ii) LIBOR, plus two
and one-quarter percentage points (2.25%). The Borrower
shall give to the Agent no later than December 29,
1997 a written notice (the "Notice of Initial Interest
Rate Election") that it elects to have the Revolving
Loans bear interest as Base Rate Loans or LIBOR Loans,
which Notice of Initial Interest Rate Election shall
comply in all respects with the provisions of this
Section 2.07(a)(4). Notwithstanding any provision in
this Amendment and Restatement to the contrary, if the
Borrower fails to give such Notice of Initial Interest
Rate Election to the Agent on or before December 29,
1997, the Revolving Loans initially shall bear interest
from and after January 1, 1998 as Base Rate Loans. In
the event that the Borrower, pursuant to and in accor
dance with this Section 2.07(a)(4), elects to have the
Revolving Loans initially bear interest from and after
January 1, 1998 as LIBOR Loans, such Notice of Initial
Interest Rate Election must state whether the initial
LIBOR Interest Period applicable to the Revolving Loans
shall be a period of one month, two months, three months
or six months. With respect to all LIBOR Loans in
effect during the Remaining Revolving Period, the
Borrower shall give to the Agent at least three (3)
Eurodollar Days prior to the last day of the LIBOR
Interest Period then applicable to such LIBOR Loans a
written notice stating whether the Borrower elects to
continue such Loan as a LIBOR Loan and the LIBOR
Interest Period to be applicable thereto or as a Base
Rate Loan; provided that in no event shall the Borrower
have the right (x) to select a LIBOR Interest Period
that extends beyond the Expiry Date or (y) if at the
time of such election, an Event of Default shall have
occurred, to continue such Loan as LIBOR Loan. Notwith
standing any provision in this Amendment and Restatement
to the contrary, in no event shall the Borrower have the
right to borrow a Revolving Loan or to convert or con
tinue any Revolving Loan as a LIBOR Loan, unless the
amount of such new Revolving Loan equal to or greater
than $500,000 or, with respect to a conversion or con
tinuation of a Revolving Loan as a LIBOR Loan, the
aggregate principal amount of all Revolving Loans is
equal to or greater than $500,000.
During the Revolving Period, interest accruing on
the principal balance of the Revolving Loans at the
rate(s) per annum aforesaid shall be due and payable (i)
quarterly in arrears on the last day of each March,
June, September and December, (ii) on the Expiry Date,
(iii) on the last day of each LIBOR Interest Period and
(iv) at maturity (whether by acceleration or otherwise).
"(b) Term Loan Period. In the event that the
Term Loans shall be made, then during the period (the
"Term Loan Period") commencing on the Expiry Date, to
and including the date that the Term Loans are paid in
full, at the option of the Borrower initially either (i)
a floating rate per annum equal to the Base Rate in
effect from time to time, or (ii) LIBOR, plus two and
one-half percentage points (2.50%). The Borrower shall
give to the Agent no later than the date (the "Term Loan
Interest Election Date") three (3) Eurodollar Days pre
ceding the Expiry Date, a written notice (the "Notice of
Interest Rate Election") that it elects to have the Term
Loans bear interest as Base Rate Loans or LIBOR Loans,
which Notice of Interest Rate Election shall comply in
all respects with the provisions of this Section
2.07(b). Notwithstanding any provision in this
Amendment and Restatement to the contrary, if the
Borrower fails to give such Notice of Interest Rate
Election to the Agent on or before the Term Loan
Interest Election Date, the Term Loans initially shall
bear interest from and after the date which the Term
Loans are made as Base Rate Loans. In the event that
the Borrower, pursuant to and in accordance with this
Section 2.07(b), elects to have the Term Loans initially
bear interest as LIBOR Loans, such Notice of Interest
Rate Election must state whether the initial LIBOR
Interest Period applicable to the Term Loans shall be a
period of one month, two months, three months or six
months. With respect to all LIBOR Loans in effect
during the Term Loan Period, the Borrower shall give to
the Agent at least three (3) Eurodollar Days prior to
the last day of the LIBOR Interest Period then
applicable to such LIBOR Loans a written notice stating
whether the Borrower elects to continue such Loan as a
LIBOR Loan and the LIBOR Interest Period to be
applicable thereto or as a Base Rate Loan; provided that
in no event shall the Borrower have the right (x) to
select a LIBOR Interest Period that extends beyond the
Maturity Date or (y) if at the time of such election, an
Event of Default shall have occurred, to continue such
Loan as LIBOR Loan. Notwithstanding any provision in
this Amendment and Restatement to the contrary, in no
event shall the Borrower have the right to borrow, con
vert or continue any Term Loan as a LIBOR Loan, unless
the aggregate principal amount of all Term Loans is
greater than or equal to $500,000.
From and after the date of the making of the Term
Loans, interest accruing on the principal balance of the
Term Loans at the floating rate(s) per annum aforesaid
shall be due and payable (i) quarterly in arrears on the
last day of each March, June, September and December and
(ii) on the last day of each LIBOR Interest Period and
(iii) at maturity (whether by acceleration or
otherwise).
"(c) General. With respect to all Loans:
(1) "Base Rate" means the primary index
rate established from time to time by Bank of Hawaii in
the ordinary course of its business and with due consid
eration of the money market, and published by intrabank
memoranda for the guidance of its loan officers in pric
ing all of its loans which float with the Base Rate.
(2) The Base Rate will increase or
decrease during the term of this Loan Agreement if there
is an increase or decrease in the rate to which the Base
Rate is tied. If the rate to which the Base Rate is
tied is no longer available, the Agent will choose a new
rate that is based on comparable information.
(3) Interest shall be computed on the ba
sis of the actual number of days elapsed between
payments and on the basis of (x) with respect to Base
Rate Loans, a 365-day year (or, in leap years, on the
basis of 366-day year) and (y) with respect to LIBOR
Loans, on the basis of a 360-day year.
(4) In computing interest on each Loan,
the date of the making of such Loan shall be included
and the date of payment shall be excluded; provided,
however, that if a Loan is repaid on the same day on
which it is made, such day shall nevertheless be
included in computing interest thereon.
(5) In no event shall the Borrower be ob
ligated to pay any amount under this Amendment and
Restatement that exceeds the maximum amount allowable by
law. If any sum is collected in excess of the
applicable maximum amount allowable by law, the excess
collected shall, at the Lenders' discretion, be applied
to reduce the principal balance of the Loans or returned
to the Borrower.
(6) The foregoing rates of interest
shall be subject to the provisions of Section 6.02(c)
hereof relating to the Default Rate upon the occurrence
and during the continuance of an Event of Default.
"(d) At any time and from time to time, the
Borrower may elect, subject to the condition precedent
that no Event of Default shall have occurred and is con
tinuing, to convert the Loans from one Type to another
Type at any time and from time to time prior to the
Expiry Date, with respect to the Revolving Loans, or the
Maturity Date, with respect to the Term Loans, as the
case may be. Each time that the Borrower elects to con
vert Loans from one Type to another Type, it shall
deliver to the Agent a written notice (a "Notice of Con
version") at least three (3) Business Days, if such
Loans are to be converted to Base Rate Loans, or at
least three (3) Eurodollar Days, if such Loans are to be
converted to LIBOR Loans, prior to the date on which
such conversion is to be effective. Each such
Notice of Conversion shall state (i) the date (the
"Conversion Date") on which such conversion is to occur,
which date shall be (1) a Business Day, if such Loans
are to be converted from LIBOR Loans to Base Rate Loans
or (2) a Eurodollar Day, if such Loans are to be
converted to LIBOR Loans, (ii) whether such Loans are to
be converted to Base Rate Loans or a LIBOR Loans and
(iii) with respect to the conversion from Base Rate
Loans to LIBOR Loans, the LIBOR Interest Period which
shall be applicable to the LIBOR Loans upon such
conversion. Notwithstanding any provision in this Amend
ment and Restatement to the contrary, in no event shall
the Borrower have any right to select any LIBOR Interest
Period which extends beyond the Expiry Date, if such
Loans are Revolving Loans, or the Maturity Date, if such
Loans are Term Loans."
(g) Effective on and after the Effective Date,
Section 2.08(c)(1) of the Loan Agreement is amended and
restated in its entirety to read as follows:
"(1) Principal balances outstanding under the
Notes shall be paid, and may be prepaid without penalty
or premium, in the amounts, at the times and in the
manner stated herein and in the Notes. No payment or
prepayment of principal under any of the Notes shall be
made without a concurrent payment or prepayment of prin
cipal under the other Notes, and all principal amounts
paid or prepaid on the Notes shall be shared among the
Lenders pro rata, in accordance with their respective
Individual Loan Commitment Percentages. Payments and
prepayments of principal, during the Revolving Loan
Period, shall be in amounts not less than $250,000, and
in integral multiples of $50,000. Notwithstanding any
provision in this Amendment and Restatement to the con
trary, in no event shall any prepayment of any LIBOR
Loan occur on any day other than the last day of the
LIBOR Interest Period applicable to such LIBOR Loan."
(h) Effective on and after the Effective Date,
Section 2.10 of the Loan Agreement is amended and restated in
its entirety to read as follows:
"2.10 Payment Dates. Whenever any payment of
principal of, or interest on, any Loan or of any commit
ment fee shall be due on a day which is not a Business
Day or Eurodollar Day, as may be applicable, the date
for payment thereof shall be extended to the next
succeeding Business Day or Eurodollar Day, as the case
may be. If the date for any payment of principal is
extended by operation of law or otherwise, interest
shall be payable for such extended time."
(i) Effective on and after the Effective Date,
Section 2.11 of the Loan Agreement is amended to add thereto
a new subsection (c) which shall read as follows:
"(c) LIBOR Regulations. In the event that any
Lender shall have reasonably determined (which determina
tion shall be final and conclusive and binding upon all
parties) that:
(i) on any date for determining LIBOR
for any LIBOR Interest Period, by reason of any change
after the date hereof affecting the interbank Eurodollar
market or affecting the position of such Lender in such
market, adequate and fair means do not exist for
ascertaining the applicable interest rate by reference
to LIBOR; or
(ii) at any time, by reason of (y) any
change after the date hereof in any applicable law or
governmental rule, regulation or order (or any interpre
tation thereof by a Government Authority or otherwise
(provided that, in the case of an interpretation not by
a governmental authority, such interpretation shall be
made in good faith and shall have a reasonable basis)
and including the introduction of any new law or
governmental rule, regulation or order), to the extent
not provided for in clause (iii) below, or (z) in the
case of LIBOR Loans, other circumstances affecting such
Lender or the interbank Eurodollar market or the
position of such Lender in such market, LIBOR shall not
represent the effective pricing to such Lender for
funding or maintaining the affected LIBOR Loan; or
(iii) at any time, by reason of the
requirements of Regulation D or other official reserve
requirements, LIBOR shall not represent the effective
pricing to such Lender for funding or maintaining the
affected LIBOR Loan; or
(iv) at any time, that the making or con
tinuance of any LIBOR Loan has become unlawful by compli
ance by such Lender in good faith with any law, govern
mental rule, regulation, guideline or order, or would
cause severe hardship to such Lender as a result of a
contingency occurring after the date hereof which materi
ally and adversely affects the interbank Eurodollar
market;
then, and in any such event, such Lender shall on such
date of determination give notice (by telephone
confirmed in writing) to the Agent and the Borrower of
such determination. Thereafter, in the case of clause
(i), (ii) or (iii) above, (and without affecting
Borrower's obligations to pay interest on the Loans at
the rates set forth in Section 2.07 hereof) Borrower
shall pay to the Agent for payment to such Lender, upon
written demand therefor, such additional amounts deemed
in good faith by such Lender to be material (in the form
of an increased rate of, or a different method of cal
culating, interest or otherwise as the Agent or such
Lender in its discretion shall determine) as shall be
required to cause such Lender to receive interest with
respect to its affected LIBOR Loan at a rate per annum
equal to the sum of (x) the applicable rate per annum
determined in accordance with Section 2.07(a)(4)(ii) or
Section 2.07(b)(ii), as the case may be, hereinabove,
plus (y) the effective pricing to such Lender to make or
maintain such LIBOR Loan, and in the case of clause
(iv), Borrower shall within five (5) Business Days
prepay all LIBOR Loans so affected, together with all
accrued interest thereon, subject to the provisions of
Section 2.11(d) hereinbelow. A certificate as to
additional amounts owed to any Lender, showing in
reasonable detail the basis for the calculation thereof,
submitted to Borrower and the Agent by the Lender shall,
absent manifest error, be final, conclusive and binding
upon all of the parties hereto.
(d) At any time that any of its Loans are
affected by the circumstances described in Section
2.11(c) Borrower may (i) if the affected LIBOR Loan is
then being made pursuant to a Borrowing or a conversion,
cancel said Borrowing or conversion by giving the
Borrower notice thereof by telephone (confirmed in writ
ing) pursuant to Section 2.11(c) or (ii) if the affected
LIBOR Loan is then outstanding, upon at least three (3)
Eurodollar Days' written notice to the Lender, require
the Lender to convert such LIBOR Loan into a Base Rate
Loan."
(j) Effective on and after the Effective Date,
Section 5.01(F)(3) of the Loan Agreement is amended to add
thereto a new subsection (c) which shall read as follows:
"(3) A minimum Net Worth of at least
(a) on December 31, 1995, the amount of
$57,000,000,
(b) on December 31, 1996, an amount equal to the
sum of (i) $57,000,000, plus (ii) 50% of the cumulative
net profits (but not any net losses) of the Borrower for
the fiscal year ending on such date, and
(c) for the fiscal period of the Borrower ending on
December 31, 1997 and at all times thereafter, an amount
equal to the sum of (i) $58,300,000, plus (ii) 50% of
the cumulative net profits (but not any net losses) of
the Borrower from and after September 30, 1997."
(k) Effective on and after the Effective Date,
Section 5.01(N) of the Loan Agreement is amended and restated
in its entirety to read as follows:
"(N) The Borrower will pay to the Agent, on
(or at the Borrower's option, before) (i) July 1 of each
year prior to July 1, 1998, a $25,000 Agent's Fee and
(ii) commencing on July 1, 1998 and on each July 1 of
each year thereafter, a $15,000 Agent's Fee, in each
case for services rendered and to be rendered by the
Agent under the Agency Agreement."
(l) Effective on and after the Effective Date,
Section 5.02(C) of the Loan Agreement is amended and restated
in its entirety to read as follows:
"(C) The Borrower will not declare or pay any
dividends, or make any other payment or distribution on
account of its capital stock, except that, subject to
the satisfaction in full of the condition precedent that
the Agent shall have received, prior to any declaration
or payment of cash dividends, the Borrower's audited
annual financial statements for the 1997 fiscal year and
for each fiscal year thereafter of the Borrower, the
Borrower may declare and pay cash dividends for and in
respect of the third and fourth quarters of 1996 and for
any fiscal year of the Borrower, beginning with the
Borrower's 1997 fiscal year and for each fiscal year of
the Borrower thereafter, provided that (i) dividends
paid for the third quarter of 1996 do not exceed 30% of
its Net Profits through the first three quarters of
1996, (ii) cumulative dividends paid in respect of the
third and fourth quarters of 1996 and for each fiscal
year of the Borrower thereafter do not exceed 30% of its
Net Profits for 1996, (iii) dividends paid for the 1997
fiscal year do not exceed 30% of its Net Profits for the
Borrower's 1997 fiscal year and (iv) dividends paid for
each fiscal year of the Borrower after the Borrower's
1997 fiscal year do not exceed 30% of its Net Profits
for such fiscal year."
(m) Effective on and after the Effective
Date, Section 5.02(D) of the Loan Agreement is amended
and restated in its entirety to read as follows:
"(D) Neither the Borrower nor any
Subsidiary will make any Capital Expenditures or
any Investments, or both, in any of the fiscal
years listed below in column (a) which, together
with all other Capital Expenditures and
Investments made by the Borrower and its
Subsidiaries in any such fiscal year, will exceed
in the aggregate the amount shown opposite such
fiscal year listed below in column (b):
(a) (b)
1992 $14.0 Million
1993 $13.0 Million
1994 $11.0 Million
1995 $10.0 Million
1996 $ 8.5 Million
thereafter $10.0 Million"
(n) Effective on and after the Effective Date,
Section 5.02(H) of the Loan Agreement is amended and restated
in its entirety to read as follows:
"(H) Neither the Borrower nor any Subsidiary,
without the prior written consent of all of the Lenders,
will incur, agree to incur, assume, or in any manner
become liable in respect of any Indebtedness for Bor
rowed Money (recourse or nonrecourse) other than the
indebtedness evidenced by the Notes and this Loan
Agreement and additional indebtedness which, together
with the indebtedness evidenced by the Notes and this
Loan Agreement, shall cause Total Debt to not exceed:
(a) $66,000,000 in the aggregate princi
pal amount as of December 31, 1993, and
(b) $63,000,000 in the aggregate princi
pal amount as of March 31, 1994, and
(c) $65,000,000 in the aggregate princi
pal amount as of June 30, 1994, and
(d) $69,000,000 in the aggregate princi
pal amount as of September 30, 1994, and
(e) $57,000,000 in the aggregate princi
pal amount as of December 31, 1994, and
(f) $58,000,000 in the aggregate princi
pal amount as of March 15, 1995, and
(g) $53,000,000 in the aggregate princi
pal amount as of May 5, 1995, and
(h) $50,000,000 in the aggregate princi
pal amount as of December 31, 1995, and
(i) $40,000,000 in the aggregate princi
pal amount as of December 31, 1996 and
(j) $44,000,000 in the aggregate princi
pal amount as of December 31, 1997 and thereafter.
For the purposes of this Section 5.02(H), KCA's debt
approved by the Lenders pursuant to the last sentence in
Section 5.02(I) of this Amendment and Restatement, and
any KCA debt which is Nonrecourse to the Borrower,
including that portion subject to Borrower's Limited Pay
ment Guaranty, shall not be deemed to constitute
indebtedness of the Borrower or any Subsidiary."
SECTION 3. General Amendments.
All references set forth in the Loan Agreement
(including, without limitation, all exhibits, schedules and
appendices thereto), the Notes, the Mortgage, the Agency
Agreement, the Environmental Indemnity Agreement, the Addi
tional Security Mortgage and the other documents, instruments
and agreements relating to the Loan Agreement, the Notes, the
Mortgage, the Agency Agreement, the Environmental Indemnity
Agreement, the Additional Security Mortgage or to the loans
made under the Loan Agreement by the Lenders to the Borrower
(collectively, the "Loan Documents") to (i) the Loan Agree
ment, is amended to mean and include the Loan Agreement, as
amended by this Amendment, and as may be further amended,
modified and supplemented from time to time by written agree
ment between the parties hereto, (ii) the Notes, are amended
to mean and include the Notes, as amended by this Amendment,
and as may be further amended from time to time, (iii) the
Mortgage, is amended to mean and include the Mortgage, as
amended from time to time, and (iv) the other Loan Documents,
or any of them, are amended to mean and include such Loan
Documents, as amended from time to time.
SECTION 4. Representations, Warranties and
Agreements.
The Borrower hereby:
(a) reaffirms each and all of its representa
tions and warranties set forth in Section 4.01 of the Loan
Agreement as being true and correct on and as of the date
hereof with the same force and effect as if such representa
tions and warranties were set forth in full herein (provided
that the representations and warranties set forth in Section
4.01(F) of the Loan Agreement shall for the purposes hereof
be deemed to be made with respect to the Borrower's financial
statements most recently delivered to the Lenders pursuant to
the Loan Agreement);
(b) represents and warrants that no Event of
Default and no event, which with the lapse of time, the
giving of notice or both would constitute an Event of
Default, has occurred and is continuing on and as of the date
hereof;
(c) represents and warrants that no material
adverse change in the condition (financial or otherwise) of
the Borrower has occurred since the periods covered by the
Borrower's financial statements most recently delivered to
the Lenders pursuant to the Loan Agreement;
(d) represents and warrants that each of this
Amendment, the Loan Agreement, as amended by this Amendment,
and each of the Notes, as amended by this Amendment has been
duly authorized, executed and delivered by the Borrower and
constitutes the legal, valid and binding obligation of the
Borrower and is enforceable in accordance with its terms;
(e) represents and warrants that the execu
tion, delivery and performance of this Amendment do not and
will not violate articles of incorporation, by-laws, any ap
plicable laws, rules, regulations, orders, injunctions, writs
or decrees or result in a breach of or constitute a default
under any contract, agreement or instrument to which the Bor
rower is a party or by which the Borrower, or its properties
are bound, or result in the creation or imposition of any
security interest in, or lien or encumbrance upon any
property or assets of the Borrower, except in favor of the
Lenders; and
(f) represents and warrants that no consent
or withholding of objection, approval or authorization of or
declaration or filing with, or the taking of any other action
by or in respect of any governmental body or regulatory au
thority or any other Person is required in connection with
the execution, delivery and performance of this Amendment,
other than as may have been obtained or effected prior to the
date hereof, and in respect of which the Borrower shall have
notified the Lenders in writing on or prior to the date
hereof.
SECTION 5. Effectiveness. Notwithstanding any
thing herein to the contrary, the amendments to the Loan
Agreement and the other Loan Documents set forth in Sections
2 and 3 of this Amendment, shall amend the provisions of the
Loan Agreement, Notes and the other Loan Documents as of
December 31, 1997 (the "Effective Date"), when each and all
of the following conditions precedent shall have been
satisfied in full:
(a) Delivery of this Amendment. Each of the
parties hereto shall have duly executed and delivered to the
Agent this Amendment.
(b) No Default. On and as of the Effective
Date, no Event of Default shall have been declared by the
Lenders under the Loan Agreement.
(c) Payments; Charges; Fees. The Borrower
shall have paid to the Lenders in accordance with the terms
of the Loan Agreement all payments, charges and fees required
to have been paid on or before the Effective Date by the
terms of the Loan Agreement or the other Loan Documents, and
in addition, shall have paid to the Agent for pro rata dis
tribution to the Lenders an extension fee in the amount of
$10,000.
(d) Consents. There shall have been obtained
all third-party consents, if any, necessary or appropriate to
effect the amendments and consummate the transactions set
forth in this Amendment.
SECTION 6. Limitations. The amendments to the
Loan Agreement, the Notes and the other Loan Documents set
forth hereinabove in Sections 2 and 3 of this Amendment shall
be limited precisely as written and shall not, except as
expressly provided herein, be deemed otherwise to be a
consent to any waiver, amendment or modification of any other
terms or conditions of the Loan Agreement or any of the other
Loan Documents. The Loan Agreement and other Loan Documents,
heretofore amended and as amended hereby, are in all respects
ratified and confirmed and shall remain in full force and
effect.
SECTION 7. Further Assurances. The Borrower shall
take all such further actions and execute and deliver all
such further documents and instruments as the Lenders may
from time to time reasonably request to further evidence or
effect the transactions contemplated by this Amendment.
SECTION 8. Counterparts. This Amendment may be
executed in two or more counterparts, each of which shall be
an original hereof, but all of which together shall consti
tute but one and the same instrument.
SECTION 9. Headings. The section headings in this
Amendment have been inserted for convenience of reference
only and shall in no manner affect the meaning or
interpretation of the various provisions hereof.
SECTION 10. Governing Law. This Amendment shall
be governed by, and construed in accordance with, the laws of
the State of Hawaii.
SECTION 12. Expenses of the Agent. Without in any
way limiting the obligations of the Borrower under Section
7.04 of the Loan Agreement, the Borrower shall reimburse the
Agent for all of the costs and expenses of the Agent in con
nection with the preparation of this Amendment, including,
but not limited to, reasonable attorneys fees and expenses.
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed on the date first-above
written.
MAUI LAND & PINEAPPLE COMPANY, INC.
By: /S/ PAUL J. MEYER
Its: EXECUTIVE VICE PRESIDENT/
FINANCE
By: /S/ DARRYL Y. H. CHAI
Its: TREASURER
BANK OF HAWAII, individually
and as Agent
By: /S/ PETER HO
Its: V.P.
FIRST HAWAIIAN BANK
By: /S/ ANN M. K. LEE
Ann M. K. Lee
Its: Assistant Vice President
CENTRAL PACIFIC BANK
By: /S/ ALWYN CHIKAMOTO
Its: Senior Vice President & Manager
Corporate Banking Division
SECOND LOAN MODIFICATION AGREEMENT
SECOND LOAN MODIFICATION AGREEMENT, dated March 17,
1998 (the "Amendment"), by and among MAUI LAND & PINEAPPLE
COMPANY, INC. (the "Borrower") and BANK OF HAWAII, a Hawaii
banking corporation ("BKOH"), FIRST HAWAIIAN BANK, a Hawaii
banking corporation ("FHB"), CENTRAL PACIFIC BANK, a Hawaii
banking corporation ("CPB" and, together, with BKOH, and FHB,
the "Lenders") and BANK OF HAWAII, as Agent for the Lenders
(in such capacity, together with its successors in such
capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, Lenders and Agent are
parties to that certain Amended and Restated Revolving and
Term Loan Agreement, dated as of December 4, 1996, as
heretofore amended (as so amended, the "Loan Agreement"), pur
suant to which the Lenders have made Loans to the Borrower on
the terms and conditions stated therein; and
WHEREAS, the Borrower, Lenders and Agent have
agreed to amend the Loan Agreement and the other Loan
Documents (as such term is defined in the Loan Agreement) for
the purposes of amending Section 5.02(D) of the Loan Agree
ment, all as set forth in this Amendment;
NOW, THEREFORE, in consideration of the premises
and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, each of the Borrower,
Lenders and Agent agree as follows:
SECTION 1. Definitions. Capitalized terms used
herein and not otherwise defined herein shall have the mean
ings ascribed to them in the Loan Agreement.
SECTION 2. Amendment to Loan Agreement.
Effective on and after the Effective Date, Section
5.02(D) of the Loan Agreement is amended and restated in its
entirety to read as follows:
"(D) Neither the Borrower nor any Subsidiary
will make any Capital Expenditures or any Investments,
or both, in any of the fiscal years listed below in
column (a) which, together with all other Capital Expen
ditures and Investments made by the Borrower and its
Subsidiaries in any such fiscal year, will exceed in
the aggregate the amount shown opposite such fiscal
year listed below in column (b):
(a) (b)
1992 $14.0 Million
1993 $13.0 Million
1994 $11.0 Million
1995 $10.0 Million
1996 $ 8.5 Million
1997 $10.7 Million
thereafter $10.0 Million"
SECTION 3. General Amendments.
All references set forth in the Loan Agreement
(including, without limitation, all exhibits, schedules and
appendices thereto), the Notes, the Mortgage, the Agency
Agreement, the Environmental Indemnity Agreement, the Addi
tional Security Mortgage and the other documents, instruments
and agreements relating to the Loan Agreement, the Notes, the
Mortgage, the Agency Agreement, the Environmental Indemnity
Agreement, the Additional Security Mortgage or to the loans
made under the Loan Agreement by the Lenders to the Borrower
(collectively, the "Loan Documents") to (i) the Loan Agree
ment, is amended to mean and include the Loan Agreement, as
amended by this Amendment, and as may be further amended,
modified and supplemented from time to time by written agree
ment between the parties hereto, (ii) the Notes, are amended
to mean and include the Notes, as amended by this Amendment,
and as may be further amended from time to time, (iii) the
Mortgage, is amended to mean and include the Mortgage, as
amended from time to time, and (iv) the other Loan Documents,
or any of them, are amended to mean and include such Loan
Documents, as amended from time to time.
SECTION 4. Representations, Warranties and
Agreements.
The Borrower hereby:
(a) reaffirms each and all of its representa
tions and warranties set forth in Section 4.01 of the Loan
Agreement as being true and correct on and as of the date
hereof with the same force and effect as if such representa
tions and warranties were set forth in full herein (provided
that the representations and warranties set forth in Section
4.01(F) of the Loan Agreement shall for the purposes hereof
be deemed to be made with respect to the Borrower's financial
statements most recently delivered to the Lenders pursuant to
the Loan Agreement);
(b) represents and warrants that no Event of
Default and no event, which with the lapse of time, the
giving of notice or both would constitute an Event of
Default, has occurred and is continuing on and as of the date
hereof;
(c) represents and warrants that no material
adverse change in the condition (financial or otherwise) of
the Borrower has occurred since the periods covered by the
Borrower's financial statements most recently delivered to
the Lenders pursuant to the Loan Agreement;
(d) represents and warrants that each of this
Amendment, the Loan Agreement, as amended by this Amendment,
and each of the Notes, as amended by this Amendment has been
duly authorized, executed and delivered by the Borrower and
constitutes the legal, valid and binding obligation of the
Borrower and is enforceable in accordance with its terms;
(e) represents and warrants that the execu
tion, delivery and performance of this Amendment do not and
will not violate articles of incorporation, by-laws, any ap
plicable laws, rules, regulations, orders, injunctions, writs
or decrees or result in a breach of or constitute a default
under any contract, agreement or instrument to which the Bor
rower is a party or by which the Borrower, or its properties
are bound, or result in the creation or imposition of any
security interest in, or lien or encumbrance upon any
property or assets of the Borrower, except in favor of the
Lenders; and
(f) represents and warrants that no consent
or withholding of objection, approval or authorization of or
declaration or filing with, or the taking of any other action
by or in respect of any governmental body or regulatory au
thority or any other Person is required in connection with
the execution, delivery and performance of this Amendment,
other than as may have been obtained or effected prior to the
date hereof, and in respect of which the Borrower shall have
notified the Lenders in writing on or prior to the date
hereof.
SECTION 5. Effectiveness. Notwithstanding any
thing herein to the contrary, the amendments to the Loan
Agreement and the other Loan Documents set forth in Sections
2 and 3 of this Amendment, shall amend the provisions of the
Loan Agreement, Notes and the other Loan Documents as of
December 31, 1997 (the "Effective Date"), when each and all
of the following conditions precedent shall have been
satisfied in full:
(a) Delivery of this Amendment. Each of the
parties hereto shall have duly executed and delivered to the
Agent this Amendment.
(b) No Default. On and as of the Effective
Date, no Event of Default shall have been declared by the
Lenders under the Loan Agreement.
(c) Payments; Charges; Fees. The Borrower
shall have paid to the Lenders in accordance with the terms
of the Loan Agreement all payments, charges and fees required
to have been paid on or before the Effective Date by the
terms of the Loan Agreement or the other Loan Documents.
(d) Consents. There shall have been obtained
all third-party consents, if any, necessary or appropriate to
effect the amendments and consummate the transactions set
forth in this Amendment.
SECTION 6. Limitations. The amendments to the
Loan Agreement, the Notes and the other Loan Documents set
forth hereinabove in Sections 2 and 3 of this Amendment shall
be limited precisely as written and shall not, except as
expressly provided herein, be deemed otherwise to be a
consent to any waiver, amendment or modification of any other
terms or conditions of the Loan Agreement or any of the other
Loan Documents. The Loan Agreement and other Loan Documents,
heretofore amended and as amended hereby, are in all respects
ratified and confirmed and shall remain in full force and
effect.
SECTION 7. Further Assurances. The Borrower shall
take all such further actions and execute and deliver all
such further documents and instruments as the Lenders may
from time to time reasonably request to further evidence or
effect the transactions contemplated by this Amendment.
SECTION 8. Counterparts. This Amendment may be
executed in two or more counterparts, each of which shall be
an original hereof, but all of which together shall consti
tute but one and the same instrument.
SECTION 9. Headings. The section headings in this
Amendment have been inserted for convenience of reference
only and shall in no manner affect the meaning or
interpretation of the various provisions hereof.
SECTION 10. Governing Law. This Amendment shall
be governed by, and construed in accordance with, the laws of
the State of Hawaii.
SECTION 12. Expenses of the Agent. Without in any
way limiting the obligations of the Borrower under Section
7.04 of the Loan Agreement, the Borrower shall reimburse the
Agent for all of the costs and expenses of the Agent in con
nection with the preparation of this Amendment, including,
but not limited to, reasonable attorneys fees and expenses.
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed on the date first-above
written.
MAUI LAND & PINEAPPLE COMPANY, INC.
By: /S/ PAUL J. MEYER
Its: EVP/Finance
By: /S/ GARY L. GIFFORD
Its: President
BANK OF HAWAII,
individually and as Agent
By: /S/ PETER HO
Its:
FIRST HAWAIIAN BANK
By: /S/ ANN M. K. LEE
Its: Assistant Vice President
CENTRAL PACIFIC BANK
By: /S/ ROBERT KAMEMOTO
Its: Vice-President
MAUI LAND & PINEAPPLE COMPANY, INC.
EXECUTIVE CHANGE-IN-CONTROL SEVERANCE AGREEMENT
Gary L. Gifford
President/CEO
ARTICLE I. ESTABLISHMENT AND PURPOSE.
1.1 Effective Date. This Executive Change-in-Control
Severance Agreement (the "Agreement") is made and entered into
and is effective as of this 13th day of March,
1998 ("Effective Date"), by and between Maui Land & Pineapple
Company, Inc. ("ML&P"), a Hawaii corporation, and
Gary L. Gifford ("Executive") of ML&P and its Subsidiaries.
This Agreement shall supersede and replace any prior severance
agreement entered into between ML&P and the Executive.
1.2 Term of the Agreement. The Agreement shall commence
as of the Effective Date written above, and shall continue
until the Board of Directors of ML&P ("Board") determines, in
good faith and in its sole discretion, that the Executive is
no longer to be included in the Plan and so notifies in writing
the Executive during the term of this Agreement of such
determination.
Provided, however, in the event that a Change in
Control of ML&P or its Subsidiaries, as defined in Section 2.1
herein, occurs during the term of this Agreement, this
Agreement shall remain irrevocably in effect for the greater of
thirty-six (36) months from the date of such Change in Control,
or until all benefits have been paid to the Executive
hereunder.
Further, in the event that the Board has knowledge
that a third party has taken steps reasonably calculated to
effect a Change in Control of ML&P or its Subsidiaries,
including, but not limited to the commencement of a tender
offer for the voting stock of ML&P, or the circulation of a
proxy to ML&P's shareholders, then this Agreement shall remain
irrevocably in effect until the Board, in good faith,
determines that such third party has fully abandoned or
terminated its effort to effect a Change in Control of ML&P or
its Subsidiaries.
1.3 Purpose of the Agreement. The purpose of this
Agreement pursuant to the Plan, is to advance the interests of
ML&P and its Subsidiaries by assuring that ML&P and its
Subsidiaries shall have the continued employment and dedication
of the Executive and the availability of his advice and counsel
in the event that an acquisition or Change in Control of ML&P
or its Subsidiaries occurs. This Agreement shall also assure
the Executive of equitable treatment during the period of
uncertainty that surrounds an acquisition or Change in Control,
and allow the Executive to act at all times in the best
interest of ML&P and its shareholders.
1.4 Contractual Right to Benefits. This Agreement
establishes and vests in the Executive a contractual right to
the benefits which he or she is entitled hereunder, enforceable
by the Executive against ML&P. However, nothing herein shall
require ML&P to segregate, earmark, or otherwise set aside any
funds or other assets to provide for any payments hereunder.
1.5 Legal Status. This Agreement shall be considered an
unfunded agreement to provide welfare benefits to a select
group of management or highly compensated employees and is
therefore intended to be a "top-hat" plan exempt from the
requirements of the provisions of Parts 2, 3 and 4 of Title I
of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
ARTICLE II. DEFINITIONS AND CONSTRUCTION.
2.1 Definitions. Whenever used in this Agreement, the
following terms shall have the meanings set forth below and,
when the meaning is intended, the initial letter of the word is
capitalized.
a. "Base Salary" means the annualized salary
at the beginning of each Year, which includes all regular
basic wages, before reduction for any amounts deferred on
a tax-qualified or nonqualified basis, payable in cash to
an Executive for services rendered to ML&P or its
Subsidiaries during the Year. Base Salary shall exclude
bonuses, incentive compensation, special fees or awards,
commissions, allowances, or any other form of premium or
incentive pay, or amounts designated by ML&P or its
Subsidiaries as payment toward or reimbursement of
expenses.
b. "Beneficial Owner" shall have the meaning
ascribed to such terms in Rule 13d-3 of the General Rules
and Regulations under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
c. "Beneficiary" with respect to an Executive
means the persons or entities designated or deemed
designated by the Executive pursuant to Section 8.2
herein.
d. "Board" means the Board of Directors of
ML&P.
e. "Change in Control" of ML&P or its
Subsidiaries means any one or more of the following
occurrences:
(1) Any Person, including a "group" as
defined in Section 13 (d)(3) of the Exchange Act, who
is not at the date of this Agreement the beneficial
owner of shares of the given entity having 25% or
more of the total number of votes that may be cast
for the election of Directors of such entity, becomes
the beneficial owner (including acquisition of
beneficial ownership resulting from formation of a
"group") of shares of such entity having 25% or more
of such voting power;
(2) Any Person, including a "group" as
defined in Section 13(d)(3) of the Exchange Act, who
is not at the date of this Agreement the beneficial
owner of shares of a given entity having 50% or more
of the total number of votes that may be cast for the
election of Directors of such entity, becomes the
beneficial owner (including acquisition of beneficial
ownership resulting from formation of a "group") of
shares of such entity having 50% or more of such
voting power;
(3) As the result of, or in connection
with any cash tender or exchange offer, merger or
other business combination, sale of assets or
contested election, or any combination of the
foregoing transactions, the persons who were
Directors of the given entity before the transaction
shall cease to constitute a majority of the Board of
Directors of such entity or any successor to such
entity;
(4) A merger or consolidation of the given
entity in which such entity is not the surviving
entity; or
(5) The sale, transfer, or other
disposition of all or substantially all of the assets
of the given entity (and for this purpose, the term
"substantially all" shall mean assets having a fair
market value, whether or not realized in the
transaction, that is 50% or more of the aggregate
fair market value of all assets of such entity); or
in the case of a Subsidiary the sale, transfer or
other disposition (other than to a direct or indirect
wholly owned subsidiary of M&LP) of securities that
immediately prior to such transaction constituted 50%
or more of such Subsidiary's outstanding voting
securities.
f. "Committee" means the Compensation
Committee of the Board of Directors of ML&P or any other
committee appointed by the Board to administer this
Agreement.
g. "Disability" means a physical or mental
condition which renders an Executive unable to discharge
his normal work responsibility with ML&P or its
Subsidiaries and which, in the opinion of a licensed
physician selected by the Executive, subject to reasonable
approval by the Committee based upon sufficient medical
evidence, can be reasonably expected to continue for a
period of at least one full calendar year. If an
Executive fails to select a physician within ten (10)
business days of a written request made by ML&P, then ML&P
may select a physician for purposes of this paragraph.
h. "Effective Date" means the date the
Agreement is approved by the Board, or such other date as
the Board shall designate in its resolution approving the
Agreement, and as provided in Section 1.1 herein.
i. "Effective Date of Termination" means the
date on which a Qualifying Termination occurs.
j. "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended from time to time,
or any successor act thereto.
k. "Expiration Date" means the date the
Agreement expires, as provided in Section 1.2 herein.
l. "Just Cause" means the basis for a
termination of an Executive's employment by ML&P or its
Subsidiaries for which no Severance Benefits are payable
hereunder, as provided in Article IV herein.
m. "ML&P" means Maui Land & Pineapple Company,
Inc., a Hawaii corporation, or any successor thereto that
adopts the Agreement, as provided in Section 8.1 herein.
n. "Normal Retirement Date" shall mean the
date on which the Executive attains age 65.
o. "Person" shall have the meaning ascribed to
such terms in Section 3 (a)(9) of the Exchange Act and
used in Sections 13(d) and 14(d) thereof, including a
"group" as defined in Section 13(d); provided that for
purposes of Section 2.1(e) "Person" shall not include any
entity that is a direct or indirect wholly owned
subsidiary of ML&P.
p. "Qualifying Termination" means a
termination of the Executive's employment by ML&P or its
Subsidiaries as described in Section 3.2 herein.
q. "Severance Benefit" means the payment of
severance compensation as provided in Article III herein.
r. "Subsidiaries" means Maui Pineapple
Company, Ltd. and Kapalua Land Company, Ltd.
s. "Year" means the consecutive 12-month
period beginning each January 1 and ending December 31.
