SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 No.)
of incorporation or organization)
P. O. BOX 187, KAHULUI, MAUI, HAWAII 96733-6687
(Address of principal executive offices)
Registrant's telephone number, including area code: (808) 877-3351
NONE
Former name, former address and former fiscal year, if changed
since last report
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at August 6, 1999
Common Stock, no par value 7,188,500 shares
<PAGE>
MAUI LAND & PINEAPPLE COMPANY, INC.
AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets,
June 30, 1999 (Unaudited) and December 31, 1998 3
Condensed Statements of Operations and Retained Earnings,
Three Months Ended June 30, 1999 and 1998 (Unaudited) 4
Condensed Statements of Operations and Retained Earnings,
Six Months Ended June 30, 1999 and 1998 (Unaudited) 5
Condensed Statements of Cash Flows,
Six Months Ended June 30, 1999 and 1998 (Unaudited) 6
Notes to Condensed Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security-Holders 16
Item 6. Exhibits and Reports on Form 8-K 16
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES
CONDENSED BALANCE SHEETS
Unaudited
6/30/99 12/31/98
(Dollars in Thousands)
ASSETS
Current Assets
Cash and cash equivalents $ 2,254 $ 3,447
Accounts and notes receivable 8,723 13,005
Inventories 21,363 15,520
Other current assets 3,518 3,659
Total current assets 35,858 35,631
Property 215,573 209,967
Accumulated depreciation (124,364) (120,046)
Property - net 91,209 89,921
Other Assets 11,624 10,695
Total 138,691 136,247
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt
and capital lease obligations 3,546 2,753
Trade accounts payable 5,400 6,613
Other current liabilities 8,242 7,280
Total current liabilities 17,188 16,646
Long-Term Liabilities
Long-term debt and capital lease obligations 23,050 23,592
Accrued retirement benefits 23,200 22,920
Equity in losses of joint venture 8,476 7,969
Other long-term liabilities 3,179 2,628
Total long-term liabilities 57,905 57,109
Stockholders' Equity
Common stock, no par value - 7,200,000 shares
authorized, 7,188,500 issued and outstanding 12,318 12,318
Retained earnings 51,280 50,174
Stockholders' equity 63,598 62,492
Total $138,691 $ 136,247
See accompanying Notes to Condensed Financial Statements.
<PAGE>
MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(UNAUDITED)
Three Months Ended
6/30/99 6/30/98
(Dollars in Thousands
Except Share Amounts)
Revenues
Net sales $22,013 $22,263
Operating income 8,032 7,221
Other income 326 652
Total Revenues 30,371 30,136
Costs and Expenses
Cost of goods sold 13,776 15,122
Operating expenses 6,946 6,500
Shipping and marketing 3,603 3,689
General and administrative 4,773 3,563
Interest 401 325
Equity in losses of joint ventures 268 748
Total Costs and Expenses 29,767 29,947
Income Before Income Taxes 604 189
Income Tax Expense 223 66
Net Income 381 123
Retained Earnings, Beginning of Period 50,899 46,272
Retained Earnings, End of Period 51,280 46,395
Per Common Share
Net income $ .05 $ .02
See accompanying Notes to Condensed Financial Statements.
<PAGE>
MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(UNAUDITED)
Six Months Ended
6/30/99 6/30/98
(Dollars in Thousands
Except Share Amounts)
Revenues
Net sales $45,297 $42,421
Operating income 18,196 15,408
Other income 525 776
Total Revenues 64,018 58,605
Costs and Expenses
Cost of goods sold 28,518 29,402
Operating expenses 13,422 13,002
Shipping and marketing 9,367 7,168
General and administrative 8,220 7,168
Interest 892 1,508
Equity in losses of joint ventures 417 647
Total Costs and Expenses 60,836 58,895
Income (Loss) Before Income Taxes 3,182 (290)
Income Tax Expense (Credit) 1,177 (107)
Net Income (Loss) 2,005 (183)
Retained Earnings, Beginning of Period 50,174 46,578
Cash Dividends (899) --
Retained Earnings, End of Period 51,280 46,395
Per Common Share
Net income (loss) .28 (.03)
Dividends $ .125 $ --
See accompanying Notes to Condensed Financial Statements.
<PAGE>
MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
6/30/99 6/30/98
(Dollars in Thousands)
Net Cash Provided by
(Used in) Operating Activities $ 7,852 $ (806)
Investing Activities
Purchases of property (7,027) (3,060)
Proceeds from disposal of property 122 601
Contributions to joint ventures (300) (100)
Other (1,462) (454)
Net Cash Used in Investing Activities (8,667) (3,013)
Financing Activities
Payments of long-term debt and capital
lease obligations (954) (4,839)
Proceeds from long-term debt 932 7,800
Proceeds from short-term debt 273 --
Dividend paid (899) --
Other 270 --
Net Cash Provided by
(Used in) Financing Activities (378) 2,961
Net Decrease in Cash (1,193) (858)
Cash and Cash Equivalents
at Beginning of Period 3,447 1,611
Cash and Cash Equivalents
at End of Period $ 2,254 $ 753
Supplemental Disclosure and Cash Flow Information - Interest (net
of amounts capitalized) of $844,000 and $1,581,000 was paid
during the six months ended June 30, 1999 and 1998, respectively.
Income taxes of $1,036,000 and $519,000 were paid during the six
months ended June 30, 1999 and 1998, respectively.
See accompanying Notes to Condensed Financial Statements.
<PAGE>
MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. In the opinion of management, the accompanying condensed
financial statements contain all normal and recurring adjustments
necessary to present a fair statement of financial position,
results of operations and cash flows for the interim periods
ended June 30, 1999 and 1998.
2. The Company's reports for interim periods utilize numerous
estimates of production, general and administrative expenses, and
other costs for the full year. Consequently, amounts in the
interim reports are not necessarily indicative of results for the
full year.
3. The effective tax rate for 1999 and 1998 differs from the
statutory federal rate of 34% primarily because of the state tax
provision and refundable state tax credits.
4. Accounts and notes receivable are reflected net of allowance
for doubtful accounts of $688,000 and $493,000 at June 30, 1999
and December 31, 1998, respectively.
5. Inventories as of June 30, 1999 and December 31, 1998 were
as follows
(in thousands):
6/30/99 12/31/98
Pineapple products
Finished goods $ 8,543 $ 5,979
Work in progress 2,657 839
Raw materials 2,669 1,562
Real estate held for sale 1,187 1,083
Merchandise, materials and supplies 6,307 6,057
Total Inventories $21,363 $15,520
6. Business Segment Information (in thousands):
Three Months Ended Six Months Ended
June 30 June 30
1999 1998 1999 1998
Revenues
Pineapple $ 19,249 $ 19,710 $ 39,168 $ 37,026
Resort 10,057 9,329 22,801 19,436
Commercial
& Property 1,031 1,132 1,954 2,127
Other 34 (35) 95 16
Total revenues 30,371 30,136 64,018 58,605
Operating profit (loss)
Pineapple 1,399 539 3,242 (200)
Resort 1,101 843 2,759 2,326
Commercial
& Property (166) (158) (381) (400)
Other (1,329) (287) (1,546) (508)
Total operating
profit 1,005 937 4,074 1,218
Interest expense (401) (748) (892) (1,508)
Income tax
(expense) credit (223) (66) (1,177) 107
Net income $ 381 $ 123 $ 2,005 $ (183)
7. Average common shares outstanding for the interim periods
ended June 30, 1999 and 1998 were 7,188,500.
8. In December of 1998, the presentation of "operating profit
(loss)" was modified to include allocated expenses of centralized
functions and the part of corporate administration attributable
to the business segment. Operating profits for prior periods
have been restated to conform to the current presentation.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
Consolidated
Consolidated net income for the second quarter of 1999 was
$381,000 compared to $123,000 for the second quarter of 1998.
Revenues of $30.4 million for the second quarter of 1999 were
approximately 1% higher than the second quarter of 1998.
For the first half of 1999, the Company produced net income of $2
million compared to a net loss of $183,000 for the first half of
1998. Revenues for the first half of 1999 were 9% higher than
the same period in 1998.
Net income for 1999 is lower by $692,000 ($1.1 million general
and administrative expense, less income tax credit of $406,000)
because of a second quarter write-off of deferred costs for
consultants engaged to analyze and develop potential strategic
plans for the Company. These costs were charged to expense due
to the pending sale of approximately 41% of the Company's
outstanding shares that was announced on
July 1, 1999.
Interest expense was lower by 46% and 41% for the second quarter
and first half of 1999, respectively, compared to the same
periods in 1998 due to lower average borrowings and to lower
average interest rates. Borrowings were lower in 1999 because of
the retirement of certain debt in December 1998 and higher cash
flows from operating activities during 1999.
Pineapple
Revenue from Pineapple operations was lower by 2% for the second
quarter of 1999, but higher by 6% for the first half of 1999 as
compared to the same periods in 1998. Pineapple operations
produced an operating profit of $1.4 million for the second
quarter of 1999 compared to $539,000 for the second quarter of
1998. For the first six months of 1999 the Pineapple segment
reported operating profit of $3.2 million compared to an
operating loss of $200,000 for the first six months in 1998.
These results primarily reflect higher average prices for canned
pineapple in 1999, which more than offset lower case sales volume
and higher average cost of sales per case. Higher prices
resulted in increased revenue of approximately $1.6 million and
$2.9 million, respectively, for the second quarter and first half
of 1999. Lower case sales volume resulted in lower revenue of
approximately $2.2 million and $1 million, respectively, for the
second quarter and first half of 1999.
Unseasonably cool weather on Maui has caused some delays in
delivery of fruit to the cannery. This resulted in higher
production costs and a slightly higher cost of sales per case for
the second quarter and first half of 1999. The County of Maui
has imposed water use restrictions in Upcountry Maui because of
drought conditions. Improvements to our irrigation systems over
the past few years have substantially increased our ability to
weather a drought. The Company has experienced some delay in its
normal planting schedule because of the dry conditions.