2.2 Gender and Number. Except where otherwise indicated
by the context, any masculine term used herein also shall
include the feminine, the plural shall include the singular,
and the singular shall include the plural.
2.3 Severability. In the event any provision of the
Agreement shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts
of the Agreement, and the Agreement shall be construed and
enforced as if the illegal or invalid provision had not been
included.
2.4 Modification. No express provisions of this
Agreement may be modified, waived, or discharged unless such
modification, waiver, or discharge is agreed to by the
Executive in writing and approved by the Compensation Committee
of the Board of Directors.
2.5 Applicable Law. To the extent not preempted by the
laws of the United States, the laws of the State of Hawaii
shall be the controlling law in all matters relating to the
Agreement without regard to the conflicts of law principles in
such laws.
ARTICLE III. SEVERANCE BENEFITS.
3.1 Right to Severance Benefits. The Executive shall be
entitled to receive from ML&P Severance Benefits as described
in Section 3.4 herein, if there has been a Change in Control of
ML&P or its Subsidiaries, as defined in Section 2.1(e) herein,
and if, within thirty-six (36) months thereafter, the
Executive's employment with ML&P or its Subsidiaries shall end
for any reason specified in Section 3.2 herein as being a
Qualifying Termination. An Executive shall not be entitled to
receive Severance Benefits if the Executive's employment with
ML&P or its Subsidiaries ends due to an involuntary termination
by ML&P or its Subsidiaries for Just Cause, as provided under
Article IV herein, or if the Executive's employment terminates
due to death or Disability.
3.2 Qualifying Termination. The occurrence of any one or
more of the following events within thirty-six (36) calendar
months after a Change in Control of ML&P or its Subsidiaries
shall cause the payment of Severance Benefits to the Executive,
as provided under Section 3.4 herein:
a. ML&P's or its Subsidiaries' involuntary
termination of the Executive's employment without Just
Cause, as defined in Article IV herein;
b. The Executive's voluntary employment
termination from ML&P or its Subsidiaries for Good Reason,
as defined by Section 3.3 herein;
c. A successor entity fails or refuses to
assume ML&P's or its Subsidiaries' obligations under this
Agreement in their entirety, as required by Article VIII
herein; or
d. ML&P or any successor entity commits a
material breach of any of the provisions of this
Agreement.
3.3 Definition of Good Reason. "Good Reason" means,
without the Executive's express written consent, the occurrence
after a Change in Control of ML&P or its Subsidiaries of any
one or more of the following:
a. The assignment of the Executive to duties
materially inconsistent with the Executive's authorities,
duties, responsibilities, and status (including offices,
titles and reporting requirements) as an executive and/or
officer of ML&P or its Subsidiaries, or a material
reduction of the Executive's authorities, duties, or
responsibilities from those in effect as of ninety (90)
days prior to the Change in Control, other than an act
that is remedied by ML&P or its Subsidiaries promptly
after receipt of notice thereof given by the Executive
(provided, however, that "Good Reason" shall not include
the events described in the preceding portions of this
paragraph (a) if the changes described therein have been
approved by a majority of the board of directors of ML&P
and also by a number of such directors who comprised at
least a majority of the directors of ML&P 90 days prior to
the Change In Control);
b. ML&P or its Subsidiaries requiring the
Executive to be based at a location in excess of seventy-
five (75) miles from the location of the Executive's
principal job location or office immediately prior to the
Change in Control; except for required travel on company
business to an extent substantially consistent with the
Executive's then present business travel obligations;
c. A more than ten percent (10%) reduction by
ML&P or its Subsidiaries of the Executive's annual rate of
Base Salary in effect as of ninety (90) days prior to the
Change in Control;
d. The failure of ML&P or its Subsidiaries to
continue in effect any of ML&P's or its Subsidiaries'
annual incentive compensation plans, or employee benefit
or retirement plans, policies, practices, or other
compensation arrangements in which the Executive
participates as in effect prior to the Change in Control,
unless such failure to continue the plan, policy, practice
or arrangement pertains to all plan participants
generally; or the failure by ML&P or its Subsidiaries to
continue the Executive's participation therein on
substantially the same basis, both in terms of the amount
of benefits provided and the level of the Executive's
participation relative to other participants and
commensurate with the Executive's responsibility and
duties; and
e. The failure of ML&P or its Subsidiaries to
obtain a satisfactory agreement from any successor to ML&P
or its Subsidiaries to assume and agree to perform ML&P's
or its Subsidiaries' obligations under this Agreement, as
contemplated in Article VIII herein.
3.4 Description of Severance Benefits. In the event that
an Executive becomes entitled to receive Severance Benefits, as
provided in Section 3.1 herein, ML&P shall pay to the Executive
and provide him with the following:
a. An amount equal to 2.99 times the
Executive's annual rate of Base Salary in effect upon the
Effective Date of Termination; and
b. A payout under the ML&P Annual Incentive
Plan, in accordance with the terms of such plan; and
c. A continuation of all welfare benefits at
normal employee cost including medical and dental
insurance, long-term disability, group term life
insurance, and accidental death & dismemberment insurance
for three (3) full years from the Effective Date of
Termination or until the Executive reaches his Normal
Retirement Date, whichever occurs earlier. In the event
that participation in any one or more of the welfare
benefits is not possible under the terms of the governing
welfare benefit provisions or due to the modification or
elimination of the welfare benefits, ML&P shall provide
substantially identical welfare benefits at the normal
employee cost of the affected welfare benefits. However,
these benefits shall be discontinued prior to the end of
the three (3) years in the event the Executive receives
substantially similar benefits from a subsequent employer,
as determined by the Committee. The right of the
Executive and his spouse and other dependents to continued
group health coverage under Section 4980B of the Internal
Revenue Code of 1986, as amended ("Code"), shall commence
at the end of the applicable Severance Benefits period.
Unless otherwise provided under this Agreement, the
applicable Severance Benefits period shall be treated as
if it were a period of employment with ML&P or its
Subsidiaries for purposes of determining rights and
benefits under any retirement plan or other plan or
program and shall be treated as a period of covered
employment under such plan or other plan or program if the
Executive was in covered employment immediately prior to
the Change in Control, provided that, if such treatment is
not possible under the terms of such plan or other plan or
program, ML&P shall directly provide substantially
identical benefits attributable to the crediting of the
Severance Benefits period.
3.5 Reduction of Severance Benefits. In the event there
are fewer than thirty-six (36) whole or partial months
remaining from the Executive's Effective Date of Termination
until the Executive's Normal Retirement Date, then the amounts
provided for under Section 3.4(a) above shall be reduced by a
fraction, the numerator of which shall be the number of whole
or partial months remaining until the Executive's Normal
Retirement Date, and the denominator of which shall be
thirty-six (36).
3.6 Special Retirement Benefits. The Executive shall
receive special retirement benefits as provided below, so that
the total retirement benefits that the Executive receives will
equal the retirement benefits that the Executive would have
received under the Maui Land & Pineapple Company, Inc. Pension
Plan for Non-Bargaining Unit Employees ("Retirement Plan"),
Maui Land & Pineapple Company, Inc. Supplemental Executive
Retirement Plan, and the Maui Land & Pineapple Company, Inc.
Executive Supplemental Insurance Plan/Executive Deferred
Compensation Plan (collectively, "Plans"), or any successor
Plans or arrangements to such Plans, had the Executive
continued in the employ of ML&P and its Subsidiaries for
three (3) years following the Executive's Effective Date of
Termination (or until his Normal Retirement Date, whichever is
earlier) but without regard to any ancillary benefits. The
amount of special retirement benefits payable hereunder to the
Executive or his beneficiaries shall equal the excess of the
amount specified in (a) over the amount specified in (b) below.
a. The total retirement benefits on an
actuarial equivalent single-life basis would be paid to
the Executive if the three (3) years (or the period to his
Normal Retirement Date, if less) following the Executive's
Effective Date of Termination are added to his credited
service under the Plans.
b. The total retirement benefits actually paid
on an actuarial equivalent single-life basis to the
Executive under the Plans.
Such special retirement benefits shall be paid at the
same time and in the same form (e.g., actuarial equivalent
single-life or contingent annuitant basis) as the Executive's
retirement benefits under the Plans. The special retirement
benefits shall be paid by the Plans or, if the terms of such
Plans do not provide for such benefits, the special retirement
benefits shall be paid directly by ML&P. The actuarial
equivalent of special retirement benefits shall be determined
in accordance with the factors provided under the Retirement
Plan.
3.7 Outplacement Services. In the event that the
Executive becomes entitled to receive Severance Benefits as
provided in Section 3.1 herein, the Executive shall be
entitled, at the expense of ML&P, to receive standard
outplacement services as selected by the Executive, for a
period of up to thirty-six (36) months from the Effective Date
of Termination. However, such services shall not exceed a
maximum annual benefit of ten percent (10%) of the Executive's
annual rate of Base Salary as of the Effective Date of
Termination.
3.8 Incentive Compensation. In the event that the
Executive becomes entitled to receive Severance Benefits as
provided in Section 3.1 herein, any deferred awards previously
granted to the Executive under ML&P's or its Subsidiaries'
incentive compensation plans and not previously paid to the
Executive shall immediately vest on the date of the Executive's
Effective Date of Termination and shall be paid no later than
ninety (90) calendar days following that date, and be included
as compensation in the month paid.
ARTICLE IV. DISQUALIFICATION FROM RECEIPT OF BENEFITS.
No Severance Benefits shall be payable to the
Executive under this Agreement in the event the Executive is
terminated by ML&P or its Subsidiaries for Just Cause. For
this purpose, Just Cause shall mean willful, malicious conduct
by the Executive which is detrimental to the best interests of
ML&P, including theft, embezzlement, the conviction of a
criminal act, disclosure of trade secrets, a gross dereliction
of duty, or other grave misconduct on the part of the Executive
which is substantially injurious to ML&P or its Subsidiaries.
Just Cause also shall include the failure of the Executive to
perform any and all covenants under this Agreement.
ARTICLE V. FORM AND TIMING OF SEVERANCE BENEFITS.
5.1 Form and Timing of Severance Benefits. The Severance
Benefits described in Section 3.4(a) and (b) herein, shall be
paid by ML&P in cash to the Executive in a single lump sum as
soon as practicable following the Executive's Effective Date of
Termination, but in no event beyond ninety (90) calendar days
from such date.
The Severance Benefits described in Section 3.4 (c)
herein shall be provided by ML&P to the Executive immediately
upon the Executive's Effective Date of Termination and shall
continue to be provided for three (3) full calendar years from
the Executive's Effective Date of Termination or until the
Executive reaches his Normal Retirement date, whichever occurs
earlier. However, the Severance Benefits described in Section
3.4 (c) herein shall be discontinued prior to the end of the
three (3) year period immediately upon the Executive receiving
substantially similar benefits from a subsequent employer, as
determined by the Committee.
5.2 Withholding of Taxes. ML&P or its Subsidiaries shall
withhold from any amounts payable under this Agreement all
Federal, state, city or other taxes as legally shall be
required.
ARTICLE VI. PARACHUTE PAYMENTS.
6.1 Determination of Alternative Severance Benefit Limit.
Notwithstanding any other provision of this Agreement, if any
portion of the Severance Benefits or any other payment under
this Agreement, or under any other agreement with, or plan of,
ML&P (in the aggregate "Total Payments") would constitute an
"excess parachute payment," then the payments to be made to the
Executive under this Agreement shall be reduced such that the
value of the aggregate Total Payments that the Executive is
entitled to receive shall be one dollar ($1) less than the
maximum amount which the Executive may receive without becoming
subject to the tax imposed by Section 4999 of the Code, or
which ML&P may pay without loss of deduction under Section
280G(a) of the Code. However, such reduction in Severance
Benefits shall apply if, and only if, the resulting Severance
benefits with such reduction is greater in value to the
Executive than the value of the Severance Benefits without a
reduction, net of any tax imposed on the Executive pursuant to
Section 4999 of the Code. For purposes of this Agreement, the
terms "excess parachute payment" and "parachute payments" shall
have the meanings assigned to such terms in Section 280G of the
Code, and such "parachute payments" shall be valued as provided
therein.
6.2 Procedure for Establishing Alternative Limitation.
Within fifteen (15) calendar days following delivery of the
notice of Qualifying Termination or notice by ML&P to the
Executive of its belief that there is a payment or benefit due
the Executive which will result in an "excess parachute
payment" as defined in Section 280G of the Code, the Executive
and ML&P, at ML&P's expense, shall obtain the opinion of ML&P's
principal outside law firm, accounting firm, and/or
compensation and benefits consulting firm, which sets forth:
(a) the amount of the Executive's "annualized includible
compensation for the base period" (as defined in Section
280G(d)(1) of the Code); (b) the present value of the Total
Payments; and (c) the amount and present value of any "excess
parachute payment."
In the event that such opinion determines that there
would be an "excess parachute payment," such that a reduction
in the Severance Benefits would result in a greater net benefit
to the Executive (as provided in Section 6.1 herein), then the
Severance Benefits hereunder or any other payment determined
under the opinion to be includible in Total Payments shall be
reduced or eliminated so that, on the basis of calculations set
forth in such opinion, there will be no "excess
parachute payment". The reduction or elimination of specific
payments shall apply to such type and amount of specific
payments as may be designated by the Executive in writing
delivered to ML&P within ten (10) calendar days of receipt of
the opinion, or if the Executive fails to so notify ML&P, as
may be reasonably determined by ML&P.
The provisions of this Section 6.2, including the
calculations, notices, and opinion provided herein, shall be
based upon the conclusive presumption that the following
amounts are reasonable: (a) the compensation and benefits
provided for in Article III herein; and (b) any other
compensation earned prior to the Effective Date of Termination
by the Executive pursuant to ML&P's compensation programs (if
such payments would have been made in the future in any event,
even though the timing of such payment is triggered by the
Change in Control).
6.3 Subsequent Imposition of Excise Tax. If,
notwithstanding compliance with the provisions of Sections 6.1
and 6.2 herein, it is ultimately determined by a court or
pursuant to a final determination by the Internal Revenue
Service that any portion of the Total Payments is considered to
be a "parachute payment", subject to excise tax under Section
4999 of the Code, which was not contemplated to be a "parachute
payment" at the time of payment (so as to accurately determine
whether a limitation should have been applied to the Total
Payments to maximize the net benefit to the Executive, as
provided in Sections 6.1 and 6.2 herein), the Executive shall
be entitled to receive a lump sum cash payment sufficient to
place the Executive in the same net after-tax position,
computed by using the "Special Tax Rate" as such term is
defined below, that the Executive would have been in had such
payment not been subject to such excise tax, and had the
Executive not incurred any interest charges or penalties with
respect to the imposition of such excise tax. For purposes of
this Agreement, the "Special Tax Rate" shall be the highest
effective Federal and state marginal tax rates applicable to
the Executive in the year in which the payment contemplated
under this Section 6.3 is made.
ARTICLE VII. OTHER RIGHTS AND BENEFITS NOT AFFECTED.
7.1 Other Benefits. Neither the provisions of this
Agreement nor the Severance Benefits provided for hereunder
shall reduce any amounts otherwise payable, or in any way
diminish the Executive's rights as an employee of ML&P or its
Subsidiaries, whether existing now or hereafter, under any
benefit, incentive, retirement, stock option, stock bonus,
stock purchase plan, or any employment agreement, or other plan
or arrangement.
7.2 Employment Status. This Agreement does not
constitute a contract of employment or impose on ML&P or its
Subsidiaries any obligation to retain the Executive as an
employee, to change the status of the Executive's employment,
or to change ML&P's or its Subsidiaries' policies regarding
termination of employment. The Executive serves as an employee
of ML&P or its Subsidiaries, and this Agreement shall not
create an employment relationship between ML&P or its
Subsidiaries and the Executive.
ARTICLE VIII. SUCCESSORS.
8.1 Successors. ML&P or its Subsidiaries will require
any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) of all or substantially all of the
business and/or assets of ML&P or its Subsidiaries, or any
division or subsidiary thereof to expressly assume and agree to
perform this Agreement in the same manner and to the same
extent that ML&P or its Subsidiaries would be required to
perform it if no such succession had taken place. Failure of
ML&P or its Subsidiaries to obtain such assumption and
agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the
Executive to compensation from ML&P or its Subsidiaries in the
same amount and on the same terms as they would be entitled
hereunder if terminated voluntarily following a Change in
Control. Except for the purposes of implementing the
foregoing, the date on which any succession becomes effective
shall be deemed the Effective Date of Termination.
This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees. If an Executive should
die while any amount would still be payable to him hereunder
had he continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of
this Agreement, to the Executive's devisee, legatee, or other
designee, or if there is no such designee, to the Executive's
estate.
8.2 Beneficiaries. In the event of the death of the
Executive, all unpaid amounts payable to the Executive under
this Agreement shall be paid to his or her Beneficiary. The
Executive's spouse and other dependents shall continue to be
covered by all applicable welfare benefits during the remainder
of the Severance Benefits period, if any, pursuant to
Section 3.4.c (unless payments at death are specified by the
applicable welfare benefits provisions). The Beneficiary of
the Executive's Severance Benefits under this Agreement shall
be designated by the Executive in the form of a signed writing
acceptable to the Committee. An Executive may make or change
such designation at any time.
ARTICLE IX. ADMINISTRATION.
9.1 Administration. The Compensation Committee of the
Board of Directors shall administer this Agreement. The
Committee is authorized to interpret this Agreement, to
prescribe and rescind rules and regulations, to provide
conditions and assurances deemed necessary and advisable, to
protect the interest of ML&P or its Subsidiaries, and to make
all other determinations necessary or advisable for the
Agreement's administration. In fulfilling its administrative
duties hereunder, the Committee may rely on outside counsel,
independent accountants, or other consultants to render advice
or assistance.
9.2 Indemnification and Exculpation. The members of the
Board, its agents and officers, directors and employees of ML&P
and its Subsidiaries shall be indemnified and held harmless by
ML&P and its Subsidiaries against and from any and all loss,
cost, liability, or expense that may be imposed upon or
reasonably incurred by them in connection with or resulting
from any claim, action, suit or proceeding to which they may be
a party or in which they may be involved by reason of any
action taken or failure to act under this Agreement and against
and from any and all amounts paid by them in settlement (with
ML&P's written approval) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding. The foregoing
provision shall not be applicable to any person if the loss,
cost, liability or expense is due to such person's gross
negligence or willful misconduct.
9.3 Legal Fees. ML&P shall pay all reasonable legal
fees, costs of litigation and other expenses incurred in good
faith by the Executive as a result of ML&P's refusal to provide
the Severance Benefits to which the Executive becomes entitled
under this Agreement, or as a result of ML&P's contesting the
validity, enforceability or interpretation of the Agreement.
Provided, however, that such payments shall not exceed the
amount permitted by law and ML&P's Articles of Incorporation.
IN WITNESS WHEREOF, ML&P has caused this Agreement to
be executed by a resolution of the Board of Directors, as of
the day and year first above written.
MAUI LAND & PINEAPPLE COMPANY, INC.
By /S/ ADELE H. SUMIDA
Its Secretary
/S/ GARY L. GIFFORD
GARY L. GIFFORD
"Executive"
ATTEST:
/S/ IRIS Y. MATSUMOTO
MAUI LAND & PINEAPPLE COMPANY, INC.
EXECUTIVE CHANGE-IN-CONTROL SEVERANCE AGREEMENT
Paul J. Meyer
Executive Vice President/Finance
ARTICLE I. ESTABLISHMENT AND PURPOSE.
1.1 Effective Date. This Executive Change-in-Control
Severance Agreement (the "Agreement") is made and entered into
and is effective as of this 13th day of March,
1998 ("Effective Date"), by and between Maui Land & Pineapple
Company, Inc. ("ML&P"), a Hawaii corporation, and
Paul J. Meyer ("Executive") of ML&P and its Subsidiaries.
This Agreement shall supersede and replace any prior severance
agreement entered into between ML&P and the Executive.
1.2 Term of the Agreement. The Agreement shall commence
as of the Effective Date written above, and shall continue
until the Board of Directors of ML&P ("Board") determines, in
good faith and in its sole discretion, that the Executive is
no longer to be included in the Plan and so notifies in writing
the Executive during the term of this Agreement of such
determination.
Provided, however, in the event that a Change in
Control of ML&P or its Subsidiaries, as defined in Section 2.1
herein, occurs during the term of this Agreement, this
Agreement shall remain irrevocably in effect for the greater of
thirty-six (36) months from the date of such Change in Control,
or until all benefits have been paid to the Executive
hereunder.
Further, in the event that the Board has knowledge
that a third party has taken steps reasonably calculated to
effect a Change in Control of ML&P or its Subsidiaries,
including, but not limited to the commencement of a tender
offer for the voting stock of ML&P, or the circulation of a
proxy to ML&P's shareholders, then this Agreement shall remain
irrevocably in effect until the Board, in good faith,
determines that such third party has fully abandoned or
terminated its effort to effect a Change in Control of ML&P or
its Subsidiaries.
1.3 Purpose of the Agreement. The purpose of this
Agreement pursuant to the Plan, is to advance the interests of
ML&P and its Subsidiaries by assuring that ML&P and its
Subsidiaries shall have the continued employment and dedication
of the Executive and the availability of his advice and counsel
in the event that an acquisition or Change in Control of ML&P
or its Subsidiaries occurs. This Agreement shall also assure
the Executive of equitable treatment during the period of
uncertainty that surrounds an acquisition or Change in Control,
and allow the Executive to act at all times in the best
interest of ML&P and its shareholders.
1.4 Contractual Right to Benefits. This Agreement
establishes and vests in the Executive a contractual right to
the benefits which he or she is entitled hereunder, enforceable
by the Executive against ML&P. However, nothing herein shall
require ML&P to segregate, earmark, or otherwise set aside any
funds or other assets to provide for any payments hereunder.
1.5 Legal Status. This Agreement shall be considered an
unfunded agreement to provide welfare benefits to a select
group of management or highly compensated employees and is
therefore intended to be a "top-hat" plan exempt from the
requirements of the provisions of Parts 2, 3 and 4 of Title I
of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
ARTICLE II. DEFINITIONS AND CONSTRUCTION.
2.1 Definitions. Whenever used in this Agreement, the
following terms shall have the meanings set forth below and,
when the meaning is intended, the initial letter of the word is
capitalized.
a. "Base Salary" means the annualized salary
at the beginning of each Year, which includes all regular
basic wages, before reduction for any amounts deferred on
a tax-qualified or nonqualified basis, payable in cash to
an Executive for services rendered to ML&P or its
Subsidiaries during the Year. Base Salary shall exclude
bonuses, incentive compensation, special fees or awards,
commissions, allowances, or any other form of premium or
incentive pay, or amounts designated by ML&P or its
Subsidiaries as payment toward or reimbursement of
expenses.
b. "Beneficial Owner" shall have the meaning
ascribed to such terms in Rule 13d-3 of the General Rules
and Regulations under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
c. "Beneficiary" with respect to an Executive
means the persons or entities designated or deemed
designated by the Executive pursuant to Section 8.2
herein.
d. "Board" means the Board of Directors of
ML&P.
e. "Change in Control" of ML&P or its
Subsidiaries means any one or more of the following
occurrences:
(1) Any Person, including a "group" as
defined in Section 13 (d)(3) of the Exchange Act, who
is not at the date of this Agreement the beneficial
owner of shares of the given entity having 25% or
more of the total number of votes that may be cast
for the election of Directors of such entity, becomes
the beneficial owner (including acquisition of
beneficial ownership resulting from formation of a
"group") of shares of such entity having 25% or more
of such voting power;
(2) Any Person, including a "group" as
defined in Section 13(d)(3) of the Exchange Act, who
is not at the date of this Agreement the beneficial
owner of shares of a given entity having 50% or more
of the total number of votes that may be cast for the
election of Directors of such entity, becomes the
beneficial owner (including acquisition of beneficial
ownership resulting from formation of a "group") of
shares of such entity having 50% or more of such
voting power;
(3) As the result of, or in connection
with any cash tender or exchange offer, merger or
other business combination, sale of assets or
contested election, or any combination of the
foregoing transactions, the persons who were
Directors of the given entity before the transaction
shall cease to constitute a majority of the Board of
Directors of such entity or any successor to such
entity;
(4) A merger or consolidation of the given
entity in which such entity is not the surviving
entity; or
(5) The sale, transfer, or other
disposition of all or substantially all of the assets
of the given entity (and for this purpose, the term
"substantially all" shall mean assets having a fair
market value, whether or not realized in the
transaction, that is 50% or more of the aggregate
fair market value of all assets of such entity); or
in the case of a Subsidiary the sale, transfer or
other disposition (other than to a direct or indirect
wholly owned subsidiary of M&LP) of securities that
immediately prior to such transaction constituted 50%
or more of such Subsidiary's outstanding voting
securities.
f. "Committee" means the Compensation
Committee of the Board of Directors of ML&P or any other
committee appointed by the Board to administer this
Agreement.
g. "Disability" means a physical or mental
condition which renders an Executive unable to discharge
his normal work responsibility with ML&P or its
Subsidiaries and which, in the opinion of a licensed
physician selected by the Executive, subject to reasonable
approval by the Committee based upon sufficient medical
evidence, can be reasonably expected to continue for a
period of at least one full calendar year. If an
Executive fails to select a physician within ten (10)
business days of a written request made by ML&P, then ML&P
may select a physician for purposes of this paragraph.
h. "Effective Date" means the date the
Agreement is approved by the Board, or such other date as
the Board shall designate in its resolution approving the
Agreement, and as provided in Section 1.1 herein.
i. "Effective Date of Termination" means the
date on which a Qualifying Termination occurs.
j. "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended from time to time,
or any successor act thereto.
k. "Expiration Date" means the date the
Agreement expires, as provided in Section 1.2 herein.
l. "Just Cause" means the basis for a
termination of an Executive's employment by ML&P or its
Subsidiaries for which no Severance Benefits are payable
hereunder, as provided in Article IV herein.
m. "ML&P" means Maui Land & Pineapple Company,
Inc., a Hawaii corporation, or any successor thereto that
adopts the Agreement, as provided in Section 8.1 herein.
n. "Normal Retirement Date" shall mean the
date on which the Executive attains age 65.
o. "Person" shall have the meaning ascribed to
such terms in Section 3 (a)(9) of the Exchange Act and
used in Sections 13(d) and 14(d) thereof, including a
"group" as defined in Section 13(d); provided that for
purposes of Section 2.1(e) "Person" shall not include any
entity that is a direct or indirect wholly owned
subsidiary of ML&P.
p. "Qualifying Termination" means a
termination of the Executive's employment by ML&P or its
Subsidiaries as described in Section 3.2 herein.
q. "Severance Benefit" means the payment of
severance compensation as provided in Article III herein.
r. "Subsidiaries" means Maui Pineapple
Company, Ltd. and Kapalua Land Company, Ltd.
s. "Year" means the consecutive 12-month
period beginning each January 1 and ending December 31.
2.2 Gender and Number. Except where otherwise indicated
by the context, any masculine term used herein also shall
include the feminine, the plural shall include the singular,
and the singular shall include the plural.
2.3 Severability. In the event any provision of the
Agreement shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts
of the Agreement, and the Agreement shall be construed and
enforced as if the illegal or invalid provision had not been
included.
2.4 Modification. No express provisions of this
Agreement may be modified, waived, or discharged unless such
modification, waiver, or discharge is agreed to by the
Executive in writing and approved by the Compensation Committee
of the Board of Directors.
2.5 Applicable Law. To the extent not preempted by the
laws of the United States, the laws of the State of Hawaii
shall be the controlling law in all matters relating to the
Agreement without regard to the conflicts of law principles in
such laws.
ARTICLE III. SEVERANCE BENEFITS.
3.1 Right to Severance Benefits. The Executive shall be
entitled to receive from ML&P Severance Benefits as described
in Section 3.4 herein, if there has been a Change in Control of
ML&P or its Subsidiaries, as defined in Section 2.1(e) herein,
and if, within thirty-six (36) months thereafter, the
Executive's employment with ML&P or its Subsidiaries shall end
for any reason specified in Section 3.2 herein as being a
Qualifying Termination. An Executive shall not be entitled to
receive Severance Benefits if the Executive's employment with
ML&P or its Subsidiaries ends due to an involuntary termination
by ML&P or its Subsidiaries for Just Cause, as provided under
Article IV herein, or if the Executive's employment terminates
due to death or Disability.
3.2 Qualifying Termination. The occurrence of any one or
more of the following events within thirty-six (36) calendar
months after a Change in Control of ML&P or its Subsidiaries
shall cause the payment of Severance Benefits to the Executive,
as provided under Section 3.4 herein:
a. ML&P's or its Subsidiaries' involuntary
termination of the Executive's employment without Just
Cause, as defined in Article IV herein;
b. The Executive's voluntary employment
termination from ML&P or its Subsidiaries for Good Reason,
as defined by Section 3.3 herein;
c. A successor entity fails or refuses to
assume ML&P's or its Subsidiaries' obligations under this
Agreement in their entirety, as required by Article VIII
herein; or
d. ML&P or any successor entity commits a
material breach of any of the provisions of this
Agreement.
3.3 Definition of Good Reason. "Good Reason" means,
without the Executive's express written consent, the occurrence
after a Change in Control of ML&P or its Subsidiaries of any
one or more of the following:
a. The assignment of the Executive to duties
materially inconsistent with the Executive's authorities,
duties, responsibilities, and status (including offices,
titles and reporting requirements) as an executive and/or
officer of ML&P or its Subsidiaries, or a material
reduction of the Executive's authorities, duties, or
responsibilities from those in effect as of ninety (90)
days prior to the Change in Control, other than an act
that is remedied by ML&P or its Subsidiaries promptly
after receipt of notice thereof given by the Executive
(provided, however, that "Good Reason" shall not include
the events described in the preceding portions of this
paragraph (a) if the changes described therein have been
approved by a majority of the board of directors of ML&P
and also by a number of such directors who comprised at
least a majority of the directors of ML&P 90 days prior to
the Change In Control);
b. ML&P or its Subsidiaries requiring the
Executive to be based at a location in excess of seventy-
five (75) miles from the location of the Executive's
principal job location or office immediately prior to the
Change in Control; except for required travel on company
business to an extent substantially consistent with the
Executive's then present business travel obligations;
c. A more than ten percent (10%) reduction by
ML&P or its Subsidiaries of the Executive's annual rate of
Base Salary in effect as of ninety (90) days prior to the
Change in Control;
d. The failure of ML&P or its Subsidiaries to
continue in effect any of ML&P's or its Subsidiaries'
annual incentive compensation plans, or employee benefit
or retirement plans, policies, practices, or other
compensation arrangements in which the Executive
participates as in effect prior to the Change in Control,
unless such failure to continue the plan, policy, practice
or arrangement pertains to all plan participants
generally; or the failure by ML&P or its Subsidiaries to
continue the Executive's participation therein on
substantially the same basis, both in terms of the amount
of benefits provided and the level of the Executive's
participation relative to other participants and
commensurate with the Executive's responsibility and
duties; and
e. The failure of ML&P or its Subsidiaries to
obtain a satisfactory agreement from any successor to ML&P
or its Subsidiaries to assume and agree to perform ML&P's
or its Subsidiaries' obligations under this Agreement, as
contemplated in Article VIII herein.
3.4 Description of Severance Benefits. In the event that
an Executive becomes entitled to receive Severance Benefits, as
provided in Section 3.1 herein, ML&P shall pay to the Executive
and provide him with the following:
a. An amount equal to 2.99 times the
Executive's annual rate of Base Salary in effect upon the
Effective Date of Termination; and
b. A payout under the ML&P Annual Incentive
Plan, in accordance with the terms of such plan; and
c. A continuation of all welfare benefits at
normal employee cost including medical and dental
insurance, long-term disability, group term life
insurance, and accidental death & dismemberment insurance
for three (3) full years from the Effective Date of
Termination or until the Executive reaches his Normal
Retirement Date, whichever occurs earlier. In the event
that participation in any one or more of the welfare
benefits is not possible under the terms of the governing
welfare benefit provisions or due to the modification or
elimination of the welfare benefits, ML&P shall provide
substantially identical welfare benefits at the normal
employee cost of the affected welfare benefits. However,
these benefits shall be discontinued prior to the end of
the three (3) years in the event the Executive receives
substantially similar benefits from a subsequent employer,
as determined by the Committee. The right of the
Executive and his spouse and other dependents to continued
group health coverage under Section 4980B of the Internal
Revenue Code of 1986, as amended ("Code"), shall commence
at the end of the applicable Severance Benefits period.
Unless otherwise provided under this Agreement, the
applicable Severance Benefits period shall be treated as
if it were a period of employment with ML&P or its
Subsidiaries for purposes of determining rights and
benefits under any retirement plan or other plan or
program and shall be treated as a period of covered
employment under such plan or other plan or program if the
Executive was in covered employment immediately prior to
the Change in Control, provided that, if such treatment is
not possible under the terms of such plan or other plan or
program, ML&P shall directly provide substantially
identical benefits attributable to the crediting of the
Severance Benefits period.
3.5 Reduction of Severance Benefits. In the event there
are fewer than thirty-six (36) whole or partial months
remaining from the Executive's Effective Date of Termination
until the Executive's Normal Retirement Date, then the amounts
provided for under Section 3.4(a) above shall be reduced by a
fraction, the numerator of which shall be the number of whole
or partial months remaining until the Executive's Normal
Retirement Date, and the denominator of which shall be
thirty-six (36).
3.6 Special Retirement Benefits. The Executive shall
receive special retirement benefits as provided below, so that
the total retirement benefits that the Executive receives will
equal the retirement benefits that the Executive would have
received under the Maui Land & Pineapple Company, Inc. Pension
Plan for Non-Bargaining Unit Employees ("Retirement Plan"),
Maui Land & Pineapple Company, Inc. Supplemental Executive
Retirement Plan, and the Maui Land & Pineapple Company, Inc.
Executive Supplemental Insurance Plan/Executive Deferred
Compensation Plan (collectively, "Plans"), or any successor
Plans or arrangements to such Plans, had the Executive
continued in the employ of ML&P and its Subsidiaries for
three (3) years following the Executive's Effective Date of
Termination (or until his Normal Retirement Date, whichever is
earlier) but without regard to any ancillary benefits. The
amount of special retirement benefits payable hereunder to the
Executive or his beneficiaries shall equal the excess of the
amount specified in (a) over the amount specified in (b) below.
a. The total retirement benefits on an
actuarial equivalent single-life basis would be paid to
the Executive if the three (3) years (or the period to his
Normal Retirement Date, if less) following the Executive's
Effective Date of Termination are added to his credited
service under the Plans.
b. The total retirement benefits actually paid
on an actuarial equivalent single-life basis to the
Executive under the Plans.
Such special retirement benefits shall be paid at the
same time and in the same form (e.g., actuarial equivalent
single-life or contingent annuitant basis) as the Executive's
retirement benefits under the Plans. The special retirement
benefits shall be paid by the Plans or, if the terms of such
Plans do not provide for such benefits, the special retirement
benefits shall be paid directly by ML&P. The actuarial
equivalent of special retirement benefits shall be determined
in accordance with the factors provided under the Retirement
Plan.
3.7 Outplacement Services. In the event that the
Executive becomes entitled to receive Severance Benefits as
provided in Section 3.1 herein, the Executive shall be
entitled, at the expense of ML&P, to receive standard
outplacement services as selected by the Executive, for a
period of up to thirty-six (36) months from the Effective Date
of Termination. However, such services shall not exceed a
maximum annual benefit of ten percent (10%) of the Executive's
annual rate of Base Salary as of the Effective Date of
Termination.
3.8 Incentive Compensation. In the event that the
Executive becomes entitled to receive Severance Benefits as
provided in Section 3.1 herein, any deferred awards previously
granted to the Executive under ML&P's or its Subsidiaries'
incentive compensation plans and not previously paid to the
Executive shall immediately vest on the date of the Executive's
Effective Date of Termination and shall be paid no later than
ninety (90) calendar days following that date, and be included
as compensation in the month paid.
ARTICLE IV. DISQUALIFICATION FROM RECEIPT OF BENEFITS.
No Severance Benefits shall be payable to the
Executive under this Agreement in the event the Executive is
terminated by ML&P or its Subsidiaries for Just Cause. For
this purpose, Just Cause shall mean willful, malicious conduct
by the Executive which is detrimental to the best interests of
ML&P, including theft, embezzlement, the conviction of a
criminal act, disclosure of trade secrets, a gross dereliction
of duty, or other grave misconduct on the part of the Executive
which is substantially injurious to ML&P or its Subsidiaries.
Just Cause also shall include the failure of the Executive to
perform any and all covenants under this Agreement.
ARTICLE V. FORM AND TIMING OF SEVERANCE BENEFITS.