Resort
Revenues from the Company's Kapalua Resort segment were $10.1
million for the second quarter of 1999 compared to $9.3 million
for the second quarter of 1998. For the first half of 1999
Resort revenues were $22.8 million compared to $19.4 million for
the first half of 1998. The operating profit from the Resort was
$1.1 million for the second quarter of 1999 compared to $843,000
for the second quarter of 1998. For the first six months of 1999
Resort operating profit was $2.8 million compared to $2.3 million
for the first six months of 1998. Approximately half of the
increase in revenues for the first six months of 1999 was due to
tournament operations fees received as a result of hosting the
Mercedes Championships held in January of 1999. Costs and
expenses to host the tournament more than offset the tournament
operations fees and were charged primarily to marketing expense
in the first quarter of 1999. Higher Resort marketing expense is
largely the reason for the increase in consolidated Shipping and
Marketing expenses for the first six months of 1999 compared to
the same period in 1998.
The increase in revenues and operating profits in the second
quarter and first half of 1999 were primarily attributable to
increased profits from golf, retail, villa rental operations and
the hotel ground leases. Higher average green fees in first half
of 1999 more than offset a reduction in the number of paid rounds
of golf. For the second quarter of 1999, both average green fees
and the number of paid rounds of golf exceeded the second quarter
of 1998.
The Company is proceeding with development plans for 14 single-
family lots on the remaining 34 acres in Plantation Estates Phase
II. We have reservation agreements for 12 of the lots. If
closing of the reservation agreements and construction of the
improvements commence in October as currently planned, the
Company will begin recognizing profits from this project in the
fourth quarter of 1999, using the percentage of completion
method, over the period of construction of the site improvements.
Commercial & Property
Revenues from the Commercial & Property segment were $1 million
for the second quarter of 1999 compared to $1.1 million for the
second quarter of 1998. For the first six months of 1999
Commercial & Property revenues were $2 million compared to $2.1
million for the first six months of 1998. Lower revenues in 1999
were primarily due to higher land sales in 1998. The segment
generated an operating loss of $166,000 for the second quarter of
1999 compared to $158,000 for the second quarter of 1998. For
the first half of 1999 the loss from this segment was $381,000
compared to $400,000 for the first half of 1998.
The Company's losses from its investment in Kaahumanu Center were
$289,000 for the second quarter of 1999 compared to $321,000 for
the second quarter of 1998. For the first half of 1999 the
Company's loss from Kaahumanu Center was $469,000 compared to
$651,000 for the first half of 1998. The lower loss for 1999 was
principally attributable to higher revenues and lower bad debt
expense in 1999.
LIQUIDITY, CAPITAL RESOURCES AND OTHER
Total debt including capital leases was $26.6 million at June 30,
1999, compared to $26.3 million at December 31, 1998.
Outstanding debt is expected to increase in the third quarter as
seasonal cash requirements for the pineapple operations and
construction of The Village Course Clubhouse and Kapalua Golf
Academy continues. Unused short- and long-term lines of credit
available to the Company at June 30, 1999, including the $15
million development line of credit for construction of the
clubhouse and golf academy, totaled $33.6 million. These credit
lines and anticipated cash flows from operations are expected to
be adequate to cover the Company's cash requirements for 1999.
Expenditures for fixed assets and deferred development costs are
estimated to be approximately $22 million in 1999. This amount
includes approximately $11.2 million for the clubhouse and golf
academy and $6.5 million for replacement of existing equipment
for Pineapple and Resort operations.
Effective June 1, 1999, the Company's $15 million bridge loan
agreement was amended and restated in its entirety and converted
to a term loan secured by certain parcels of the Company's real
property on Maui. Principal payments are due from September 2004
through June 2009. Interest rates on the loan are adjustable to
2.15% to 2.55% above six-month, one year and three year rates
made available by the Federal Farm Credit Bank. The agreement
includes certain financial covenants including the maintenance of
a minimum tangible net worth and debt coverage ratio, maximum
funded debt to capitalization ratio, and limits on capital
expenditures, investments and the payment of dividends.
Kapalua Coconut Grove LLC is in the process of obtaining
financing for the construction of 36 luxury beachfront
condominiums on the parcel adjacent to the Kapalua Bay Hotel.
The Company, as a 50% member of the limited liability company,
may be required under certain circumstances to guarantee the
construction loan. Presales of the project are scheduled for
August 1999 and mass grading and site work is scheduled to begin
in October.
The Company has evaluated its information technology (IT) and non-
IT systems with respect to Year 2000 capability and has set
target dates for compliance of all systems. In May of 1999 the
manufacturer of the Company's power generating system informed
the Company that the monitoring and control portion of the system
is not Year 2000 compliant and that they would be unable to
supply an upgrade or replacement parts for the non-compliant
system. The Company has found alternative sources for monitoring
and control systems that are Year 2000 compliant and has awarded
the contract for the purchase and installation of the equipment.
It is estimated that the power generating system will be
compliant by October 15, 1999.
Several of the Company's data processing applications use
software programs purchased from outside vendors. All
applications requiring software upgrades from outside vendors are
now Year 2000 compliant. The upgrade to the operating system
used by the Resort merchandise inventory control and golf
reservations applications has been received and will be installed
and tested in September. The target date for completion is
October 1, 1999.
All of the Company's custom data processing applications required
modification to be Year 2000 compliant. Among them, the
Pineapple sales system and the Pineapple warehouse system are
critical to the Company's operations. Modification and testing
of both systems were completed by year-end 1998. The remaining
custom data processing applications are now compliant and testing
will continue through the end of the third quarter of 1999.
The Company initiated correspondence with vendors, suppliers and
trading partners during 1998 and through the first quarter of
1999 to assess risk of business interruption by noncompliance of
third parties. The Company received responses from all of those
businesses whose noncompliance would have a material impact on
the Company. The responses indicate that these companies' data
processing systems are either Year 2000 compliant or are expected
to be compliant by the end of the third quarter of 1999.
The most reasonably likely worst case scenario regarding Year
2000 is the non-compliance of the power generating system. These
generators are the primary source of electricity for Kaahumanu
Shopping Center, the Company's pineapple cannery and the
administrative offices in Kahului. The Company is prepared to
monitor and control the generators manually should there be
delays in upgrading the system. Alternatively, the Company's
electricity requirements can be met by the electric public
utility company on Maui, but control and reliability could be
sacrificed.
It is anticipated the Company's Information Services personnel
will spend approximately 50% of their time on continued testing
and monitoring and on non-critical Year 2000 programming issues
during the second half of 1999 and the first quarter of 2000. It
appears that the Company's present Information Services personnel
will be able to complete all program modifications, installation
and testing, and that no outside resources will be required. The
Company does not separately track internal costs incurred for
Year 2000 issues. Such costs are principally payroll and related
costs for the Company's Information Services personnel.
The Company has not incurred any material external expenditures
for Year 2000 compliance to date. The purchase, installation and
testing of the monitoring and control system for the power
generation plant is expected to cost approximately $145,000.
Should the alternative of purchasing electricity from the public
utility become necessary, the incremental cost to the Company is
estimated to be approximately $1,000 per day. Based on current
information, no other material future expenditures have been
identified.
This report contains forward-looking statements, within the
meaning of Private Securities Litigation Reform Act of 1995, as
to the Company's expectations for positive cash flows from
operating activities, the development of Plantation Estates Phase
II and Kapalua Coconut Grove, its expectations regarding the Year
2000 issue and other matters. Forward-looking statements
contained in this report or otherwise made by the Company are
subject to certain risks and uncertainties that could cause
actual results to differ materially from those in the forward-
looking statements. Potential risks and uncertainties include,
but are not limited to, those risks and uncertainties as
disclosed in the Company's Form 10-K filing with the Securities
and Exchange Commission.
Item 3. Quantitative and Qualitative Disclosures about Market
Risk
The Company's primary market risk exposure with regard to
financial instruments is to changes in interest rates. The
Company manages this risk by monitoring interest rates and future
cash requirements, and evaluating opportunities to refinance
borrowings at various maturities and interest rates. During the
second quarter of 1999, the Company's conversion of its $15
million bridge loan into a term loan did not have a material
impact on the Company's market risk exposure due to changes in
interest rates.
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
A. Antidumping Petition
In April of 1998, the United States Court of Appeals for the
Federal Circuit heard the appeals of Maui Pineapple Company, Ltd.
and the Department of Commerce regarding the antidumping petition
and calculation of duties on imports of canned pineapple fruit
from Thailand. A final decision was reached on July 28, 1999.
In its decision by judges Archer and Rader, the United States
Court of Appeals for the Federal Circuit said, "We conclude in
this case that the Commerce's interpretation was reasonable,
supported by substantial evidence, and thus entitled to
deference. For the reasons stated, the decision of the Court of
International Trade is REVERSED." The decision, in effect,
affirms the duties on imports of canned pineapple fruit from
Thailand established as a result of the Company's antidumping
petition.
Preliminary results of the third administrative review covering
the period from July 1997 to June 1998 were published in June
1999, and did not result in any material changes to the duties
being assessed.
B. Chemical Litigation
See item 3.B of Form 10-K for the year ended December 31, 1998,
for background information concerning these proceedings.
In Board of Water Supply of the County of Maui vs. Shell Oil
Company, et al. (the "DBCP Litigation"), global settlement
negotiations involving all of the Defendants, including the
Company, with the assistance of a mediator are progressing.
During the pendency of such negotiations the parties have stayed
all discovery and trial preparation. In the DBCP Litigation, the
County of Maui seeks to hold Dow Chemical Company, Occidental
Chemical Corporation, Occidental Petroleum Corporation, Shell Oil
Company, AMVAC Chemical Corporation, American Vanguard
Corporation, Brewer Environmental Industries LLC, Maui Pineapple
Company, Ltd. and Maui Land & Pineapple Company, Inc. jointly and
severally liable for DBCP remediation of certain water wells.
On August 5, 1999, Maui Land & Pineapple Company, Inc. and Maui
Pineapple Company, Ltd., entered into a settlement agreement with
Occidental Chemical Company and its affiliates in Maui Land &
Pineapple Company, Inc. vs. Occidental Chemical Corporation
regarding the claim made by Occidental for indemnification under
that March 14, 1978 Agreement between the parties.
The Company has agreed to pay to Occidental $100,000 for a
release of liability for past, present and future attorneys' fees
and costs in the DBCP Litigation and as elected by Occidental,
either (a) (i) 50% of Occidental's share (up to a maximum of
$300,000, subject to potential increase) of the negotiated cost
of remediation of one existing well and the temporary drought
treatment of two wells which are the subject of the DBCP
Litigation and (ii) 50% of Occidental's share of future capital,
operation and maintenance costs associated with the remediation
of future DBCP affected wells on Maui as such costs may become
due and payable to the Board of Water Supply (the "Board")
pursuant to the terms of a settlement agreement with Occidental
or (b) 50% of any settlement paid by Occidental to the Board
relating to the DBCP Litigation if Occidental settles separately,
or (c) in the event a settlement is not reached in the DBCP
Litigation, 50% of Occidental's liability if the matter proceeds
to trial and results in a judgment against Occidental.
In addition, the Company has agreed to pay 50% of Occidental's
share of any liability in any future action brought against it by
the Board or any other person alleging property damage allegedly
based on contamination of one or more water wells on Maui by
DBCP, whether such liability is determined by settlement or by
verdict, and pay 50% of Occidental's attorneys' fees and costs
and expenses incurred in the defense of such action.
The Company is a party to litigation with the Hawaiian Insurance
& Guaranty Company (now known as HUI/Unico in Liquidation, Inc.
("HUI/Unico")) relating to insurance coverage for the claims made
by Occidental. An agreement in principle, subject to formal
settlement documentation, was reached on July 22, 1999, under
which the Company would receive $600,000 from HUI/Unico and the
Company would release any right that it had to make any existing
or future claims against such insurance policy. A definitive
settlement agreement is currently being prepared.
A reserve of $250,000 was established in June 1999 against
identifiable liabilities arising out of the foregoing cases.
<PAGE>
Item 4. Submission of Matters to a Vote of Security-Holders
On April 30, 1999, the annual meeting of the Company's
shareholders was held. Proxies for the meeting were solicited
pursuant to Regulation 14A under the Securities Exchange Act of
1934. The number of outstanding shares as of March 8, 1999, the
record date of the annual meeting, was 7,188,500. The results of
the matters voted upon were as follows:
Election of Class Three directors for a three-year term:
Shares Voted For Shares Withheld
Richard H. Cameron 6,624,510 55,740
Morton B. Plant 6,630,302 49,948
Election of the firm Deloitte & Touche LLP as auditor of the
Company for the fiscal year 1999:
Shares voted for: 6,656,186
Shares voted against: 16,270
Shares abstained: 7,794
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(4) Instruments Defining the Rights of Security Holders
A.* Term Loan Agreement between Pacific Coast Farm
Credit Services and Maui Land & Pineapple Company, Inc.
entered into as of June 1, 1999.
(27)* Financial Data Schedule
As of June 30, 1999 and for the six months then ended.
*Filed Herewith
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K for the period
covered by this report.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MAUI LAND & PINEAPPLE COMPANY, INC.
August 13, 1999 /S/ PAUL J. MEYER
Date Paul J. Meyer
Executive Vice President/Finance
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Maui
Land & Pineapple Company, Inc. Balance Sheet as of June 30, 1999 and the
Statement of Operations for the six months then ended, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,254
<SECURITIES> 0
<RECEIVABLES> 9,411
<ALLOWANCES> 688
<INVENTORY> 21,363
<CURRENT-ASSETS> 35,858
<PP&E> 215,573
<DEPRECIATION> 124,364
<TOTAL-ASSETS> 138,691
<CURRENT-LIABILITIES> 17,188
<BONDS> 23,050
0
0
<COMMON> 12,318
<OTHER-SE> 51,280
<TOTAL-LIABILITY-AND-EQUITY> 138,691
<SALES> 45,297
<TOTAL-REVENUES> 64,018
<CGS> 28,518
<TOTAL-COSTS> 41,940
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 892
<INCOME-PRETAX> 3,182
<INCOME-TAX> 1,177
<INCOME-CONTINUING> 2,005
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,005
<EPS-BASIC> .28
<EPS-DILUTED> .28
</TABLE>
TERM LOAN AGREEMENT
between
PACIFIC COAST FARM CREDIT SERVICES, ACA
and
MAUI LAND & PINEAPPLE COMPANY, INC.
Loan No. 0426195000
June 1, 1999
Loan No. 0426195000
TERM LOAN AGREEMENT
This TERM LOAN AGREEMENT ("Agreement") is entered into
as of June 1, 1999 between PACIFIC COAST FARM CREDIT SERVICES, ACA,
("PCFC") and MAUI LAND & PINEAPPLE COMPANY, INC., a Hawaii
corporation ("Borrower").
Recitals
A. Borrower and PCFC are parties to that certain Bridge
Loan Agreement dated as of December 30, 1998 (the "Bridge Loan
Agreement"), pursuant to which PCFC advanced to Borrower as a
bridge loan in the principal amount of Fifteen Million Dollars
($15,000,000) (the "Bridge Loan").
B. Borrower has requested, and PCFC has agreed, to amend
and restate the Bridge Loan Agreement in its entirety to convert
the Bridge Loan into a term loan, on the terms and conditions set
forth below.
Agreement
NOW, THEREFORE, in consideration of the premises and
covenants set forth below, the parties hereby agree that the
Bridge Loan Agreement is hereby amended and restated in its
entirety as follows:
1. Definitions and Rules of Construction.
(a) Definitions. The following terms used in this Agreement
shall have the following meanings:
"Adjusted Gains on Asset Sales" shall mean the
capital gains recognized by Borrower upon the sale of a real
property asset, or upon the sale of a real property asset by a
Person in which Borrower has an investment or upon the sale by
Borrower of its interest in a Person holding a real property
asset, attributable to the increase in value of the real property
that occurred as a result of appreciation in value of the
underlying land prior to the commencement of development of such
real property, as opposed to profit attributable to the increase
in value that occurred after commencement of development.
"Affiliate" shall mean, with respect to any
Person, (i) each Person that, directly or indirectly, owns or
controls, whether beneficially, or as a trustee, guardian or
other fiduciary, ten percent (10%) or more of the Stock having
ordinary voting power in the election of directors of such
Person, (ii) each Person that controls, is controlled by or is
under common control with such Person or any Affiliate of such
Person, or (iii) each of such Person's officers, directors, joint
venturers and partners. For the purpose of this definition,
"control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its
management or policies, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" shall mean this Term Loan Agreement,
together with Exhibits and Schedules attached hereto, and as
hereafter amended, restated, modified, or supplemented.
"Applicable Spread" shall mean, (i) with respect
to the Six Month Fixed Rate Tranche, two and one-half percent (2.50%),
(ii) with respect to the One Year Fixed Rate Tranche, two and
fifty-five one-hundredths percent (2.55%), and (iii) with respect
to the Three Year Fixed Rate Tranche, either (x) two and one-half
percent (2.50%) during any six month fixed rate Interest Period,
or (y) two and forty-five one-hundredths percent (2.45%) during
any three year fixed rate Interest Period; provided, that the
Applicable Spread for any Fixed Rate Tranche may be adjusted
pursuant to Section 4(c)(2).
"Bridge Loan Agreement" shall have the meaning
assigned thereto in the Recitals.
"Business Day" shall mean any day that is not a
Saturday, a Sunday, or a day on which banks are required or
permitted to be closed in the State of California.
"Capital Expenditures" shall mean, for any period,
the aggregate of all expenditures (whether paid in cash or other
consideration or accrued as a liability and including that
portion of Capital Leases that is capitalized on the balance
sheet of Borrower including in connection with a sale-leaseback
transaction) by Borrower and its Subsidiaries for the acquisition
or leasing of fixed or capital assets or additions to equipment
(including replacements, capitalized repairs and improvements
during such period) which are required to be capitalized under
GAAP on a consolidated balance sheet of Borrower and its
Subsidiaries. Capital Expenditures shall not include (i) the
actual value received for existing equipment either traded-in at
time of purchase of new equipment or sold in the ordinary course
of business (but only to the extent such equipment is replaced),
and (ii) expenditures made from insurance proceeds.
"Capital Lease" shall mean any lease of any
property (whether real, personal or mixed) by Borrower or a
Subsidiary as lessee that, in accordance with GAAP, either would
be required to be classified and accounted for as a capital lease
on a balance sheet of Borrower or such Subsidiary or otherwise be
disclosed as such in a note to such balance sheet.
"Cash Equivalents" shall mean any of the
following: (i) certificates of deposit or other depository
accounts with commercial banks organized under the laws of the
United States or a state thereof, to the extent such certificates
or accounts are fully insured by the Federal Deposit Insurance
Corporation; (ii) treasury bills, and other marketable
obligations issued or fully guaranteed by, or backed by the full
faith and credit of, the United States and maturing not more than
one (1) year from the date of issuance; or (iii) open market
commercial paper rated at least "A1" or "P1" or higher by a
national credit rating agency and maturing not more than two
hundred seventy (270 ) days from the date of issuance.
"Closing Date" shall mean the date on which all of
the conditions precedent described in Section 3 shall have been
satisfied or waived by PCFC, and the Term Loan has been funded or
applied by PCFC to refinance the Bridge Loan.