5.1 Form and Timing of Severance Benefits. The Severance
Benefits described in Section 3.4(a) and (b) herein, shall be
paid by ML&P in cash to the Executive in a single lump sum as
soon as practicable following the Executive's Effective Date of
Termination, but in no event beyond ninety (90) calendar days
from such date.
The Severance Benefits described in Section 3.4 (c)
herein shall be provided by ML&P to the Executive immediately
upon the Executive's Effective Date of Termination and shall
continue to be provided for three (3) full calendar years from
the Executive's Effective Date of Termination or until the
Executive reaches his Normal Retirement date, whichever occurs
earlier. However, the Severance Benefits described in Section
3.4 (c) herein shall be discontinued prior to the end of the
three (3) year period immediately upon the Executive receiving
substantially similar benefits from a subsequent employer, as
determined by the Committee.
5.2 Withholding of Taxes. ML&P or its Subsidiaries shall
withhold from any amounts payable under this Agreement all
Federal, state, city or other taxes as legally shall be
required.
ARTICLE VI. PARACHUTE PAYMENTS.
6.1 Determination of Alternative Severance Benefit Limit.
Notwithstanding any other provision of this Agreement, if any
portion of the Severance Benefits or any other payment under
this Agreement, or under any other agreement with, or plan of,
ML&P (in the aggregate "Total Payments") would constitute an
"excess parachute payment," then the payments to be made to the
Executive under this Agreement shall be reduced such that the
value of the aggregate Total Payments that the Executive is
entitled to receive shall be one dollar ($1) less than the
maximum amount which the Executive may receive without becoming
subject to the tax imposed by Section 4999 of the Code, or
which ML&P may pay without loss of deduction under Section
280G(a) of the Code. However, such reduction in Severance
Benefits shall apply if, and only if, the resulting Severance
benefits with such reduction is greater in value to the
Executive than the value of the Severance Benefits without a
reduction, net of any tax imposed on the Executive pursuant to
Section 4999 of the Code. For purposes of this Agreement, the
terms "excess parachute payment" and "parachute payments" shall
have the meanings assigned to such terms in Section 280G of the
Code, and such "parachute payments" shall be valued as provided
therein.
6.2 Procedure for Establishing Alternative Limitation.
Within fifteen (15) calendar days following delivery of the
notice of Qualifying Termination or notice by ML&P to the
Executive of its belief that there is a payment or benefit due
the Executive which will result in an "excess parachute
payment" as defined in Section 280G of the Code, the Executive
and ML&P, at ML&P's expense, shall obtain the opinion of ML&P's
principal outside law firm, accounting firm, and/or
compensation and benefits consulting firm, which sets forth:
(a) the amount of the Executive's "annualized includible
compensation for the base period" (as defined in Section
280G(d)(1) of the Code); (b) the present value of the Total
Payments; and (c) the amount and present value of any "excess
parachute payment."
In the event that such opinion determines that there
would be an "excess parachute payment," such that a reduction
in the Severance Benefits would result in a greater net benefit
to the Executive (as provided in Section 6.1 herein), then the
Severance Benefits hereunder or any other payment determined
under the opinion to be includible in Total Payments shall be
reduced or eliminated so that, on the basis of calculations set
forth in such opinion, there will be no "excess
parachute payment". The reduction or elimination of specific
payments shall apply to such type and amount of specific
payments as may be designated by the Executive in writing
delivered to ML&P within ten (10) calendar days of receipt of
the opinion, or if the Executive fails to so notify ML&P, as
may be reasonably determined by ML&P.
The provisions of this Section 6.2, including the
calculations, notices, and opinion provided herein, shall be
based upon the conclusive presumption that the following
amounts are reasonable: (a) the compensation and benefits
provided for in Article III herein; and (b) any other
compensation earned prior to the Effective Date of Termination
by the Executive pursuant to ML&P's compensation programs (if
such payments would have been made in the future in any event,
even though the timing of such payment is triggered by the
Change in Control).
6.3 Subsequent Imposition of Excise Tax. If,
notwithstanding compliance with the provisions of Sections 6.1
and 6.2 herein, it is ultimately determined by a court or
pursuant to a final determination by the Internal Revenue
Service that any portion of the Total Payments is considered to
be a "parachute payment", subject to excise tax under Section
4999 of the Code, which was not contemplated to be a "parachute
payment" at the time of payment (so as to accurately determine
whether a limitation should have been applied to the Total
Payments to maximize the net benefit to the Executive, as
provided in Sections 6.1 and 6.2 herein), the Executive shall
be entitled to receive a lump sum cash payment sufficient to
place the Executive in the same net after-tax position,
computed by using the "Special Tax Rate" as such term is
defined below, that the Executive would have been in had such
payment not been subject to such excise tax, and had the
Executive not incurred any interest charges or penalties with
respect to the imposition of such excise tax. For purposes of
this Agreement, the "Special Tax Rate" shall be the highest
effective Federal and state marginal tax rates applicable to
the Executive in the year in which the payment contemplated
under this Section 6.3 is made.
ARTICLE VII. OTHER RIGHTS AND BENEFITS NOT AFFECTED.
7.1 Other Benefits. Neither the provisions of this
Agreement nor the Severance Benefits provided for hereunder
shall reduce any amounts otherwise payable, or in any way
diminish the Executive's rights as an employee of ML&P or its
Subsidiaries, whether existing now or hereafter, under any
benefit, incentive, retirement, stock option, stock bonus,
stock purchase plan, or any employment agreement, or other plan
or arrangement.
7.2 Employment Status. This Agreement does not
constitute a contract of employment or impose on ML&P or its
Subsidiaries any obligation to retain the Executive as an
employee, to change the status of the Executive's employment,
or to change ML&P's or its Subsidiaries' policies regarding
termination of employment. The Executive serves as an employee
of ML&P or its Subsidiaries, and this Agreement shall not
create an employment relationship between ML&P or its
Subsidiaries and the Executive.
ARTICLE VIII. SUCCESSORS.
8.1 Successors. ML&P or its Subsidiaries will require
any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) of all or substantially all of the
business and/or assets of ML&P or its Subsidiaries, or any
division or subsidiary thereof to expressly assume and agree to
perform this Agreement in the same manner and to the same
extent that ML&P or its Subsidiaries would be required to
perform it if no such succession had taken place. Failure of
ML&P or its Subsidiaries to obtain such assumption and
agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the
Executive to compensation from ML&P or its Subsidiaries in the
same amount and on the same terms as they would be entitled
hereunder if terminated voluntarily following a Change in
Control. Except for the purposes of implementing the
foregoing, the date on which any succession becomes effective
shall be deemed the Effective Date of Termination.
This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees. If an Executive should
die while any amount would still be payable to him hereunder
had he continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of
this Agreement, to the Executive's devisee, legatee, or other
designee, or if there is no such designee, to the Executive's
estate.
8.2 Beneficiaries. In the event of the death of the
Executive, all unpaid amounts payable to the Executive under
this Agreement shall be paid to his or her Beneficiary. The
Executive's spouse and other dependents shall continue to be
covered by all applicable welfare benefits during the remainder
of the Severance Benefits period, if any, pursuant to
Section 3.4.c (unless payments at death are specified by the
applicable welfare benefits provisions). The Beneficiary of
the Executive's Severance Benefits under this Agreement shall
be designated by the Executive in the form of a signed writing
acceptable to the Committee. An Executive may make or change
such designation at any time.
ARTICLE IX. ADMINISTRATION.
9.1 Administration. The Compensation Committee of the
Board of Directors shall administer this Agreement. The
Committee is authorized to interpret this Agreement, to
prescribe and rescind rules and regulations, to provide
conditions and assurances deemed necessary and advisable, to
protect the interest of ML&P or its Subsidiaries, and to make
all other determinations necessary or advisable for the
Agreement's administration. In fulfilling its administrative
duties hereunder, the Committee may rely on outside counsel,
independent accountants, or other consultants to render advice
or assistance.
9.2 Indemnification and Exculpation. The members of the
Board, its agents and officers, directors and employees of ML&P
and its Subsidiaries shall be indemnified and held harmless by
ML&P and its Subsidiaries against and from any and all loss,
cost, liability, or expense that may be imposed upon or
reasonably incurred by them in connection with or resulting
from any claim, action, suit or proceeding to which they may be
a party or in which they may be involved by reason of any
action taken or failure to act under this Agreement and against
and from any and all amounts paid by them in settlement (with
ML&P's written approval) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding. The foregoing
provision shall not be applicable to any person if the loss,
cost, liability or expense is due to such person's gross
negligence or willful misconduct.
9.3 Legal Fees. ML&P shall pay all reasonable legal
fees, costs of litigation and other expenses incurred in good
faith by the Executive as a result of ML&P's refusal to provide
the Severance Benefits to which the Executive becomes entitled
under this Agreement, or as a result of ML&P's contesting the
validity, enforceability or interpretation of the Agreement.
Provided, however, that such payments shall not exceed the
amount permitted by law and ML&P's Articles of Incorporation.
IN WITNESS WHEREOF, ML&P has caused this Agreement to
be executed by a resolution of the Board of Directors, as of
the day and year first above written.
MAUI LAND & PINEAPPLE COMPANY, INC.
By /S/ GARY L. GIFFORD
Its President
/S/ PAUL J. MEYER
PAUL J. MEYER
"Executive"
ATTEST:
/S/ IRIS Y. MATSUMOTO
MAUI LAND & PINEAPPLE COMPANY, INC.
EXECUTIVE CHANGE-IN-CONTROL SEVERANCE AGREEMENT
Donald A. Young
Executive Vice President/Resort
ARTICLE I. ESTABLISHMENT AND PURPOSE.
1.1 Effective Date. This Executive Change-in-Control
Severance Agreement (the "Agreement") is made and entered into
and is effective as of this 13th day of March,
1998 ("Effective Date"), by and between Maui Land & Pineapple
Company, Inc. ("ML&P"), a Hawaii corporation, and
Donald A. Young ("Executive") of ML&P and its Subsidiaries.
This Agreement shall supersede and replace any prior severance
agreement entered into between ML&P and the Executive.
1.2 Term of the Agreement. The Agreement shall commence
as of the Effective Date written above, and shall continue
until the Board of Directors of ML&P ("Board") determines, in
good faith and in its sole discretion, that the Executive is
no longer to be included in the Plan and so notifies in writing
the Executive during the term of this Agreement of such
determination.
Provided, however, in the event that a Change in
Control of ML&P or its Subsidiaries, as defined in Section 2.1
herein, occurs during the term of this Agreement, this
Agreement shall remain irrevocably in effect for the greater of
thirty-six (36) months from the date of such Change in Control,
or until all benefits have been paid to the Executive
hereunder.
Further, in the event that the Board has knowledge
that a third party has taken steps reasonably calculated to
effect a Change in Control of ML&P or its Subsidiaries,
including, but not limited to the commencement of a tender
offer for the voting stock of ML&P, or the circulation of a
proxy to ML&P's shareholders, then this Agreement shall remain
irrevocably in effect until the Board, in good faith,
determines that such third party has fully abandoned or
terminated its effort to effect a Change in Control of ML&P or
its Subsidiaries.
1.3 Purpose of the Agreement. The purpose of this
Agreement pursuant to the Plan, is to advance the interests of
ML&P and its Subsidiaries by assuring that ML&P and its
Subsidiaries shall have the continued employment and dedication
of the Executive and the availability of his advice and counsel
in the event that an acquisition or Change in Control of ML&P
or its Subsidiaries occurs. This Agreement shall also assure
the Executive of equitable treatment during the period of
uncertainty that surrounds an acquisition or Change in Control,
and allow the Executive to act at all times in the best
interest of ML&P and its shareholders.
1.4 Contractual Right to Benefits. This Agreement
establishes and vests in the Executive a contractual right to
the benefits which he or she is entitled hereunder, enforceable
by the Executive against ML&P. However, nothing herein shall
require ML&P to segregate, earmark, or otherwise set aside any
funds or other assets to provide for any payments hereunder.
1.5 Legal Status. This Agreement shall be considered an
unfunded agreement to provide welfare benefits to a select
group of management or highly compensated employees and is
therefore intended to be a "top-hat" plan exempt from the
requirements of the provisions of Parts 2, 3 and 4 of Title I
of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
ARTICLE II. DEFINITIONS AND CONSTRUCTION.
2.1 Definitions. Whenever used in this Agreement, the
following terms shall have the meanings set forth below and,
when the meaning is intended, the initial letter of the word is
capitalized.
a. "Base Salary" means the annualized salary
at the beginning of each Year, which includes all regular
basic wages, before reduction for any amounts deferred on
a tax-qualified or nonqualified basis, payable in cash to
an Executive for services rendered to ML&P or its
Subsidiaries during the Year. Base Salary shall exclude
bonuses, incentive compensation, special fees or awards,
commissions, allowances, or any other form of premium or
incentive pay, or amounts designated by ML&P or its
Subsidiaries as payment toward or reimbursement of
expenses.
b. "Beneficial Owner" shall have the meaning
ascribed to such terms in Rule 13d-3 of the General Rules
and Regulations under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
c. "Beneficiary" with respect to an Executive
means the persons or entities designated or deemed
designated by the Executive pursuant to Section 8.2
herein.
d. "Board" means the Board of Directors of
ML&P.
e. "Change in Control" of ML&P or its
Subsidiaries means any one or more of the following
occurrences:
(1) Any Person, including a "group" as
defined in Section 13 (d)(3) of the Exchange Act, who
is not at the date of this Agreement the beneficial
owner of shares of the given entity having 25% or
more of the total number of votes that may be cast
for the election of Directors of such entity, becomes
the beneficial owner (including acquisition of
beneficial ownership resulting from formation of a
"group") of shares of such entity having 25% or more
of such voting power;
(2) Any Person, including a "group" as
defined in Section 13(d)(3) of the Exchange Act, who
is not at the date of this Agreement the beneficial
owner of shares of a given entity having 50% or more
of the total number of votes that may be cast for the
election of Directors of such entity, becomes the
beneficial owner (including acquisition of beneficial
ownership resulting from formation of a "group") of
shares of such entity having 50% or more of such
voting power;
(3) As the result of, or in connection
with any cash tender or exchange offer, merger or
other business combination, sale of assets or
contested election, or any combination of the
foregoing transactions, the persons who were
Directors of the given entity before the transaction
shall cease to constitute a majority of the Board of
Directors of such entity or any successor to such
entity;
(4) A merger or consolidation of the given
entity in which such entity is not the surviving
entity; or
(5) The sale, transfer, or other
disposition of all or substantially all of the assets
of the given entity (and for this purpose, the term
"substantially all" shall mean assets having a fair
market value, whether or not realized in the
transaction, that is 50% or more of the aggregate
fair market value of all assets of such entity); or
in the case of a Subsidiary the sale, transfer or
other disposition (other than to a direct or indirect
wholly owned subsidiary of M&LP) of securities that
immediately prior to such transaction constituted 50%
or more of such Subsidiary's outstanding voting
securities.
f. "Committee" means the Compensation
Committee of the Board of Directors of ML&P or any other
committee appointed by the Board to administer this
Agreement.
g. "Disability" means a physical or mental
condition which renders an Executive unable to discharge
his normal work responsibility with ML&P or its
Subsidiaries and which, in the opinion of a licensed
physician selected by the Executive, subject to reasonable
approval by the Committee based upon sufficient medical
evidence, can be reasonably expected to continue for a
period of at least one full calendar year. If an
Executive fails to select a physician within ten (10)
business days of a written request made by ML&P, then ML&P
may select a physician for purposes of this paragraph.
h. "Effective Date" means the date the
Agreement is approved by the Board, or such other date as
the Board shall designate in its resolution approving the
Agreement, and as provided in Section 1.1 herein.
i. "Effective Date of Termination" means the
date on which a Qualifying Termination occurs.
j. "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended from time to time,
or any successor act thereto.
k. "Expiration Date" means the date the
Agreement expires, as provided in Section 1.2 herein.
l. "Just Cause" means the basis for a
termination of an Executive's employment by ML&P or its
Subsidiaries for which no Severance Benefits are payable
hereunder, as provided in Article IV herein.
m. "ML&P" means Maui Land & Pineapple Company,
Inc., a Hawaii corporation, or any successor thereto that
adopts the Agreement, as provided in Section 8.1 herein.
n. "Normal Retirement Date" shall mean the
date on which the Executive attains age 65.
o. "Person" shall have the meaning ascribed to
such terms in Section 3 (a)(9) of the Exchange Act and
used in Sections 13(d) and 14(d) thereof, including a
"group" as defined in Section 13(d); provided that for
purposes of Section 2.1(e) "Person" shall not include any
entity that is a direct or indirect wholly owned
subsidiary of ML&P.
p. "Qualifying Termination" means a
termination of the Executive's employment by ML&P or its
Subsidiaries as described in Section 3.2 herein.
q. "Severance Benefit" means the payment of
severance compensation as provided in Article III herein.
r. "Subsidiaries" means Maui Pineapple
Company, Ltd. and Kapalua Land Company, Ltd.
s. "Year" means the consecutive 12-month
period beginning each January 1 and ending December 31.
2.2 Gender and Number. Except where otherwise indicated
by the context, any masculine term used herein also shall
include the feminine, the plural shall include the singular,
and the singular shall include the plural.
2.3 Severability. In the event any provision of the
Agreement shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts
of the Agreement, and the Agreement shall be construed and
enforced as if the illegal or invalid provision had not been
included.
2.4 Modification. No express provisions of this
Agreement may be modified, waived, or discharged unless such
modification, waiver, or discharge is agreed to by the
Executive in writing and approved by the Compensation Committee
of the Board of Directors.
2.5 Applicable Law. To the extent not preempted by the
laws of the United States, the laws of the State of Hawaii
shall be the controlling law in all matters relating to the
Agreement without regard to the conflicts of law principles in
such laws.
ARTICLE III. SEVERANCE BENEFITS.
3.1 Right to Severance Benefits. The Executive shall be
entitled to receive from ML&P Severance Benefits as described
in Section 3.4 herein, if there has been a Change in Control of
ML&P or its Subsidiaries, as defined in Section 2.1(e) herein,
and if, within thirty-six (36) months thereafter, the
Executive's employment with ML&P or its Subsidiaries shall end
for any reason specified in Section 3.2 herein as being a
Qualifying Termination. An Executive shall not be entitled to
receive Severance Benefits if the Executive's employment with
ML&P or its Subsidiaries ends due to an involuntary termination
by ML&P or its Subsidiaries for Just Cause, as provided under
Article IV herein, or if the Executive's employment terminates
due to death or Disability.
3.2 Qualifying Termination. The occurrence of any one or
more of the following events within thirty-six (36) calendar
months after a Change in Control of ML&P or its Subsidiaries
shall cause the payment of Severance Benefits to the Executive,
as provided under Section 3.4 herein:
a. ML&P's or its Subsidiaries' involuntary
termination of the Executive's employment without Just
Cause, as defined in Article IV herein;
b. The Executive's voluntary employment
termination from ML&P or its Subsidiaries for Good Reason,
as defined by Section 3.3 herein;
c. A successor entity fails or refuses to
assume ML&P's or its Subsidiaries' obligations under this
Agreement in their entirety, as required by Article VIII
herein; or
d. ML&P or any successor entity commits a
material breach of any of the provisions of this
Agreement.
3.3 Definition of Good Reason. "Good Reason" means,
without the Executive's express written consent, the occurrence
after a Change in Control of ML&P or its Subsidiaries of any
one or more of the following:
a. The assignment of the Executive to duties
materially inconsistent with the Executive's authorities,
duties, responsibilities, and status (including offices,
titles and reporting requirements) as an executive and/or
officer of ML&P or its Subsidiaries, or a material
reduction of the Executive's authorities, duties, or
responsibilities from those in effect as of ninety (90)
days prior to the Change in Control, other than an act
that is remedied by ML&P or its Subsidiaries promptly
after receipt of notice thereof given by the Executive
(provided, however, that "Good Reason" shall not include
the events described in the preceding portions of this
paragraph (a) if the changes described therein have been
approved by a majority of the board of directors of ML&P
and also by a number of such directors who comprised at
least a majority of the directors of ML&P 90 days prior to
the Change In Control);
b. ML&P or its Subsidiaries requiring the
Executive to be based at a location in excess of seventy-
five (75) miles from the location of the Executive's
principal job location or office immediately prior to the
Change in Control; except for required travel on company
business to an extent substantially consistent with the
Executive's then present business travel obligations;
c. A more than ten percent (10%) reduction by
ML&P or its Subsidiaries of the Executive's annual rate of
Base Salary in effect as of ninety (90) days prior to the
Change in Control;
d. The failure of ML&P or its Subsidiaries to
continue in effect any of ML&P's or its Subsidiaries'
annual incentive compensation plans, or employee benefit
or retirement plans, policies, practices, or other
compensation arrangements in which the Executive
participates as in effect prior to the Change in Control,
unless such failure to continue the plan, policy, practice
or arrangement pertains to all plan participants
generally; or the failure by ML&P or its Subsidiaries to
continue the Executive's participation therein on
substantially the same basis, both in terms of the amount
of benefits provided and the level of the Executive's
participation relative to other participants and
commensurate with the Executive's responsibility and
duties; and
e. The failure of ML&P or its Subsidiaries to
obtain a satisfactory agreement from any successor to ML&P
or its Subsidiaries to assume and agree to perform ML&P's
or its Subsidiaries' obligations under this Agreement, as
contemplated in Article VIII herein.
3.4 Description of Severance Benefits. In the event that
an Executive becomes entitled to receive Severance Benefits, as
provided in Section 3.1 herein, ML&P shall pay to the Executive
and provide him with the following:
a. An amount equal to 2.99 times the
Executive's annual rate of Base Salary in effect upon the
Effective Date of Termination; and
b. A payout under the ML&P Annual Incentive
Plan, in accordance with the terms of such plan; and
c. A continuation of all welfare benefits at
normal employee cost including medical and dental
insurance, long-term disability, group term life
insurance, and accidental death & dismemberment insurance
for three (3) full years from the Effective Date of
Termination or until the Executive reaches his Normal
Retirement Date, whichever occurs earlier. In the event
that participation in any one or more of the welfare
benefits is not possible under the terms of the governing
welfare benefit provisions or due to the modification or
elimination of the welfare benefits, ML&P shall provide
substantially identical welfare benefits at the normal
employee cost of the affected welfare benefits. However,
these benefits shall be discontinued prior to the end of
the three (3) years in the event the Executive receives
substantially similar benefits from a subsequent employer,
as determined by the Committee. The right of the
Executive and his spouse and other dependents to continued
group health coverage under Section 4980B of the Internal
Revenue Code of 1986, as amended ("Code"), shall commence
at the end of the applicable Severance Benefits period.
Unless otherwise provided under this Agreement, the
applicable Severance Benefits period shall be treated as
if it were a period of employment with ML&P or its
Subsidiaries for purposes of determining rights and
benefits under any retirement plan or other plan or
program and shall be treated as a period of covered
employment under such plan or other plan or program if the
Executive was in covered employment immediately prior to
the Change in Control, provided that, if such treatment is
not possible under the terms of such plan or other plan or
program, ML&P shall directly provide substantially
identical benefits attributable to the crediting of the
Severance Benefits period.
3.5 Reduction of Severance Benefits. In the event there
are fewer than thirty-six (36) whole or partial months
remaining from the Executive's Effective Date of Termination
until the Executive's Normal Retirement Date, then the amounts
provided for under Section 3.4(a) above shall be reduced by a
fraction, the numerator of which shall be the number of whole
or partial months remaining until the Executive's Normal
Retirement Date, and the denominator of which shall be
thirty-six (36).
3.6 Special Retirement Benefits. The Executive shall
receive special retirement benefits as provided below, so that
the total retirement benefits that the Executive receives will
equal the retirement benefits that the Executive would have
received under the Maui Land & Pineapple Company, Inc. Pension
Plan for Non-Bargaining Unit Employees ("Retirement Plan"),
Maui Land & Pineapple Company, Inc. Supplemental Executive
Retirement Plan, and the Maui Land & Pineapple Company, Inc.
Executive Supplemental Insurance Plan/Executive Deferred
Compensation Plan (collectively, "Plans"), or any successor
Plans or arrangements to such Plans, had the Executive
continued in the employ of ML&P and its Subsidiaries for
three (3) years following the Executive's Effective Date of
Termination (or until his Normal Retirement Date, whichever is
earlier) but without regard to any ancillary benefits. The
amount of special retirement benefits payable hereunder to the
Executive or his beneficiaries shall equal the excess of the
amount specified in (a) over the amount specified in (b) below.
a. The total retirement benefits on an
actuarial equivalent single-life basis would be paid to
the Executive if the three (3) years (or the period to his
Normal Retirement Date, if less) following the Executive's
Effective Date of Termination are added to his credited
service under the Plans.
b. The total retirement benefits actually paid
on an actuarial equivalent single-life basis to the
Executive under the Plans.
Such special retirement benefits shall be paid at the
same time and in the same form (e.g., actuarial equivalent
single-life or contingent annuitant basis) as the Executive's
retirement benefits under the Plans. The special retirement
benefits shall be paid by the Plans or, if the terms of such
Plans do not provide for such benefits, the special retirement
benefits shall be paid directly by ML&P. The actuarial
equivalent of special retirement benefits shall be determined
in accordance with the factors provided under the Retirement
Plan.
3.7 Outplacement Services. In the event that the
Executive becomes entitled to receive Severance Benefits as
provided in Section 3.1 herein, the Executive shall be
entitled, at the expense of ML&P, to receive standard
outplacement services as selected by the Executive, for a
period of up to thirty-six (36) months from the Effective Date
of Termination. However, such services shall not exceed a
maximum annual benefit of ten percent (10%) of the Executive's
annual rate of Base Salary as of the Effective Date of
Termination.
3.8 Incentive Compensation. In the event that the
Executive becomes entitled to receive Severance Benefits as
provided in Section 3.1 herein, any deferred awards previously
granted to the Executive under ML&P's or its Subsidiaries'
incentive compensation plans and not previously paid to the
Executive shall immediately vest on the date of the Executive's
Effective Date of Termination and shall be paid no later than
ninety (90) calendar days following that date, and be included
as compensation in the month paid.
ARTICLE IV. DISQUALIFICATION FROM RECEIPT OF BENEFITS.
No Severance Benefits shall be payable to the
Executive under this Agreement in the event the Executive is
terminated by ML&P or its Subsidiaries for Just Cause. For
this purpose, Just Cause shall mean willful, malicious conduct
by the Executive which is detrimental to the best interests of
ML&P, including theft, embezzlement, the conviction of a
criminal act, disclosure of trade secrets, a gross dereliction
of duty, or other grave misconduct on the part of the Executive
which is substantially injurious to ML&P or its Subsidiaries.
Just Cause also shall include the failure of the Executive to
perform any and all covenants under this Agreement.
ARTICLE V. FORM AND TIMING OF SEVERANCE BENEFITS.
5.1 Form and Timing of Severance Benefits. The Severance
Benefits described in Section 3.4(a) and (b) herein, shall be
paid by ML&P in cash to the Executive in a single lump sum as
soon as practicable following the Executive's Effective Date of
Termination, but in no event beyond ninety (90) calendar days
from such date.
The Severance Benefits described in Section 3.4 (c)
herein shall be provided by ML&P to the Executive immediately
upon the Executive's Effective Date of Termination and shall
continue to be provided for three (3) full calendar years from
the Executive's Effective Date of Termination or until the
Executive reaches his Normal Retirement date, whichever occurs
earlier. However, the Severance Benefits described in Section
3.4 (c) herein shall be discontinued prior to the end of the
three (3) year period immediately upon the Executive receiving
substantially similar benefits from a subsequent employer, as
determined by the Committee.
5.2 Withholding of Taxes. ML&P or its Subsidiaries shall
withhold from any amounts payable under this Agreement all
Federal, state, city or other taxes as legally shall be
required.
ARTICLE VI. PARACHUTE PAYMENTS.
6.1 Determination of Alternative Severance Benefit Limit.
Notwithstanding any other provision of this Agreement, if any
portion of the Severance Benefits or any other payment under
this Agreement, or under any other agreement with, or plan of,
ML&P (in the aggregate "Total Payments") would constitute an
"excess parachute payment," then the payments to be made to the
Executive under this Agreement shall be reduced such that the
value of the aggregate Total Payments that the Executive is
entitled to receive shall be one dollar ($1) less than the
maximum amount which the Executive may receive without becoming
subject to the tax imposed by Section 4999 of the Code, or
which ML&P may pay without loss of deduction under Section
280G(a) of the Code. However, such reduction in Severance
Benefits shall apply if, and only if, the resulting Severance
benefits with such reduction is greater in value to the
Executive than the value of the Severance Benefits without a
reduction, net of any tax imposed on the Executive pursuant to
Section 4999 of the Code. For purposes of this Agreement, the
terms "excess parachute payment" and "parachute payments" shall
have the meanings assigned to such terms in Section 280G of the
Code, and such "parachute payments" shall be valued as provided
therein.
6.2 Procedure for Establishing Alternative Limitation.
Within fifteen (15) calendar days following delivery of the
notice of Qualifying Termination or notice by ML&P to the
Executive of its belief that there is a payment or benefit due
the Executive which will result in an "excess parachute
payment" as defined in Section 280G of the Code, the Executive
and ML&P, at ML&P's expense, shall obtain the opinion of ML&P's
principal outside law firm, accounting firm, and/or
compensation and benefits consulting firm, which sets forth:
(a) the amount of the Executive's "annualized includible
compensation for the base period" (as defined in Section
280G(d)(1) of the Code); (b) the present value of the Total
Payments; and (c) the amount and present value of any "excess
parachute payment."
In the event that such opinion determines that there
would be an "excess parachute payment," such that a reduction
in the Severance Benefits would result in a greater net benefit
to the Executive (as provided in Section 6.1 herein), then the
Severance Benefits hereunder or any other payment determined
under the opinion to be includible in Total Payments shall be
reduced or eliminated so that, on the basis of calculations set
forth in such opinion, there will be no "excess
parachute payment". The reduction or elimination of specific
payments shall apply to such type and amount of specific
payments as may be designated by the Executive in writing
delivered to ML&P within ten (10) calendar days of receipt of
the opinion, or if the Executive fails to so notify ML&P, as
may be reasonably determined by ML&P.
The provisions of this Section 6.2, including the
calculations, notices, and opinion provided herein, shall be
based upon the conclusive presumption that the following
amounts are reasonable: (a) the compensation and benefits
provided for in Article III herein; and (b) any other
compensation earned prior to the Effective Date of Termination
by the Executive pursuant to ML&P's compensation programs (if
such payments would have been made in the future in any event,
even though the timing of such payment is triggered by the
Change in Control).
6.3 Subsequent Imposition of Excise Tax. If,
notwithstanding compliance with the provisions of Sections 6.1
and 6.2 herein, it is ultimately determined by a court or
pursuant to a final determination by the Internal Revenue
Service that any portion of the Total Payments is considered to
be a "parachute payment", subject to excise tax under Section
4999 of the Code, which was not contemplated to be a "parachute
payment" at the time of payment (so as to accurately determine
whether a limitation should have been applied to the Total
Payments to maximize the net benefit to the Executive, as
provided in Sections 6.1 and 6.2 herein), the Executive shall
be entitled to receive a lump sum cash payment sufficient to
place the Executive in the same net after-tax position,
computed by using the "Special Tax Rate" as such term is
defined below, that the Executive would have been in had such
payment not been subject to such excise tax, and had the
Executive not incurred any interest charges or penalties with
respect to the imposition of such excise tax. For purposes of
this Agreement, the "Special Tax Rate" shall be the highest
effective Federal and state marginal tax rates applicable to
the Executive in the year in which the payment contemplated
under this Section 6.3 is made.
ARTICLE VII. OTHER RIGHTS AND BENEFITS NOT AFFECTED.
7.1 Other Benefits. Neither the provisions of this
Agreement nor the Severance Benefits provided for hereunder
shall reduce any amounts otherwise payable, or in any way
diminish the Executive's rights as an employee of ML&P or its
Subsidiaries, whether existing now or hereafter, under any
benefit, incentive, retirement, stock option, stock bonus,
stock purchase plan, or any employment agreement, or other plan
or arrangement.
7.2 Employment Status. This Agreement does not
constitute a contract of employment or impose on ML&P or its
Subsidiaries any obligation to retain the Executive as an
employee, to change the status of the Executive's employment,
or to change ML&P's or its Subsidiaries' policies regarding
termination of employment. The Executive serves as an employee
of ML&P or its Subsidiaries, and this Agreement shall not
create an employment relationship between ML&P or its
Subsidiaries and the Executive.
ARTICLE VIII. SUCCESSORS.
8.1 Successors. ML&P or its Subsidiaries will require
any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) of all or substantially all of the
business and/or assets of ML&P or its Subsidiaries, or any
division or subsidiary thereof to expressly assume and agree to
perform this Agreement in the same manner and to the same
extent that ML&P or its Subsidiaries would be required to
perform it if no such succession had taken place. Failure of
ML&P or its Subsidiaries to obtain such assumption and
agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the
Executive to compensation from ML&P or its Subsidiaries in the
same amount and on the same terms as they would be entitled
hereunder if terminated voluntarily following a Change in
Control. Except for the purposes of implementing the
foregoing, the date on which any succession becomes effective
shall be deemed the Effective Date of Termination.
This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees. If an Executive should
die while any amount would still be payable to him hereunder
had he continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of
this Agreement, to the Executive's devisee, legatee, or other
designee, or if there is no such designee, to the Executive's
estate.
8.2 Beneficiaries. In the event of the death of the
Executive, all unpaid amounts payable to the Executive under
this Agreement shall be paid to his or her Beneficiary. The
Executive's spouse and other dependents shall continue to be
covered by all applicable welfare benefits during the remainder
of the Severance Benefits period, if any, pursuant to
Section 3.4.c (unless payments at death are specified by the
applicable welfare benefits provisions). The Beneficiary of
the Executive's Severance Benefits under this Agreement shall
be designated by the Executive in the form of a signed writing
acceptable to the Committee. An Executive may make or change
such designation at any time.
ARTICLE IX. ADMINISTRATION.
9.1 Administration. The Compensation Committee of the
Board of Directors shall administer this Agreement. The
Committee is authorized to interpret this Agreement, to
prescribe and rescind rules and regulations, to provide
conditions and assurances deemed necessary and advisable, to
protect the interest of ML&P or its Subsidiaries, and to make
all other determinations necessary or advisable for the
Agreement's administration. In fulfilling its administrative
duties hereunder, the Committee may rely on outside counsel,
independent accountants, or other consultants to render advice
or assistance.
9.2 Indemnification and Exculpation. The members of the
Board, its agents and officers, directors and employees of ML&P
and its Subsidiaries shall be indemnified and held harmless by
ML&P and its Subsidiaries against and from any and all loss,
cost, liability, or expense that may be imposed upon or
reasonably incurred by them in connection with or resulting
from any claim, action, suit or proceeding to which they may be
a party or in which they may be involved by reason of any
action taken or failure to act under this Agreement and against
and from any and all amounts paid by them in settlement (with
ML&P's written approval) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding. The foregoing
provision shall not be applicable to any person if the loss,
cost, liability or expense is due to such person's gross
negligence or willful misconduct.
9.3 Legal Fees. ML&P shall pay all reasonable legal
fees, costs of litigation and other expenses incurred in good
faith by the Executive as a result of ML&P's refusal to provide
the Severance Benefits to which the Executive becomes entitled
under this Agreement, or as a result of ML&P's contesting the
validity, enforceability or interpretation of the Agreement.
Provided, however, that such payments shall not exceed the
amount permitted by law and ML&P's Articles of Incorporation.
IN WITNESS WHEREOF, ML&P has caused this Agreement to
be executed by a resolution of the Board of Directors, as of
the day and year first above written.
MAUI LAND & PINEAPPLE COMPANY, INC.
By /S/ GARY L. GIFFORD
Its President
/S/ DONALD A. YOUNG
DONALD A. YOUNG
"Executive"
ATTEST:
/S/ IRIS Y. MATSUMOTO
MAUI LAND & PINEAPPLE COMPANY, INC.
EXECUTIVE CHANGE-IN-CONTROL SEVERANCE AGREEMENT
Douglas R. Schenk
Executive Vice President/Pineapple
ARTICLE I. ESTABLISHMENT AND PURPOSE.
1.1 Effective Date. This Executive Change-in-Control
Severance Agreement (the "Agreement") is made and entered into
and is effective as of this 16th day of March,
1998 ("Effective Date"), by and between Maui Land & Pineapple
Company, Inc. ("ML&P"), a Hawaii corporation, and
Douglas R. Schenk ("Executive") of ML&P and its Subsidiaries.
This Agreement shall supersede and replace any prior severance
agreement entered into between ML&P and the Executive.
1.2 Term of the Agreement. The Agreement shall commence
as of the Effective Date written above, and shall continue
until the Board of Directors of ML&P ("Board") determines, in
good faith and in its sole discretion, that the Executive is
no longer to be included in the Plan and so notifies in writing
the Executive during the term of this Agreement of such
determination.
Provided, however, in the event that a Change in
Control of ML&P or its Subsidiaries, as defined in Section 2.1
herein, occurs during the term of this Agreement, this
Agreement shall remain irrevocably in effect for the greater of
thirty-six (36) months from the date of such Change in Control,
or until all benefits have been paid to the Executive
hereunder.
Further, in the event that the Board has knowledge
that a third party has taken steps reasonably calculated to
effect a Change in Control of ML&P or its Subsidiaries,
including, but not limited to the commencement of a tender
offer for the voting stock of ML&P, or the circulation of a
proxy to ML&P's shareholders, then this Agreement shall remain
irrevocably in effect until the Board, in good faith,
determines that such third party has fully abandoned or
terminated its effort to effect a Change in Control of ML&P or
its Subsidiaries.
1.3 Purpose of the Agreement. The purpose of this
Agreement pursuant to the Plan, is to advance the interests of
ML&P and its Subsidiaries by assuring that ML&P and its
Subsidiaries shall have the continued employment and dedication
of the Executive and the availability of his advice and counsel
in the event that an acquisition or Change in Control of ML&P
or its Subsidiaries occurs. This Agreement shall also assure
the Executive of equitable treatment during the period of
uncertainty that surrounds an acquisition or Change in Control,
and allow the Executive to act at all times in the best
interest of ML&P and its shareholders.
1.4 Contractual Right to Benefits. This Agreement
establishes and vests in the Executive a contractual right to
the benefits which he or she is entitled hereunder, enforceable
by the Executive against ML&P. However, nothing herein shall
require ML&P to segregate, earmark, or otherwise set aside any
funds or other assets to provide for any payments hereunder.