"Collateral" shall mean all of the real property
and interests in property described in Section 9, and all other
property and interests in property that now or hereafter secure
the payment of any of the Obligations.
"Consolidated Cash Flow" shall mean, for any
period, for Borrower and its Subsidiaries on a consolidated
basis, the sum (without duplication) of: (a) Consolidated Net
Income; plus (b) the sum of (i) Equity in Losses of Joint
Ventures, (ii) extraordinary non-cash losses, (iii) interest
expense (including the interest portion of any capitalized lease
obligations); (iv) depletion, depreciation and amortization, and
(v) losses on asset sales; minus (c) the sum of (i) Equity in
Earnings of Joint Ventures, (ii) extraordinary gains, (iii) non-
cash amounts resulting from Adjusted Gains on Asset Sales, (iv)
Maintenance Capital Expenditures, and (v) Restricted Payments
made during such period, other than Restricted Payments referred
to in clause (iii) of the definition of Restricted Payments.
"Consolidated Debt Coverage Ratio" shall mean, as
at any date of determination, the ratio of Consolidated Cash Flow
for any period to Consolidated Debt Service for such period.
"Consolidated Debt Service" shall mean, for any
period, for Borrower and its Subsidiaries on a consolidated
basis, the sum (without duplication) of the following: (i)
interest expense (including the interest portion of any
capitalized lease obligations); and (ii) scheduled principal
payments (including the principal portion of capitalized lease
obligations).
"Consolidated EBITDA" shall mean, for any period,
for Borrower and its Subsidiaries on a consolidated basis, the
sum (without duplication) of: (a) Consolidated Net Income; plus
(b) the sum of (i) Federal, state, local, and foreign income
taxes, (ii) Equity in Losses of Joint Ventures, (iii) interest
expense (including the interest portion of any capitalized lease
obligations), (iv) depletion, depreciation and amortization, (v)
losses on asset sales, and (vi) all other non-cash expenses;
minus (c) the sum of (i) Equity in Earnings of Joint Ventures,
(ii) non-cash amounts resulting from Adjusted Gains on Asset
Sales, and (iii) extraordinary gains.
"Consolidated Funded Debt" shall mean, as at any
date of determination, for Borrower and its Subsidiaries on a
consolidated basis, all indebtedness for borrowed money evidenced
by notes, bonds, debentures, or similar evidences of
indebtedness, and which by its terms matures more than one year
from, or is directly or indirectly renewable or extendible at
such Person's option under a revolving credit or similar
agreement obligating the lender or lenders thereunder to extend
credit over a period of more than one year from the date of
creation thereof, and specifically including (i) capital lease
obligations, (ii) current maturities of long-term debt, (ii)
revolving credit and short-term debt extendible beyond one year
at the option of the debtor, and (iii) the Obligations.
"Consolidated Indebtedness" shall mean, as at any
date of determination, for Borrower and its Subsidiaries on a
consolidated basis, the sum (without duplication) of: (i) all
obligations for borrowed money or for the deferred purchase price
of property or services (including the present value of
capitalized lease obligations) which, in accordance with GAAP,
would be included in determining total liabilities as shown on
the liability side of a balance sheet as of the date at which
such indebtedness is to be determined; (ii) guarantees (other
than Borrower's $10,000,000 limited payment guaranty of
indebtedness of Kaahumanu Center Associates relating to the
Kaahumanu Shopping Center); and (iii) letters of credit (other
than letters of credit to support trade payables) and
endorsements (other than of notes, bills, and checks presented to
banks for collection or deposit in the ordinary course of
business), in each case to support obligations for borrowed money
of others.
"Consolidated Indebtedness to Consolidated EBITDA
Ratio" shall mean, as at any date of determination, the ratio of
Consolidated Indebtedness, as of such date of determination, to
Consolidated EBITDA for the relevant period.
"Consolidated Net Cash Flow" shall mean, for any
period, for Borrower and its Subsidiaries on a consolidated
basis, the sum (without duplication) of: (a) Consolidated Net
Income; plus (b) the sum of (i) extraordinary non-cash losses,
(ii) depletion, depreciation and amortization, and (iii) losses
on asset sales (excluding the cash portion of any such losses);
minus (c) the sum of (i) extraordinary gains, (ii) gains on asset
sales (excluding the cash portion of any gain associated with the
sale of property), (iii) principal payments on term debt
(including the interest portion of any capitalized lease
obligations), (iv) Maintenance Capital Expenditures, and (v)
other Capital Expenditures (net of the value associated with any
exchange of assets, any amounts financed, and any amounts for
which a firm financing commitment is available to Borrower or any
Subsidiary, at its discretion).
"Consolidated Net Income" shall mean, for any
period, on a consolidated basis, the net income, if any, of
Borrower and its Subsidiaries, determined in accordance with
GAAP.
"Consolidated Net Loss" shall mean, for any
period, on a consolidated basis, the net loss, if any, of
Borrower and its Subsidiaries, determined in accordance with
GAAP.
"Consolidated Net Worth" shall mean, as at any
date of determination, on a consolidated basis, the gross book
value of the assets of Borrower, minus the sum of (i) all
reserves applicable thereto, and (ii) all liabilities of Borrower
(including subordinated liabilities).
"Consolidated Tangible Net Worth" shall mean, as
at any date of determination, the gross book value of the assets
of Borrower, (exclusive of goodwill, patents, trademarks, trade
names, organization expense, unamortized debt discount and
expense, deferred charges (other than deferred development costs
related to the Kapalua Resort, provided the aggregate of said
costs shall not exceed $5,000,000), and other like intangibles),
minus (i) reserves applicable thereto, and (ii) all liabilities
(including subordinated liabilities), in each case determined in
accordance with GAAP and taking into effect such other
adjustments as may be reasonably determined by PCFC in accordance
with GAAP.
"Consolidated Total Capitalization" shall mean, as
at any date of determination, the sum of (i) Consolidated Funded
Debt, plus (ii) Consolidated Net Worth.
"Default" shall mean the occurrence of any event
or circumstance which, with the passage of time or the giving of
notice or both, would become an Event of Default.
"Default Rate" shall mean a rate of interest that
is three percent (3.00%) higher than the rate otherwise
applicable.
"Discounted Value" shall mean, with respect to any
Prepayment, the amount obtained by discounting all Remaining
Scheduled Payments with respect to such Prepayment from their
respective scheduled due dates to the payment date with respect
to such Prepayment, in accordance with accepted financial
practice and at a discount factor (applied on the same periodic
basis as that on which interest is payable for such Prepayment)
equal to the Reinvestment Yield with respect to such Prepayment.
"Environmental Laws" shall mean all applicable
federal, state, local and foreign laws, statutes, ordinances,
codes, rules, standards and regulations, now or hereafter in
effect, and any applicable judicial or administrative
interpretation thereof, including any applicable judicial or
administrative order, consent decree, order or judgment, imposing
liability or standards of conduct for or relating to the
regulation and protection of human health, safety, the
environment and natural resources (including ambient air, surface
water, groundwater, wetlands, land surface or subsurface strata,
wildlife, aquatic species and vegetation). Environmental Laws
include: the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980 (42 U.S.C. 9601 et seq.) ("CERCLA");
the Hazardous Materials Transportation Authorization Act of 1994
(49 U.S.C. 5101 et seq.); the Federal Insecticide, Fungicide,
and Rodenticide Act (7 U.S.C. 136 et seq.); the Solid Waste
Disposal Act (42 U.S.C. 6901 et seq.); the Toxic Substance
Control Act (15 U.S.C. 2601 et seq.); the Clean Air Act (42
U.S.C. 7401 et seq.); the Federal Water Pollution Control Act
(33 U.S.C. 1251 et seq.); the Occupational Safety and Health
Act (29 U.S.C. 651 et seq.); the Safe Drinking Water Act (42
U.S.C. 300(f) et seq.); and any and all regulations
promulgated thereunder, and all analogous state, local and
foreign counterparts or equivalents and any transfer of ownership
notification or approval statutes.
"Environmental Liabilities" shall mean, with
respect to any Person, all liabilities, obligations,
responsibilities, response, remedial and removal costs,
investigation and feasibility study costs, capital costs,
operation and maintenance costs, losses, damages, punitive
damages, property damages, natural resource damages,
consequential damages, treble damages, costs and expenses
(including all fees, disbursements and expenses of counsel,
experts and consultants), fines, penalties, sanctions and
interest incurred as a result of or related to any claim, suit,
action, investigation, proceeding or demand by any Person,
whether based in contract, tort, implied or express warranty,
strict liability, criminal or civil statute or common law,
including any arising under or related to any Environmental Laws,
environmental permits, or in connection with any release or
threatened release or presence of a Hazardous Material whether
on, at, in, under, from or about or in the vicinity of any real
or personal property.
"Equity in Earnings of Joint Ventures" shall mean
that portion of the earnings from joint ventures that is not
distributed in cash to Borrower, determined on a consolidated
basis in conformity with GAAP.
"Equity in Losses of Joint Venture" shall mean the
non-cash portion of any losses realized from joint ventures,
determined on a consolidated basis in conformity with GAAP.
"Event of Default" shall have the meaning assigned
thereto in Section 13.
"Farm Credit One-Year Discount Note Rate" shall
mean, at any time, the all-in cost paid by Western Farm Credit
Bank on one-year Farm Credit Discount Notes made available to
Western Farm Credit Bank by the Federal Farm Credit Banks Funding
Corporation.
"Farm Credit Six-Month Discount Note Rate" shall
mean, at any time, the all-in cost paid by Western Farm Credit
Bank on six-month Farm Credit Discount Notes made available to
Western Farm Credit Bank by the Federal Farm Credit Banks Funding
Corporation.
"Farm Credit Medium Term Note Rate" shall mean, at
any time, the all-in cost paid by Western Farm Credit Bank on
three year Farm Credit Medium Term Notes, made available to
Western Farm Credit Bank by the Federal Farm Credit Banks Funding
Corporation.