1.5 Legal Status. This Agreement shall be considered an
unfunded agreement to provide welfare benefits to a select
group of management or highly compensated employees and is
therefore intended to be a "top-hat" plan exempt from the
requirements of the provisions of Parts 2, 3 and 4 of Title I
of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
ARTICLE II. DEFINITIONS AND CONSTRUCTION.
2.1 Definitions. Whenever used in this Agreement, the
following terms shall have the meanings set forth below and,
when the meaning is intended, the initial letter of the word is
capitalized.
a. "Base Salary" means the annualized salary
at the beginning of each Year, which includes all regular
basic wages, before reduction for any amounts deferred on
a tax-qualified or nonqualified basis, payable in cash to
an Executive for services rendered to ML&P or its
Subsidiaries during the Year. Base Salary shall exclude
bonuses, incentive compensation, special fees or awards,
commissions, allowances, or any other form of premium or
incentive pay, or amounts designated by ML&P or its
Subsidiaries as payment toward or reimbursement of
expenses.
b. "Beneficial Owner" shall have the meaning
ascribed to such terms in Rule 13d-3 of the General Rules
and Regulations under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
c. "Beneficiary" with respect to an Executive
means the persons or entities designated or deemed
designated by the Executive pursuant to Section 8.2
herein.
d. "Board" means the Board of Directors of
ML&P.
e. "Change in Control" of ML&P or its
Subsidiaries means any one or more of the following
occurrences:
(1) Any Person, including a "group" as
defined in Section 13 (d)(3) of the Exchange Act, who
is not at the date of this Agreement the beneficial
owner of shares of the given entity having 25% or
more of the total number of votes that may be cast
for the election of Directors of such entity, becomes
the beneficial owner (including acquisition of
beneficial ownership resulting from formation of a
"group") of shares of such entity having 25% or more
of such voting power;
(2) Any Person, including a "group" as
defined in Section 13(d)(3) of the Exchange Act, who
is not at the date of this Agreement the beneficial
owner of shares of a given entity having 50% or more
of the total number of votes that may be cast for the
election of Directors of such entity, becomes the
beneficial owner (including acquisition of beneficial
ownership resulting from formation of a "group") of
shares of such entity having 50% or more of such
voting power;
(3) As the result of, or in connection
with any cash tender or exchange offer, merger or
other business combination, sale of assets or
contested election, or any combination of the
foregoing transactions, the persons who were
Directors of the given entity before the transaction
shall cease to constitute a majority of the Board of
Directors of such entity or any successor to such
entity;
(4) A merger or consolidation of the given
entity in which such entity is not the surviving
entity; or
(5) The sale, transfer, or other
disposition of all or substantially all of the assets
of the given entity (and for this purpose, the term
"substantially all" shall mean assets having a fair
market value, whether or not realized in the
transaction, that is 50% or more of the aggregate
fair market value of all assets of such entity); or
in the case of a Subsidiary the sale, transfer or
other disposition (other than to a direct or indirect
wholly owned subsidiary of M&LP) of securities that
immediately prior to such transaction constituted 50%
or more of such Subsidiary's outstanding voting
securities.
f. "Committee" means the Compensation
Committee of the Board of Directors of ML&P or any other
committee appointed by the Board to administer this
Agreement.
g. "Disability" means a physical or mental
condition which renders an Executive unable to discharge
his normal work responsibility with ML&P or its
Subsidiaries and which, in the opinion of a licensed
physician selected by the Executive, subject to reasonable
approval by the Committee based upon sufficient medical
evidence, can be reasonably expected to continue for a
period of at least one full calendar year. If an
Executive fails to select a physician within ten (10)
business days of a written request made by ML&P, then ML&P
may select a physician for purposes of this paragraph.
h. "Effective Date" means the date the
Agreement is approved by the Board, or such other date as
the Board shall designate in its resolution approving the
Agreement, and as provided in Section 1.1 herein.
i. "Effective Date of Termination" means the
date on which a Qualifying Termination occurs.
j. "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended from time to time,
or any successor act thereto.
k. "Expiration Date" means the date the
Agreement expires, as provided in Section 1.2 herein.
l. "Just Cause" means the basis for a
termination of an Executive's employment by ML&P or its
Subsidiaries for which no Severance Benefits are payable
hereunder, as provided in Article IV herein.
m. "ML&P" means Maui Land & Pineapple Company,
Inc., a Hawaii corporation, or any successor thereto that
adopts the Agreement, as provided in Section 8.1 herein.
n. "Normal Retirement Date" shall mean the
date on which the Executive attains age 65.
o. "Person" shall have the meaning ascribed to
such terms in Section 3 (a)(9) of the Exchange Act and
used in Sections 13(d) and 14(d) thereof, including a
"group" as defined in Section 13(d); provided that for
purposes of Section 2.1(e) "Person" shall not include any
entity that is a direct or indirect wholly owned
subsidiary of ML&P.
p. "Qualifying Termination" means a
termination of the Executive's employment by ML&P or its
Subsidiaries as described in Section 3.2 herein.
q. "Severance Benefit" means the payment of
severance compensation as provided in Article III herein.
r. "Subsidiaries" means Maui Pineapple
Company, Ltd. and Kapalua Land Company, Ltd.
s. "Year" means the consecutive 12-month
period beginning each January 1 and ending December 31.
2.2 Gender and Number. Except where otherwise indicated
by the context, any masculine term used herein also shall
include the feminine, the plural shall include the singular,
and the singular shall include the plural.
2.3 Severability. In the event any provision of the
Agreement shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts
of the Agreement, and the Agreement shall be construed and
enforced as if the illegal or invalid provision had not been
included.
2.4 Modification. No express provisions of this
Agreement may be modified, waived, or discharged unless such
modification, waiver, or discharge is agreed to by the
Executive in writing and approved by the Compensation Committee
of the Board of Directors.
2.5 Applicable Law. To the extent not preempted by the
laws of the United States, the laws of the State of Hawaii
shall be the controlling law in all matters relating to the
Agreement without regard to the conflicts of law principles in
such laws.
ARTICLE III. SEVERANCE BENEFITS.
3.1 Right to Severance Benefits. The Executive shall be
entitled to receive from ML&P Severance Benefits as described
in Section 3.4 herein, if there has been a Change in Control of
ML&P or its Subsidiaries, as defined in Section 2.1(e) herein,
and if, within thirty-six (36) months thereafter, the
Executive's employment with ML&P or its Subsidiaries shall end
for any reason specified in Section 3.2 herein as being a
Qualifying Termination. An Executive shall not be entitled to
receive Severance Benefits if the Executive's employment with
ML&P or its Subsidiaries ends due to an involuntary termination
by ML&P or its Subsidiaries for Just Cause, as provided under
Article IV herein, or if the Executive's employment terminates
due to death or Disability.
3.2 Qualifying Termination. The occurrence of any one or
more of the following events within thirty-six (36) calendar
months after a Change in Control of ML&P or its Subsidiaries
shall cause the payment of Severance Benefits to the Executive,
as provided under Section 3.4 herein:
a. ML&P's or its Subsidiaries' involuntary
termination of the Executive's employment without Just
Cause, as defined in Article IV herein;
b. The Executive's voluntary employment
termination from ML&P or its Subsidiaries for Good Reason,
as defined by Section 3.3 herein;
c. A successor entity fails or refuses to
assume ML&P's or its Subsidiaries' obligations under this
Agreement in their entirety, as required by Article VIII
herein; or
d. ML&P or any successor entity commits a
material breach of any of the provisions of this
Agreement.
3.3 Definition of Good Reason. "Good Reason" means,
without the Executive's express written consent, the occurrence
after a Change in Control of ML&P or its Subsidiaries of any
one or more of the following:
a. The assignment of the Executive to duties
materially inconsistent with the Executive's authorities,
duties, responsibilities, and status (including offices,
titles and reporting requirements) as an executive and/or
officer of ML&P or its Subsidiaries, or a material
reduction of the Executive's authorities, duties, or
responsibilities from those in effect as of ninety (90)
days prior to the Change in Control, other than an act
that is remedied by ML&P or its Subsidiaries promptly
after receipt of notice thereof given by the Executive
(provided, however, that "Good Reason" shall not include
the events described in the preceding portions of this
paragraph (a) if the changes described therein have been
approved by a majority of the board of directors of ML&P
and also by a number of such directors who comprised at
least a majority of the directors of ML&P 90 days prior to
the Change In Control);
b. ML&P or its Subsidiaries requiring the
Executive to be based at a location in excess of seventy-
five (75) miles from the location of the Executive's
principal job location or office immediately prior to the
Change in Control; except for required travel on company
business to an extent substantially consistent with the
Executive's then present business travel obligations;
c. A more than ten percent (10%) reduction by
ML&P or its Subsidiaries of the Executive's annual rate of
Base Salary in effect as of ninety (90) days prior to the
Change in Control;
d. The failure of ML&P or its Subsidiaries to
continue in effect any of ML&P's or its Subsidiaries'
annual incentive compensation plans, or employee benefit
or retirement plans, policies, practices, or other
compensation arrangements in which the Executive
participates as in effect prior to the Change in Control,
unless such failure to continue the plan, policy, practice
or arrangement pertains to all plan participants
generally; or the failure by ML&P or its Subsidiaries to
continue the Executive's participation therein on
substantially the same basis, both in terms of the amount
of benefits provided and the level of the Executive's
participation relative to other participants and
commensurate with the Executive's responsibility and
duties; and
e. The failure of ML&P or its Subsidiaries to
obtain a satisfactory agreement from any successor to ML&P
or its Subsidiaries to assume and agree to perform ML&P's
or its Subsidiaries' obligations under this Agreement, as
contemplated in Article VIII herein.
3.4 Description of Severance Benefits. In the event that
an Executive becomes entitled to receive Severance Benefits, as
provided in Section 3.1 herein, ML&P shall pay to the Executive
and provide him with the following:
a. An amount equal to 2.99 times the
Executive's annual rate of Base Salary in effect upon the
Effective Date of Termination; and
b. A payout under the ML&P Annual Incentive
Plan, in accordance with the terms of such plan; and
c. A continuation of all welfare benefits at
normal employee cost including medical and dental
insurance, long-term disability, group term life
insurance, and accidental death & dismemberment insurance
for three (3) full years from the Effective Date of
Termination or until the Executive reaches his Normal
Retirement Date, whichever occurs earlier. In the event
that participation in any one or more of the welfare
benefits is not possible under the terms of the governing
welfare benefit provisions or due to the modification or
elimination of the welfare benefits, ML&P shall provide
substantially identical welfare benefits at the normal
employee cost of the affected welfare benefits. However,
these benefits shall be discontinued prior to the end of
the three (3) years in the event the Executive receives
substantially similar benefits from a subsequent employer,
as determined by the Committee. The right of the
Executive and his spouse and other dependents to continued
group health coverage under Section 4980B of the Internal
Revenue Code of 1986, as amended ("Code"), shall commence
at the end of the applicable Severance Benefits period.
Unless otherwise provided under this Agreement, the
applicable Severance Benefits period shall be treated as
if it were a period of employment with ML&P or its
Subsidiaries for purposes of determining rights and
benefits under any retirement plan or other plan or
program and shall be treated as a period of covered
employment under such plan or other plan or program if the
Executive was in covered employment immediately prior to
the Change in Control, provided that, if such treatment is
not possible under the terms of such plan or other plan or
program, ML&P shall directly provide substantially
identical benefits attributable to the crediting of the
Severance Benefits period.
3.5 Reduction of Severance Benefits. In the event there
are fewer than thirty-six (36) whole or partial months
remaining from the Executive's Effective Date of Termination
until the Executive's Normal Retirement Date, then the amounts
provided for under Section 3.4(a) above shall be reduced by a
fraction, the numerator of which shall be the number of whole
or partial months remaining until the Executive's Normal
Retirement Date, and the denominator of which shall be
thirty-six (36).
3.6 Special Retirement Benefits. The Executive shall
receive special retirement benefits as provided below, so that
the total retirement benefits that the Executive receives will
equal the retirement benefits that the Executive would have
received under the Maui Land & Pineapple Company, Inc. Pension
Plan for Non-Bargaining Unit Employees ("Retirement Plan"),
Maui Land & Pineapple Company, Inc. Supplemental Executive
Retirement Plan, and the Maui Land & Pineapple Company, Inc.
Executive Supplemental Insurance Plan/Executive Deferred
Compensation Plan (collectively, "Plans"), or any successor
Plans or arrangements to such Plans, had the Executive
continued in the employ of ML&P and its Subsidiaries for
three (3) years following the Executive's Effective Date of
Termination (or until his Normal Retirement Date, whichever is
earlier) but without regard to any ancillary benefits. The
amount of special retirement benefits payable hereunder to the
Executive or his beneficiaries shall equal the excess of the
amount specified in (a) over the amount specified in (b) below.
a. The total retirement benefits on an
actuarial equivalent single-life basis would be paid to
the Executive if the three (3) years (or the period to his
Normal Retirement Date, if less) following the Executive's
Effective Date of Termination are added to his credited
service under the Plans.
b. The total retirement benefits actually paid
on an actuarial equivalent single-life basis to the
Executive under the Plans.
Such special retirement benefits shall be paid at the
same time and in the same form (e.g., actuarial equivalent
single-life or contingent annuitant basis) as the Executive's
retirement benefits under the Plans. The special retirement
benefits shall be paid by the Plans or, if the terms of such
Plans do not provide for such benefits, the special retirement
benefits shall be paid directly by ML&P. The actuarial
equivalent of special retirement benefits shall be determined
in accordance with the factors provided under the Retirement
Plan.
3.7 Outplacement Services. In the event that the
Executive becomes entitled to receive Severance Benefits as
provided in Section 3.1 herein, the Executive shall be
entitled, at the expense of ML&P, to receive standard
outplacement services as selected by the Executive, for a
period of up to thirty-six (36) months from the Effective Date
of Termination. However, such services shall not exceed a
maximum annual benefit of ten percent (10%) of the Executive's
annual rate of Base Salary as of the Effective Date of
Termination.
3.8 Incentive Compensation. In the event that the
Executive becomes entitled to receive Severance Benefits as
provided in Section 3.1 herein, any deferred awards previously
granted to the Executive under ML&P's or its Subsidiaries'
incentive compensation plans and not previously paid to the
Executive shall immediately vest on the date of the Executive's
Effective Date of Termination and shall be paid no later than
ninety (90) calendar days following that date, and be included
as compensation in the month paid.
ARTICLE IV. DISQUALIFICATION FROM RECEIPT OF BENEFITS.
No Severance Benefits shall be payable to the
Executive under this Agreement in the event the Executive is
terminated by ML&P or its Subsidiaries for Just Cause. For
this purpose, Just Cause shall mean willful, malicious conduct
by the Executive which is detrimental to the best interests of
ML&P, including theft, embezzlement, the conviction of a
criminal act, disclosure of trade secrets, a gross dereliction
of duty, or other grave misconduct on the part of the Executive
which is substantially injurious to ML&P or its Subsidiaries.
Just Cause also shall include the failure of the Executive to
perform any and all covenants under this Agreement.
ARTICLE V. FORM AND TIMING OF SEVERANCE BENEFITS.
5.1 Form and Timing of Severance Benefits. The Severance
Benefits described in Section 3.4(a) and (b) herein, shall be
paid by ML&P in cash to the Executive in a single lump sum as
soon as practicable following the Executive's Effective Date of
Termination, but in no event beyond ninety (90) calendar days
from such date.
The Severance Benefits described in Section 3.4 (c)
herein shall be provided by ML&P to the Executive immediately
upon the Executive's Effective Date of Termination and shall
continue to be provided for three (3) full calendar years from
the Executive's Effective Date of Termination or until the
Executive reaches his Normal Retirement date, whichever occurs
earlier. However, the Severance Benefits described in Section
3.4 (c) herein shall be discontinued prior to the end of the
three (3) year period immediately upon the Executive receiving
substantially similar benefits from a subsequent employer, as
determined by the Committee.
5.2 Withholding of Taxes. ML&P or its Subsidiaries shall
withhold from any amounts payable under this Agreement all
Federal, state, city or other taxes as legally shall be
required.
ARTICLE VI. PARACHUTE PAYMENTS.
6.1 Determination of Alternative Severance Benefit Limit.
Notwithstanding any other provision of this Agreement, if any
portion of the Severance Benefits or any other payment under
this Agreement, or under any other agreement with, or plan of,
ML&P (in the aggregate "Total Payments") would constitute an
"excess parachute payment," then the payments to be made to the
Executive under this Agreement shall be reduced such that the
value of the aggregate Total Payments that the Executive is
entitled to receive shall be one dollar ($1) less than the
maximum amount which the Executive may receive without becoming
subject to the tax imposed by Section 4999 of the Code, or
which ML&P may pay without loss of deduction under Section
280G(a) of the Code. However, such reduction in Severance
Benefits shall apply if, and only if, the resulting Severance
benefits with such reduction is greater in value to the
Executive than the value of the Severance Benefits without a
reduction, net of any tax imposed on the Executive pursuant to
Section 4999 of the Code. For purposes of this Agreement, the
terms "excess parachute payment" and "parachute payments" shall
have the meanings assigned to such terms in Section 280G of the
Code, and such "parachute payments" shall be valued as provided
therein.
6.2 Procedure for Establishing Alternative Limitation.
Within fifteen (15) calendar days following delivery of the
notice of Qualifying Termination or notice by ML&P to the
Executive of its belief that there is a payment or benefit due
the Executive which will result in an "excess parachute
payment" as defined in Section 280G of the Code, the Executive
and ML&P, at ML&P's expense, shall obtain the opinion of ML&P's
principal outside law firm, accounting firm, and/or
compensation and benefits consulting firm, which sets forth:
(a) the amount of the Executive's "annualized includible
compensation for the base period" (as defined in Section
280G(d)(1) of the Code); (b) the present value of the Total
Payments; and (c) the amount and present value of any "excess
parachute payment."
In the event that such opinion determines that there
would be an "excess parachute payment," such that a reduction
in the Severance Benefits would result in a greater net benefit
to the Executive (as provided in Section 6.1 herein), then the
Severance Benefits hereunder or any other payment determined
under the opinion to be includible in Total Payments shall be
reduced or eliminated so that, on the basis of calculations set
forth in such opinion, there will be no "excess
parachute payment". The reduction or elimination of specific
payments shall apply to such type and amount of specific
payments as may be designated by the Executive in writing
delivered to ML&P within ten (10) calendar days of receipt of
the opinion, or if the Executive fails to so notify ML&P, as
may be reasonably determined by ML&P.
The provisions of this Section 6.2, including the
calculations, notices, and opinion provided herein, shall be
based upon the conclusive presumption that the following
amounts are reasonable: (a) the compensation and benefits
provided for in Article III herein; and (b) any other
compensation earned prior to the Effective Date of Termination
by the Executive pursuant to ML&P's compensation programs (if
such payments would have been made in the future in any event,
even though the timing of such payment is triggered by the
Change in Control).
6.3 Subsequent Imposition of Excise Tax. If,
notwithstanding compliance with the provisions of Sections 6.1
and 6.2 herein, it is ultimately determined by a court or
pursuant to a final determination by the Internal Revenue
Service that any portion of the Total Payments is considered to
be a "parachute payment", subject to excise tax under Section
4999 of the Code, which was not contemplated to be a "parachute
payment" at the time of payment (so as to accurately determine
whether a limitation should have been applied to the Total
Payments to maximize the net benefit to the Executive, as
provided in Sections 6.1 and 6.2 herein), the Executive shall
be entitled to receive a lump sum cash payment sufficient to
place the Executive in the same net after-tax position,
computed by using the "Special Tax Rate" as such term is
defined below, that the Executive would have been in had such
payment not been subject to such excise tax, and had the
Executive not incurred any interest charges or penalties with
respect to the imposition of such excise tax. For purposes of
this Agreement, the "Special Tax Rate" shall be the highest
effective Federal and state marginal tax rates applicable to
the Executive in the year in which the payment contemplated
under this Section 6.3 is made.
ARTICLE VII. OTHER RIGHTS AND BENEFITS NOT AFFECTED.
7.1 Other Benefits. Neither the provisions of this
Agreement nor the Severance Benefits provided for hereunder
shall reduce any amounts otherwise payable, or in any way
diminish the Executive's rights as an employee of ML&P or its
Subsidiaries, whether existing now or hereafter, under any
benefit, incentive, retirement, stock option, stock bonus,
stock purchase plan, or any employment agreement, or other plan
or arrangement.
7.2 Employment Status. This Agreement does not
constitute a contract of employment or impose on ML&P or its
Subsidiaries any obligation to retain the Executive as an
employee, to change the status of the Executive's employment,
or to change ML&P's or its Subsidiaries' policies regarding
termination of employment. The Executive serves as an employee
of ML&P or its Subsidiaries, and this Agreement shall not
create an employment relationship between ML&P or its
Subsidiaries and the Executive.
ARTICLE VIII. SUCCESSORS.
8.1 Successors. ML&P or its Subsidiaries will require
any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) of all or substantially all of the
business and/or assets of ML&P or its Subsidiaries, or any
division or subsidiary thereof to expressly assume and agree to
perform this Agreement in the same manner and to the same
extent that ML&P or its Subsidiaries would be required to
perform it if no such succession had taken place. Failure of
ML&P or its Subsidiaries to obtain such assumption and
agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the
Executive to compensation from ML&P or its Subsidiaries in the
same amount and on the same terms as they would be entitled
hereunder if terminated voluntarily following a Change in
Control. Except for the purposes of implementing the
foregoing, the date on which any succession becomes effective
shall be deemed the Effective Date of Termination.
This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees. If an Executive should
die while any amount would still be payable to him hereunder
had he continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of
this Agreement, to the Executive's devisee, legatee, or other
designee, or if there is no such designee, to the Executive's
estate.
8.2 Beneficiaries. In the event of the death of the
Executive, all unpaid amounts payable to the Executive under
this Agreement shall be paid to his or her Beneficiary. The
Executive's spouse and other dependents shall continue to be
covered by all applicable welfare benefits during the remainder
of the Severance Benefits period, if any, pursuant to
Section 3.4.c (unless payments at death are specified by the
applicable welfare benefits provisions). The Beneficiary of
the Executive's Severance Benefits under this Agreement shall
be designated by the Executive in the form of a signed writing
acceptable to the Committee. An Executive may make or change
such designation at any time.
ARTICLE IX. ADMINISTRATION.
9.1 Administration. The Compensation Committee of the
Board of Directors shall administer this Agreement. The
Committee is authorized to interpret this Agreement, to
prescribe and rescind rules and regulations, to provide
conditions and assurances deemed necessary and advisable, to
protect the interest of ML&P or its Subsidiaries, and to make
all other determinations necessary or advisable for the
Agreement's administration. In fulfilling its administrative
duties hereunder, the Committee may rely on outside counsel,
independent accountants, or other consultants to render advice
or assistance.
9.2 Indemnification and Exculpation. The members of the
Board, its agents and officers, directors and employees of ML&P
and its Subsidiaries shall be indemnified and held harmless by
ML&P and its Subsidiaries against and from any and all loss,
cost, liability, or expense that may be imposed upon or
reasonably incurred by them in connection with or resulting
from any claim, action, suit or proceeding to which they may be
a party or in which they may be involved by reason of any
action taken or failure to act under this Agreement and against
and from any and all amounts paid by them in settlement (with
ML&P's written approval) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding. The foregoing
provision shall not be applicable to any person if the loss,
cost, liability or expense is due to such person's gross
negligence or willful misconduct.
9.3 Legal Fees. ML&P shall pay all reasonable legal
fees, costs of litigation and other expenses incurred in good
faith by the Executive as a result of ML&P's refusal to provide
the Severance Benefits to which the Executive becomes entitled
under this Agreement, or as a result of ML&P's contesting the
validity, enforceability or interpretation of the Agreement.
Provided, however, that such payments shall not exceed the
amount permitted by law and ML&P's Articles of Incorporation.
IN WITNESS WHEREOF, ML&P has caused this Agreement to
be executed by a resolution of the Board of Directors, as of
the day and year first above written.
MAUI LAND & PINEAPPLE COMPANY, INC.
By /S/ GARY L. GIFFORD
Its President
/S/ DOUGLAS R. SCHENK
DOUGLAS R. SCHENK
"Executive"
ATTEST:
/S/ IRIS Y. MATSUMOTO
MAUI LAND & PINEAPPLE COMPANY, INC.
CHANGE-IN-CONTROL SEVERANCE AGREEMENT
Warren A. Suzuki
Vice President/Land Management
ARTICLE I. ESTABLISHMENT AND PURPOSE.
1.1 Effective Date. This Change-in-Control Severance
Agreement (the "Agreement") is made and entered into and is
effective as of this 16th day of March, 1998
("Effective Date"), by and between Maui Land & Pineapple
Company, Inc. ("ML&P"), a Hawaii corporation, and
Warren A. Suzuki ("Executive") of ML&P and its Subsidiaries.
This Agreement shall supersede and replace any prior severance
agreement entered into between ML&P and the Executive.
1.2 Term of the Agreement. The Agreement shall commence
as of the Effective Date written above, and shall continue
until the Board of Directors of ML&P ("Board") determines, in
good faith and in its sole discretion, that the Executive is
no longer to be included in the Plan and so notifies in writing
the Executive during the term of this Agreement of such
determination.
Provided, however, in the event that a Change in
Control of ML&P or its Subsidiaries, as defined in Section 2.1
herein, occurs during the term of this Agreement, this
Agreement shall remain irrevocably in effect for the greater of
twenty-four (24) months from the date of such Change in
Control, or until all benefits have been paid to the Executive
hereunder.
Further, in the event that the Board has knowledge
that a third party has taken steps reasonably calculated to
effect a Change in Control of ML&P or its Subsidiaries,
including, but not limited to the commencement of a tender
offer for the voting stock of ML&P, or the circulation of a
proxy to ML&P's shareholders, then this Agreement shall remain
irrevocably in effect until the Board, in good faith,
determines that such third party has fully abandoned or
terminated its effort to effect a Change in Control of ML&P or
its Subsidiaries.
1.3 Purpose of the Agreement. The purpose of this
Agreement pursuant to the Plan, is to advance the interests of
ML&P and its Subsidiaries by assuring that ML&P and its
Subsidiaries shall have the continued employment and dedication
of the Executive and the availability of his advice and counsel
in the event that an acquisition or Change in Control of ML&P
or its Subsidiaries occurs. This Agreement shall also assure
the Executive of equitable treatment during the period of
uncertainty that surrounds an acquisition or Change in Control,
and allow the Executive to act at all times in the best
interest of ML&P and its shareholders.
1.4 Contractual Right to Benefits. This Agreement
establishes and vests in the Executive a contractual right to
the benefits which he or she is entitled hereunder, enforceable
by the Executive against ML&P. However, nothing herein shall
require ML&P to segregate, earmark, or otherwise set aside any
funds or other assets to provide for any payments hereunder.
1.5 Legal Status. This Agreement shall be considered an
unfunded agreement to provide welfare benefits to a select
group of management or highly compensated employees and is
therefore intended to be a "top-hat" plan exempt from the
requirements of the provisions of Parts 2, 3 and 4 of Title I
of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
ARTICLE II. DEFINITIONS AND CONSTRUCTION.
2.1 Definitions. Whenever used in this Agreement, the
following terms shall have the meanings set forth below and,
when the meaning is intended, the initial letter of the word is
capitalized.
a. "Base Salary" means the annualized salary
at the beginning of each Year, which includes all regular
basic wages, before reduction for any amounts deferred on
a tax-qualified or nonqualified basis, payable in cash to
an Executive for services rendered to ML&P or its
Subsidiaries during the Year. Base Salary shall exclude
bonuses, incentive compensation, special fees or awards,
commissions, allowances, or any other form of premium or
incentive pay, or amounts designated by ML&P or its
Subsidiaries as payment toward or reimbursement of
expenses.
b. "Beneficial Owner" shall have the meaning
ascribed to such terms in Rule 13d-3 of the General Rules
and Regulations under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
c. "Beneficiary" with respect to an Executive
means the persons or entities designated or deemed
designated by the Executive pursuant to Section 8.2
herein.
d. "Board" means the Board of Directors of
ML&P.
e. "Change in Control" of ML&P or its
Subsidiaries means any one or more of the following
occurrences:
(1) Any Person, including a "group" as
defined in Section 13 (d)(3) of the Exchange Act, who
is not at the date of this Agreement the beneficial
owner of shares (or, in the case of a partnership,
beneficial owner of partnership units) of the given
entity having 25% or more of the total number of
votes that may be cast for the election of Directors
(or, in the case of a partnership, for the election
of members of the corresponding governing body or for
the determination the general partner of the
partnership) of such entity, becomes the beneficial
owner (including acquisition of beneficial ownership
resulting from formation of a "group") of shares or
units of such entity having 25% or more of such
voting power;
(2) Any Person, including a "group" as
defined in Section 13(d)(3) of the Exchange Act, who
is not at the date of this Agreement the beneficial
owner of shares (or, in the case of a partnership,
beneficial owner of partnership units) of a given
entity having 50% or more of the total number of
votes that may be cast for the election of Directors
(or, in the case of a partnership, for the election
of members of the corresponding governing body or for
the determination the general partner of the
partnership) of such entity, becomes the beneficial
owner (including acquisition of beneficial ownership
resulting from formation of a "group") of shares or
units of such entity having 50% or more of such
voting power;
(3) As the result of, or in connection
with any cash tender or exchange offer, merger or
other business combination, sale of assets or
contested election, or any combination of the
foregoing transactions, the persons who were
Directors of the given entity before the transaction
shall cease to constitute a majority of the Board of
Directors of such entity or any successor to such
entity (or, in the case of a partnership, the general
partner before the transaction shall cease to be the
general partner of the partnership);
(4) A merger or consolidation of the given
entity in which such entity is not the surviving
entity; or
(5) The sale, transfer, or other
disposition of all or substantially all of the assets
of the given entity (and for this purpose, the term
"substantially all" shall mean assets having a fair
market value, whether or not realized in the
transaction, that is 50% or more of the aggregate
fair market value of all assets of such entity); or
in the case of a Subsidiary the sale, transfer or
other disposition (other than to a direct or indirect
wholly owned subsidiary of M&LP) of securities that
immediately prior to such transaction constituted 50%
or more of such Subsidiary's outstanding voting
securities.
f. "Committee" means the Compensation
Committee of the Board of Directors of ML&P or any other
committee appointed by the Board to administer this
Agreement.
g. "Disability" means a physical or mental
condition which renders an Executive unable to discharge
his normal work responsibility with ML&P or its
Subsidiaries and which, in the opinion of a licensed
physician selected by the Executive, subject to reasonable
approval by the Committee based upon sufficient medical
evidence, can be reasonably expected to continue for a
period of at least one full calendar year. If an
Executive fails to select a physician within ten (10)
business days of a written request made by ML&P, then ML&P
may select a physician for purposes of this paragraph.
h. "Effective Date" means the date the
Agreement is approved by the Board, or such other date as
the Board shall designate in its resolution approving the
Agreement, and as provided in Section 1.1 herein.
i. "Effective Date of Termination" means the
date on which a Qualifying Termination occurs.
j. "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended from time to time,
or any successor act thereto.
k. "Expiration Date" means the date the
Agreement expires, as provided in Section 1.2 herein.
l. "Just Cause" means the basis for a
termination of an Executive's employment by ML&P or its
Subsidiaries for which no Severance Benefits are payable
hereunder, as provided in Article IV herein.
m. "ML&P" means Maui Land & Pineapple Company,
Inc., a Hawaii corporation, or any successor thereto that
adopts the Agreement, as provided in Section 8.1 herein.
n. "Normal Retirement Date" shall mean the
date on which the Executive attains age 65.
o. "Person" shall have the meaning ascribed to
such terms in Section 3 (a)(9) of the Exchange Act and
used in Sections 13(d) and 14(d) thereof, including a
"group" as defined in Section 13(d); provided that for
purposes of Section 2.1(e) "Person" shall not include any
entity that is a direct or indirect wholly owned
subsidiary of ML&P.
p. "Qualifying Termination" means a
termination of the Executive's employment by ML&P or its
Subsidiaries as described in Section 3.2 herein.
q. "Severance Benefit" means the payment of
severance compensation as provided in Article III herein.
r. "Subsidiaries" means Maui Pineapple
Company, Ltd. and Kapalua Land Company, Ltd. However, if
the Executive under this Agreement is the Vice President
Retail Property for ML&P, the term Subsidiaries shall mean
and be limited to Kaahumanu Center Associates.
s. "Year" means the consecutive 12-month
period beginning each January 1 and ending December 31.
2.2 Gender and Number. Except where otherwise indicated
by the context, any masculine term used herein also shall
include the feminine, the plural shall include the singular,
and the singular shall include the plural.
2.3 Severability. In the event any provision of the
Agreement shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts
of the Agreement, and the Agreement shall be construed and
enforced as if the illegal or invalid provision had not been
included.
2.4 Modification. No express provisions of this
Agreement may be modified, waived, or discharged unless such
modification, waiver, or discharge is agreed to by the
Executive in writing and approved by the Compensation Committee
of the Board of Directors.
2.5 Applicable Law. To the extent not preempted by the
laws of the United States, the laws of the State of Hawaii
shall be the controlling law in all matters relating to the
Agreement without regard to the conflicts of law principles in
such laws.
ARTICLE III. SEVERANCE BENEFITS.
3.1 Right to Severance Benefits. The Executive shall be
entitled to receive from ML&P Severance Benefits as described
in Section 3.4 herein, if there has been a Change in Control of
ML&P or its Subsidiaries, as defined in Section 2.1(e) herein,
and if, within twenty-four (24) months thereafter, the
Executive's employment with ML&P or its Subsidiaries shall end
for any reason specified in Section 3.2 herein as being a
Qualifying Termination. An Executive shall not be entitled to
receive Severance Benefits if the Executive's employment with
ML&P or its Subsidiaries ends due to an involuntary termination
by ML&P or its Subsidiaries for Just Cause, as provided under
Article IV herein, or if the Executive's employment terminates
due to death or Disability.
3.2 Qualifying Termination. The occurrence of any one or
more of the following events within twenty-four (24) calendar
months after a Change in Control of ML&P or its Subsidiaries
shall trigger the payment of Severance Benefits to the
Executive, as provided under Section 3.4 herein:
a. ML&P's or its Subsidiaries' involuntary
termination of the Executive's employment without Just
Cause, as defined in Article IV herein;
b. The Executive's voluntary employment
termination from ML&P or its Subsidiaries for Good Reason,
as defined by Section 3.3 herein;
c. A successor entity fails or refuses to
assume ML&P's or its Subsidiaries' obligations under this
Agreement in their entirety, as required by Article VIII
herein; or
d. ML&P or any successor entity commits a
material breach of any of the provisions of this
Agreement.
3.3 Definition of Good Reason. "Good Reason" means,
without the Executive's express written consent, the occurrence
after a Change in Control of ML&P or its Subsidiaries of any
one or more of the following:
a. The assignment of the Executive to duties
materially inconsistent with the Executive's authorities,
duties, responsibilities, and status (including offices,
titles and reporting requirements) as an executive and/or
officer of ML&P or its Subsidiaries, or a material
reduction of the Executive's authorities, duties, or
responsibilities from those in effect as of ninety (90)
days prior to the Change in Control, other than an act
that is remedied by ML&P or its Subsidiaries promptly
after receipt of notice thereof given by the Executive
(provided, however, that "Good Reason" shall not include
the events described in the preceding portions of this
paragraph (a) if the changes described therein have been
approved by a majority of the board of directors of ML&P
and also by a number of such directors who comprised at
least a majority of the directors of ML&P 90 days prior to
the Change In Control);
b. ML&P or its Subsidiaries requiring the
Executive to be based at a location in excess of seventy-
five (75) miles from the location of the Executive's
principal job location or office immediately prior to the
Change in Control; except for required travel on company
business to an extent substantially consistent with the
Executive's then present business travel obligations;
c. A reduction by ML&P or its Subsidiaries of
the Executive's annual rate of Base Salary in effect as of
ninety (90) days prior to the Change in Control;
d. The failure of ML&P or its Subsidiaries to
continue in effect any of ML&P's or its Subsidiaries'
annual incentive compensation plans, or employee benefit
or retirement plans, policies, practices, or other
compensation arrangements in which the Executive
participates as in effect prior to the Change in Control,
unless such failure to continue the plan, policy, practice
or arrangement pertains to all plan participants
generally; or the failure by ML&P or its Subsidiaries to
continue the Executive's participation therein on
substantially the same basis, both in terms of the amount
of benefits provided and the level of the Executive's
participation relative to other participants and
commensurate with the Executive's responsibility and
duties; and
e. The failure of ML&P or its Subsidiaries to
obtain a satisfactory agreement from any successor to ML&P
or its Subsidiaries to assume and agree to perform ML&P's
or its Subsidiaries' obligations under this Agreement, as
contemplated in Article VIII herein.
3.4 Description of Severance Benefits. In the event that
an Executive becomes entitled to receive Severance Benefits, as
provided in Section 3.1 herein, ML&P shall pay to the Executive
and provide him with the following:
a. An amount equal to 2.00 times the
Executive's annual rate of Base Salary in effect upon the
Effective Date of Termination; and
b. A payout under the ML&P Annual Incentive
Plan, in accordance with the terms of such plan; and
c. A continuation of all welfare benefits at
normal employee cost including medical and dental
insurance, long-term disability, group term life
insurance, and accidental death & dismemberment insurance
for two (2) full years from the Effective Date of
Termination or until the Executive reaches his Normal
Retirement Date, whichever occurs earlier. In the event
that participation in any one or more of the welfare
benefits is not possible under the terms of the governing
welfare benefit provisions or due to the modification or
elimination of the welfare benefits, ML&P shall provide
substantially identical welfare benefits at the normal
employee cost of the affected welfare benefits. However,
these benefits shall be discontinued prior to the end of
the two (2) years in the event the Executive receives
substantially similar benefits from a subsequent employer,
as determined by the Committee. The right of the
Executive and his spouse and other dependents to continued
group health coverage under Section 4980B of the Internal
Revenue Code of 1986, as amended ("Code"), shall commence
at the end of the applicable Severance Benefits period.
Unless otherwise provided under this Agreement, the
applicable Severance Benefits period shall be treated as
if it were a period of employment with ML&P or its
Subsidiaries for purposes of determining rights and
benefits under any retirement plan or other plan or
program and shall be treated as a period of covered
employment under such plan or other plan or program if the
Executive was in covered employment immediately prior to
the Change in Control, provided that, if such treatment is
not possible under the terms of such plan or other plan or
program, ML&P shall directly provide substantially
identical benefits attributable to the crediting of the
Severance Benefits period.
3.5 Reduction of Severance Benefits. In the event there
are fewer than twenty-four (24) whole or partial months
remaining from the Executive's Effective Date of Termination
until the Executive's Normal Retirement Date, then the amounts
provided for under Section 3.4(a) above shall be reduced by a
fraction, the numerator of which shall be the number of whole
or partial months remaining until the Executive's Normal
Retirement Date, and the denominator of which shall be
twenty-four (24).
3.6 Special Retirement Benefits. The Executive shall
receive special retirement benefits as provided below, so that
the total retirement benefits that the Executive receives will
equal the retirement benefits that the Executive would have
received under the Maui Land & Pineapple Company, Inc. Pension
Plan for Non-Bargaining Unit Employees ("Retirement Plan"),
Maui Land & Pineapple Company, Inc. Supplemental Executive
Retirement Plan, and the Maui Land & Pineapple Company, Inc.
Executive Supplemental Insurance Plan/Executive Deferred
Compensation Plan (collectively, "Plans"), or any successor
plans or arrangements to such Plans, had the Executive
continued in the employ of ML&P and its Subsidiaries for
two (2) years following the Executive's Effective Date of
Termination (or until his Normal Retirement Date, whichever is
earlier) but without regard to any ancillary benefits. The
amount of special retirement benefits payable hereunder to the
Executive or his beneficiaries shall equal the excess of the
amount specified in (a) over that in (b) below.
a. The total retirement benefits on an
actuarial equivalent single-life basis would be paid to
the Executive if the two (2) years (or the period to his
Normal Retirement Date, if less) following the Executive's
Effective Date of Termination are added to his credited
service under the Plans.
b. The total retirement benefits actually paid
on a single-life basis to the Executive under the Plans.
Such special retirement benefits shall be paid at the
same time and in the same form (e.g., actuarial equivalent
single-life or contingent annuitant basis) as the Executive's
retirement benefits under the Plans. The special retirement
benefits shall be paid by the Plans or, if the terms of such
Plans do not provide for such benefits, the special retirement
benefits shall be paid directly by ML&P. The actuarial
equivalent of special retirement benefits shall be determined
in accordance with the factors provided under the Retirement
Plan.
3.7 Outplacement Services. In the event that the
Executive becomes entitled to receive Severance Benefits as
provided in Section 3.1 herein, the Executive shall be
entitled, at the expense of ML&P, to receive standard
outplacement services as selected by the Executive, for a
period of up to twenty-four (24) months from the Effective Date
of Termination. However, such services shall not exceed a
maximum annual benefit of ten percent (10%) of the Executive's
annual rate of Base Salary as of the Effective Date of
Termination.
3.8 Incentive Compensation. In the event that the
Executive becomes entitled to receive Severance Benefits as
provided in Section 3.1 herein, any deferred awards previously
granted to the Executive under ML&P's or its Subsidiaries'
incentive compensation plans and not previously paid to the
Executive shall immediately vest on the date of the Executive's
Effective Date of Termination and shall be paid no later than
ninety (90) calendar days following that date, and be included
as compensation in the month paid.
ARTICLE IV. DISQUALIFICATION FROM RECEIPT OF BENEFITS.
No Severance Benefits shall be payable to the
Executive under this Agreement in the event the Executive is
terminated by ML&P or its Subsidiaries for Just Cause. For
this purpose, Just Cause shall mean willful, malicious conduct
by the Executive which is detrimental to the best interests of
ML&P, including theft, embezzlement, the conviction of a
criminal act, disclosure of trade secrets, a gross dereliction
of duty, or other grave misconduct on the part of the Executive
which is substantially injurious to ML&P or its Subsidiaries.
Just Cause also shall include the failure of the Executive to
perform any and all covenants under this Agreement.
ARTICLE V. FORM AND TIMING OF SEVERANCE BENEFITS.
5.1 Form and Timing of Severance Benefits. The Severance
Benefits described in Section 3.4(a) and (b) herein, shall be
paid by ML&P in cash to the Executive in a single lump sum as
soon as practicable following the Executive's Effective Date of
Termination, but in no event beyond ninety (90) calendar days
from such date.
The Severance Benefits described in Section 3.4 (c)
herein shall be provided by ML&P to the Executive immediately
upon the Executive's Effective Date of Termination and shall
continue to be provided for two (2) full calendar years from
the Executive's Effective Date of Termination or until the
Executive reaches his Normal Retirement date, whichever occurs
earlier. However, the Severance Benefits described in Section
3.4 (c) herein shall be discontinued prior to the end of the
two (2) year period immediately upon the Executive receiving
substantially similar benefits from a subsequent employer, as
determined by the Committee.
5.2 Withholding of Taxes. ML&P or its Subsidiaries
shall withhold from any amounts payable under this Agreement
all Federal, state, city or other taxes as legally shall be
required.
ARTICLE VI. PARACHUTE PAYMENTS.
6.1 Determination of Alternative Severance Benefit Limit.
Notwithstanding any other provision of this Agreement, if any
portion of the Severance Benefits or any other payment under
this Agreement, or under any other agreement with, or plan of,
ML&P (in the aggregate "Total Payments") would constitute an
"excess parachute payment," then the payments to be made to the
Executive under this Agreement shall be reduced such that the
value of the aggregate Total Payments that the Executive is
entitled to receive shall be one dollar ($1) less than the
maximum amount which the Executive may receive without becoming
subject to the tax imposed by Section 4999 of the Code, or
which ML&P may pay without loss of deduction under Section
280G(a) of the Code. However, such reduction in Severance
Benefits shall apply if, and only if, the resulting Severance
benefits with such reduction is greater in value to the
Executive than the value of the Severance Benefits without a
reduction, net of any tax imposed on the Executive pursuant to
Section 4999 of the Code. For purposes of this Agreement, the
terms "excess parachute payment" and "parachute payments" shall
have the meanings assigned to such terms in Section 280G of the
Code, and such "parachute payments" shall be valued as provided
therein.
6.2 Procedure for Establishing Alternative Limitation.
Within fifteen (15) calendar days following delivery of the
notice of Qualifying Termination or notice by ML&P to the
Executive of its belief that there is a payment or benefit due
the Executive which will result in an "excess parachute
payment" as defined in Section 280G of the Code, the Executive
and ML&P, at ML&P's expense, shall obtain the opinion of ML&P's
principal outside law firm, accounting firm, and/or
compensation and benefits consulting firm, which sets forth:
(a) the amount of the Executive's "annualized includible
compensation for the base period" (as defined in Section
280G(d)(1) of the Code); (b) the present value of the Total
Payments; and (c) the amount and present value of any "excess
parachute payment."
In the event that such opinion determines that there
would be an "excess parachute payment," such that a reduction
in the Severance Benefits would result in a greater net benefit
to the Executive (as provided in Section 6.1 herein), then the
Severance Benefits hereunder or any other payment determined
under the opinion to be includible in Total Payments shall be
reduced or eliminated so that, on the basis of calculations set
forth in such opinion, there will be no "excess
parachute payment". The reduction or elimination of specific
payments shall apply to such type and amount of specific
payments as may be designated by the Executive in writing
delivered to ML&P within ten (10) calendar days of receipt of
the opinion, or if the Executive fails to so notify ML&P, as
may be reasonably determined by ML&P.
The provisions of this Section 6.2, including the
calculations, notices, and opinion provided herein, shall be
based upon the conclusive presumption that the following
amounts are reasonable: (a) the compensation and benefits
provided for in Article III herein; and (b) any other
compensation earned prior to the Effective Date of Termination
by the Executive pursuant to ML&P's compensation programs (if
such payments would have been made in the future in any event,
even though the timing of such payment is triggered by the
Change in Control).
6.3 Subsequent Imposition of Excise Tax. If,
notwithstanding compliance with the provisions of Sections 6.1
and 6.2 herein, it is ultimately determined by a court or
pursuant to a final determination by the Internal Revenue
Service that any portion of the Total Payments is considered to
be a "parachute payment", subject to excise tax under Section
4999 of the Code, which was not contemplated to be a "parachute
payment" at the time of payment (so as to accurately determine
whether a limitation should have been applied to the Total
Payments to maximize the net benefit to the Executive, as
provided in Sections 6.1 and 6.2 herein), the Executive shall
be entitled to receive a lump sum cash payment sufficient to
place the Executive in the same net after-tax position,
computed by using the "Special Tax Rate" as such term is
defined below, that the Executive would have been in had such
payment not been subject to such excise tax, and had the
Executive not incurred any interest charges or penalties with
respect to the imposition of such excise tax. For purposes of
this Agreement, the "Special Tax Rate" shall be the highest
effective Federal and state marginal tax rates applicable to
the Executive in the year in which the payment contemplated
under this Section 6.3 is made.
ARTICLE VII. OTHER RIGHTS AND BENEFITS NOT AFFECTED.
7.1 Other Benefits. Neither the provisions of this
Agreement nor the Severance Benefits provided for hereunder
shall reduce any amounts otherwise payable, or in any way
diminish the Executive's rights as an employee of ML&P or its
Subsidiaries, whether existing now or hereafter, under any
benefit, incentive, retirement, stock option, stock bonus,
stock purchase plan, or any employment agreement, or other plan
or arrangement.
7.2 Employment Status. This Agreement does not
constitute a contract of employment or impose on ML&P or its
Subsidiaries any obligation to retain the Executive as an
employee, to change the status of the Executive's employment,
or to change ML&P's or its Subsidiaries' policies regarding
termination of employment. The Executive serves as an employee
of ML&P or its Subsidiaries, and this Agreement shall not
create an employment relationship between ML&P or its
Subsidiaries and the Executive.
ARTICLE VIII. SUCCESSORS.
8.1 Successors. ML&P or its Subsidiaries will require
any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) of all or substantially all of the
business and/or assets of ML&P or its Subsidiaries, or any
division or subsidiary thereof to expressly assume and agree to
perform this Agreement in the same manner and to the same
extent that ML&P or its Subsidiaries would be required to
perform it if no such succession had taken place. Failure of
ML&P or its Subsidiaries to obtain such assumption and
agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the
Executive to compensation from ML&P or its Subsidiaries in the
same amount and on the same terms as they would be entitled
hereunder if terminated voluntarily following a Change in
Control. Except for the purposes of implementing the
foregoing, the date on which any succession becomes effective
shall be deemed the Effective Date of Termination.
This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees. If an Executive should
die while any amount would still be payable to him hereunder
had he continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of
this Agreement, to the Executive's devisee, legatee, or other
designee, or if there is no such designee, to the Executive's
estate.
8.2 Beneficiaries. In the event of the death of the
Executive, all unpaid amounts payable to the Executive under
this Agreement shall be paid to his or her Beneficiary. The
Executive's spouse and other dependents shall continue to be
covered by all applicable welfare benefits during the remainder
of the Severance Benefits period, if any, pursuant to
Section 3.4.c (unless payments at death are specified by the
applicable welfare benefits provisions). The Beneficiary of
the Executive's Severance Benefits under this Agreement shall
be designated by the Executive in the form of a signed writing
acceptable to the Committee. An Executive may make or change
such designation at any time.
ARTICLE IX. ADMINISTRATION.
9.1 Administration. The Compensation Committee of the
Board of Directors shall administer this Agreement. The
Committee is authorized to interpret this
Agreement, to prescribe and rescind rules and regulations, to
provide conditions and assurances deemed necessary and
advisable, to protect the interest of ML&P or its Subsidiaries,
and to make all other determinations necessary or advisable for
the Agreement's administration. In fulfilling its
administrative duties hereunder, the Committee may rely on
outside counsel, independent accountants, or other consultants
to render advice or assistance.
9.2 Indemnification and Exculpation. The members of the
Board, its agents and officers, directors and employees of ML&P
and its Subsidiaries shall be indemnified and held harmless by
ML&P and its Subsidiaries against and from any and all loss,
cost, liability, or expense that may be imposed upon or
reasonably incurred by them in connection with or resulting
from any claim, action, suit or proceeding to which they may be
a party or in which they may be involved by reason of any
action taken or failure to act under this Agreement and against
and from any and all amounts paid by them in settlement (with
ML&P's written approval) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding. The foregoing
provision shall not be applicable to any person if the loss,
cost, liability or expense is due to such person's gross
negligence or willful misconduct.
9.3 Legal Fees. ML&P shall pay all reasonable legal
fees, costs of litigation and other expenses incurred in good
faith by the Executive as a result of ML&P's refusal to provide
the Severance Benefits to which the Executive becomes entitled
under this Agreement, or as a result of ML&P's contesting the
validity, enforceability or interpretation of the Agreement.
Provided, however, that such payments shall not exceed the
amount permitted by law and ML&P's Articles of Incorporation.
IN WITNESS WHEREOF, ML&P has caused this Agreement to
be executed by a resolution of the Board of Directors, as of
the day and year first above written.
MAUI LAND & PINEAPPLE COMPANY, INC.
By /S/ GARY L. GIFFORD
Its President
/S/ WARREN A. SUZUKI
WARREN A. SUZUKI
"Executive"
ATTEST:
/S/ IRIS Y. MATSUMOTO
MAUI LAND & PINEAPPLE COMPANY, INC.
CHANGE-IN-CONTROL SEVERANCE AGREEMENT
Scott A. Crockford
Vice President/Retail Property
ARTICLE I. ESTABLISHMENT AND PURPOSE.
1.1 Effective Date. This Change-in-Control Severance
Agreement (the "Agreement") is made and entered into and is
effective as of this 13th day of March, 1998
("Effective Date"), by and between Maui Land & Pineapple
Company, Inc. ("ML&P"), a Hawaii corporation, and
Scott A. Crockford ("Executive") of ML&P and its Subsidiaries.
This Agreement shall supersede and replace any prior severance
agreement entered into between ML&P and the Executive.
1.2 Term of the Agreement. The Agreement shall commence
as of the Effective Date written above, and shall continue
until the Board of Directors of ML&P ("Board") determines, in
good faith and in its sole discretion, that the Executive is
no longer to be included in the Plan and so notifies in writing
the Executive during the term of this Agreement of such
determination.
Provided, however, in the event that a Change in
Control of ML&P or its Subsidiaries, as defined in Section 2.1
herein, occurs during the term of this Agreement, this
Agreement shall remain irrevocably in effect for the greater of
twenty-four (24) months from the date of such Change in
Control, or until all benefits have been paid to the Executive
hereunder.
Further, in the event that the Board has knowledge
that a third party has taken steps reasonably calculated to
effect a Change in Control of ML&P or its Subsidiaries,
including, but not limited to the commencement of a tender
offer for the voting stock of ML&P, or the circulation of a
proxy to ML&P's shareholders, then this Agreement shall remain
irrevocably in effect until the Board, in good faith,
determines that such third party has fully abandoned or
terminated its effort to effect a Change in Control of ML&P or
its Subsidiaries.
1.3 Purpose of the Agreement. The purpose of this
Agreement pursuant to the Plan, is to advance the interests of
ML&P and its Subsidiaries by assuring that ML&P and its
Subsidiaries shall have the continued employment and dedication
of the Executive and the availability of his advice and counsel
in the event that an acquisition or Change in Control of ML&P
or its Subsidiaries occurs. This Agreement shall also assure
the Executive of equitable treatment during the period of
uncertainty that surrounds an acquisition or Change in Control,
and allow the Executive to act at all times in the best
interest of ML&P and its shareholders.
1.4 Contractual Right to Benefits. This Agreement
establishes and vests in the Executive a contractual right to
the benefits which he or she is entitled hereunder, enforceable
by the Executive against ML&P. However, nothing herein shall
require ML&P to segregate, earmark, or otherwise set aside any
funds or other assets to provide for any payments hereunder.
1.5 Legal Status. This Agreement shall be considered an
unfunded agreement to provide welfare benefits to a select
group of management or highly compensated employees and is
therefore intended to be a "top-hat" plan exempt from the
requirements of the provisions of Parts 2, 3 and 4 of Title I
of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
ARTICLE II. DEFINITIONS AND CONSTRUCTION.
2.1 Definitions. Whenever used in this Agreement, the
following terms shall have the meanings set forth below and,
when the meaning is intended, the initial letter of the word is
capitalized.
a. "Base Salary" means the annualized salary
at the beginning of each Year, which includes all regular
basic wages, before reduction for any amounts deferred on
a tax-qualified or nonqualified basis, payable in cash to
an Executive for services rendered to ML&P or its
Subsidiaries during the Year. Base Salary shall exclude
bonuses, incentive compensation, special fees or awards,
commissions, allowances, or any other form of premium or
incentive pay, or amounts designated by ML&P or its
Subsidiaries as payment toward or reimbursement of
expenses.
b. "Beneficial Owner" shall have the meaning
ascribed to such terms in Rule 13d-3 of the General Rules
and Regulations under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
c. "Beneficiary" with respect to an Executive
means the persons or entities designated or deemed
designated by the Executive pursuant to Section 8.2
herein.
d. "Board" means the Board of Directors of
ML&P.
e. "Change in Control" of ML&P or its
Subsidiaries means any one or more of the following
occurrences:
(1) Any Person, including a "group" as
defined in Section 13 (d)(3) of the Exchange Act, who
is not at the date of this Agreement the beneficial
owner of shares (or, in the case of a partnership,
beneficial owner of partnership units) of the given
entity having 25% or more of the total number of
votes that may be cast for the election of Directors
(or, in the case of a partnership, for the election
of members of the corresponding governing body or for
the determination the general partner of the
partnership) of such entity, becomes the beneficial
owner (including acquisition of beneficial ownership
resulting from formation of a "group") of shares or
units of such entity having 25% or more of such
voting power;
(2) Any Person, including a "group" as
defined in Section 13(d)(3) of the Exchange Act, who
is not at the date of this Agreement the beneficial
owner of shares (or, in the case of a partnership,
beneficial owner of partnership units) of a given
entity having 50% or more of the total number of
votes that may be cast for the election of Directors
(or, in the case of a partnership, for the election
of members of the corresponding governing body or for
the determination the general partner of the
partnership) of such entity, becomes the beneficial
owner (including acquisition of beneficial ownership
resulting from formation of a "group") of shares or
units of such entity having 50% or more of such
voting power;
(3) As the result of, or in connection
with any cash tender or exchange offer, merger or
other business combination, sale of assets or
contested election, or any combination of the
foregoing transactions, the persons who were
Directors of the given entity before the transaction
shall cease to constitute a majority of the Board of
Directors of such entity or any successor to such
entity (or, in the case of a partnership, the general
partner before the transaction shall cease to be the
general partner of the partnership);
(4) A merger or consolidation of the given
entity in which such entity is not the surviving
entity; or
(5) The sale, transfer, or other
disposition of all or substantially all of the assets
of the given entity (and for this purpose, the term
"substantially all" shall mean assets having a fair
market value, whether or not realized in the
transaction, that is 50% or more of the aggregate
fair market value of all assets of such entity); or
in the case of a Subsidiary the sale, transfer or
other disposition (other than to a direct or indirect
wholly owned subsidiary of M&LP) of securities that
immediately prior to such transaction constituted 50%
or more of such Subsidiary's outstanding voting
securities.
f. "Committee" means the Compensation
Committee of the Board of Directors of ML&P or any other
committee appointed by the Board to administer this
Agreement.
g. "Disability" means a physical or mental
condition which renders an Executive unable to discharge
his normal work responsibility with ML&P or its
Subsidiaries and which, in the opinion of a licensed
physician selected by the Executive, subject to reasonable
approval by the Committee based upon sufficient medical
evidence, can be reasonably expected to continue for a
period of at least one full calendar year. If an
Executive fails to select a physician within ten (10)
business days of a written request made by ML&P, then ML&P
may select a physician for purposes of this paragraph.
h. "Effective Date" means the date the
Agreement is approved by the Board, or such other date as
the Board shall designate in its resolution approving the
Agreement, and as provided in Section 1.1 herein.
i. "Effective Date of Termination" means the
date on which a Qualifying Termination occurs.
j. "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended from time to time,
or any successor act thereto.
k. "Expiration Date" means the date the
Agreement expires, as provided in Section 1.2 herein.
l. "Just Cause" means the basis for a
termination of an Executive's employment by ML&P or its
Subsidiaries for which no Severance Benefits are payable
hereunder, as provided in Article IV herein.
m. "ML&P" means Maui Land & Pineapple Company,
Inc., a Hawaii corporation, or any successor thereto that
adopts the Agreement, as provided in Section 8.1 herein.
n. "Normal Retirement Date" shall mean the
date on which the Executive attains age 65.
o. "Person" shall have the meaning ascribed to
such terms in Section 3 (a)(9) of the Exchange Act and
used in Sections 13(d) and 14(d) thereof, including a
"group" as defined in Section 13(d); provided that for
purposes of Section 2.1(e) "Person" shall not include any
entity that is a direct or indirect wholly owned
subsidiary of ML&P.
p. "Qualifying Termination" means a
termination of the Executive's employment by ML&P or its
Subsidiaries as described in Section 3.2 herein.
q. "Severance Benefit" means the payment of
severance compensation as provided in Article III herein.
r. "Subsidiaries" means Maui Pineapple
Company, Ltd. and Kapalua Land Company, Ltd. However, if
the Executive under this Agreement is the Vice President
Retail Property for ML&P, the term Subsidiaries shall mean
and be limited to Kaahumanu Center Associates.
s. "Year" means the consecutive 12-month
period beginning each January 1 and ending December 31.
2.2 Gender and Number. Except where otherwise indicated
by the context, any masculine term used herein also shall
include the feminine, the plural shall include the singular,
and the singular shall include the plural.
2.3 Severability. In the event any provision of the
Agreement shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts
of the Agreement, and the Agreement shall be construed and
enforced as if the illegal or invalid provision had not been
included.
2.4 Modification. No express provisions of this
Agreement may be modified, waived, or discharged unless such
modification, waiver, or discharge is agreed to by the
Executive in writing and approved by the Compensation Committee
of the Board of Directors.
2.5 Applicable Law. To the extent not preempted by the
laws of the United States, the laws of the State of Hawaii
shall be the controlling law in all matters relating to the
Agreement without regard to the conflicts of law principles in
such laws.
ARTICLE III. SEVERANCE BENEFITS.
3.1 Right to Severance Benefits. The Executive shall be
entitled to receive from ML&P Severance Benefits as described
in Section 3.4 herein, if there has been a Change in Control of
ML&P or its Subsidiaries, as defined in Section 2.1(e) herein,
and if, within twenty-four (24) months thereafter, the
Executive's employment with ML&P or its Subsidiaries shall end
for any reason specified in Section 3.2 herein as being a
Qualifying Termination. An Executive shall not be entitled to
receive Severance Benefits if the Executive's employment with
ML&P or its Subsidiaries ends due to an involuntary termination
by ML&P or its Subsidiaries for Just Cause, as provided under
Article IV herein, or if the Executive's employment terminates
due to death or Disability.
3.2 Qualifying Termination. The occurrence of any one or
more of the following events within twenty-four (24) calendar
months after a Change in Control of ML&P or its Subsidiaries
shall trigger the payment of Severance Benefits to the
Executive, as provided under Section 3.4 herein:
a. ML&P's or its Subsidiaries' involuntary
termination of the Executive's employment without Just
Cause, as defined in Article IV herein;
b. The Executive's voluntary employment
termination from ML&P or its Subsidiaries for Good Reason,
as defined by Section 3.3 herein;
c. A successor entity fails or refuses to
assume ML&P's or its Subsidiaries' obligations under this
Agreement in their entirety, as required by Article VIII
herein; or
d. ML&P or any successor entity commits a
material breach of any of the provisions of this
Agreement.
3.3 Definition of Good Reason. "Good Reason" means,
without the Executive's express written consent, the occurrence
after a Change in Control of ML&P or its Subsidiaries of any
one or more of the following:
a. The assignment of the Executive to duties
materially inconsistent with the Executive's authorities,
duties, responsibilities, and status (including offices,
titles and reporting requirements) as an executive and/or
officer of ML&P or its Subsidiaries, or a material
reduction of the Executive's authorities, duties, or
responsibilities from those in effect as of ninety (90)
days prior to the Change in Control, other than an act
that is remedied by ML&P or its Subsidiaries promptly
after receipt of notice thereof given by the Executive
(provided, however, that "Good Reason" shall not include
the events described in the preceding portions of this
paragraph (a) if the changes described therein have been
approved by a majority of the board of directors of ML&P
and also by a number of such directors who comprised at
least a majority of the directors of ML&P 90 days prior to
the Change In Control);
b. ML&P or its Subsidiaries requiring the
Executive to be based at a location in excess of seventy-
five (75) miles from the location of the Executive's
principal job location or office immediately prior to the
Change in Control; except for required travel on company
business to an extent substantially consistent with the
Executive's then present business travel obligations;
c. A reduction by ML&P or its Subsidiaries of
the Executive's annual rate of Base Salary in effect as of
ninety (90) days prior to the Change in Control;
d. The failure of ML&P or its Subsidiaries to
continue in effect any of ML&P's or its Subsidiaries'
annual incentive compensation plans, or employee benefit
or retirement plans, policies, practices, or other
compensation arrangements in which the Executive
participates as in effect prior to the Change in Control,
unless such failure to continue the plan, policy, practice
or arrangement pertains to all plan participants
generally; or the failure by ML&P or its Subsidiaries to
continue the Executive's participation therein on
substantially the same basis, both in terms of the amount
of benefits provided and the level of the Executive's
participation relative to other participants and
commensurate with the Executive's responsibility and
duties; and
e. The failure of ML&P or its Subsidiaries to
obtain a satisfactory agreement from any successor to ML&P
or its Subsidiaries to assume and agree to perform ML&P's
or its Subsidiaries' obligations under this Agreement, as
contemplated in Article VIII herein.
3.4 Description of Severance Benefits. In the event that
an Executive becomes entitled to receive Severance Benefits, as
provided in Section 3.1 herein, ML&P shall pay to the Executive
and provide him with the following:
a. An amount equal to 2.00 times the
Executive's annual rate of Base Salary in effect upon the
Effective Date of Termination; and
b. A payout under the ML&P Annual Incentive
Plan, in accordance with the terms of such plan; and
c. A continuation of all welfare benefits at
normal employee cost including medical and dental
insurance, long-term disability, group term life
insurance, and accidental death & dismemberment insurance
for two (2) full years from the Effective Date of
Termination or until the Executive reaches his Normal
Retirement Date, whichever occurs earlier. In the event
that participation in any one or more of the welfare
benefits is not possible under the terms of the governing
welfare benefit provisions or due to the modification or
elimination of the welfare benefits, ML&P shall provide
substantially identical welfare benefits at the normal
employee cost of the affected welfare benefits. However,
these benefits shall be discontinued prior to the end of
the two (2) years in the event the Executive receives
substantially similar benefits from a subsequent employer,
as determined by the Committee. The right of the
Executive and his spouse and other dependents to continued
group health coverage under Section 4980B of the Internal
Revenue Code of 1986, as amended ("Code"), shall commence
at the end of the applicable Severance Benefits period.
Unless otherwise provided under this Agreement, the
applicable Severance Benefits period shall be treated as
if it were a period of employment with ML&P or its
Subsidiaries for purposes of determining rights and
benefits under any retirement plan or other plan or
program and shall be treated as a period of covered
employment under such plan or other plan or program if the
Executive was in covered employment immediately prior to
the Change in Control, provided that, if such treatment is
not possible under the terms of such plan or other plan or
program, ML&P shall directly provide substantially
identical benefits attributable to the crediting of the
Severance Benefits period.
3.5 Reduction of Severance Benefits. In the event there
are fewer than twenty-four (24) whole or partial months
remaining from the Executive's Effective Date of Termination
until the Executive's Normal Retirement Date, then the amounts
provided for under Section 3.4(a) above shall be reduced by a
fraction, the numerator of which shall be the number of whole
or partial months remaining until the Executive's Normal
Retirement Date, and the denominator of which shall be
twenty-four (24).
3.6 Special Retirement Benefits. The Executive shall
receive special retirement benefits as provided below, so that
the total retirement benefits that the Executive receives will
equal the retirement benefits that the Executive would have
received under the Maui Land & Pineapple Company, Inc. Pension
Plan for Non-Bargaining Unit Employees ("Retirement Plan"),
Maui Land & Pineapple Company, Inc. Supplemental Executive
Retirement Plan, and the Maui Land & Pineapple Company, Inc.
Executive Supplemental Insurance Plan/Executive Deferred
Compensation Plan (collectively, "Plans"), or any successor
plans or arrangements to such Plans, had the Executive
continued in the employ of ML&P and its Subsidiaries for
two (2) years following the Executive's Effective Date of
Termination (or until his Normal Retirement Date, whichever is
earlier) but without regard to any ancillary benefits. The
amount of special retirement benefits payable hereunder to the
Executive or his beneficiaries shall equal the excess of the
amount specified in (a) over that in (b) below.
a. The total retirement benefits on an
actuarial equivalent single-life basis would be paid to
the Executive if the two (2) years (or the period to his
Normal Retirement Date, if less) following the Executive's
Effective Date of Termination are added to his credited
service under the Plans.
b. The total retirement benefits actually paid
on a single-life basis to the Executive under the Plans.
Such special retirement benefits shall be paid at the
same time and in the same form (e.g., actuarial equivalent
single-life or contingent annuitant basis) as the Executive's
retirement benefits under the Plans. The special retirement
benefits shall be paid by the Plans or, if the terms of such
Plans do not provide for such benefits, the special retirement
benefits shall be paid directly by ML&P. The actuarial
equivalent of special retirement benefits shall be determined
in accordance with the factors provided under the Retirement
Plan.
3.7 Outplacement Services. In the event that the
Executive becomes entitled to receive Severance Benefits as
provided in Section 3.1 herein, the Executive shall be
entitled, at the expense of ML&P, to receive standard
outplacement services as selected by the Executive, for a
period of up to twenty-four (24) months from the Effective Date
of Termination. However, such services shall not exceed a
maximum annual benefit of ten percent (10%) of the Executive's
annual rate of Base Salary as of the Effective Date of
Termination.
3.8 Incentive Compensation. In the event that the
Executive becomes entitled to receive Severance Benefits as
provided in Section 3.1 herein, any deferred awards previously
granted to the Executive under ML&P's or its Subsidiaries'
incentive compensation plans and not previously paid to the
Executive shall immediately vest on the date of the Executive's
Effective Date of Termination and shall be paid no later than
ninety (90) calendar days following that date, and be included
as compensation in the month paid.
ARTICLE IV. DISQUALIFICATION FROM RECEIPT OF BENEFITS.
No Severance Benefits shall be payable to the
Executive under this Agreement in the event the Executive is
terminated by ML&P or its Subsidiaries for Just Cause. For
this purpose, Just Cause shall mean willful, malicious conduct
by the Executive which is detrimental to the best interests of
ML&P, including theft, embezzlement, the conviction of a
criminal act, disclosure of trade secrets, a gross dereliction
of duty, or other grave misconduct on the part of the Executive
which is substantially injurious to ML&P or its Subsidiaries.
Just Cause also shall include the failure of the Executive to
perform any and all covenants under this Agreement.
ARTICLE V. FORM AND TIMING OF SEVERANCE BENEFITS.
5.1 Form and Timing of Severance Benefits. The Severance
Benefits described in Section 3.4(a) and (b) herein, shall be
paid by ML&P in cash to the Executive in a single lump sum as
soon as practicable following the Executive's Effective Date of
Termination, but in no event beyond ninety (90) calendar days
from such date.
The Severance Benefits described in Section 3.4 (c)
herein shall be provided by ML&P to the Executive immediately
upon the Executive's Effective Date of Termination and shall
continue to be provided for two (2) full calendar years from
the Executive's Effective Date of Termination or until the
Executive reaches his Normal Retirement date, whichever occurs
earlier. However, the Severance Benefits described in Section
3.4 (c) herein shall be discontinued prior to the end of the
two (2) year period immediately upon the Executive receiving
substantially similar benefits from a subsequent employer, as
determined by the Committee.
5.2 Withholding of Taxes. ML&P or its Subsidiaries
shall withhold from any amounts payable under this Agreement
all Federal, state, city or other taxes as legally shall be
required.
ARTICLE VI. PARACHUTE PAYMENTS.
6.1 Determination of Alternative Severance Benefit Limit.
Notwithstanding any other provision of this Agreement, if any
portion of the Severance Benefits or any other payment under
this Agreement, or under any other agreement with, or plan of,
ML&P (in the aggregate "Total Payments") would constitute an
"excess parachute payment," then the payments to be made to the
Executive under this Agreement shall be reduced such that the
value of the aggregate Total Payments that the Executive is
entitled to receive shall be one dollar ($1) less than the
maximum amount which the Executive may receive without becoming
subject to the tax imposed by Section 4999 of the Code, or
which ML&P may pay without loss of deduction under Section
280G(a) of the Code. However, such reduction in Severance
Benefits shall apply if, and only if, the resulting Severance
benefits with such reduction is greater in value to the
Executive than the value of the Severance Benefits without a
reduction, net of any tax imposed on the Executive pursuant to
Section 4999 of the Code. For purposes of this Agreement, the
terms "excess parachute payment" and "parachute payments" shall
have the meanings assigned to such terms in Section 280G of the
Code, and such "parachute payments" shall be valued as provided
therein.
6.2 Procedure for Establishing Alternative Limitation.
Within fifteen (15) calendar days following delivery of the
notice of Qualifying Termination or notice by ML&P to the
Executive of its belief that there is a payment or benefit due
the Executive which will result in an "excess parachute
payment" as defined in Section 280G of the Code, the Executive
and ML&P, at ML&P's expense, shall obtain the opinion of ML&P's
principal outside law firm, accounting firm, and/or
compensation and benefits consulting firm, which sets forth:
(a) the amount of the Executive's "annualized includible
compensation for the base period" (as defined in Section
280G(d)(1) of the Code); (b) the present value of the Total
Payments; and (c) the amount and present value of any "excess
parachute payment."
In the event that such opinion determines that there
would be an "excess parachute payment," such that a reduction
in the Severance Benefits would result in a greater net benefit
to the Executive (as provided in Section 6.1 herein), then the
Severance Benefits hereunder or any other payment determined
under the opinion to be includible in Total Payments shall be
reduced or eliminated so that, on the basis of calculations set
forth in such opinion, there will be no "excess
parachute payment". The reduction or elimination of specific
payments shall apply to such type and amount of specific
payments as may be designated by the Executive in writing
delivered to ML&P within ten (10) calendar days of receipt of
the opinion, or if the Executive fails to so notify ML&P, as
may be reasonably determined by ML&P.
The provisions of this Section 6.2, including the
calculations, notices, and opinion provided herein, shall be
based upon the conclusive presumption that the following
amounts are reasonable: (a) the compensation and benefits
provided for in Article III herein; and (b) any other
compensation earned prior to the Effective Date of Termination
by the Executive pursuant to ML&P's compensation programs (if
such payments would have been made in the future in any event,
even though the timing of such payment is triggered by the
Change in Control).
6.3 Subsequent Imposition of Excise Tax. If,
notwithstanding compliance with the provisions of Sections 6.1
and 6.2 herein, it is ultimately determined by a court or
pursuant to a final determination by the Internal Revenue
Service that any portion of the Total Payments is considered to
be a "parachute payment", subject to excise tax under Section
4999 of the Code, which was not contemplated to be a "parachute
payment" at the time of payment (so as to accurately determine
whether a limitation should have been applied to the Total
Payments to maximize the net benefit to the Executive, as
provided in Sections 6.1 and 6.2 herein), the Executive shall
be entitled to receive a lump sum cash payment sufficient to
place the Executive in the same net after-tax position,
computed by using the "Special Tax Rate" as such term is
defined below, that the Executive would have been in had such
payment not been subject to such excise tax, and had the
Executive not incurred any interest charges or penalties with
respect to the imposition of such excise tax. For purposes of
this Agreement, the "Special Tax Rate" shall be the highest
effective Federal and state marginal tax rates applicable to
the Executive in the year in which the payment contemplated
under this Section 6.3 is made.
ARTICLE VII. OTHER RIGHTS AND BENEFITS NOT AFFECTED.
7.1 Other Benefits. Neither the provisions of this
Agreement nor the Severance Benefits provided for hereunder
shall reduce any amounts otherwise payable, or in any way
diminish the Executive's rights as an employee of ML&P or its
Subsidiaries, whether existing now or hereafter, under any
benefit, incentive, retirement, stock option, stock bonus,
stock purchase plan, or any employment agreement, or other plan
or arrangement.
7.2 Employment Status. This Agreement does not
constitute a contract of employment or impose on ML&P or its
Subsidiaries any obligation to retain the Executive as an
employee, to change the status of the Executive's employment,
or to change ML&P's or its Subsidiaries' policies regarding
termination of employment. The Executive serves as an employee
of ML&P or its Subsidiaries, and this Agreement shall not
create an employment relationship between ML&P or its
Subsidiaries and the Executive.
ARTICLE VIII. SUCCESSORS.
8.1 Successors. ML&P or its Subsidiaries will require
any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) of all or substantially all of the
business and/or assets of ML&P or its Subsidiaries, or any
division or subsidiary thereof to expressly assume and agree to
perform this Agreement in the same manner and to the same
extent that ML&P or its Subsidiaries would be required to
perform it if no such succession had taken place. Failure of
ML&P or its Subsidiaries to obtain such assumption and
agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the
Executive to compensation from ML&P or its Subsidiaries in the
same amount and on the same terms as they would be entitled
hereunder if terminated voluntarily following a Change in
Control. Except for the purposes of implementing the
foregoing, the date on which any succession becomes effective
shall be deemed the Effective Date of Termination.
This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees. If an Executive should
die while any amount would still be payable to him hereunder
had he continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of
this Agreement, to the Executive's devisee, legatee, or other
designee, or if there is no such designee, to the Executive's
estate.
8.2 Beneficiaries. In the event of the death of the
Executive, all unpaid amounts payable to the Executive under
this Agreement shall be paid to his or her Beneficiary. The
Executive's spouse and other dependents shall continue to be
covered by all applicable welfare benefits during the remainder
of the Severance Benefits period, if any, pursuant to
Section 3.4.c (unless payments at death are specified by the
applicable welfare benefits provisions). The Beneficiary of
the Executive's Severance Benefits under this Agreement shall
be designated by the Executive in the form of a signed writing
acceptable to the Committee. An Executive may make or change
such designation at any time.
ARTICLE IX. ADMINISTRATION.