"Fiscal Quarter" shall mean any of the quarterly
accounting periods of Borrower.
"Fiscal Year" shall mean the 12-month period of
Borrower ending December 31 of each year. Subsequent changes of
the fiscal year of Borrower shall not change the term "Fiscal
Year," unless PCFC shall consent in writing to such change.
"Fixed Rate Tranche" shall have the meaning
assigned to it in Section 2.
"GAAP" shall mean generally accepted accounting
principles.
"Guarantor" shall mean any Person that has
guaranteed to PCFC all or any part of the Loan.
"Guaranty Agreement" shall mean any Continuing
Guaranty or other agreement by which a Guarantor has guaranteed
all or any portion of the Loan.
"Hazardous Material" shall mean any substance,
material or waste that is regulated by or forms the basis of
liability now or hereafter under, any Environmental Laws,
including any material or substance that is (a) defined as a
"solid waste," "hazardous waste," "hazardous material,"
"hazardous substance," "extremely hazardous waste," "restricted
hazardous waste," "pollutant," "contaminant," "hazardous
constituent," "special waste," "toxic substance" or other similar
term or phrase under any Environmental Laws, (b) petroleum or any
fraction or by-product thereof, asbestos, polychlorinated
biphenyls (PCB's), or any radioactive substance.
"Indemnified Person" shall mean all Persons
indemnified by Borrower pursuant to Section 15.
"Index Rate" shall mean, at any time, (i) with
respect to the Six Month Fixed Rate Tranche, the Farm Credit Six-
Month Discount Note Rate then in effect, (ii) with respect to the
One Year Fixed Rate Tranche, the Farm Credit One-Year Discount
Note Rate then in effect, and (iii) with respect to the Three
Year Fixed Rate Tranche, either (x) if a six month fixed rate
Interest Period is then in effect, the Farm Credit Six-Month
Discount Note Rate then in effect, or (y) if a three year fixed
rate Interest Period is then in effect, the Farm Credit Medium
Term Note Rate then in effect.
"Interest Period" shall mean, with respect to any
Fixed Rate Tranche, a period beginning on the Closing Date or the
Reset Date for such Fixed Rate Tranche, and ending on the next
Reset Date for such Fixed Rate Tranche.
"Investments" shall mean all expenditures by
Borrower and its Subsidiaries, other than Capital Expenditures,
made for the purpose of acquiring, increasing, or supplementing
equity interests of any nature in partnerships, joint ventures,
corporations, trusts, associations, or other business entities,
or in real or personal property of any kind and as reflected as
investments in Borrower's financial statements.
"Lien" shall mean any mortgage or deed of trust,
pledge, hypothecation, assignment, deposit arrangement, lien,
charge, claim, security interest or encumbrance, or preference,
priority or other security agreement or preferential arrangement
of any kind or nature whatsoever (including any lease or title
retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing).
"Maintenance Capital Expenditures" shall mean
Capital Expenditures for the replacement of capital assets used
in the ordinary course of business.
"Make-Whole Amount" shall mean, with respect to
any Prepayment of the Three Year Fixed Rate Tranche, the amount,
if any, by which the Discounted Value of the Remaining Scheduled
Payments with respect to the Prepayment exceeds the amount of
such Prepayment; provided, that the Make-Whole Amount shall in no
event be less than zero.
"Material Adverse Effect" shall mean a Material
Adverse Effect with respect to (i) the business, assets,
operations, prospects, or financial or other condition of
Borrower or any Guarantor, (ii) Borrower's ability to pay its
obligations to PCFC under this Agreement, or (iii) PCFC's rights
and remedies under this Agreement or any Guaranty Agreement.
"Obligations" shall mean all loans, advances,
debts, liabilities, and obligations, for the performance of
covenants, tasks or duties or for payment of monetary amounts
(whether or not such performance is then required or contingent,
or amounts are liquidated or determinable and whether or not
allowed as a claim in any proceeding referred to in Section
13(f)) owing by Borrower to PCFC, and all covenants and duties
regarding such amounts, of any kind or nature, present or future,
whether or not evidenced by any note, agreement or other
instrument, arising under any of the Other Documents. This term
includes the Term Loan, all principal, interest, fees, charges,
expenses, attorneys' fees and any other sum chargeable to
Borrower under this Agreement or any of the Other Documents.
"One Year Fixed Rate Tranche" shall have the
meaning set forth in Section 2.
"Other Agreements" shall mean all of the documents
listed in Exhibit A.
"Permitted Encumbrances" shall mean the following
encumbrances: (i) Liens for taxes or assessments or other
governmental charges or levies, either not yet due and payable or
to the extent that nonpayment thereof is permitted by the terms
of this Agreement; (ii) pledges or deposits securing obligations
under workmen's compensation, unemployment insurance, social
security or public liability laws or similar legislation; (iii)
pledges or deposits securing bids, tenders, contracts (other than
contracts for the payment of money) or leases to which Borrower
or any Guarantor is a party as lessee made in the ordinary course
of business; (iv) workers', mechanics', suppliers' or similar
Liens arising in the ordinary course of business that are either
not yet due and payable or that are being contested in good faith
by appropriate proceedings and for which Borrower or any
Guarantor has established adequate reserves; (v) carriers',
warehousemen's, or other similar possessory Liens arising in the
ordinary course of business; (vi) an attachment or judgment Lien,
but only for a period of thirty (30) days following attachment of
such Lien and such attachment or judgment lien shall cease to be
a Permitted Encumbrance if the obligation that it secures has not
been satisfied or bonded during such thirty (30) day period;
(vii) zoning restrictions, easements, licenses, or other
restrictions on the use of real property or other minor
irregularities in title (including leasehold title) thereto, so
long as the same do not materially impair the use, value, or
marketability of such real property, leases or leasehold estates;
(viii) Liens securing indebtedness owed by a Subsidiary to
Borrower; (ix) security interests securing purchase money
indebtedness in capital assets, the acquisition of which is
permitted by this Agreement, and so long as the security interest
does not encumber any asset other than the asset acquired; (x)
any Lien listed as a Permitted Encumbrance on the Disclosure
Schedule referred to in Exhibit A; (xi) the refinancing of the
real property mortgages referred to in the Disclosure Schedule
referred to in Exhibit A, provided that such refinancing covers
the same property covered by the original mortgages, secures a
principal amount not in excess of that secured by such mortgages
on the date of refinancing, and the terms of such refinancing
have all been negotiated at arms length and are on fair market
terms; and (xii) other Liens securing Consolidated Indebtedness
not exceeding Fifteen Million Dollars ($15,000,000) in the
aggregate outstanding at any time, so long as such other Liens do
not attach to any of the Collateral.
"Person" shall mean any individual, sole
proprietorship, partnership, joint venture, trust, unincorporated
organization, association, corporation, limited liability
company, institution, public benefit corporation, entity or
government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality,
division, agency, body or department thereof).
"Prepayment" shall mean a prepayment, prior to the
Term Loan Maturity Date, of all or any portion of the principal
amount of the Term Loan.
"Reinvestment Yield" shall mean, with respect to
any Prepayment of the Three Year Fixed Rate Tranche, the yield to
maturity implied by (i) the yields reported, as of 10:00 a.m.
(New York City time) on the second Business Day preceding the
payment date with respect to such Prepayment, on the display
designated as "Page PX1" or other applicable "PX" page of the
Bloomberg Financial Markets Services Screen (or such other
display as may replace Page PX1 or such other page on the
Bloomberg Financial Markets Services Screen) for actively traded
U.S. Treasury securities having a maturity equal to the Remaining
Average Life of such Prepayment as of such payment date, or (ii)
if such yields are not reported as of such time or the yields
reported as of such time are not ascertainable, the Treasury
Constant Maturity Series Yields reported, for the latest date for
which such yields have been so reported as of the second Business
Day preceding the payment date with respect to such Prepayment,
in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S.
Treasury securities having a constant maturity equal to the
Remaining Average Life of such Prepayment as of such payment
date. Such implied yield will be determined, if necessary, by
(a) converting U.S. Treasury bill quotations to bond-equivalent
yields in accordance with accepted financial practice and (b)
interpolating linearly between (1) the actively traded U.S.
Treasury security with the maturity closest to and greater than
the Remaining Average Life and (2) the actively traded U.S.
Treasury security with the maturity closest to and less than the
Remaining Average Life.
"Remaining Average Life" shall mean, with respect
to any Prepayment of the Three Year Fixed Rate Tranche, the
number of years (calculated to the nearest one-twelfth year)
obtained by: (i) multiplying (a) the principal component of each
Remaining Scheduled Payment covered by such Prepayment by (b) the
number of years (calculated to the nearest one-twelfth year) that
will elapse between the date of such Prepayment and the scheduled
due date of such Remaining Scheduled Payment; (ii) adding the
products of each such calculation; and (iii) dividing the
resulting sum by the amount of such Prepayment.
"Remaining Scheduled Payments" shall mean, with
respect to any Prepayment of the Three Year Fixed Rate Tranche,
all payments and interest that would be due after the date of the
Prepayment and on or prior to the next Reset Date with respect to
the principal prepaid if such Prepayment were not made; provided,
that if such payment date is not a date on which interest
payments are due to be made under the terms of this Agreement,
then the amount of the next succeeding scheduled interest payment
will be reduced by the amount of interest accrued to such payment
date and required to be paid on such payment date pursuant to
this Agreement.
"Reset Date" shall mean, (i) with respect to the
Six Month Fixed Rate Tranche, December 1, 1999 and each June 1
and December 1 thereafter until the Term Loan Maturity Date, (ii)
with respect to the One Year Fixed Rate Tranche, June 1, 2000 and
each June 1 thereafter until the Term Loan Maturity Date, and
(iii) with respect to the Three Year Fixed Rate Tranche, either
(x) if a six month fixed rate Interest Period is then in effect,
the June 1 or December 1 immediately following the commencement
of such Interest Period, or (y) if a three year fixed rate
Interest Period is then in effect, the June 1 or December 1 that
corresponds to the third anniversary of the commencement of such
Interest Period.