9.1 Administration. The Compensation Committee of the
Board of Directors shall administer this Agreement. The
Committee is authorized to interpret this
Agreement, to prescribe and rescind rules and regulations, to
provide conditions and assurances deemed necessary and
advisable, to protect the interest of ML&P or its Subsidiaries,
and to make all other determinations necessary or advisable for
the Agreement's administration. In fulfilling its
administrative duties hereunder, the Committee may rely on
outside counsel, independent accountants, or other consultants
to render advice or assistance.
9.2 Indemnification and Exculpation. The members of the
Board, its agents and officers, directors and employees of ML&P
and its Subsidiaries shall be indemnified and held harmless by
ML&P and its Subsidiaries against and from any and all loss,
cost, liability, or expense that may be imposed upon or
reasonably incurred by them in connection with or resulting
from any claim, action, suit or proceeding to which they may be
a party or in which they may be involved by reason of any
action taken or failure to act under this Agreement and against
and from any and all amounts paid by them in settlement (with
ML&P's written approval) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding. The foregoing
provision shall not be applicable to any person if the loss,
cost, liability or expense is due to such person's gross
negligence or willful misconduct.
9.3 Legal Fees. ML&P shall pay all reasonable legal
fees, costs of litigation and other expenses incurred in good
faith by the Executive as a result of ML&P's refusal to provide
the Severance Benefits to which the Executive becomes entitled
under this Agreement, or as a result of ML&P's contesting the
validity, enforceability or interpretation of the Agreement.
Provided, however, that such payments shall not exceed the
amount permitted by law and ML&P's Articles of Incorporation.
IN WITNESS WHEREOF, ML&P has caused this Agreement to
be executed by a resolution of the Board of Directors, as of
the day and year first above written.
MAUI LAND & PINEAPPLE COMPANY, INC.
By /S/ GARY L. GIFFORD
Its President
/S/ SCOTT A. CROCKFORD
SCOTT A. CROCKFORD
"Executive"
ATTEST:
/S/ IRIS Y. MATSUMOTO
01248916.1.010225-143
9.
MAUI LAND & PINEAPPLE COMPANY, INC.
EXECUTIVE SEVERANCE PLAN
Article 1. Purpose. This Maui Land & Pineapple
Company, Inc. Executive Severance Plan ("Plan") is intended to
advance the interests of Maui Land & Pineapple Company, Inc.
("Company") and certain of its subsidiaries by providing
severance benefits to eligible executive employees upon
termination of employment in order to ease their transition out
of the organization and facilitate their search for alternative
employment.
Article 2. Effective Date. This Plan shall become
effective as of March 5, 1998 ("Effective Date"), upon adoption
by the Board of Directors of the Company, and shall operate on
the basis of the calendar year ("Plan Year").
Article 3. Participating Employers. This Plan
provides for certain severance benefits for eligible executive
employees of the Company and any other related entity
designated by the Company ("Participating Employers").
Participants and beneficiaries may receive from the Plan
Administrator, upon written request, information as to whether
a particular employer is a Participating Employer, and if so,
the Participating Employer's address.
Article 4. Eligibility. Any individual employed by a
Participating Employer in a position of Vice President or
higher (or equivalent) and with a salary midpoint of 1040 or
higher (or equivalent) shall be eligible to participate in this
Plan ("Eligible Executive") upon and as of the date of written
notice of his/her designation and approval as an Eligible
Executive by the President and Chief Executive Officer of the
Company.
Article 5. Severance Benefits. In the event of an
"Involuntary Termination of Employment" with a Participating
Employer, an Eligible Executive shall be entitled to the
payment of a severance benefit amount ("Severance Benefit
Amount") equal to the Eligible Executive's "Monthly Base
Salary" multiplied by his/her "Years of Service".
For purposes of determining eligibility for a
Severance Benefit Amount, the term "Involuntary Termination of
Employment" shall mean, as determined by the Plan
Administrator, a termination of employment at the initiation of
the Participating Employer due to: (a) restructuring or
downsizing of operations of the Company or its subsidiaries;
(b) discontinuance of certain business activities of the
Company or its subsidiaries; (c) elimination of a position with
no comparable position (determined with reference to Section
6.d below) with the Company or its subsidiaries offered to the
Eligible Executive.
Also, for purposes of determining a Severance Benefit
Amount, the term "Monthly Base Salary" shall be determined as
of the date of termination of employment and shall mean the
monthly base salary of the Eligible Executive in accordance
with the payroll records and procedures of the Participating
Employer, and such term shall not include bonuses and other
supplementary compensation. Further, the term "Years of
Service" shall be determined as of the date of termination of
employment and shall mean the sum of each completed whole
calendar year of continuous service since the Eligible
Executive's most recent employment commencement date in which
the Eligible Executive works 1,000 hours of service or more,
and such term shall not include any partial Year of Service for
any prorated calendar year in which less than 1,000 hours of
service is performed. In determining Years of Service, service
shall be credited for service with any Participating Employer.
Notwithstanding the above portion of this Section 5,
the maximum Severance Benefit Amount shall be equal to (a) 12
times the Monthly Base Salary in the case of an Eligible
Executive whose salary midpoint is between 1040 to 2000,
inclusive (or equivalent) and (b) 18 times the Monthly Base
Salary in the case of an Eligible Executive whose salary
midpoint is 2001 or above (or equivalent). In addition, with
respect to any Eligible Executive, the minimum Severance
Benefit Amount shall be equal to 6 times the Eligible
Executive's Monthly Base Salary.
The Severance Benefit Amount shall be paid in cash as
a stream of income, less legally required deductions, paid on
the regular payroll schedule commencing as of the date of the
Eligible Executive's termination of employment. As such, the
Severance Benefit Amount shall be paid as a continuation of the
Eligible Executive's Monthly Base Salary, at the same payroll
times and amounts that would otherwise apply but for his/her
termination of employment, over the applicable number of months
("Severance Payment Period"). Upon the written request of an
Eligible Executive, the Plan Administrator may, at its sole and
complete discretion, authorize and provide for a different
optional form of benefit payment (e.g., lump sum
distribution).
Article 6. Exclusions. Notwithstanding any provision
herein to the contrary, an Eligible Executive shall not be
entitled to the payment of any Severance Benefit Amount in the
event of any of the following:
a. The Eligible Executive terminates
employment on a voluntary basis.
b. The Eligible Executive terminates
employment on a voluntary or involuntary basis for just
cause. For this purpose, a voluntary or involuntary
termination for just cause shall mean termination as a
result of willful, malicious conduct by the Eligible
Executive which is detrimental to the interests of the
Company or its subsidiaries, including theft,
embezzlement, conviction of a criminal act, disclosure of
trade secrets, gross dereliction of duty, or other grave
misconduct on the part of the Eligible Executive which is
substantially injurious to the Company or its
subsidiaries.
c. The Eligible Executive terminates
employment due to retirement and is eligible for normal
retirement benefits under the Maui Land & Pineapple
Company, Inc. Pension Plan for Non-Bargaining Unit
Employees ("Retirement Plan").
d. The Eligible Executive refuses to accept a
"comparable" position of employment with the Company or
its subsidiaries, under which there is no reduction of
his/her annual rate of base salary, and there is no
material reduction of his/her authorities, duties, or
responsibilities, and there is no geographic job
relocation in excess of 75 miles.
e. The Eligible Executive fails to agree to
and execute a general release and waiver of all employment-
related claims against the Company and its subsidiaries.
f. The Eligible Executive is reemployed with
the Company or its subsidiaries in a comparable (as
determined in accordance with the provisions of Section
6.d above) or higher level position within 90 days of
his/her termination of employment.
g. The Eligible Executive is a party to a Maui
Land & Pineapple Change-In-Control Severance Agreement and
is determined by the Compensation Committee of the Board
of Directors of the Company to be entitled to the payment
of severance benefits thereunder due to the occurrence of
a "change in control" within the meaning of such Agreement
and all applicable conditions for the payment of such
severance benefits are satisfied.
Article 7. Other Benefits.
a. Annual Incentive Plan. In the event that
an Eligible Executive is entitled to a Severance Benefit
Amount, the Eligible Executive shall be entitled to a
payout under the Maui Land & Pineapple Company, Inc.
Annual Incentive Plan in accordance with the terms and
conditions of such plan.
b. Welfare Benefits. In the event that an
Eligible Executive is entitled to a Severance Benefit
Amount, the Eligible Executive shall be entitled during
the Severance Payment Period to medical and dental
insurance benefits at the same coverage and normal
employee cost levels as he/she were subject as of the date
of termination of employment. In the event that
participation in the medical or dental insurance plans is
not possible under the terms of the plans or due to the
modification or elimination of the plans, the
Participating Employer shall provide substantially
identical benefits at the same level of coverage and
employee cost. However, the medical and dental insurance
benefits shall be discontinued prior to the end of the
Severance Payment Period in the event the Eligible
Executive receives substantially similar benefits from a
subsequent employer as determined by the Plan
Administrator. The Eligible Executive shall be
responsible for notifying the Plan Administrator of the
receipt of such similar benefits from any subsequent
employer.
c. Retirement Benefits. An Eligible
Executive's service and compensation during the Severance
Payment Period shall not be considered for purposes of
determining the Eligible Executive's benefits under the
Retirement Plan. However, in the case of an Eligible
Executive who is eligible for early retirement benefits
under the Retirement Plan or other employee benefit plan
as of his/her date of termination of employment, the
Severance Payment Period shall be treated as if it were a
period of employment exclusively for purposes of
postponing any benefit payment, and the Eligible Executive
shall be entitled to benefits due him/her as an early
retiree as of the expiration of the Severance Payment
Period.
An Eligible Executive who would become first
eligible for normal retirement benefits (either pension or
post-retirement welfare benefits) during the Severance
Payment Period shall be allowed to postpone the effective
date of his/her termination of employment and to continue
on active payroll, at the sole and complete discretion of
the Plan Administrator, either on a paid administrative
leave or specified work assignment, until his/her
retirement eligibility date. During this "bridge" period,
the Eligible Executive's current base salary and benefit
level as of his/her otherwise applicable employment
termination date shall continue and shall not be subject
to merit or pay increases. As of his/her retirement
eligibility date, the Eligible Executive's employment
shall be terminated, and his/her otherwise applicable
Severance Benefit Amount and Severance Benefit Period
shall be proportionately reduced by the bridge
compensation and period.
d. Automobile. In the event that an Eligible
Executive is entitled to a Severance Benefit Amount and is
furnished a company-owned vehicle for use as an employee,
he/she shall be allowed to purchase the assigned vehicle
for the current low Blue Book price, less $500. This
vehicle purchase option shall be available as of the date
on which the Eligible Executive terminates employment and
until the date of the agreement and execution of the
general release and waiver as described in Section 6.e.
If the Eligible Executive terminates employment and does
not exercise his/her option to purchase the vehicle,
he/she shall not be allowed to use the vehicle after such
termination and prior to his/her actual purchase of
the vehicle.
Article 8. Distribution Due to Death. In the event
that an Eligible Executive is entitled to the payment of a
Severance Benefit Amount and he/she dies before the completion
of the Severance Payment Period, the unpaid balance of any
Severance Benefit Amount as of the date of death shall be paid
in a single lump sum to his/her designated beneficiary as soon
as practicable following the date of death. The Eligible
Executive's designated beneficiary shall be designated or
changed by the Eligible Executive (without the consent of any
prior beneficiary) through written notice delivered to the
Company. If no such beneficiary is designated, or if no
designated beneficiary survives the Eligible Executive, the
amount payable due to the Eligible Executive's death shall be
payable to the Eligible Executive's estate. However, in the
event of death, Article 7 above shall not be applicable and the
other benefits described therein shall be forfeited and shall
not be provided to any person effective as of the date of death
(unless such other benefits are otherwise provided without
regard to the provisions of this Plan).
Article 9. Administration. The Plan shall be
administered by Maui Land & Pineapple Company, Inc., who shall
be the Plan Administrator for purposes of the requirements of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). The Plan Administrator shall have the exclusive
right, power, and authority, in its sole and absolute
discretion, to administer, apply, and interpret the Plan and
other Plan documents and to decide all matters arising in
connection with the operation or administration of the Plan.
Without limiting the generality of the above, the Plan
Administrator shall have the sole and absolute discretionary
authority: (a) to take all actions and make all decisions with
respect to the eligibility for, and the amount of, benefits
payable under the Plan; (b) to formulate, interpret, and apply
rules, regulations, and policies necessary to administer the
Plan in accordance with its terms; (c) to decide questions,
including legal or factual questions, relating to the
calculation and payment of benefits under the Plan; (d) to
resolve and clarify any ambiguities, inconsistencies, and
omissions arising under the Plan or other Plan documents; and
(e) except as otherwise provided herein, to process, and
approve or deny, benefit claims and rule on any benefit
exclusions. All determinations made by the Plan Administrator
with respect to any matter arising under the Plan and any other
Plan documents shall be final and binding on all parties.
Legal process may be served on the Plan Administrator.
The name and address of the Plan Administrator is:
Maui Land & Pineapple Company, Inc.
P.O. Box 187
Kahului, Maui, HI 96733-6687
1-(808) 877-3351
EIN: 99-0107542
Article 10. Amendment or Termination. The Company
reserves the right at any time and from time to time, in its
sole and absolute discretion, to terminate or amend in whole or
in part any or all of the provisions of the Plan, by action of
the Board of Directors of the Company or an authorized
committee thereof. The identity of the members of the Board of
Directors and such authorized committee may be obtained from
the Plan Administrator.
Article 11. Claims Procedure. A claim under this Plan
may be made by the claimant in writing within 60 days of the
date of termination of employment of the claimant.
If a claim is wholly or partially denied, the Plan
Administrator shall furnish the Eligible Executive notice in
writing of the decision not later than 90 days after the date
of the filing of the claim. If notice of denial of a claim is
not furnished within such 90-day period, the claim shall be
deemed denied.
A written denial of a claim for benefits shall
(i) specify the reason or reasons for the denial, (ii) refer to
any provisions of the Severance Plan on which the denial is
based, (iii) describe any additional material or information
necessary for the Eligible Executive to perfect his/her claim
with an explanation of why such material or information is
necessary, and (iv) explain the Plan's claim procedure.
Upon a denial of a claim, the Eligible Executive or
his/her duly authorized representative may request a review by
the Plan Administrator upon written application within 60 days
after receipt of the denial of the claim. The Eligible
Executive or his/her duly authorized representative may review
pertinent documents and submit issues and comments in writing.
The Plan Administrator shall make a decision
concerning the review of the claim promptly, but not later than
60 days after receipt of request for review unless special
circumstances require a longer period of time for review. If
an extension of time for review is required, written notice of
the extension will be furnished to the Eligible Executive and a
decision shall be rendered as soon as possible, but not later
than 120 days after receipt of the request for review.
The decision on review will be in writing and include
specific reasons for the decision and specific references to
the Severance Plan provisions on which the decision is based.
If the decision on review is not furnished within the time
specified above, the claim will be deemed denied on review.
Article 12. Incapacity. If the Plan Administrator
finds that any person to whom payment is payable under this
Plan is unable to care for his affairs because of illness or
accident, or is a minor, any payment due (unless a prior claim
for such payment has been made by a duly appointed guardian,
committee, or other legal representative) may be paid to the
spouse, a child, a parent, or a brother or sister, or to any
person deemed by the Plan Administrator to have incurred
expense for such person otherwise entitled to payment.
Article 13. Funding. The amounts payable under this
Plan shall be paid in cash from the general funds of the
Company or Participating Employer, and an Eligible Executive
shall have no right, title, or interest whatsoever in or to
investments, if any, which the Company may make to aid it in
meeting its obligations under this Plan. Title to and
beneficial ownership of any such investments shall at all times
remain in the Company. Nothing contained in this Plan, and no
action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind. To the extent that
any person acquires a right to receive a payment under this
Plan, such right shall be no greater than the right of any
unsecured creditor.
Article 14. Legal Status. This Plan is intended to
constitute an employee welfare benefit plan under ERISA. As
sponsored by the Company and Participating Employer, the Plan
has been designated as Plan No. 508. Prior to the actual
payment of the benefits hereunder, there is no transfer of any
assets to an Eligible Executive or for the benefit of the
Eligible Executive under this Plan, and the Plan is intended to
confer no current benefit that would be immediately taxable to
the Eligible Executive under the constructive receipt rule or
economic benefit doctrine under the tax laws.
Article 15. Continued Service. Nothing contained in
this Plan shall be construed as conferring upon an Eligible
Executive the right to continue in the employment of the
Company or a Participating Employer in any capacity.
Article 16. Nonassignment. The interests of an
Eligible Executive hereunder may not be sold, transferred,
signed, pledged, or hypothecated. No Eligible Executive may
borrow against his interest in the Plan.
Article 17. Controlling Documents. This document
constitutes the actual Plan document and also serves as the
Summary Plan Description as required under ERISA.
Article 18. Enforceability and Controlling Law. If any
provision of this Plan is held by a court of competent
jurisdiction to be invalid or unenforceable, the remaining
provisions shall continue in full force and effect. The
provisions of this Plan shall be construed, administered, and
enforced according to the laws of the State of Hawaii.
Article 19. Gender. Wherever any words are used under
the Plan in the masculine, feminine, or neuter gender, they
shall be construed as though they were also used in another
gender in all cases where they would so apply.
IN WITNESS WHEREOF, the Company has caused this Plan
to be executed by its duly authorized officers on this 26th
day of March, 1998.
MAUI LAND & PINEAPPLE COMPANY,
INC.
By /S/ GARY L. GIFFORD
Its PRESIDENT
By /S/ ADELE H. SUMIDA
Its SECRETARY
"Company"
MAUI LAND & PINEAPPLE COMPANY, INC
ANNUAL REPORT
1997
CONTENTS
Letter to Shareholders 2
Pineapple 4
Resort 5
Commercial & Property 6
Independent Auditors' Report 7
Consolidated Balance Sheets 8
Consolidated Statements of Operations and Retained Earnings 10
Consolidated Statements of Cash Flows 11
Notes to Consolidated Financial Statements 12
Common Stock 19
Selected Financial Data 20
Management's Discussion and Analysis of
Financial Condition and Results of Operations 21
Officers and Directors 24
THE COMPANY
Maui Land & Pineapple Company, Inc., a Hawaii corporation
organized in 1909, is a land-holding and operating company with
several wholly owned subsidiaries, including two major operating
companies, Maui Pineapple Company, Ltd. and Kapalua Land Company,
Ltd. The Company, as used herein, refers to the parent and its
wholly owned subsidiaries. The Company's principal business
activities are Pineapple, Resort and Commercial & Property.
The Company owns approximately 28,600 acres of land on the
Island of Maui, of which about 8,100 acres are used directly or
indirectly in the Company's operations. The Company employed
approximately 2,270 people in 1997 on a year-round or seasonal
basis.
Maui Pineapple Company, Ltd. is the operating subsidiary for
Pineapple. Its canned pineapple, pineapple juice, and fresh
pineapple are found in supermarkets throughout the United States.
The canned pineapple products are sold as store-brand pineapple
with 100% HAWAIIAN U.S.A.(TM) imprinted on the can lid. In
addition, the products are sold through institutional, industrial
and export distribution channels.
Kapalua Land Company, Ltd. is the development and operating
subsidiary for the Kapalua Resort. The Kapalua Resort is a
master-planned golf resort community on Maui's northwest coast.
The property encompasses 1,650 acres bordering the ocean with
three white sand beaches.
Commercial & Property includes the operations of various
properties, including Kaahumanu Center, the largest retail and
entertainment center on Maui. It also includes the Company's
land entitlement and management activities and land sales that
are not part of the Kapalua Resort.
10-K REPORT
Shareholders who wish to receive, free of charge, a copy of the
Company's 10-K Report to the Securities and Exchange Commission
(excluding certain exhibits) may write to:
Corporate Secretary
Maui Land & Pineapple Company, Inc.
P. O. Box 187
Kahului, Hawaii 96733-6687
OFFICES
Corporate Offices Pineapple Marketing Office
Maui Land & Pineapple Company, Inc. Maui Pineapple Company, Ltd.
P. O. Box 187 P. O. Box 4003
Kahului, Hawaii 96733-6687 Concord, California 94524-
4003
Telephone: 808-877-3351 Telephone: 510-798-0240
Fax: 808-871-0953 Fax: 510-798-0252
http://www.mauiland.com
Maui Pineapple Company, Ltd.
P. O. Box 187
Kahului, Hawaii 96733-6687
Telephone: 808-877-3351
Fax: 808-871-0953
http://www.pineapplehawaii.com
Kapalua Land Company, Ltd.
1000 Kapalua Drive
Kapalua, Hawaii 96761-9028
Telephone: 808-669-5622
Fax: 808-669-5454
http://www.kapaluamaui.com
Kaahumanu Center
275 Kaahumanu Avenue
Kahului, Hawaii 96732-1612
Telephone: 808-877-3369
Fax: 808-877-5992
http://www.maui.net/~kcenter/
Transfer Agent & Registrar Independent Auditors
ChaseMellon Shareholder Services Deloitte & Touche LLP
85 Challenger Road 1132 Bishop Street, Suite 1200
Ridgefield Park, New Jersey 07660 Honolulu, Hawaii 96813-2870
Telephone: 800-356-2017 Telephone: 808-543-0700
<TABLE>
MAUI LAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIES
FINANCIAL HIGHLIGHTS
<CAPTION>
1997 1996 1995
(Dollars in Thousands
Except Per Share Amounts)
<S> <C> <C> <C>
REVENUES
Pineapple $ 90,949 $ 95,700 $ 81,052
Resort 40,338 35,676 34,330
Commercial & Property 5,065 4,850 10,123
Corporate 146 109 72
Total 136,498 136,335 125,577
NET INCOME (LOSS) 863 (747) (1,559)
NET INCOME (LOSS)
PER COMMON SHARE $ .48 $ (.42) $ (.87)
AVERAGE COMMON
SHARES OUTSTANDING 1,797,125 1,797,125 1,797,125
TOTAL ASSETS $ 134,714 $ 132,851 $137,085
CURRENT RATIO 2.20 2.23 2.78
LONG-TERM DEBT and
CAPITAL LEASES $ 29,435 $ 28,898 $ 36,227
STOCKHOLDERS' EQUITY 58,896 58,033 58,870
STOCKHOLDERS' EQUITY PER
COMMON SHARE $ 32.77 32.29 $ 32.76
EMPLOYEES 2,270 2,160 1,990
</TABLE>
TO OUR SHAREHOLDERS AND EMPLOYEES
Nineteen ninety-seven was a year of progress for Maui Land &
Pineapple Company, Inc. A net profit was posted for the first time
since 1991. In many ways however, operating results did not
reflect the substantial progress that has been made in the
Company's operations over the last three years and, in this
respect, the magnitude of the net profit was disappointing.
Through the end of the third quarter, the Company posted a net
profit of $2.6 million. The fourth quarter net loss of $1.8
million reduced the net profit for the full year to $863,000. The
fourth quarter loss was primarily attributable to the Resort
segment experiencing a decline in occupancy, golf rounds and
merchandise sales as well as bad debts due to tenant turnover and a
decline in electricity revenue in the Commercial segment.
The focus and concentrated effort of our strategic planning
program has led to the development of new products, to the creation
of two new joint venture affiliations and to planning for a number
of near-term development projects that are promising. The sales
volume and profits from new product opportunities, projects and new
lines of business have not developed as fast as we would have
liked. Last year, we referred to a number of fundamental
improvements that will have long-term positive impact on our
businesses, such as the repositioning of the Kapalua Bay Hotel.
Although the Company did not benefit from the full profit impact of
these fundamental improvements in 1997, we are confident it will in
the future.
The 1997 net profit of $863,000 was an improvement over the
1996 net loss of $747,000 and a further improvement from the 1995
loss of $1.6 million. The 1997 results include the profit
recognized from three land sale transactions concluded in the
second and third quarters, equivalent to $3.3 million on an after-
tax basis. Further information on these land sales transactions is
provided in the Resort and Commercial & Property sections of this
report.
Revenues in 1997 were almost identical to 1996 revenues at
approximately $136 million. The operating results from our major
business segments, Pineapple, Resort and Commercial & Property,
were a $3.7 million profit, a $4.8 million profit, and a $127,000
profit, respectively. This compares to operating results of a $4
million profit, a $2.2 million profit, and a $105,000 profit,
respectively, for Pineapple, Resort and Commercial & Property
segments in 1996.
It should be noted that although Pineapple's operating results
declined by approximately $300,000, the operating profit in 1997
was generated with sales of 6% fewer cases sold than 1996 while
sales prices were only marginally better in 1997. Production of
cases packed was 8% higher than 1996. These operating results show
a substantially improved level of operating efficiency in the
Pineapple division.
The Kapalua Resort's improvement in operating profit of $2.6
million in 1997 is due entirely to results from development
activities, specifically the sale of a one-half interest in the
Kapalua Coconut Grove project. Despite increased real estate
activity in 1997, resort ongoing operations experienced a decline
in operating profit from $2 million in 1996 to $800,000 due to
effects of the closure for renovation of the Kapalua Bay Hotel for
a majority of the year and the continued weak level of visitor
arrivals and visitor occupancy on Maui.
The improved operating profit from Commercial & Property
activities reflects two land sale transactions, which generated an
operating profit of $1 million offset by the loss for the year from
Kaahumanu Center as a result of continued poor retail economic
conditions on Maui.
We are concerned that three factors that had negative
influences on the Company's operations and profitability in 1997
will persist without significant improvement in 1998. First, the
poor performance of the Hawaii economy in the face of excellent
business conditions in the rest of the U.S. and the lack of
meaningful steps to reduce the costs of doing business in Hawaii
need immediate attention. We have devoted considerable effort to
participating in and supporting the initiatives of the joint public
and private Economic Recovery Task Force as a starting point.
These initiatives must be enacted by the State legislature.
Progress beyond these initiatives must continue on a priority basis
in terms of reducing the size and cost of our State government and
in reducing the costs of doing business, such as health care,
workers' compensation, insurance, torts and taxes. We hope the
State legislators and administration take the necessary steps to
improve this situation.
Second, the extension of the runway at Kahului Airport from
7,000 feet to 9,600 feet has yet to be accomplished despite broad
community and County government support. Lack of progress on this
project remains the most serious impediment to the health of our
key retail and visitor industries on Maui, and continues to limit
sales of the Company's fresh pineapple products.
Third, financial difficulties in the major Asian countries
continue to have a negative impact on Maui's visitor and retail
industries. It appears unlikely that we will see significant
improvement in 1998 in these three key areas. Due to devaluation
of foreign currencies, we would, under normal circumstances, expect
to see some downward pressure in pineapple pricing; however,
foreign suppliers are experiencing low inventories and pricing has
remained steady.
Notwithstanding the poor climate for business in Hawaii,
progress was made in 1997. The Pineapple division completed a
joint venture affiliation with the U.S. subsidiary of an Indonesian
pineapple producer. The joint venture, Premium Tropicals
International, LLC, markets pineapple products from Indonesia to
U.S. grocery chain customers. This strategic alliance broadens the
Company's product line and presents marketing opportunities that we
were not able to take advantage of in prior years. Shipments by
Premium Tropicals in 1997 and sales in early 1998, while lower than
our expectations because a severe drought in Indonesia limited
product availability, were well received by Premium Tropicals'
customers. The volume of sales and profit contribution from
Premium Tropicals should increase if drought conditions in
Indonesia moderate and a greater volume of pineapple products
become available. Progress also was made in the Pineapple division
in developing additional markets for fresh whole pineapple,
including both Jet Fresh pineapple grown and packed on Maui and
pineapple grown in other countries and marketed through our wholly
owned subsidiary, Royal Coast Tropical Fruit Company. We expect
the volume of fresh whole pineapple and the contribution from these
activities to grow in the future, subject to resolution of
transportation and distribution issues, such as the Kahului Airport
runway extension.
Considerable progress was made in analyzing consumer
preferences for fresh cut pineapple products and in analyzing and
resolving production issues for this new product line. While sales
and shipments of fresh cut products were lower than expected in
1997, we remain convinced that fresh cut pineapple is an excellent
product opportunity for the Company and will represent an important
and growing source of revenues and profits in the future.
The Kapalua Resort also made progress in 1997. Kapalua Bay
Hotel was placed under the management of Halekulani Corporation by
its new owner, ERE Yarmouth. The hotel was closed for part of the
year while a renovation costing some $16 million was completed. As
a result, we did not receive any benefit from occupancy of the
hotel by guests nor did we receive any rent under the ground lease
of the hotel property. The hotel re-opened late in the year and
accrual of rent under the ground lease was reinstated. In June of
1997, ERE Yarmouth purchased a 50% interest in the 12-acre parcel
of land adjoining the hotel and a joint venture was formed with ERE
Yarmouth for development of that parcel. Market studies indicate
that demand for luxury condominiums on that site should be
reasonably strong and we hope to proceed with that project in 1998.
Real estate activity at Kapalua increased significantly in
1997, resulting in the sale of the final three lots owned by our
joint venture, Plantation Club Associates. As a result, this
partnership was dissolved as of year-end 1997. With the
improvement in real estate activity at the resort, the Company has
accelerated its planning efforts for future projects.
The selection of Kapalua as the site for the prestigious PGA
Tour Mercedes Championships for 1999 through 2002 should serve to
enhance Kapalua's reputation as one of the leading golf resorts in
the world. While the business outlook for 1998 is not expected to
improve substantially, improved financial performance should result
from repositioning the Kapalua Bay Hotel and the additional
international recognition received by the resort.
Results of the Company's Commercial & Property division are
dominated by the Kaahumanu Center, which at 573,000 square feet of
gross leaseable area is Maui's largest shopping center. High
turnover of tenants and a lackluster level of sales resulting from
a very competitive retail market on Maui negatively impacted 1997
results. Considerable progress was made in attracting new, high
quality tenants to the Center and overall tenant sales volume
increased approximately 5% over 1996 levels. Kaahumanu Center
continues to demonstrate the ability to attract new tenants, which
should result in improved financial performance for 1998.
At the end of 1997, the Company's total debt, including
capital leases, was $32.5 million, a $2.3 million increase from
year-end 1996. While this level of debt is still above the target
level of financial leverage for the Company, by year-end the
Company had paid entirely its revolving loans from bank lenders.
We are disappointed that 1997 did not result in a substantial
level of net profit for the Company. We believe the progress made
in 1997 has the effect of positioning Maui Land & Pineapple
Company, Inc. for substantially improved results under better
economic conditions.
Thank you for your continued support.
/S/ MARY C. SANFORD
Mary C. Sanford
Chairman
/S/ GARY L. GIFFORD
Gary L. Gifford
President & CEO
February 6, 1998
PINEAPPLE
In 1997, Maui Pineapple Company, Ltd. reported operating
profits before allocated interest and corporate expenses of
$3,749,000, $258,000 lower than 1996. This was the second year of
profitability after three years of net losses.
Pineapple's revenue for 1997 was $91 million, down 5% from
1996 levels. Total canned pineapple case sales volume was down 6%.
Canned fruit, our largest category, experienced an 8% case volume
decline. Price increases partially offset the effect of lower
sales volume. Case volume shortfalls in our domestic markets
resulted from low inventory levels, which affected product delivery
during the key Easter and Christmas holiday periods. Export case
volume was down significantly due to poor economic conditions that
continue to persist in the Asian markets.
Canned juice case volume was down 2% compared with 1996, while
pricing increased 5%. Supported by the State of California Women,
Infants and Children Supplemental Nutritional Feeding Program
contract, which we were awarded in 1997, volume and pricing for the
grocery juice segment was ahead of 1996 levels by 5%. All other
juice segments experienced case volume decreases. Pricing
increased in the industrial, club, frozen juice, institutional and
government segments. Due to consumers purchasing fewer canned
juices, we expect the canned juice category to experience downward
pricing pressure as sales continue to decline.
Net sales of the fresh whole fruit segment increased 2% over
1996 levels as the number of tons sold increased. Growth in this
category will be limited until the Kahului Airport runway is
extended. The company expects to increase sales volume of its Jet
Fresh fruit once the airport runway expansion is completed.
The company had a very good pineapple crop in the second half
of 1997, in contrast to the first half when we experienced weather-
related fruit shortages and quality problems. Pineapple fruit and
juice recovery was higher than 1996. These increases resulted in a
higher pack than expected and provided an opportunity to improve
our beginning inventory balances of canned pineapple for 1998.
This past year was excellent for plant growth and fruit
development. The company's plantings are in good condition for
1998 and beyond.
Increased pack, good weather conditions and the company's
continued emphasis on cost reduction contributed to lower operating
costs.
The company continues to closely monitor canned pineapple
imports. Through November 1997, case volume of imported canned
pineapple fruit and juice increased 6% and 2%, respectively, over
1996 levels. Juice concentrate import volume was down 7%.
Antidumping duties on canned pineapple fruit from Thailand
were in effect throughout 1997. The company does not expect any
significant changes in these duties in 1998. This past year the
company and the Department of Commerce each filed an appeal with
the Court of Appeals for the Federal Circuit challenging a decision
by the United States Court of International Trade. This decision
required the Department of Commerce to recalculate the antidumping
duties using accounting methods not normally used by Thai
producers. This method understates how much dumping is occurring
and the Company and the Department of Commerce believe the decision
should be overturned by the Court of Appeals for the Federal
Circuit. In the annual review process, the company is aggressively
pursuing the issue of canned pineapple sales in the U.S. at prices
below fair value by several Thai producers.
Winter crop output in both Indonesia and Thailand has been
poor, resulting in relatively firm marketplace pricing. Even
though raw material costs in Thailand have fallen since last year's
peak, the devaluation of the Thai baht continues to exert upward
pressure on other Thai production costs. It is unclear what the
long-term effect of the Thailand economic crisis will have on
pricing or the antidumping duties.
As part of the Company's strategic plan, we are continuing our
efforts in new product and new business development. During 1997
we made steady progress, including gaining marketplace experience
in developing a new fresh cut fruit program.
Through our Royal Coast Tropical Fruit Company, Inc.
subsidiary, we formed a joint venture with P.T. Great Giant
Pineapple Co., an Indonesian pineapple grower and canner and one of
the largest and lowest cost producers in the world. The joint
venture company, Premium Tropicals International, LLC, will market
and sell Indonesian canned pineapple in the United States. Sales
through this joint venture began in 1998. Under the Royal Coast
label, the company also sells fresh whole fruit from Central and
South America in the U.S. market. From a profit standpoint, our
financial results in both new businesses were less than expected.
Assuming favorable market conditions, we have laid the groundwork
for growth of these businesses in the coming years.
The company continues to be a leader in environmental issues.
This past fall, at a cost of $3.2 million, the cannery completed a
water-recycling program. This new system provides cannery-
processed water to Hawaiian Commercial & Sugar Company for seed
cane irrigation. Both Haliimaile and Honolua plantations have been
given Integrated Pest Management certification through the
University of Hawaii. This program reduces the overall use of
chemicals by using innovative agricultural practices to control
pests. The company also remains committed to retaining the
pristine condition of the Colin C. Cameron Puu Kukui Conservation
Easement.
The company's main focus over the next year is to improve
profitability by continued emphasis on cost reductions in
operations, maximizing yields and improving recovery. Significant
resources will continue to be directed toward improving product
quality and sales volume in the fresh cut categories where customer
demand is growing. Sales and marketing objectives are to achieve
the highest return from sales of "100% HAWAIIAN U.S.A.T" canned
pineapple and to expand sales through the Royal Coast label and the
Premium Tropicals International joint venture. We expect 1998 to
be another challenging year as we continue to expand and improve
our business.
RESORT
In 1997, Kapalua Land Company, Ltd. had a profit, before
allocated interest and corporate expenses, of $4.8 million compared
with a profit of $2.2 million in 1996. All of the increased
profit was due to the $4.2 million gain on the sale of a 50%
interest in a 12-acre oceanfront development parcel (Site 29) next
to the Kapalua Bay Hotel.
ERE Yarmouth, the owner of the Kapalua Bay Hotel, exercised
its option to purchase an interest in Site 29 and, after closing
the transaction in June of 1997, we formed Kapalua Coconut Grove
LLC, a 50/50 limited liability corporation with Yarmouth.
Preliminary development plans for approximately 40 luxury
condominiums on Site 29 have been completed and an application for
Special Management Area (SMA) approval is expected to be submitted
in the first half of 1998.
Overall, Hawaii's resort real estate market continued to show
signs of strengthening. Resort residential property resale
activity for all of Maui in 1997 increased 14% in total dollar
volume with prices stabilized or up slightly. Kapalua's resale
volume increased about 7% in 1997, mostly from residential property
and land sales activity.
In addition to the resale activity, the final three lots in
Phase I of Plantation Estates closed escrow in 1997. Although
there was significant cash generated by these sales, there was very
little profit recognition. Following these sales, we concluded an
agreement with our joint venture partner to dissolve Plantation
Club Associates. As part of the distribution at year-end, Kapalua
Land Company received ownership of the remaining development assets
comprised of the 142-acre Plantation Estates Phase II. Our net
cash proceeds from Plantation Club Associates in 1997 was
approximately $1.5 million.
We are proceeding with plans to reconfigure Plantation Estates
Phase II into fewer, larger lots as an alternative residential
product that would complement the two-acre single family lot
product in Phase I and the overall resort master plan for Kapalua.
The sale of a 75-acre portion of Phase II, which was placed in
escrow last year subject to a number of contingencies, is
tentatively scheduled to close escrow in 1998.
Results for our real estate brokerage operation, Kapalua
Realty, continued to improve in 1997 with a 50% increase in total
commission income and a dominant market share of both listings and
sales for the resort.
In addition to Site 29, our primary planning focus has been on
the near-term development of the 55-acre Central Resort area of
Kapalua. Significant progress has been made in finalizing
conceptual plans that include a new golf clubhouse and practice
facility for the Village Course, a resort spa, villa reception
center, Town Center and new villa product. We hope to obtain the
approvals and appropriate financing necessary to begin construction
of the Village Course redevelopment in 1998.
Hawaii's visitor industry finished 1997 with lower hotel
occupancy and growing concern over the trend in the declining
number of eastbound visitors and their expenditures. The recent
Asian financial crisis has added a new level of uncertainty and
concern for Hawaii's visitor industry in 1998.
Maui's hotel occupancy rate declined about 2 percentage points
last year to 71.6%, mostly because of the loss of eastbound
visitors to the Island of Hawaii which has benefited from the
recently lengthened Keahole-Kona airport runway. Excluding the
impact of closing the Kapalua Bay Hotel for renovation, our resort
occupancy increased more than 11% in 1997.
Excluding the sale of Site 29, our ongoing resort operations
had an operating profit of approximately $800,000 in 1997 compared
to $2 million in 1996. Total resort revenues from ongoing
operations increased 2% to $36.1 million. Increased golf green
fees from higher rates and increased Kapalua Club membership income
were offset by lower merchandise sales and higher resort operating
expenses.
The closure of the Kapalua Bay Hotel for major renovations in
1997 had a much greater negative impact on our operations than we
had anticipated and accounted for most of the decrease in profits.
The hotel closed on April 1 and did not fully reopen until the
fourth quarter. In addition to reduced hotel and commercial lease
rents and lower retail revenues due to the closing of the hotel, we
also incurred significant expense to settle a lawsuit related to
the sale of the hotel.
The agreement with Yarmouth to consolidate the short-term
villa rentals under our villa operation (The Kapalua Villas)
resulted in a significant and almost equal increase in both
revenues and expenses for 1997. With an inventory of over 260
resort villas now under management by The Kapalua Villas, this
operation clearly gives Kapalua a more unified and stronger market
position that complements the resort's two hotels.
Our resort marketing continues to emphasize golf, our unique
resort environment and Kapalua special events. Beginning in
January 1999, Kapalua and The Plantation Course will host the
prestigious Mercedes Championships, which will be the season
opening event for the PGA Tour. The Mercedes Championships
replaces the Lincoln-Mercury Kapalua International and gives us a
significant opportunity to further position Kapalua as one of the
premiere golf resort communities in the world.
Despite projections for another difficult year for Hawaii's
tourism industry, our resort operations should show improved
results in 1998 from having the Kapalua Bay Hotel reopened under
the management of Halekulani Corporation. Development profit in
1998 is expected to be limited to the pending sale of a 75-acre
parcel in Plantation Estates Phase II. With the planned
development of Site 29 and continued improvement from resort
operations, the longer-term outlook for Kapalua Land Company
continues to be positive.
COMMERCIAL & PROPERTY
The Commercial & Property business segment produced slightly
higher revenue and operating profits in 1997 compared to 1996.
Revenue increased from $4.9 million in 1996 to slightly over $5.0
million in 1997. Operating profit, before allocation of interest
and corporate expenses, was $127,000 in 1997 compared to $105,000
in 1996. Land sales arising from two transactions contributed a
total of $1.3 million in cash flow and $1.0 million in operating
profit for 1997. The two transactions involved the sale of an
existing residence on a two-acre parcel of land along Kaluanui Road
in Makawao to a private buyer and two parcels of land in West Maui
to the County of Maui.
Kaahumanu Center, Maui's largest shopping center, posted
results lower than expected due mostly to higher than anticipated
tenant turnover and the timing of new tenant installations.
Kaahumanu Center continues to attract new quality tenants,
including Sam Choy's Kahului, Spencer Gifts, Perfumania, Forever
21, PrimeCo, Madison Avenue, Cesia, Cinnabon, Hoaloha Heirlooms,
Gold Mart and Papyrus. Traffic at Kaahumanu Center remained strong
despite new competition. Tenant sales increased 5% over 1996.
Recent exit surveys conducted at Kahului Airport indicated that
Kaahumanu Center showed significant improvement in both eastbound
and westbound tourist traffic in 1997. Kaahumanu Center continues
to increase its entertainment component with the addition of new
restaurants and a contemplated expansion of the existing multiplex
cinema.
Napili Plaza, a 44,000 square foot community center, showed
improved results due to higher occupancy and tenant sales. New
competition from Honokowai Marketplace, a 75,000 square foot center
to be anchored by Star Market and currently under construction, may
negatively impact Napili Plaza's results in the future.
In 1997, the Land Management Division devoted significant time
and effort to monitor various proposed legislation before the
County of Maui and State of Hawaii that could potentially impact
the ability of the Company to benefit from its land and water
resources.
The Land Management Division is nearing completion of a Land
and Water Use and Development Plan and a Management Information
System Database for our land and water resources. Once completed,
the plan and database will ensure the effective management and
development of the Company's land and water resources.
In December of 1997, Change in Zoning, District Boundary
Amendment and Special Management Area Permit applications were
submitted to the County of Maui for the 45-lot Kapua Village
Employee Subdivision in West Maui. Current plans are to commence
construction of subdivision improvements during the last quarter of
1998.
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Directors of Maui Land & Pineapple Company,
Inc.:
We have audited the accompanying consolidated balance sheets
of Maui Land & Pineapple Company, Inc. and its subsidiaries as of
December 31, 1997 and 1996, and the related consolidated statements
of operations and retained earnings and of cash flows for each of
the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of the
Companies as of December 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years
in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.
/S/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Honolulu, Hawaii
February 6, 1998
(February 26, 1998 as to the seventh paragraph of Note 4)
<TABLE>
MAUI LAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
<CAPTION>
1997 1996
(Dollars in Thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 1,611 $ 453
Accounts and notes receivable,
less allowance of $567 and $698 12,748 14,343
Inventories
Pineapple products 11,125 9,740
Real estate held for sale 1,349 339
Merchandise, materials and supplies 6,239 6,405
Prepaid expenses and other assets 4,076 4,028
Total Current Assets 37,148 35,308
NOTES RECEIVABLE--REAL ESTATE SALES 370 419
INVESTMENTS AND OTHER ASSETS 9,575 10,514
PROPERTY
Land 4,614 4,605
Land improvements 42,761 42,184
Buildings 48,374 47,991
Machinery and equipment 98,700 93,472
Construction in progress 5,144 2,747
Total Property 199,593 190,999
Less accumulated depreciation 111,972 104,389
Net Property 87,621 86,610
TOTAL $134,714 $132,851
<CAPTION>
1997 1996
(Dollars in Thousands)
<S> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 2,043 $ 53
Current portion of capital
lease obligations 1,009 1,201
Trade accounts payable 6,166 7,661
Payroll and employee benefits 4,637 4,235
Accrued interest 702 898
Other accrued liabilities 2,308 1,793
Total Current Liabilities 16,865 15,841
LONG-TERM LIABILITIES
Long-term debt 28,257 27,347
Capital lease obligations 1,178 1,551
Accrued retirement benefits 21,571 21,983
Equity in losses of joint venture 6,655 6,256
Other noncurrent liabilities 1,292 1,840
Total Long-Term Liabilities 58,953 58,977
CONTINGENCIES AND COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock--no par value, 1,800,000 shares
authorized, 1,797,125 shares issued
and outstanding 12,318 12,318
Retained earnings 46,578 45,715
Stockholders' Equity 58,896 58,033
TOTAL $134,714 $132,851
See Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
MAUI LAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Years Ended December 31, 1997, 1996 and 1995
<CAPTION>
1997 1996 1995
(Dollars in Thousands Except Per Share Amounts)
<S> <C> <C> <C>
REVENUES
Net sales $101,421 $106,666 $ 91,227
Operating revenue 29,058 28,062 30,104
Other income 6,019 1,607 4,246
Total Revenues 136,498 136,335 125,577
COSTS AND EXPENSES
Cost of goods sold 72,200 75,279 69,314
Operating expenses 26,027 24,030 24,315
Shipping and marketing 18,053 19,185 16,793
General and administrative 14,600 14,507 15,160
Equity in (earnings) losses
of joint ventures 1,211 882 (4,001)
Interest 3,045 3,575 7,021
Total Costs and Expenses 135,136 137,458 128,602
INCOME (LOSS) BEFORE
INCOME TAXES 1,362 (1,123) (3,025)
INCOME TAXES (CREDITS) 499 (376) (1,466)
NET INCOME (LOSS) 863 (747) (1,559)
RETAINED EARNINGS,
BEGINNING OF YEAR 45,715 46,552 48,111
CASH DIVIDENDS -- (90) --
RETAINED EARNINGS, END OF YEAR 46,578 45,715 46,552
PER COMMON SHARE
Net Income (Loss) .48 (.42) (.87)
Cash Dividends $ -- $ .05 $ --
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
MAUI LAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1997, 1996 and 1995
<CAPTION>
1997 1996 1995
(Dollars in Thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 863 $ (747) $(1,559)
Adjustments to reconcile
net income (loss) to net cash
provided by operating activities
Depreciation 8,041 8,606 10,202
Undistributed equity in (earnings)
losses of joint ventures 1,211 1,010 (3,850)
Gain on property disposals (5,254) (812) (3,408)
Deferred income taxes (313) (389) (1,471)
(Increase) decrease in
accounts receivable 1,446 (1,105) (723)
(Increase) decrease in
refundableincome taxes (38) (44) 1,392
(Increase) decrease
in inventories (1,219) 3,191 862
Increase (decrease) in
trade payables (1,356) 1,602 573
Net change in other operating
assets and liabilities 72 442 124
NET CASH PROVIDED BY
OPERATING ACTIVITIES 3,453 11,754 2,142
INVESTING ACTIVITIES
Purchases of property (8,388) (5,284) (5,679)
Proceeds from sale of property 5,882 845 3,469
Distributions from joint ventures 1,460 712 303
Contributions to joint ventures (1,030) -- --
Payments for other investments (1,815) (437) (3,563)
Proceeds from surrender of
insurance policies -- 3,125 --
Reimbursement from Kaahumanu
Center Associates -- 328 11,843
NET CASH PROVIDED BY (USED IN)
INVESTING A CTIVITIES (3,891) (711) 6,373
FINANCING ACTIVITIES
Proceeds from long-term
borrowings 23,891 18,800 16,388
Payments of long-term debt (20,991) (28,097) (25,515)
Payments on capital lease
obligations (1,304) (1,369) (1,491)
Dividend paid -- (90) --
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 1,596 (10,756) (10,618)
NET INCREASE (DECREASE) IN CASH 1,158 287 (2,103)
CASH AT BEGINNING OF YEAR 453 166 2,269
CASH AT END OF YEAR $ 1,611 $ 453 $ 166
Supplemental Disclosures of Cash Flow Information and Non-Cash
Investing and Financing Activities:
1. Cash paid (received) during the year (in thousands):
Interest (net of
amount capitalized) $ 3,235 $ 3,751 $ 7,339
Income taxes $ 335 $ 301 $(1,205)
2. Capital lease obligations of $739,000 in 1997 and $1,092,000
in 1996 were incurred for new equipment.
3. Effective December 31, 1997, the Company's investment in
Plantation Club Associates (PCA) was liquidated and the Company
assumed PCA's remaining assets totaling $1.4 million (see Note 3
to Consolidated Financial Statements).
4. Effective April 30, 1995, the Employees' Retirement System
of the State of Hawaii converted its $30.6 million loan to an
additional 49% ownership in Kaahumanu Center Associates (see Note
3 to Consolidated Financial Statements).
5. In 1995, the $4.7 million loan from Kaptel Associates to the
Company was offset against the cost of the related off-site
improvements (see Note 3 to Consolidated Financial Statements).
See Notes to Consolidated Financial Statements.
</TABLE>
MAUI LAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts
of Maui Land & Pineapple Company, Inc. and its wholly owned
subsidiaries, primarily Maui Pineapple Company, Ltd. and Kapalua
Land Company, Ltd. Significant intercompany balances and
transactions have been eliminated.
INVENTORIES
Inventories of tinplate, cans, ends and canned pineapple
products are stated at cost, not in excess of market value, using
the dollar value last-in, first-out (LIFO) method.
The costs of growing pineapple are charged to production in
the year incurred rather than deferred until the year of harvest.
For financial reporting purposes, each year's total cost of
growing and harvesting pineapple is allocated to products on the
basis of their respective market values; for income tax purposes,
the allocation is based upon the weight of fruit included in each
product.
Real estate held for sale is stated at the lower of cost or
fair value less cost to sell.
Merchandise, materials and supplies are stated at cost, not
in excess of market value, using retail and average cost methods.
INVESTMENTS AND OTHER ASSETS
Cash surrender value of life insurance policies are
reflected net of loans against the policies.
Investments in joint ventures are generally accounted for
using the equity method.
PROPERTY AND DEPRECIATION
Property is stated at cost. Major replacements, renewals
and betterments are capitalized while maintenance and repairs
that do not improve or extend the life of an asset are charged to
expense as incurred. When property is retired or otherwise
disposed of, the cost of the property and the related accumulated
depreciation are written off and the resulting gains or losses
are included in income. Depreciation is provided over estimated
useful lives of the respective assets using the straight-line
method.
POSTRETIREMENT BENEFITS
The Company's policy is to fund pension cost at a level at
least equal to the minimum amount required under federal law, but
not more than the maximum amount deductible for federal income
tax purposes.
Deferred compensation plans for certain management employees
provide for specified payments after retirement. The present
value of estimated payments to be made are accrued over the
period of active employment.
The estimated cost of providing postretirement health care
and life insurance benefits is accrued over the period employees
render the necessary services.
REVENUE RECOGNITION
Revenue from the sale of pineapple is recognized when title
to the product is transferred to the customer. The timing of the
transfer of title varies according to the shipping and delivery
terms of the sale.
Sales of real estate are recognized as revenues in the
period in which sufficient cash has been received, collection of
the balance is reasonably assured and risks of ownership have
passed to the buyer.
INTEREST CAPITALIZATION
Interest costs are capitalized during the construction
period of major capital projects.
ADVERTISING AND RESEARCH AND DEVELOPMENT
The costs of advertising and research and development
activities are expensed as incurred.
LEASES
Leases that transfer substantially all of the benefits and
risks of ownership of the property are accounted for as capital
leases. Amortization of capital leases is included in
depreciation expense. Other leases are accounted for as
operating leases.
INCOME TAXES
The Company's provision for income taxes is calculated using
the liability method. Deferred income taxes are provided for all
temporary differences between the financial statement and tax
bases of assets and liabilities using enacted tax rates.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
periods. Future actual amounts could differ from those
estimates.
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed using the
weighted average number of shares outstanding during the period.
2. INVENTORIES
Pineapple product inventories were comprised of the
following components at December 31, 1997 and 1996:
1997 1996
(Dollars in Thousands)
Finished Goods $ 8,977 $ 7,306
Work In Progress 823 1,645
Raw Materials 1,325 789
Total $ 11,125 $ 9,740
The replacement cost of pineapple product inventories at
year-end approximated $25 million in 1997 and $22 million in
1996. In 1996 and 1995 there were partial liquidations of LIFO
inventories; thus, cost of sales included prior years' inventory
costs which were lower than current costs. Had current costs
been charged to cost of sales, the net losses for 1996 and 1995
would have increased by $795,000 or $.44 per share and $54,000 or
$.03 per share, respectively.
3. INVESTMENTS AND OTHER ASSETS
Investments and Other Assets at December 31, 1997 and 1996
consisted of the following:
1997 1996
(Dollars in Thousands)
Plantation Club Associates $ -- $ 2,961
Cash Surrender Value of Life
Insurance Policies (net) 532 386
Deferred Costs 6,206 4,889
Other 2,837 2,278
Total $ 9,575 $10,514
Cash surrender values of life insurance policies are stated
net of policy loans totaling $892,000 at December 31, 1997 and
1996.
Deferred costs are primarily intangible predevelopment costs
related to various projects at the Kapalua Resort, which will be
allocated to future development projects.
PLANTATION CLUB ASSOCIATES
Plantation Club Associates (PCA) was an unincorporated joint
venture in which Kapalua Land Company, Ltd. (Kapalua) was the
managing venturer. Profits and losses of the joint venture were
allocated based on the estimated distributions to the partners,
which was 85% to Kapalua and 15% to the other partner. The
partnership agreement required that all major decisions receive
unanimous approval of the partners.
In 1997 the three remaining lots in Plantation Estates Phase
I were sold and the partners concluded an agreement to liquidate
PCA as of December 31, 1997. After distribution of the joint
venture's cash to the partners, Kapalua assumed PCA's remaining
assets of $1.4 million, primarily land and planning costs for
Plantation Estates Phase II.
Summarized balance sheet information for PCA as of December
31, 1996 and operating information for the years ended December
31, 1997, 1996 and 1995 follows:
1996
(Dollars in Thousands)
Real estate inventories $ 2,608
Other assets 1,351
Total Assets 3,959
Less: Total Liabilities 547
Partners' Capital $ 3,412
1997 1996 1995
Revenues $ 1,823 $ 560 $ 672
Costs and Expenses 1,850 397 481
Net Income (Loss) $ (27) $ 163 $ 191
Kapalua's pre-tax share of the joint venture's net income
(loss) was $(56,000), $128,000 and $152,000 for 1997, 1996 and
1995, respectively. These amounts include expenses incurred by
the Company related to the investment (primarily amortization of
capitalized interest cost). The Company received cash
distributions from PCA of $1,460,000, $850,000 and $465,000 in
1997, 1996 and 1995, respectively.
KAPTEL ASSOCIATES
Kapalua Investment Corp. (KIC), a wholly owned subsidiary of
Maui Land & Pineapple Company, Inc., was a 25% general partner in
Kaptel Associates, the partnership that owned The Ritz-Carlton
Kapalua Hotel. In February of 1995, Kaptel defaulted on its $186
million non-recourse financing arrangement. NI Hawaii Resorts,
Inc. (NI), the major general partner, acquired the indebtedness
and on October 31, 1995, the partners of Kaptel concluded an
agreement to dissolve the partnership. KIC transferred its
interest in the partnership to NI.
Because of the dissolution agreement, the Company's equity
in the losses of Kaptel Associates aggregating $4,990,000
recorded through December 31, 1994, were reversed in 1995 and
recorded as a credit to equity in (earnings) losses of joint
ventures.
The Company leased the 36-acre hotel site to Kaptel under a
long-term lease. In 1990, the Company borrowed $4,750,000 from
Kaptel for construction of certain off-site improvements related
to the hotel property. Principal and interest payments on the
loan were payable solely from rental income receivable by the
Company under the hotel ground lease. The lease was renegotiated
with the hotel owner, effective January 1, 1996. The
renegotiated lease subordinates the Company's fee interest to a
$65 million first mortgage and requires that ground rents be
applied against the off-site loan with any balance remaining on
the loan at January 1, 1999 to be canceled. For accounting
purposes, the off-site loan was offset against the cost of the
off-site improvements as of December 31, 1995, and the Company
will not recognize any income from the ground lease until January
1, 1999.
KAAHUMANU CENTER ASSOCIATES
In June 1993 Kaahumanu Center Associates (KCA) was formed to
finance the expansion and renovation of and to own and operate
Kaahumanu Center. KCA is a partnership between the Company as
general partner and the Employees' Retirement System of the State
of Hawaii (ERS) as a limited partner. The Company contributed
the then existing shopping center, subject to a first mortgage,
and approximately nine acres of adjacent land. ERS contributed
$312,000 and made a $30.6 million loan to the partnership. The
remainder of the construction cost was funded principally by bank
loans.
The expansion and renovation was substantially complete by
the end of November 1994. Effective April 30, 1995, the ERS
converted its $30.6 million loan to an additional 49% ownership
in KCA. Effective with the conversion of the ERS loan, the
Company and ERS each have a 50% interest in KCA and the Company
has accounted for its investment in KCA by the equity method.
Prior to the conversion, the financial statements of KCA were
consolidated with those of the Company.
The Company has a long-term agreement with KCA to manage the
Kaahumanu Center. The agreement provides for certain performance
tests, which if not met could result in termination of the
agreement. KCA does not have any employees. As manager the
Company provides all on-site and administrative personnel and
also incurs other costs and expenses, primarily insurance, which
are reimbursable by KCA. The Company generates a portion of the
electricity used by Kaahumanu Center. In 1997 and 1996
reimbursements from KCA for payroll and other costs and expenses
totaled $2,240,000 and $2,391,000, respectively, and the Company
charged KCA $2,574,000 and $2,621,000, respectively, for
electricity and management fees. For the eight months ended
December 31, 1995, reimbursements for payroll and other costs and
expenses totaled $1,512,000 and charges by the Company for
electricity and management fees totaled $1,695,000. At December
31, 1997 and 1996, $430,000 and $630,000, respectively, were due
to the Company from KCA for management fees, electricity and
reimbursable costs.
Summarized balance sheet information for KCA as of December
31, 1997 and 1996 and operating information for the years ended
December 31, 1997 and 1996, and for the eight months ended
December 31, 1995 follows:
1997 1996
(Dollars in Thousands)
Current assets $ 923 $ 701
Property and equipment, net 73,405 75,581
Other assets, net 5,627 5,461
Total Assets 79,955 81,743
Current liabilities 1,454 1,742
Noncurrent liabilities 62,376 63,226
Total Liabilities 63,830 64,968
Partners' Capital $ 16,125 $16,775
1997 1996 1995
Revenues $ 13,945 $13,677 $ 8,991
Costs and Expenses 16,255 15,697 11,272
Net Loss $ 2,310 $ 2,020 $ 2,281
The Company's share of losses from KCA was $1,155,000,
$1,010,000 and $1,141,000, respectively, for 1997, 1996 and for
the eight months ended December 31, 1995. ERS and the Company
each have a 9% cumulative, non-compounded priority right to cash
distributions based on their net contributions to the partnership
(preferred return). For the purpose of calculating preferred
returns, each partner's capital contribution had an agreed upon
value of $30.9 million on May 1, 1995. The Company's preferred
return is subordinate to the ERS preferred return. As of
December 31, 1997, the accumulated unpaid preferred return was
$6.3 million each for ERS and the Company. Pursuant to cash
calls, the partners each contributed $830,000 to the partnership
in 1997.
The Company's investment in KCA is a negative $6.7 million
at December 31, 1997. The negative balance is a result of
recording the Company's initial contribution in 1993 at net book
value of the assets contributed, reduced by the related debt. In
1995, $1.3 million owing to the Company by KCA was considered a
capital contribution. This amount was reduced in 1996 by
$533,000 for items which would have impacted the previous amount
owing, including a payment of $328,000 to the Company.
4. BORROWING ARRANGEMENTS
Short-term bank lines of credit available to the Company at
December 31, 1997 were $2 million. These lines provide for
interest at the prime rate (8.5% at December 31, 1997) plus 1/4%
to 1%. There were no borrowings under these lines at December
31, 1997, but a $775,000 letter of credit has been reserved
against these lines to secure the Company's portion of insurance
claims administered by an insurance company.
During 1997, 1996 and 1995, the Company had average
borrowings outstanding of $32.8 million, $36.5 million and $67.6
million, respectively, at average interest rates of 8.8%, 8.9%
and 9.7%, respectively.
Long-term debt at December 31, 1997 and 1996 consisted of
the following (interest rates represent the rates at December
31):
1997 1996
(Dollars in Thousands)
Revolving credit agreement, 8.5% and 8.25% $ -- $ 2,400
Senior unsecured notes, 8.86% 20,000 20,000
Mortgage loan, 8.25% 4,948 5,000
Pacific Coast Farm Credit Services,
8.14% to 8.68% 4,335 --
Other 8.45% 1,017 --
Total 30,300 27,400
Less portion classified as current 2,043 53
Long-term debt $ 28,257 $27,347
The Company has a revolving credit agreement with
participating banks under which it may borrow up to $15 million
in revolving loans through December 31, 1999. Amounts
outstanding at that date may, at the Company's option, be
converted to a three-year term loan payable in six equal semi-
annual installments. Commitment fees of 1/4% are payable on the
unused portions of this credit line. At the Company's option,
interest on advances is at the prime rate or based on a
Eurodollar rate. The agreement contains certain financial
covenants, including the maintenance of consolidated net worth
and working capital at certain levels, limits on the incurrence
of other indebtedness and capital expenditures and restrictions
on the payment of dividends. The loan is collateralized by the
Company's three golf courses at the Kapalua Resort.
In September 1993 the Company concluded a private placement
of $20 million in ten-year, 8.86% senior unsecured notes.
Mandatory annual principal payments of 20% of the original
principal amount will begin in 1999. The agreement includes
financial covenants that are similar to the Company's revolving
credit agreement, except that payment of dividends is restricted
to 30% of cumulative net earnings after January 1, 1993.
The mortgage loan is collateralized by the Napili Plaza
shopping center and matures on December 31, 2005. Payments are
based on a 25-year amortization. The interest rate, presently
fixed at 8.25%, will be adjusted as of January 1, 2000 and
January 1, 2003.
In April 1997 the Company entered into a $5 million loan
agreement with Pacific Coast Farm Credit Services. Advances
under this loan are to be used to purchase assets for the
Company's pineapple operations. The loan includes a revolving
period of approximately two years and a final maturity date of
January 1, 2002. At the Company's option, interest on advances
is to be based on the prime rate, a Western Farm Credit Bank
rate, or a Eurodollar rate. The agreement includes certain
financial covenants that are similar to those in the Company's
revolving credit agreement, plus
a requirement for the maintenance of a minimum tangible net worth
and debt coverge ration (as defined). The Company was not in
compliance with the annual debt coverage ratio as of December 31,
1997. On February 26, 1998, the lender waived the covenant
requirement with respect to the year ended December 31, 1997.
Maturities of long-term debt during the next five years,
from 1998 through 2002, are as follows: $2,043,000, $5,787,000,
$5,396,000, $4,323,000, $4,168,000.
5. POSTRETIREMENT BENEFITS
The Company has defined benefit pension plans covering
substantially all regular employees. Pension benefits are based
primarily on years of service and compensation levels.
The projected benefit obligations were determined using
discount rates of 7.5% and 8% as of December 31, 1997 and 1996,
respectively, and compensation increases ranging up to 4.5%. The
expected long-term rate of return on assets was 8% for 1997 and
1996. The assets of the plans consist primarily of stocks,
bonds, real estate and short-term investments.
Net pension cost for 1997, 1996 and 1995 included the
following components:
1997 1996 1995
(Dollars in Thousands)
Service cost--benefits earned during
the year $ 1,030 $ 982 $ 882
Interest cost on projected
benefit obligation 2,161 2,190 2,076
Actual return on plan assets (5,742) (3,117) (5,294)
Net amortization and deferral 2,708 258 2,863
Net pension expense $ 157 $ 313 $ 527
<TABLE>
The following table sets forth the funded status of the
pension plans and the amounts recognized in the balance sheets at
December 31:
<CAPTION>
1997 1996
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations
Vested benefits $ 26,132 $ 1,254 $ 25,086 $ 1,243
Nonvested benefits 378 55 256 79
Accumulated benefit
obligation 26,510 1,309 25,342 1,322
Effect of assumed increase in
compensation levels 2,842 354 2,670 320
Projected benefit
obligation for services
rendered to date 29,352 1,663 28,012 1,642
Assets of plans at
fair value 36,679 851 32,216 776
Assets over (under) projected
benefit obligation 7,327 (812) 4,204 (866)
Unrecognized net (gain) loss (3,210) 155 (272) 168
Unrecognized net transition
(asset) obligation (2,223) 393 (2,787) 421
Unrecognized prior
service cost 245 60 298 67
Adjustment required to
recognize
minimum liability -- (253) -- (336)
Pension asset (liability)
recognized in
balance sheets $ 2,139 $ (457) $ 1,443 $ (546)
</TABLE>
The Company has an Employee Stock Ownership Plan (ESOP) for
non-bargaining salaried employees and bargaining unit clerical
employees of Maui Pineapple Company, Ltd. Since December of
1993, the 205,533 shares originally sold to the ESOP in 1979 have
all been allocated to participants' accounts, and there have been
no contributions paid to the ESOP since 1994.
The Company has contributory, defined contribution plans
covering all non-bargaining salaried employees and all bargaining
unit employees of Maui Pineapple Company, Ltd. The participants
may elect to make pretax contributions to the plans. The Company
can also elect to contribute, but made no contributions to the
plans in 1997, 1996 or 1995.
In addition to providing pension benefits, the Company
provides certain health care and life insurance benefits to
substantially all retirees. The net periodic cost of these
benefits for 1997, 1996 and 1995 consisted of the following
components:
<TABLE>
<CAPTION>
1997 1996 1995
(Dollars in Thousands)
<S> <C> <C> <C>
Service cost $ 325 $ 328 $ 337
Interest cost 991 1,012 985
Net amortization and deferral (447) (371) (374)
Net expense $ 869 $ 969 $ 948
</TABLE>
<TABLE>
<CAPTION>
The funded status of these plans as of December 31, 1997 and 1996
was as follows:
1997 1996
(Dollars in Thousands)
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $ 6,913 $ 6,901
Fully eligible active
plan participants 2,410 2,576
Other active plan participants 4,817 4,136
Accumulated postretirement
benefit obligation 14,140 13,613
Unrecognized prior service cost 1,471 1,619
Unrecognized net gain 3,772 4,033
Accrued postretirement benefit
obligation recognized in
balance sheets $ 19,383 $19,265
</TABLE>
Measurements of the accumulated postretirement benefit
obligation as of December 31, 1997 and 1996 were determined using
discount rates of 7.5% and 8%, respectively, and compensation
increases ranging up to 4.5%.
The accumulated postretirement benefit obligation as of
December 31, 1997 and 1996 was determined using a health care
cost trend rate of 10% in 1995, decreasing by .5% each year from
1995 through 2004 and 5% thereafter. The effect of a 1% annual
increase in these assumed cost trend rates would increase the
accrued postretirement benefit obligation by approximately
$2,215,000 as of December 31, 1997 and the aggregate of the
service and interest cost for 1997 by approximately $255,000 .
6. REAL ESTATE SALES
Other income for 1997, 1996 and 1995 includes $5.2 million,
$700,000 and $3.4 million, respectively, attributable to real
estate sales.
7. LEASES
LESSEE
The Company has capital leases, primarily on equipment used
in pineapple operations, which expire at various dates through
2002. At December 31, 1997 and 1996, property included capital
leases of $6,013,000 and $5,842,000, respectively (accumulated
depreciation of $2,403,000 and $1,756,000, respectively). Future
minimum rental payments under capital leases aggregate $2,416,000
(including $229,000 representing interest) and are payable during
the next five years (1998 to 2002) as follows: $1,123,000,
$562,000, $298,000, $272,000 and $161,000.
The Company also has various operating leases, primarily for
land used in pineapple operations, which expire at various dates
through 2012. A major operating lease covering approximately
1,500 acres used primarily for pineapple operations expires on
December 31, 1999. Total rental expense under operating leases
was $804,000 in 1997, $736,000 in 1996 and $818,000 in 1995.
Future minimum rental payments under operating leases aggregate
$2,409,000 and are payable during the next five years (1998 to
2002) as follows: $599,000, $484,000, $192,000, $122,000,
$113,000, respectively, and $899,000 thereafter.
LESSOR
The Company leases land and land improvements, primarily to
the hotels at Kapalua, and buildings, primarily to retail
tenants. The leases generally provide for minimum rents and, in
most cases, percentage rentals based on tenant revenues. In
addition, the leases generally provide for reimbursement of
common area maintenance and other expenses. Total rental income
under these operating leases was as follows:
1997 1996 1995
(Dollars in Thousands)
Minimum rentals $ 1,575 $ 2,370 $ 4,569
Percentage rentals 1,140 738 1,235
Total $ 2,715 $ 3,108 $ 5,804
Property at December 31, 1997 and 1996 includes leased
property of $19,043,000 and $18,886,000, respectively
(accumulated depreciation of $8,770,000 and $8,176,000,
respectively).
Future minimum rental income aggregates $7,413,000 and is
receivable during the next five years (1998 to 2002) as follows:
$1,482,000, $1,043,000, $870,000, $563,000, $391,000,
respectively, and $3,064,000 thereafter.
8. INCOME TAXES
The components of the income tax provision (credit) were as
follows:
1997 1996 1995
(Dollars in Thousands)
Current
Federal $ 931 $ 51 $ 32
State (119) (38) (27)
Total 812 13 5
Deferred
Federal (433) (379) (1,197)
State 120 (10) (274)
Total (313) (389) (1,471)
Total provision (credit) $ 499 $ (376) $(1,466)
Reconciliation between the total provision (credit) and the
amount computed using the statutory federal rate of 34% follows:
1997 1996 1995
(Dollars in Thousands)
Federal provision (credit) at
statutory rate $ 463 $ (382) $(1,028)
Adjusted for
State income taxes--
net of effect on
federal income taxes (5) (19) (192)
Appreciated property donation -- -- (228)
Other 41 25 (18)
Total income tax
provision (credit) $ 499 $ (376) $(1,466)
Deferred tax assets and liabilities were comprised of the
following types of temporary differences as of December 31, 1997
and 1996:
1997 1996
(Dollars in Thousands)
Accrued retirement benefits $ 7,358 $ 7,440
Net operating loss carryforward 2,134 3,366
Minimum tax credit carryforward 3,641 2,709
Accrued liabilities 1,215 1,224
Allowance for doubtful accounts 211 264
Inventory 264 87
Total deferred tax assets 14,823 15,090
Deferred condemnation proceeds (6,397) (6,507)
Property net book value (4,546) (4,729)
Income from partnerships (1,363) (1,796)
Charitable contributions (1,410) (1,357)
Pineapple marketing costs (685) (624)
Other (96) (64)
Total deferred tax liabilities (14,497) (15,077)
Net deferred tax asset $ 326 $ 13
At December 31, 1997 the Company had federal income tax net
operating loss carryforwards of approximately $5 million, which
expire in 2009. The Company also had federal minimum tax credit
carryforwards of $3.6 million.
The Company's federal income tax returns for 1989 through
1994 are under examination by the Internal Revenue Service. The
revenue agent's report on these years has not yet been issued and
the Company cannot presently predict the outcome of these
examinations.
9. INTEREST CAPITALIZATION
Interest cost incurred in 1997, 1996 and 1995 was
$3,214,000, $3,633,000, and $7,043,000, respectively, of which
$169,000, $58,000 and $22,000, respectively, was capitalized.
10. ADVERTISING AND RESEARCH AND DEVELOPMENT
Advertising expense totaled $1,594,000 in 1997, $1,537,000
in 1996 and $1,254,000 in 1995. Research and development
expenses totaled $601,000 in 1997, $543,000 in 1996 and $410,000
in 1995.
11. CONTINGENCIES AND COMMITMENTS
There are various claims and legal actions pending against
the Company. In the opinion of management, after consultation
with legal counsel, the resolution of these matters will not have
a material adverse effect on the Company's financial position or
results of operations.
The Department of Health of the State of Hawaii (DOH) has
cited the Company for improper disposal of its cannery cooling
and processing wastewater. The Company is in negotiation with
the DOH regarding the penalties it may impose on the Company. In
addition, the Company is a party to litigation related to the
County of Maui's claim against certain chemical manufacturers
because of chemical contamination in certain water wells on Maui.
Based on discussion with counsel, the Company believes that the
final resolution of these matters will not have a material effect
on the Company's financial position or results of operations.
The Company has guaranteed the payment of up to $10 million
of debt service for Kaahumanu Center Associates. The lender will
release the guaranty when Kaahumanu Center attains a defined
level of net operating income.
Premium Tropicals International, LLC (PTI) is a joint
venture between Royal Coast Tropical Fruit Company, Inc. (a
wholly owned subsidiary of Maui Pineapple Company, Ltd.) and an
Indonesian pineapple grower and canner. The joint venture will
market and sell Indonesian canned pineapple in the United States.
The Company is a guarantor of a $2 million line of credit, which
supports letters of credit to be issued on behalf of PTI for
import trading purposes.
12. CONCENTRATIONS OF CREDIT RISK
A substantial portion of the Company's trade receivables
results from sales of pineapple products, primarily to food
distribution customers in the United States. Credit is extended
after evaluating creditworthiness and no collateral is generally
required from customers. Notes receivable result principally
from sales of real estate in Hawaii and are collateralized by the
property sold.
13. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Except as indicated below, the carrying amount is considered
to be the fair value of financial instruments. The following
methods and assumptions were used to estimate the fair value of
certain financial instruments:
Notes and Interest Receivable:
The fair value of these assets was estimated based on rates
currently available for similar types of transactions.
Long-Term Debt and Accrued Interest:
The fair value of these liabilities was estimated based on
rates currently available to the Company for debt with similar
terms and remaining maturities.
The estimated fair values for these financial instruments at
December 31, 1997 and 1996 were as follows:
<TABLE>
1997 1996
(Dollars in Thousands)
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Notes and Interest Receivable $ 954 $ 931 $ 739 $ 717
Long-Term Debt and
Accrued Interest $31,859 $32,064 $29,189 $29,033
</TABLE>
14. RECLASSIFICATIONS
Certain amounts for prior years have been reclassified to
conform to the presentation for the current year.
15. BUSINESS SEGMENTS
The Company's reportable segments are Pineapple, Resort and
Commercial & Property. Each segment is a line of business
requiring different technical and marketing strategies.
Pineapple includes growing pineapple, canning pineapple in
tin-plated steel containers fabricated by the Company, and
marketing canned and fresh pineapple products.
Resort includes the development and sale of real estate,
property management and the operation of recreational and retail
facilities and utility companies at Kapalua on Maui. It also
includes the Company's investments in Plantation Club Associates
and Kaptel Associates (through 1995).
Commercial & Property covers non-resort real estate
activities including Kaahumanu Center (investment in Kaahumanu
Center Associates, effective May 1, 1995), Napili Plaza shopping
center, non-resort property rentals and sales and the Company's
land entitlement and management activities.
The accounting policies of the segments are the same as
those described in Note 1, Summary of Significant Accounting
Policies.
<TABLE>
Commercial
Pineapple Resort & Property Other Consolidated
(Dollars in Thousands)
1997
<S> <C> <C> <C> <C> <C>
Revenues (1)(4) $90,949 $ 40,338 $ 5,065 $ 146 $ 136,498
Operating profit (2) 3,749 4,758 127 -- 8,634
Interest expense (1,479) (1,102) (164) (300) (3,045)
Corporate expense (1,670) (986) (606) (965) (4,227)
Income (loss) before
income taxes 600 2,670 (643) (1,265) 1,362
Depreciation 4,562 2,898 415 166 8,041
Equity in earnings
(losses) of joint ventures -- (56) (1,155) -- (1,211)
Investment in
joint ventures 100 112 (6,655) -- (6,443)
Segment assets (3) 63,760 52,437 6,922 11,595 134,714
Expenditures for
segment assets 6,485 4,153 1,002 822 12,462
1996
Revenues (1)(4) 95,700 35,676 4,850 109 136,335
Operating profit (2) 4,007 2,190 105 -- 6,302
Interest expense (1,777) (1,381) (181) (236) (3,575)
Corporate expense (1,323) (898) (613) (1,016) (3,850)
Income (loss) before
income taxes 907 (89) (689) (1,252) (1,123)
Depreciation 4,943 3,050 415 198 8,606
Equity in earnings
(losses) of joint ventures -- 128 (1,010) -- (882)
Investment in
joint ventures -- 2,961 (6,256) -- (3,295)
Segment assets (3) 61,969 53,731 7,943 9,208 132,851
Expenditures for
segment assets 4,657 2,309 289 707 7,962
1995
Revenues (1)(4) 81,052 34,330 10,123 72 125,577
Operating profit
(loss)(2)(5) (3,548) 7,338 3,312 -- 7,102
Interest expense (2,232) (1,707) (2,795) (287) (7,021)
Corporate expense (1,175) (760) (756) (415) (3,106)
Income (loss) before
income taxes (6,955) 4,871 (239) (702) (3,025)
Depreciation 5,112 3,492 1,355 243 10,202
Equity in earnings (losses)
of joint ventures (5) -- 5,142 (1,141) -- 4,001
Investment in
joint ventures -- 3,683 (4,637) -- (954)
Segment assets (5) 63,321 56,340 8,244 9,180 137,085
Expenditures for
segment assets $ 1,537 $ 1,482 $ 1,301 $ 917 $ 5,237
</TABLE>
(1) Amounts are principally revenues from external customers.