"Restricted Payments" shall mean (i) dividends or
other distributions or payments on account of or with respect to
any capital stock of Borrower or of any Guarantor, except
distributions consisting of such stock or, in the case of a
Guarantor, distributions or payments made to Borrower, (ii) the
redemption or acquisition of such stock or of warrants, rights,
or other options to purchase such stock, except, in the case of a
Guarantor, redemption or acquisition of stock held by Borrower,
and (iii) any payment, repayment, redemption, retirement,
repurchase or other acquisition, direct or indirect, by Borrower,
any Guarantor or any Subsidiary of Borrower or any Guarantor of
any principal portion of any obligation or indebtedness that has
been subordinated to the indebtedness owed by Borrower to PCFC.
"Six Month Fixed Rate Tranche" shall have the
meaning set forth in Section 2.
"Stock" shall mean all shares, options, warrants,
general or limited partnership interests, participations or other
equivalents (regardless of how designated) of or in a
corporation, partnership or equivalent entity whether voting or
nonvoting, including, without limitation, common stock, preferred
stock, or any other "equity security" (as such term is defined in
Rule 3a11-1 of the General Rules and Regulations promulgated by
the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended).
"Subsidiary" shall mean, with respect to any
Person, (i) any corporation of which an aggregate of more than
50% of the outstanding Stock having ordinary voting power to
elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, Stock of any other class
or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the
time, directly or indirectly, owned legally or beneficially by
such Person and/or one or more Subsidiaries of such Person, or
with respect to which any such Person has the right to vote or
designate the vote of 50% or more of such Stock whether by proxy,
agreement, operation of law or otherwise and (ii) any
partnership, trust, limited liability company, or other entity in
which such Person and/or one or more Subsidiaries of such Person
shall have an interest (whether in the form of voting or
participation in profits or capital contribution) of more than
50% or of which any such Person is a general partner or may
exercise the powers of a general partner.
"Term Loan" shall have the meaning set forth in
Section 2.
"Term Loan Fee" shall have the meaning set forth
in Section 5.
"Term Loan Maturity Date" shall have the meaning
set forth in Section 2.
"Three Year Fixed Rate Tranche" shall have the
meaning set forth in Section 2.
(b) Rules of Construction. Unless otherwise specified,
references in this Agreement to a Section, Subsection, clause,
Exhibit, or Schedule refer to such Section, Subsection, clause,
Exhibit, or Schedule as contained in this Agreement. The words
"herein," hereof," and "hereunder" and other words of similar
import refer to this Agreement as a whole, including all Exhibits
and Schedules hereto, as the same may from time to time be
amended, restated, modified or supplemented. Wherever from the
context it appears appropriate, each term stated in either the
singular or plural shall include the singular and the plural.
The words "including," "includes," and "include" shall be deemed
to be followed by the words "without limitation"; references to
persons include their respective successors and assigns, to the
extent permitted by the loan documents executed in connection
with this Agreement, or, in the case of governmental persons,
persons succeeding to the relevant functions of such persons; all
references to statutes and related regulations shall include any
amendments of the same and any successor statutes and
regulations; whenever any provision in this Agreement or any such
loan document refers to the knowledge (or analogous phrase) of
Borrower or any Affiliate of Borrower, such words are intended to
signify that Borrower or such Affiliate has actual knowledge or
awareness of a particular fact or circumstance of that Borrower
or such Affiliate, if it had exercised reasonable due diligence,
would have known or been aware of such fact or circumstance.
2. The Loan. On the terms and conditions set forth in this
Agreement, PCFC agrees to make a term loan to Borrower in a
principal amount of Fifteen Million Dollars ($15,000,000) (the
"Term Loan"). The Term Loan will be available to Borrower on the
terms and conditions set forth in this Agreement on the Closing
Date when all conditions precedent set forth in Section 3 have
been satisfied. The Term Loan shall be used to refinance the
obligations of Borrower to PCFC under the Bridge Loan Agreement.
The Term Loan shall be divided into three interest rate
components (each such interest rate component being referred to
individually as a "Fixed Rate Tranche," and all such interest
rate components being referred to collectively as the "Fixed Rate
Tranches"), consisting of:
(a) a Fixed Rate Tranche for Four Million Dollars
($4,000,000) utilizing fixed rate Interest Periods of six months
(the "Six Month Fixed Rate Tranche");
(b) a Fixed Rate Tranche for Six Million Dollars
($6,000,000) utilizing fixed rate Interest Periods of one year
(the "One Year Fixed Rate Tranche"); and
(c) a Fixed Rate Tranche for Five Million Dollars
($5,000,000) utilizing any combination of six month fixed rate Interest
Periods and three year fixed rate Interest Periods as Borrower
may select, provided, that (i) Borrower may not select a three
year fixed rate Interest Period commencing on any Reset Date
after the seventh anniversary of the Closing Date, (ii) each
Interest Period selected by Borrower shall apply to the entire
amount of such Fixed Rate Tranche, and (iii) if any Event of
Default has occurred and is continuing on any Reset Date for such
Fixed Rate Tranche, the Interest Period selected on such Reset
Date shall be a six month fixed rate Interest Period (the "Three
Year Fixed Rate Tranche").
The Term Loan shall amortize as set forth in Section 4(a) and
shall be due and payable in full on June 1, 2009 (the "Term Loan
Maturity Date"); provided, that if the Obligations shall become
due and payable in accordance with Section 14 or any other
provision of this Agreement prior to such date, then the Term
Loan Maturity Date shall be the date on which the Obligations
become due and payable.
3. Conditions Precedent. PCFC's obligation to advance the Term
Loan hereunder is subject to the following conditions precedent:
(a) Required Documents. PCFC must have received from Borrower
either an executed original, or a facsimile of the signature page
of an executed original, of this Agreement as well as all of the
other documents (the "Other Documents") listed in Exhibit A, each
of which must be satisfactory to PCFC in its sole discretion.
(b) Recordation of Modification of Mortgage and Issuance of
Title Commitment. The Modification of and Supplement to
Mortgage, Assignment of Rents, Security Agreement, Financing
Statement and Fixture Filing executed by Borrower in favor of
PCFC must have been duly recorded, and Title Guaranty of Hawaii,
Incorporated must have issued its 1992 ALTA lender's policy of
title insurance or commitment therefor in favor of PCFC, each in
form and substance satisfactory to PCFC.
(c) Approvals. PCFC shall have received evidence satisfactory
to PCFC that all consents and approvals which are necessary for
or required as a condition of the validity and enforceability of
this Agreement and all documents and instruments contemplated
hereby, have been obtained and are in full force and effect.
(d) Event of Default. No Default or Event of Default shall
have occurred and be continuing, and no default or event of default
shall have occurred and be continuing under the Bridge Loan
Agreement.
(e) Loan Fee. Borrower shall have paid to PCFC the Term Loan
Fee required by Section 5.
(f) Continuing Guaranty Agreements. Borrower shall have
delivered to PCFC continuing guaranty agreements, in form and
substance satisfactory to PCFC, from the persons identified on
Exhibit A pursuant to which such Persons guarantee to PCFC all of
Borrower's obligations to PCFC under this Agreement.
4. Terms of Term Loan.
(a) Repayment of Principal. Borrower shall repay principal of
the Term Loan as follows:
(1) Borrower shall pay the principal amount of the Six
Month Fixed Rate Tranche ($4,000,000) in consecutive installments of
Fifty Thousand Dollars ($50,000) each, commencing on September 1,
2004, and continuing on the first day of each December, March,
June, and September thereafter through March 1, 2009, and a final
payment of Three Million Fifty Thousand Dollars ($3,050,000) on
the Term Loan Maturity Date;
(2) Borrower shall pay the principal amount of the One
Year Fixed Rate Tranche ($6,000,000) in consecutive installments of
Seventy-Five Thousand Dollars ($75,000) each, commencing on
September 1, 2004, and continuing on the first day of each
December, March, June, and September thereafter through March 1,
2009, and a final payment of Four Million Five Hundred Seventy-
Five Thousand Dollars ($4,575,000) on the Term Loan Maturity
Date; and
(3) Borrower shall pay the principal amount of the
Three Year Fixed Rate Tranche ($5,000,000) in consecutive installments of
Two Hundred and Fifty Thousand Dollars ($250,000) each,
commencing on September 1, 2004, and continuing on the first day
of each December, March, June, and September thereafter through
March 1, 2009, and a final payment of Two Hundred Fifty Thousand
Dollars ($250,000) on the Term Loan Maturity Date.
Borrower shall repay all unpaid principal of the Term Loan, and
all accrued interest, fees (including prepayment surcharges, if
any) , and reimbursable expenses with respect thereto, in full,
on the Term Loan Maturity Date.
(b) Payment of Interest. Borrower shall pay interest on the
Term Loan, in arrears, every three (3) months, commencing on
September 1, 1999, and continuing on the first day of each
December, March, June and September thereafter; provided, that
interest accrued on the Term Loan but not otherwise due and
payable at the expiration of an Interest Period or on the Term
Loan Maturity Date shall become due and payable on such
expiration date or the Term Loan Maturity Date, respectively. If
any installment of interest or any other amount payable hereunder
or under any Other Document becomes due and payable on a day
other than a Business Day, the payment date for such payment
shall be extended to the next succeeding Business Day and, with
respect to payments of principal or other payments that bear
interest (other than interest first due on such date), interest
thereon shall be payable at the then applicable rate during such
extension; provided, that if any installment of interest shall
become due and payable on a Friday or Saturday, the payment date
for such payment shall be the immediately preceding Business Day.