Intersegment revenues and interest revenues were
insignificant. Sales to any single customer did not exceed
10% of consolidated revenues. Revenues attributed to
foreign countries were $3.4 million, $5.2 million and $5.4
million, respectively, in 1997, 1996 and 1995. Foreign
sales are attributed to countries based on the location of
the customer.
(2) "Operating Profit (Loss)" is total revenues less all
expenses except allocated corporate and interest expenses
and income taxes.
(3) Segment assets are located in the United States, primarily
Maui. Other assets are corporate and non-segment assets.
(4) Resort includes gains on land sales of $4.2 million in 1997.
Commercial & Property includes gains on land sales of $1
million in 1997, $700,000 in 1996 and $3.4 million in 1995.
(5) Resort operating profit for 1995 includes noncash profits of
$4,990,000, representing the reversal of the Company's
previous equity in losses of Kaptel Associates.
COMMON STOCK
In compliance with the terms of certain borrowing
arrangements, the Company did not declare any dividends in 1997.
The Company paid a dividend of five cents per share in the fourth
quarter of 1996.
At February 2, 1998, there were 379 shareholders of record.
Stock is traded over the counter nationally. The range of
common stock bid prices which follow were supplied by the
National Quotation Bureau Incorporated. The quotes reflect inter-
dealer prices and do not include retail markup, markdown or
commission and may not necessarily represent actual transactions.
First Second Third Fourth
Quarter Quarter Quarter Quarter
1997 High 42.5 37 40.5 43.75
Low 35 34 36 40.5
1996 High 48 46.5 44.5 47
Low 46 43.5 43.5 40
<TABLE>
SELECTED FINANCIAL DATA
<CAPTION>
1997 1996 1995 1994 1993
(Dollars in Thousands Except Per Share Amounts)
<S> <C> <C> <C> <C> <C>
FOR THE YEAR
Summary of Operations
Revenues` $136,498 $ 136,335 $ 125,577 $ 125,882 $ 131,172
Cost of goods sold 72,200 75,279 69,314 67,321 84,932
Operating expenses 26,027 24,030 24,315 23,853 22,577
Shipping and marketing 18,053 19,185 16,793 16,568 17,673
General and
administrative 14,600 14,507 15,160 14,352 18,657
Equity in (earnings) losses
of joint ventures 1,211 882 (4,001) 4,844 1,018
Interest expense 3,045 3,575 7,021 5,682 4,797
Income taxes (credits) 499 (376) (1,466) (2,829) (7,423)
Net Income (Loss) 863 (747) (1,559) (3,909) (11,059)
Per Common Share
Net Income (Loss) .48 (.42) (.87) (2.18) (6.15)
Other Data
Cash dividends
Amount -- 90 -- -- 1,348
Per common share -- .05 -- -- .75
Depreciation $ 8,041 $ 8,606 $ 10,202 $ 10,851 $ 10,315
Return on beginning
stockholders' equity 1.5% (1.3%) (2.6%) (6.1%) (14.5%)
Percent of net income (loss)
to revenues .6% (.5%) (1.2%) (3.1%) (8.4%)
AT YEAR END
Current assets less
current liabilities (1) $20,283 $ 19,467 $ 23,428 $ (1,097) $ 29,398
Ratio of current assets
to current liabilities (1) 2.20 2.23 2.78 .97 2.47
Property, net of
depreciation (2) $87,621 $ 86,610 $ 88,557 $ 180,194 $ 148,774
Total assets (2) 134,714 132,851 137,085 235,411 211,588
Long-term debt and
capital leases (2) 29,435 28,898 36,227 99,180 96,108
Stockholders' equity
Amount 58,896 58,033 58,870 60,429 64,321
Per common share $ 32.77 $ 32.29 $ 32.76 $ 33.63 $ 35.79
Common shares
outstanding 1,797,125 1,797,125 1,797,125 1,797,125 1,797,125
</TABLE>
(1) At December 31, 1994, current liabilities exceeded current
assets because borrowings totaling $27.8 million on a
revolving credit commitment were classified as current.
After the amendment to the commitment in July of 1995,
borrowings under this line have been classified as
noncurrent.
(2) Property, net of depreciation, total assets and long-term
debt and capital leases decreased in 1995 primarily because,
as of April 30, 1995, the Company no longer consolidated
Kaahumanu Center Associates (see Note 3 to Consolidated
Financial Statements).
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1997 vs. 1996
CONSOLIDATED
The Company reported consolidated net income of $863,000 for
1997 compared to a net loss of $747,000 for 1996. The improved
results were due to land sales that contributed $3.3 million to
net income in 1997. In the second quarter of 1997, the Resort
segment recorded the sale of a 50% interest in the 12-acre parcel
of land adjacent to the Kapalua Bay Hotel. In the third quarter
of 1997, the Commercial & Property division recorded the sales of
two land parcels.
General and administrative expenses increased by about 1% in
1997 compared to 1996 as increases due to wage adjustments and
the use of outside consultants were partially offset by lower
expenses for pensions, postretirement benefits and insurance.
Interest expense decreased by 15% in 1997 compared to 1996.
The decrease is a result of lower average borrowings in 1997 and
lower average interest rates. The rate reduction is the result
of moving borrowings into lower fixed rate loans at the end of
1996 and during 1997, and renewing the Company's revolving credit
lines at lower rates in 1997.
PINEAPPLE
Revenues from Pineapple operations were $90.9 million in
1997 compared to $95.7 million in 1996. Operating profits from
Pineapple were $3.7 million in 1997 compared to $4 million in
1996. Lower case sales volume (the number of cases sold) and a
change in the mix of products sold (fruit, juice, concentrate)
resulted in a $6.8 million decline in revenue from Pineapple
operations. This decline was partially offset by higher average
sales prices and higher fresh fruit and other sales.
Pineapple cost of sales decreased with the reduction in
sales volume. The average cost of sales per case sold in 1997
was higher than 1996 because in 1996 there was a partial
liquidation of LIFO inventories that resulted in lower costs from
prior years being included in cost of sales. Cost of sales for
1996 would have been higher by $1,281,000 based on current
production costs for that year. In 1997 recoveries (the amount
of saleable product per ton of fruit processed) were better than
in 1996, resulting in a lower unit production cost of canned
pineapple product. In 1996 unfavorable weather conditions
resulted in poor yield (tons per acre) and lower recoveries and
in turn, an increase in unit production costs.
Pineapple shipping and marketing costs were lower in 1997
compared to 1996 as a result of the lower volume of cases sold
and changes in marketing programs.
RESORT
Revenues from the Kapalua Resort operations were $40.3
million in 1997 compared to $35.7 million in 1996. Operating
profits from this segment were $4.8 million in 1997 compared to
$2.2 million in 1996. Revenues and operating profits for 1997
include the sale to the owners of the Kapalua Bay Hotel of a 50%
interest in the 12-acre parcel of land that is adjacent to the
Hotel. This transaction added $4.2 million to Resort revenues
and operating profits.
Operating profits from Resort ongoing operations declined in
1997 compared to 1996 from $2 million to $.8 million. Lower
operating profits in 1997 largely reflect a 30% decline in income
from commercial leases and an 8% reduction in merchandise sales.
The most significant lease rent reduction was attributable to the
Kapalua Bay Hotel, which was closed during part of 1997 for
restoration work. The ground lease for the Kapalua Bay Hotel was
renegotiated as of September 1996 to include a one year
moratorium on ground rent and two years of reduced rents.
Closure of the hotel also affected Kapalua's other operations,
including merchandise sales and percentage rents from other
commercial leases.
The Kapalua Villas program contributed a 22% increase in
revenue due to additional units in the program in 1997. Kapalua
has managed approximately 55% more units within its villa program
since September of 1996. The expansion of the Villas rental
program resulted in significantly higher operating expenses in
1997, which offset increased revenue.
Resort golf operations contributed a 5% increase in revenues
in 1997 due to an increase in the number of paid rounds.
Commission income from Kapalua Realty Company increased by 40% in
1997 and Resort membership income increased over 60%. However,
these gains were more than offset by increased legal expenses,
resort maintenance and repairs and administration costs.
COMMERCIAL & PROPERTY
Revenues from the Commercial & Property division were $5.1
million in 1997 compared to $4.9 million in 1996. Operating
profits attributable to this segment were $127,000 in 1997
compared to $105,000 in 1996. Improved revenues and operating
profits in 1997 were due to two land sales in the third quarter
of 1997. Land sales in 1997 added $1 million to revenues and
operating profits compared to $700,000 in 1996.
Costs and expenses charged to Commercial & Property were
$4.9 million in 1997 compared to $4.7 million in 1996. Included
in costs and expenses is the Company's equity in the losses of
Kaahumanu Center Associates, which was $1.2 million in 1997
compared to $1 million in 1996. Increased revenues at Kaahumanu
Center were more than offset by higher expenses, most
significantly higher payroll and related costs and bad debt
expense.
1996 vs. 1995
CONSOLIDATED
For the year 1996 the Company reported a net loss of
$747,000 compared to a net loss of $1.
6 million for 1995. Operating results from the Company's
Pineapple operations improved by $7.5 million in 1996 compared to
1995. However, 1995 included $5 million of income representing
the reversal of the Company's prior years equity in losses of
Kaptel Associates (see Note 3 to Consolidated Financial
Statements). Also offsetting the improved 1996 results from
Pineapple operations was lower income from land sales, which was
$700,000 in 1996 compared to $3.4 million in 1995.
General and administrative expenses decreased by 4% in 1996
compared to 1995. The decrease was largely a result of
accounting for Kaahumanu Center Associates (KCA) by the equity
method since May 1, 1995. Prior to that time, the financial
statements of KCA were consolidated with those of the Company
(see Note 3 to Consolidated Financial Statements). Partially
offsetting this decrease were higher expenses for outside
consultants and increased employment-related costs as a result of
wage adjustments and additional employees.
Interest expense decreased by 49% in 1996 as a result of
lower average borrowings and lower average rates. For the first
four months of 1995, the Company's consolidated debt was higher
by approximately $75 million as a result of financing
arrangements for Kaahumanu Center. This was the primary reason
for higher average borrowings and rates in 1995.
PINEAPPLE
Revenue from Pineapple was $96 million in 1996 compared to
$81 million in 1995. In 1996, Pineapple operations contributed
an operating profit of $4 million compared to an operating loss
of $3.5 million for 1995. Increased case sales volume (the
number of cases sold) provided an $8 million revenue increase;
higher prices also resulted in revenue increases of $8 million.
A change in the mix of products sold (fruit, juice, concentrate),
lower fresh fruit sales and other income resulted in a $1 million
net revenue decline.
Higher cost of sales in 1996 resulted primarily from
increased sales volume. Production costs were higher in 1996
because of lower quality fruit in the fourth quarter as a result
of unfavorable weather conditions. Lower quality fruit reduces
the recovery (the amount of saleable product per ton of fruit
processed) and thereby increases the unit cost of the product.
In 1996 and 1995 there were partial liquidations of LIFO
inventories, which resulted in lower costs from prior years being
included in cost of sales. Cost of sales for 1996 and 1995 would
have been higher by $1,281,000 and $104,000, respectively, based
on current production costs for the respective years.
Shipping and marketing costs increased in 1996 due to the
higher volume of sales, increased marketing and promotional
efforts and higher surface and ocean freight costs.
RESORT
In 1996 the Resort segment contributed revenue of $35.7
million compared to $34.3 million in 1995. Operating profit for
1996 was $2.2 million compared to $7.3 million for 1995. In 1995
the Resort operating profit included $5 million representing the
reversal of the Company's equity in prior years' losses of Kaptel
Associates (see Note 3 to Consolidated Financial Statements).
Operating profit from Resort ongoing operations declined in 1996
compared to 1995, largely reflecting lower revenues from
commercial leasing, golf and membership operations coupled with
increased costs and expenses. Partially offsetting these
declines were increased operating profits from The Kapalua Villas
and the water and sewer utility operations. Overall costs and
expenses related to ongoing resort operations increased by $1.6
million, of which over 50% represented higher labor costs.
Marketing expenses were higher, primarily as a result of new
advertising initiatives that began in 1996. Other costs and
expenses were largely commensurate with corresponding revenues.
In September of 1996 the number of condominium units in The
Kapalua Villas program increased by 79 units as a result of an
agreement for the Company to take over management of units
previously managed by the Kapalua Bay Hotel. This operation
contributed revenue increases of 39% in 1996.
Merchandise sales increased by 4%. Revenues from the water
and sewer utilities increased by 48% as a result of the Public
Utility Commission's approval of rate increases. Lower revenues
from Resort golf operations and decreased land lease revenue
partially offset these increases. The number of paid golf rounds
increased in 1996. However, lower average rates resulted in a
decrease in total revenue from golf operations. Maturation of
the membership program resulted in a decrease in initiation fees
that was not offset by increases in annual dues. Revenue from
land leases declined because of renegotiation of the leases for
the land underlying The Ritz-Carlton Kapalua (see Note 3 to
Consolidated Financial Statements) and the Kapalua Bay Hotel. In
September 1996 the owners of the Kapalua Bay Hotel sold the hotel
to a third party. In connection with this transaction, the
Company, as ground lessor, agreed to amend certain terms of the
lease, including no minimum rent for the first seven years and no
percentage rent for the first year.
COMMERCIAL & PROPERTY
The Commercial & Property segment contributed revenue of
$4.9 million in 1996 compared to $10.1 million in 1995. The net
result was an operating profit in 1996 of $105,000 compared to an
operating profit of $3.3 million in 1995. Costs and expenses
charged to this segment were $4.7 million in 1996 compared to
$6.8 million for 1995.
Revenue and operating profit for 1996 included two land
sales totaling $700,000 compared to $3.4 million of land sales
in 1995. Land sales in 1995 included $1.8 million from the State
of Hawaii for the land taken under condemnation for the King
Kekaulike High School and sales of three other parcels for $1.6
million.
Excluding results from land sales, the decrease in revenue
and costs and expenses from this segment was primarily the result
of accounting for Kaahumanu Center Associates (KCA) by the equity
method since April 30, 1995. Prior to that time, the results of
KCA were consolidated with the Company (see Note 3 to
Consolidated Financial Statements).
In 1996 the loss produced by Kaahumanu Center was reduced by
48% compared to results for the year 1995. The Company's equity
in the losses of KCA were $131,000 lower in 1996 compared to
1995.
LIQUIDITY, CAPITAL RESOURCES AND OTHER
At December 31, 1997, the Company's total debt, including
capital leases, was $32.5 million compared to $30.2 million at
year-end 1996. Average debt outstanding during 1997 was
approximately 10% lower than 1996.
Unused short- and long-term lines of credit available to the
Company at year-end 1997 totaled $21.9 million. These credit
lines will be sufficient to fund seasonal cash requirements
during 1998. The Company's capital expenditures and other cash
requirements for 1998 are expected to be funded principally by
operating cash flows.
Consolidated capital expenditures are expected to be
approximately $9 million in 1998. Pineapple capital expenditures
are expected to be $6.2 million, of which approximately 54% is
for replacement of existing equipment. Capital expenditures for
the Resort segment are expected to be $2.5 million in 1998, of
which about 79% is for equipment replacements.
In addition to capital expenditures, the Company expects to
expend approximately $2.1 million in 1998 for Resort development
and planning.
Duties up to 51% on canned pineapple fruit imported from
Thailand into the United States were in effect throughout 1997 as
a result of an antidumping petition in 1994 to which the Company
was a party. In 1997 both the Company and the Department of
Commerce appealed a November 1996 decision by the United States
Court of International Trade (USCIT) regarding the appropriate
method to allocate cost to canned pineapple. If the decision
reached by the USCIT is upheld, the duties presently imposed on
these imports could be substantially reduced. A final decision
by the United States Court of Appeals for the Federal Circuit is
not expected before mid-1998.
The amount of duties on pineapple imports from Thailand is
subject to annual administrative reviews by the Department of
Commerce. These reviews can be called for by either the Company
or the Thai producers. If the cost of production changes
relative to the selling price of the product in the U.S., the
duties would be adjusted. Based on results of the recently
finalized first review, there were no significant adjustments to
the duties. Results of the second review, which covers the
period from July 1996 to June 1997, are pending.
In 1997 approximately 85% of the canned pineapple sold in
the United States was produced in foreign countries, most
significantly, in Thailand, the Philippines and Indonesia. To
the extent that devaluation of foreign currencies have the effect
of lowering competitors' cost of production, the Company could be
adversely affected.
Approximately 20% of the visitors to Maui and 40% of the
visitors to the State of Hawaii are eastbound. Continuation of
the present Asian economic crisis could affect the financial
results of Kapalua Resort because visitors from Asia, in
particular Japan, represent a significant part of Kapalua's
market for merchandise, golf, real estate and accommodations.
In June of 1997, at a total cost of $3.2 million, the
Company completed a system for disposal of its cannery cooling
and processing wastewater. The system replaced the Company's
previous system, which was cited by the Department of Health of
the State of Hawaii (DOH) as not meeting certain regulations.
The Company is in negotiation with the DOH regarding the
penalties it may impose on the Company. In addition, the Company
is a party to litigation related to the County of Maui's claim
against certain chemical manufacturers because of chemical
contamination in certain water wells on Maui. Presently, the
Company cannot predict the outcome of these issues with
certainty; however, based on discussions with counsel, the
Company believes that there will be no material adverse effect on
its financial position or results of operations.
The Company is in the process of reviewing the corrective
action necessary to enable all of its data processing systems and
computer applications to properly identify dates after 1999. A
significant number of the Company's data processing applications
use software programs purchased from outside vendors. The
vendors of the Company's core data processing applications have
already provided or will have provided all necessary system
modifications by the end of 1998. At this time it appears that
the Company's current information services personnel will be able
to modify the Company's other software programs without using
outside resources. Currently, no material prospective
expenditures for "Year 2000" compliance have been identified.
The Company, as a partner in various partnerships, may under
certain circumstances be called upon to make additional capital
contributions (see Note 3 to Consolidated Financial Statements).
IMPACT OF INFLATION AND CHANGING PRICES
The Company uses the LIFO method of accounting for its
pineapple inventories. Under this method, the cost of products
sold approximates current cost and during periods of rising
prices the ending inventory is reflected at an amount below
current cost. The replacement cost of pineapple inventory was
$25 million at December 31, 1997, which was $14 million more than
the amount reflected in the financial statements.
Most of the land owned by the Company was acquired from 1911
to 1932 and is carried at cost. A small portion of "Real Estate
Held for Sale" represents land cost. Replacements and additions
to the Pineapple operations occur every year and some of the
assets presently in use were placed in service in 1934. At
Kapalua, some of the fixed assets were constructed and placed in
service in the mid-to-late 1970s. Depreciation expense would be
considerably higher if fixed assets were stated at current cost.
FORWARD-LOOKING STATEMENTS
The Company's Annual Report to Shareholders contains forward-
looking statements (within the meaning of Private Securities
Litigation Reform Act of 1995) as to the Company's expectations
concerning 1998 profitability, the future of new products and new
business development, distribution of pineapple through Premium
Tropicals International LLC and under the Royal Coast label, the
winter crop output in Thailand and Indonesia, the appeal of a
decision affecting antidumping duties, development of the 12-acre
site next to the Kapalua Bay Hotel, and the effects of changes
involving the Kapalua Bay Hotel and The Kapalua Villas. In
addition, from time to time the Company may publish forward-
looking statements as to those matters or other aspects of the
Company's anticipated financial performance, business prospects,
new products, marketing initiatives, or similar matters.
Forward-looking statements contained in the Annual Report to
Shareholders or otherwise made by the Company are subject to
numerous factors (in addition to those otherwise noted in the
Company's Annual Report or in its filings with the Securities and
Exchange Commission) that could cause the Company's actual
results and experience to differ materially from expectations
expressed by the Company. Factors that might cause such
differences, among others, include (1) changes in domestic,
foreign or local economic conditions that affect the number,
length of stay, or expenditure levels of eastbound or westbound
visitors, or agricultural production and transportation costs of
the Company and its competitors, or Maui retail or real estate
activity; (2) the effect of weather conditions on agricultural
operations of the Company and its competitors; (3) the
possibility of an adverse ruling on appeal of the antidumping
decision; (4) events in the airline industry affecting passenger
or freight capacity or cost; (5) possible shifts in market
demand; and (6) the impact of competing products, competing
resort destinations, and competitors' pricing.
MAUI LAND & PINEAPPLE COMPANY, INC.
Officers
President & Chief Executive Officer
Gary L. Gifford
Executive Vice President/Finance
Paul J. Meyer
Executive Vice President/Pineapple
Douglas R. Schenk
Executive Vice President/Resort
Donald A. Young
Vice President/Retail Property
Scott A. Crockford
Vice President/Land Management
Warren A. Suzuki
Treasurer
Darryl Y. H. Chai
Secretary
Adele H. Sumida
Controller & Assistant Treasurer
Ted L. Proctor
Directors
Mary C. Sanford--Chairman
Chairman of the Board
Maui Publishing Company, Ltd.
Richard H. Cameron--Vice Chairman
Publisher
Maui Publishing Company, Ltd.
Peter D. Baldwin
President
Baldwin Pacific Corporation
Samuel K. Himmelrich, Sr.
Chairman of the Board
Inland Leidy, Inc.
Randolph G. Moore
Chief Executive Officer
Kaneohe Ranch
Fred E. Trotter III
President
F. E. Trotter, Inc.
Andrew T. F. Ing--Director Emeritus
Retired Financial Vice President
& Treasurer
Hawaiian Electric Industries, Inc.
Audit and Compensation Committees
Peter D. Baldwin
Richard H. Cameron
Samuel K. Himmelrich, Sr.
Andrew T. F. Ing
Randolph G. Moore--Chairman, Audit
Mary C. Sanford
Fred E. Trotter III--Chairman, Compensation
PRINCIPAL SUBSIDIARIES
MAUI PINEAPPLE COMPANY, LTD.
Officers
President & Chief Executive Officer
Douglas R. Schenk
Executive Vice President/Sales & Marketing
James B. McCann
Executive Vice President/Finance
Paul J. Meyer
Vice President/Cannery
Eduardo E. Chenchin
Vice President/Plantations
L. Douglas MacCluer
Treasurer
Darryl Y. H. Chai
Secretary
Adele H. Sumida
Controller
Stacey M. Jio
Assistant Treasurer
Ted L. Proctor
Directors
Mary C. Sanford--Chairman
Richard H. Cameron--Vice Chairman
Peter D. Baldwin
Douglas B. Cameron
Gary L. Gifford
Andrew T. F. Ing
Paul J. Meyer
Randolph G. Moore
Claire C. Sanford
Douglas R. Schenk
Fred E. Trotter III
KAPALUA LAND COMPANY, LTD.
Officers
President & Chief Executive Officer
Donald A. Young
Executive Vice President/Finance
Paul J. Meyer
Vice President/Administration
Caroline P. Egli
Vice President/Development
Robert M. McNatt
Vice President/Resort Operations
Gary M. Planos
Vice President/Marketing
Peter A. Sanborn
Treasurer
Darryl Y. H. Chai
Secretary
Adele H. Sumida
Controller
Russell E. Johnson
Assistant Treasurer
Ted L. Proctor
Directors
Mary C. Sanford--Chairman
Richard H. Cameron--Vice Chairman
Peter D. Baldwin
Gary L. Gifford
Andrew T. F. Ing
Paul J. Meyer
Randolph G. Moore
Jared B. H. Sanford
Fred E. Trotter III
Donald A. Young
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Maui
Land & Pineapple Company, Inc. Balance Sheet as of December 31, 1997 and the
Statement of Operations for the year then ended, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,611
<SECURITIES> 0
<RECEIVABLES> 13,315
<ALLOWANCES> 567
<INVENTORY> 18,713
<CURRENT-ASSETS> 37,148
<PP&E> 199,593
<DEPRECIATION> 111,972
<TOTAL-ASSETS> 134,714
<CURRENT-LIABILITIES> 16,865
<BONDS> 29,435
0
0
<COMMON> 12,318
<OTHER-SE> 46,578
<TOTAL-LIABILITY-AND-EQUITY> 134,714
<SALES> 101,421
<TOTAL-REVENUES> 136,498
<CGS> 72,200
<TOTAL-COSTS> 98,227
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,045
<INCOME-PRETAX> 1,362
<INCOME-TAX> 499
<INCOME-CONTINUING> 863
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 863
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
</TABLE>
INDEPENDENT AUDITORS' REPORT
To the Partners of Kaahumanu Center Associates:
We have audited the accompanying balance sheets of Kaahumanu
Center Associates (a Hawaii limited partnership) as of December
31, 1997 and 1996, and the related statements of operations,
changes in partners' capital (deficit) and cash flows for each of
the three years ended December 31, 1997. These financial
statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
audited standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of the Partnership at
December 31, 1997 and 1996, and the results of its operations and
its cash flows for each of the three years ended December 31,
1997 in conformity with generally accepted accounting principles.
/S/ DELOITTE & TOUCHE
DELOITTE & TOUCHE LLP
Honolulu, Hawaii
February 6,1998
KAAHUMANU CENTER ASSOCIATES
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS
1997 1996
Current Assets
Cash $ 552,879 $ 176,992
Accounts receivable - less allowance of
$247,624 and $34,942 for
doubtful accounts 318,404 480,147
Prepaid expenses 51,225 43,957
Total Current Assets 922,508 701,096
Property
Land and land improvements 5,976,029 5,976,029
Building 76,983,144 76,955,082
Furniture, fixtures and equipment 4,381,473 4,293,164
Construction in process 646,626 188,359
Total Property 87,987,272 87,412,634
Accumulated depreciation 14,582,615 11,831,746
Net Property 73,404,657 75,580,888
Other Assets 5,627,540 5,460,955
Total Assets $79,954,705 $81,742,939
LIABILITIES & PARTNERS' CAPITAL
Current Liabilities
Current portion of long-term debt $ 803,142 $ 748,840
Accounts payable 188,426 317,636
Due to ML&P 429,675 630,418
Other current liabilities 32,274 45,116
Total Current Liabilities 1,453,517 1,742,010
Long-Term Liabilities
Long-term debt 62,300,253 63,152,354
Other long-term liabilities 76,188 73,690
Total Long-Term Liabilities 62,376,441 63,226,044
Partners' Capital 16,124,747 16,774,885
Total Liabilities & Partners' Capital $79,954,705 $81,742,939
See notes to financial statements.
KAAHUMANU CENTER ASSOCIATES
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
Revenues
Rental income - minimum $7,521,860 $7,721,398 $6,571,728
Rental income - percentage 874,362 672,790 819,960
Other operating income - primarily
recoveries from tenants 5,548,824 5,283,092 4,825,309
Total Revenues 13,945,046 13,677,280 12,216,997
Costs and Expenses
Utilities 2,689,715 2,707,707 2,540,736
Payroll and related costs 1,938,328 1,843,850 1,816,498
Depreciation and
amortization 3,349,654 3,277,602 3,354,646
Interest 5,522,235 5,603,074 6,113,766
Repairs and maintenance 545,817 508,892 558,101
General excise taxes 547,949 538,472 470,808
Real property taxes 305,842 288,938 255,206
Insurance 320,284 281,276 263,168
Provision for doubtful
accounts 360,788 33,868 184,940
Advertising and promotions 148,972 106,425 172,894
Management fee 262,380 262,319 163,633
Professional fees 191,915 174,779 159,528
Other expenses 71,305 70,298 69,402
Total Costs and Expenses 16,255,184 15,697,500 16,123,326
Net Loss $(2,310,138) $(2,020,220) $(3,906,329)
See notes to financial statements.
KAAHUMANU CENTER ASSOCIATES
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
State of
Hawaii
Maui Land & Employees'
Pineapple Retirement
Company, Inc. System TOTAL
Partners' Capital (Deficit),
December 31, 1994 $(4,164,780) $331,076 $(3,833,704)
Capital Contributions:
Conversion of loan -- 30,587,879 30,587,879
Conversion of payable balance 1,332,060 -- 1,332,060
Cash Distribution -- (4,851,487) (4,851,487)
Net Loss - 1995 (2,749,360) (1,156,969) (3,906,329)
Partners' Capital (Deficit),
December 31, 1995 (5,582,080) 24,910,499 19,328,419
Adjustment to prior year
conversion of payable balance (533,314) -- (533,314)
Net Loss - 1996 (1,010,110) (1,010,110) (2,020,220)
Partners' Capital (Deficit),
December 31, 1996 (7,125,504) 23,900,389 16,774,885
Cash Calls 830,000 830,000 1,660,000
Net Loss - 1997 (1,155,069) (1,155,069) (2,310,138)
Partners' Capital (Deficit),
December 31, 1997 $(7,450,573) $23,575,320 $16,124,747
See notes to financial statements.
KAAHUMANU CENTER ASSOCIATES
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
Operating Activities:
Net Loss $(2,310,138) $(2,020,220) $(3,906,329)
Adjustments to reconcile
net loss to cash provided
by operating activities:
Depreciation and
amortization 3,349,654 3,277,602 3,354,646
Decrease in accounts
receivable 161,743 336,498 225,457
Increase (decrease) in
accounts payable (337,831) (359,679) 606,996
Increase in noncurrent
accounts receivable (139,743) (359,705) (271,778)
Net change in other operating
assets and liabilities (9,734) 34,936 (257,585)
Net Cash Provided by
(Used in) Operating Activities 13,951 909,432 (248,593)
Investment Activities:
Purchases of property (692,995) (584,175) (4,356,375)
Payments for deferred costs (651,939) (237,436) (2,124,624)
(Increase) decrease in
restricted cash 144,669 631,500 (1,503,926)
Net Cash Used in Investment
Activities (1,200,265) (190,111) (7,984,925)
Financing Activities:
Payments of long-term debt (797,799) (716,488) 45,571,361)
Payment to ML&P for adjustment
of prior year payable conversion -- (328,476) --
Proceeds from long-term debt -- -- 69,188,291
Increase (decrease) in amount
due to ML&P -- -- (11,843,476)
Cash distribution -- -- (4,851,487)
Proceeds from cash calls 1,660,000 -- --
Net Cash Provided by (Used in)
Financing Activities 862,201 (1,044,964) 6,921,967
Net Increase (Decrease) in Cash 375,887 (325,643) (1,311,551)
Cash, Beginning of Year 176,992 502,635 1,814,186
Cash, End of Year $552,879 $176,992 $502,635
See notes to financial statements.
KAAHUMANU CENTER ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
ORGANIZATION
Kaahumanu Center Associates (the Partnership) was formed on June
23, 1993 as a limited partnership between Maui Land & Pineapple
Company, Inc. (ML&P), as general partner, and the Employees'
Retirement System of the State of Hawaii (ERS), as limited
partner. The purpose of the partnership is to finance the
expansion and renovation of and to own and operate the Kaahumanu
Shopping Center (the Center).
The Center is a regional shopping mall located in Kahului, Maui.
Prior to the expansion, the Center consisted of approximately
315,000 square feet of gross leasable area. The expansion and
renovation which was completed in November 1994, increased the
Center to approximately 573,000 square feet of gross leasable
area.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - The Partnership's policy is to prepare its
financial statements using the accrual basis of accounting.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses
during the reporting periods. Future actual amounts could differ
from those estimates.
Property - Property which was contributed to the partnership by
ML&P is stated at ML&P's net book value at the date of
contribution; subsequent additions are stated at cost.
Depreciation is computed using the straight-line method.
Noncurrent Accounts Receivable - The excess of minimum rental
income recognized on a straight-line basis over amounts
receivable according to provisions of the lease are classified as
noncurrent accounts receivable, after deducting an estimated
amount for amounts not recoverable.
Deferred Costs - Amounts expended by the Partnership for
construction of tenant improvements are classified as deferred
costs and are amortized over the terms of the respective leases.
Interest Capitalization - Interest costs are capitalized during
the construction period of major capital projects.
Advertising and Promotion - The cost of advertising and sales
promotion activities is expensed as incurred.
Income Taxes - The Partnership is not subject to federal and
state income taxes. The distributive shares of income or loss
and other tax attributes from the Partnership are reportable by
the individual partners.
PARTNERSHIP AGREEMENTS
Capital Contributions - ML&P contributed the land and the
shopping center improvements as they existed prior to the
expansion and renovation project, subject to the existing first
mortgage, together with approximately nine acres of adjacent land
which became part of the expanded shopping center, for a 99%
interest in the Partnership. Effective April 30, 1995, an amount
of $1,332,000 owing to ML&P was considered a capital
contribution. This amount was reduced in 1996 by $533,000 for
items which would have impacted the previous amount owing,
including a payment of $328,000 to ML&P in 1996.
ERS originally contributed $312,000 for a one- percent interest
in the Partnership and made a loan of $30.6 million to the
Partnership. Effective April 30, 1995, after completion of the
expansion and renovation and the satisfaction of certain
conditions, ERS converted its loan to capital for an additional
49% interest and became a 50% partner with ML&P.
In 1997 the Partnership received cash of $1,660,000 from the
partners pursuant to cash calls.
Allocations and Distributions - Profit and loss allocations and
cash distributions of the partnership are based on the ownership
interests of the partners.
ERS and ML&P each have a 9% cumulative, non-compounded priority
right to cash distributions based on their net contributions to
the partnership (preferred return). The ML&P preferred return is
subordinate to the ERS preferred return. For the purpose of
calculating the preferred returns, each partner's capital
contribution had an agreed upon value of $30.9 million on April
30, 1995. The accumulated unpaid preferred returns at December
31, 1997 were $6.3 million each for ML&P and ERS.
Management and Operations - The Partnership has an Operating
Agreement with ML&P for the operation of the Center. The
Operating Agreement has an initial term of 15 years, which
commenced when ERS became a 50% partner, with options to renew
for four additional 10-year periods. It provides for certain
performance tests, which if not met could result in termination
of the agreement.
ML&P as managing partner, is responsible for the day-to-day
management of the Partnership's business affairs. Major
decisions, as defined in the partnership agreement, require the
unanimous approval of the partners.
SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental Disclosure of Cash Flow Information and Non-Cash
Investing and Financing Activities:
1.Interest paid during 1997, 1996 and 1995 was $5,522,000,
$5,603,000 and $6,671,000, respectively.
2.Effective April 30, 1995, the Employees' Retirement System of
the State of Hawaii converted its $30.6 million loan to an
additional 49% ownership in Kaahumanu Center Associates. At
the same time, ML&P contributed $1.3 million by conversion
to capital of an amount owing to it. This amount was adjusted in
1996 as discussed above.
RELATED PARTY TRANSACTIONS
Pursuant to the Partnership Operating Agreement, the Partnership
pays to ML&P an operator's fee equal to 3% of gross revenues, as
defined. In 1997, 1996 and 1995, ML&P charged the Partnership
$262,000, $262,000 and $164,000, respectively, for management
fees.
The Partnership does not have any employees. As such, ML&P
provides all on-site and administrative personnel and also incurs
other costs and expenses, primarily insurance, which are
reimbursable by the Partnership. In 1997, 1996, and 1995 ML&P
charged the Partnership $2,240,000, $2,391,000 and $2,356,000,
respectively, for payroll and other costs and expenses. Prior to
1997, real property taxes were paid on behalf of the Partnership
by ML&P and were included in the reimbursable amounts.
ML&P generates a portion of the electricity which is used by the
Center. In 1997, 1996, and 1995 ML&P charged the Partnership
$2,312,000, $2,359,000 and $2,214,000, respectively, for
electricity.
Amounts due to ML&P for management fees, electricity and
reimbursable costs were $430,000 and $630,000 as of
December 31, 1997 and 1996, respectively.
OTHER ASSETS
Other Assets at December 31, 1997 and 1996 consisted of the
following:
1997 1996
Deferred costs $4,128,557 $3,957,047
Restricted cash 727,757 872,425
Noncurrent accounts receivable 771,226 631,483
Total Other Assets $5,627,540 $5,460,955
Deferred costs are net of amortization of $1,725,000 and
$1,180,000 at December 31, 1997 and 1996, respectively.
Restricted cash represents proceeds from the mortgage loan which
are reserved for additional expansion costs (see BORROWING
ARRANGEMENTS), as well as a percentage of revenues retained for
capital improvements as set forth in the Partnership Operating
Agreement.
BORROWING ARRANGEMENTS
The Partnership has a mortgage loan which bears interest at 8.57%
and is payable in monthly installments of $526,000, including
interest, through 2005 when the entire balance is payable. The
loan is collateralized by the Center and is nonrecourse except
for the first $10 million which is guaranteed by ML&P until the
Center attains a defined level of net operating income.
Scheduled principal maturities for the next five years from 1998
through 2002 are as follows: $803,000, $942,000, $1,011,000,
1,118,000 and $1,219,000.
LEASES
Tenant leases of the Center provide for monthly base rent plus
percentage rents and reimbursement for common area maintenance
and other costs. Future minimum rental income to be received
under non-cancelable operating leases aggregates $65,515,000 and
is receivable during the next five years (1998 to 2002) as
follows: $6,931,000, $6,868,000, $6,848,000, $6,709,000,
$6,371,000, respectively, and $31,788,000 thereafter.
COMMITMENTS
At December 31, 1997, the Partnership had commitments under a
signed lease of approximately $248,000 for tenant improvement
costs.
CONCENTRATION OF CREDIT RISK
The Partnership extends credit to its tenants in the course of
its leasing operations. The creditworthiness of existing and
potential tenants is evaluated and under certain circumstances a
security deposit is required.
* * * * *