(c) Interest Rates.
(1) Interest on Fixed Rate Tranches. Each Fixed Rate
Tranche shall bear interest, from the Closing Date through the date on
which such Fixed Rate Tranche is paid in full, at a rate per
annum equal to the sum of (i) the applicable Index Rate for such
Fixed Rate Tranche, plus (ii) the Applicable Spread for the
Interest Period then in effect for such Fixed Rate Tranche.
(2) Adjustment in Applicable Spread. Commencing on
the Reset Date corresponding to the third anniversary of the Closing Date,
and continuing thereafter on the Reset Date corresponding to each
subsequent anniversary of the Closing Date, the Applicable Spread
for the Interest Period then in effect for each Fixed Rate
Tranche shall be determined, in the manner set forth below, to be
the Applicable Spread for the Interest Period then in effect for
such Fixed Rate Tranche, based on Borrower's Consolidated Funded
Debt to Consolidated EBITDA Ratio, for the immediately preceding
Fiscal Year:
Consolidated Funded Debt to Applicable Spread
Consolidated EBITDA
Ratio Level Six Month One Year Three Year
Interest Period Interest Period Interest Period
Greater than 2.75:1 2.50% 2.55% 2.45%
2.25:1 to 2.75:1 2.35% 2.40% 2.30%
Less than 2.25:1 2.20% 2.25% 2.15%
Notwithstanding any provision to the contrary: (i) the Applicable
Spread for any Fixed Rate Tranche shall not adjust until the
Reset Date for such Fixed Rate Tranche immediately following
Borrower's delivery to PCFC of the annual, audited financial
statements required pursuant to Section 11(g)(1) confirming any
such adjustment; (ii) if either (x) Borrower fails to deliver to
PCFC, on a timely basis, the annual, audited financial statements
required pursuant to Section 11(g)(1), and such failure is not
waived by PCFC, or (y) any other Default or Event of Default
occurs and is continuing, then from and after such failure or
Default or Event of Default the Applicable Margin for each Fixed
Rate Tranche shall be that set forth in the row above entitled
"Greater than 2.75:1;" and (iii) the Applicable Spread for any
Fixed Rate Tranche shall not adjust retroactively for any
Interest Period that has expired prior to such Reset Date. The
Applicable Spread shall not include any prepayment surcharge that
may be payable pursuant to Section 6(d).
(3) Calculation of Interest. All calculations of
interest for any Fixed Rate Tranche shall be made by PCFC on the basis of a
three hundred sixty (360) day year consisting of twelve (12)
months of thirty (30) days per month. Each determination by PCFC
of an interest rate hereunder shall be conclusive and binding for
all purposes, absent manifest error or bad faith.
(4) Default Rate. Any overdue principal or interest
with respect to any portion of the Term Loan, and the amount of any
fees, costs, or expenses that Borrower is obligated to pay to
PCFC under this Agreement not paid when due, shall bear interest,
payable on demand, for each day until paid at a rate per annum
equal to the Default Rate. In addition, upon and after the
occurrence of an Event of Default and continuing until such Event
of Default has been cured or waived in writing by PCFC in
accordance with the terms of this Agreement, interest shall
accrue on all obligations owed by Borrower to PCFC hereunder at
the Default Rate. The interest rate increase to the Default Rate
shall take effect immediately upon the occurrence of an Event of
Default, without prior notice to Borrower.
(5) Interest Not to Exceed Maximum Lawful Rate.
Notwithstanding anything to the contrary set forth in this Agreement,
if at anytime until payment in full of all Obligations, the rate of
interest payable hereunder exceeds the highest rate of interest
permissible under any law which a court of competent jurisdiction
shall, in a final determination, deem applicable hereto (the
"Maximum Lawful Rate"), then in such event and so long as the
Maximum Lawful Rate would be so exceeded, the rate of interest
payable hereunder shall be equal to the Maximum Lawful Rate;
provided, that if at any time thereafter the rate of interest
payable hereunder is less than the Maximum Lawful Rate, Borrower
shall continue to pay interest hereunder at the Maximum Lawful
Rate until such time as the total interest received by PCFC is
equal to the total interest which PCFC would have received had
the interest rate payable hereunder been (but for the operation
of this Section 4(c)(5) the interest rate payable since the date
of this Agreement. Thereafter, the interest rate payable
hereunder shall be the rate of interest set forth herein, unless
and until the rate of interest again exceeds the Maximum Lawful
Rate, in which event this paragraph shall again apply. In no
event shall the total interest received by PCFC pursuant to the
terms hereof exceed the amount which PCFC could lawfully have
received had the interest due hereunder been calculated for the
full term hereof at the Maximum Lawful Rate. In the event the
Maximum Lawful Rate is calculated pursuant to this Section
4(c)(5), such interest shall be calculated at a daily rate equal
to the Maximum Lawful Rate divided by the number of days in the
year in which such calculation is made. In the event that a
court of competent jurisdiction, notwithstanding the provisions
of this Section 4(c)(5), shall make a final determination that
PCFC has received interest hereunder in excess of the Maximum
Lawful Rate, PCFC shall, to the extent permitted by applicable
law, promptly apply such excess first to any interest due and not
yet paid, then to the outstanding principal of the Term Loan
(without premium or penalty), and then to any other unpaid
obligations owed by Borrower under this Agreement and thereafter
shall refund any excess to Borrower or as a court of competent
jurisdiction may otherwise order.
(6) Additional Fixed Rate Provisions. If at any time
PCFC reasonably determines that for any reason adequate and reasonable
means do not exist for ascertaining the Farm Credit Discount Note
Rate, the Farm Credit Medium Term Note Rate, or any other index
hereunder, or any such rate or index generally becomes
unavailable to PCFC, PCFC shall promptly give notice thereof to
Borrower and shall designate an alternative index that is
reasonably comparable to the Farm Credit Discount Note Rate, the
Farm Credit Medium Term Note Rate, or such other index; provided,
that PCFC's determination under this Section 4(c)(6) as to
Borrower shall be in accordance with its treatment of other
borrowers under commercial loans generally. In the event that
any law, treaty, rule, regulation, or determination of a court or
governmental authority or any change therein or in the
interpretation or application thereof or compliance by PCFC with
any request or directive (whether or not having the force of law)
from any central bank or governmental authority:
(A) shall subject PCFC to any tax of any kind
whatsoever with respect to any rate, or change the basis of taxation of
payments to PCFC of principal, interest or any other amount payable under
this Agreement (except for changes in the rate of tax on the
overall net income of PCFC); or
(B) shall impose, modify, or hold applicable any
reserve, special deposit, compulsory loan, or similar requirement against
assets held by, or deposits or other liabilities in or for the
account of, advances or loans by, or other credit extended by, or
any other acquisition of funds by, any office of PCFC; or
(C) shall impose on PCFC any other condition; and
the result of any of the foregoing is to increase the cost to PCFC of making,
renewing, or maintaining any portion of the Term Loan with interest rates
tied to rate and/or to reduce any amount receivable by PCFC in connection
therewith;
then in any such case, Borrower shall pay to PCFC, immediately
upon demand, such amount or amounts as may be necessary to
compensate PCFC for any additional costs incurred by PCFC and/or
reductions in amounts received by PCFC which are attributable to
such rates made available to Borrower hereunder. In determining
which costs incurred by PCFC or reductions in amounts received by
PCFC are attributable to such rates, any reasonable allocation
made by PCFC among its operations shall be conclusive and binding
upon Borrower; provided, that PCFC's determination under this
Section 4(c)(d) as to Borrower is in accordance with its
treatment of other borrowers under commercial loans generally.
5. Loan Fee. In consideration of the execution and delivery of
this Agreement by PCFC, Borrower shall pay to PCFC a term loan
fee of One Hundred Five Thousand Dollars (the "Term Loan Fee"),
which Term Loan Fee is equal to seven tenths of one percent
(0.70%) of the term loan commitment made available to Borrower by
PCFC, and the payment of which shall be reduced by (i)
Seventy-Five Thousand Dollars ($75,000) (the amount of the bridge
loan fee paid by Borrower to PCFC on December 30, 1998), and (ii)
the unused portion, if any, of any application fees and expense
and other deposits paid by Borrower to PCFC. The Term Loan Fee
shall be due and payable upon the Closing Date. The full amount
of the Term Loan Fee shall be considered earned upon receipt and
no portion of the Term Loan Fee shall be refundable to Borrower
under any circumstances.
6. Prepayments.
(a) Prepayment in Full of Term Loan. Borrower shall have the
right at any time to make a voluntary Prepayment of the entire
amount of the Term Loan and to terminate this Agreement upon at
least thirty (30) Business Days prior notice to PCFC and payment,
in full, of the Term Loan and all interest, fees, reimbursable
expenses, and other Obligations as of the date of such Prepayment
and, if such Prepayment does not occur on a date that is a Reset
Date for each Fixed Rate Tranche, the surcharge or surcharges
described in Section 6(d).
(b) Prepayment of any Fixed Rate Tranche on Reset Date.
Borrower shall have the right at any time to make a voluntary
Prepayment of the entire amount or any portion of any Fixed Rate
Tranche upon any Reset Date for such Fixed Rate Tranche, without
premium or surcharge, upon at least thirty (30) Business Days
prior notice to PCFC. If such Prepayment is for the entire
amount of such Fixed Rate Tranche, such Prepayment must include
all accrued interest on such Fixed Rate Tranche as of the date of
such Prepayment. Each such partial Prepayment of a Fixed Rate
Tranche shall be applied in inverse order of maturity, and shall
not result in an extension or other adjustment of the existing
amortization schedule for such Fixed Rate Tranche.
(c) Partial Prepayment of Term Loan Other Than on Reset
Date. Borrower shall have the right at any time to make such Prepayment
of any portion of the Term Loan on any date other than a Reset
Date for such portion, so long as Borrower provides at least five
(5) Business Days notice to PCFC and pays the surcharges
calculated in accordance with Section 6(d). Unless otherwise
approved by PCFC, in its discretion, all such partial Prepayments
shall be applied by PCFC on a pro rata basis to each Fixed Rate
Tranche then outstanding in the same proportion as the principal
balance of such Fixed Rate Tranche bears to the aggregate
principal balance of the Term Loan then outstanding. Each such
partial Prepayment of the Term Loan shall be applied in inverse
order of maturity to the Fixed Rate Tranches to which it is
applied, and shall not result in an extension or other adjustment
of the existing amortization schedule for any Fixed Rate Tranche.
(d) Prepayment Surcharges. Except to the extent otherwise
provided in Sections 6(a) and (b), at the time that Borrower
makes a Prepayment, whether or not such Prepayment is voluntary
by or on behalf of Borrower and specifically including a
prepayment occurring as the result of an acceleration of the Term
Loan, Borrower shall simultaneously pay to PCFC a prepayment
surcharge for each Fixed Rate Tranche of the Term Loan so prepaid
determined as follows:
(1) the prepayment surcharge applicable to a Prepayment
of the Six Month Fixed Rate Tranche or the One Year Fixed Rate Tranche
shall be an amount equal to any loss of earnings through the next
Reset Date for such Fixed Rate Tranche, plus any other expense of
PCFC or its participants incurred or projected by PCFC as a
result of such Prepayment, in each case as reasonably determined
by PCFC; and
(2) the prepayment surcharge applicable to a Prepayment
of the Three Year Fixed Rate Tranche shall equal the Make-Whole Amount.
7. Manner and Time of Payment. Borrower shall make all
payments by wire transfer of immediately available funds as
follows:
To: Bank of America
10 Santa Rosa Avenue
Santa Rosa, CA 95405
ABA Routing No.: 121000358
Account Number: 14984-00266
Account Name: Pacific Coast Farm Credit Services, ACA
Reference: Loan # 0426195000
Attention: Tina Anaya, Accounting
P.O. Box 1120, Santa Rosa, CA 95492
Tel: (707) 545-1200
Fax: (707) 545-4446
Tax ID No.: 94-1160795
(or to such other account as PCFC may designate by notice).
Borrower shall give PCFC telephonic notice no later than 12:00
noon Pacific Time of its intent to make a wire transfer. Wire
transfers received after 2:00 p.m. Pacific Time shall be credited
on the next business day.
8. Capitalization. Borrower agrees to make such investments in
PCFC as PCFC may from time to time require in accordance with its
bylaws and capital plan. In connection with the foregoing, the
Borrower hereby acknowledges receipt, prior to the execution of
this document, of copies of the following: Notice Regarding Your
Required Investment in this Association, 1998 Annual Report, and
the Association's Capitalization Plan and Bylaws. All such
investments and all other equities which the Borrower may now own
or hereafter acquire or be allocated in PCFC shall be subject to
a statutory first lien in favor of PCFC to secure any
indebtedness of Borrower to PCFC.
At the option of PCFC, any amounts borrowed to purchase
capital stock or participation certificates, and any amounts
repaid from redemption of such stock or certificates, may be
recorded as part of the loan accounting in the transaction
summary, or in a separate stock or loan account.
A certificate will not be issued for capital stock or
participation certificates, but ownership will be evidenced by
the records of PCFC. THE OWNERSHIP OF THE CAPITAL STOCK OR
PARTICIPATION CERTIFICATES WILL BE REGISTERED ON THE RECORDS OF
PCFC AS FOLLOWS: MAUI LAND & PINEAPPLE COMPANY, INC., A HAWAII
CORPORATION.
Borrower hereby grants to PCFC a security interest in
and lien upon all capital stock and participation certificates as
collateral for the Term Loan. Upon an Event of Default, PCFC may
but is not required to apply all or part of the proceeds from
such capital stock or participation certificates against the Term
Loan.
UNTIL WRITTEN NOTICE OF REVOCATION IS RECEIVED BY PCFC,
PAUL J. MEYER IS AUTHORIZED TO VOTE FOR THE ABOVE-NAMED BORROWER
AND IS AUTHORIZED TO REQUEST THE CONVERSION FROM ONE CLASS TO
ANOTHER OF ALL SHARES OF CAPITAL STOCK WHICH MAY BE REGISTERED IN
THE NAME OF BORROWER.
As required by PCFC's bylaws and the federal income tax
law, Borrower agrees that the amount of any distribution of
patronage made by written notice of allocation to Borrower after
the date of this Agreement will be included in the Borrower's
gross income for the purpose of federal income tax for the year
in which the notice is received.
PCFC hereby confirms that, as of the date of this
Agreement, Borrower has made all investments in PCFC currently
required under its bylaws and capital plan.
9. Collateral; No Subordination. The obligations of Borrower
to PCFC hereunder shall be secured as follows: (i) PCFC shall
have first priority Liens on Borrower's fee interests in the real
property located on the Island and County of Maui, State of
Hawaii and identified as Tax Map Key parcel numbers (2)
2-4-001-003, (2) 2-3-002-008, (2) 2-3-009-008, (2) 2-2-002-017,
and (2) 4-3-001-031; (ii) PCFC shall have the lien referred to in
Section 8 and any other liens provided by the Farm Credit Act;
and (iii) PCFC shall have, and Borrower hereby grants PCFC a
security interest in, all cash, accounts, securities, investment
property, instruments, documents, or other property of Borrower
that is in PCFC's possession or under its control (the items
described in clauses (i), (ii), and (iii) collectively, the
"Collateral"). The obligations of Borrower to PCFC under this
Agreement shall constitute senior indebtedness and are not
subordinate in payment or priority to any other obligations of
Borrower.
10. Representations and Warranties. Borrower represents and
warrants to PCFC that, except as may be set forth in the
disclosure schedule referred to in Exhibit A (the "Disclosure
Schedule") or in a subsequent written disclosure to PCFC, each of
the following statements is true and correct on the date hereof
and shall also be true and correct on the date that Borrower
requests the Term Loan and at all times thereafter:
(a) Corporate Existence; Compliance with Law and Agreements.
Borrower and each Guarantor: (i) are corporations duly organized,
validly existing and in good standing under the laws of the State
of Hawaii; (ii) are duly qualified as foreign corporations and in
good standing under the laws of each jurisdiction where their
ownership or lease of property or the conduct of their businesses
require such qualification (except for jurisdictions in which
such failure to so qualify or to be in good standing would not
have a Material Adverse Effect); (iii) have the requisite
corporate power and authority and the legal right to own, pledge,
mortgage, or otherwise encumber and operate all real property
that they own, to lease the real property they operate under
lease, and to conduct their businesses as now, heretofore, and
proposed to be conducted; (iv) have all material licenses,
permits, consents, or approvals from or by, and have made all
material filings with, and have given all material notices to,
all governmental authorities having jurisdiction, to the extent
required for such ownership, operation, and conduct; (v) are in
compliance with their articles or certificates of incorporation
and by-laws; (vi) are in compliance with all applicable
provisions of law where the failure to comply would have a
Material Adverse Effect, and (vii) are not in default, and, to
Borrower's knowledge, no third party is in default, under or with
respect to any contract, agreement, lease or other instrument to
which Borrower or any Guarantor is a party which default in each
case or in the aggregate would have a Material Adverse Effect.
(b) Corporate Power; Authorization; Enforceable Obligations.
The execution, delivery, and performance by Borrower of the
Agreement, and any Other Documents to which Borrower is a party,
and by each Guarantor of such Guarantor's Guaranty Agreement: (i)
are within Borrower's or such Guarantor's corporate power; (ii)
have been duly authorized by all necessary or proper corporate
action; (iii) are not in contravention of any provision of
Borrower's or such Guarantor's articles of or certificate of
incorporation or by-laws; (iv) will not violate any law or
regulation, or any order or decree of any court or governmental
instrumentality; (v) will not conflict with or result in the
breach or termination of, constitute a default under or
accelerate any performance required by, any material indenture,
mortgage, deed of trust, lease, agreement or other instrument to
which Borrower or any Guarantor is a party or by which Borrower
or any Guarantor or any of Borrower's or any Guarantor's property
is bound; (vi) will not result in the creation or imposition of
any lien upon any of the property of Borrower or any Guarantor;
and (vii) do not require the consent or approval of any
governmental authority or any other Person, except for consents
or approvals which have been duly obtained, made, or complied
with. This Agreement constitutes a legal, valid, and binding
obligation of Borrower enforceable against it in accordance with
its terms except for general principles of equity and the effect
of bankruptcy, insolvency, and other laws affecting the rights of
creditors generally.
(c) Financial Statements and Condition; Disclosure.
The current audited and unaudited financial statements previously delivered
by Borrower to PCFC, and all financial statements to be delivered
by Borrower to PCFC pursuant to Section 11(g) (i) fairly present
in all material respects the financial position of Borrower as of
the dates specified in such financial statements, (ii) have been
prepared in accordance with GAAP, consistently applied throughout
the periods involved except as set forth in the notes thereto
(subject, in the case of any interim financial statements, to
normal year-end adjustments), and (iii) do not contain any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading in light
of the circumstances under which they were made. There has been
no material adverse change in the financial condition,
operations, business, properties or prospects of Borrower since
the date of such financial statements except changes that
individually or in the aggregate could not reasonably be expected
to have a Material Adverse Effect. There is no fact or
circumstance known to Borrower that could reasonably be expected
to have a Material Adverse Effect. Borrower is solvent and will
continue to be solvent after giving effect to the transactions
contemplated by this Agreement. There is no action, claim or
proceeding now pending or, to Borrower's knowledge, threatened
against Borrower before any court, board, commission, agency, or
instrumentality of any federal, state, or local government or of
any agency or subdivision thereof, or before any arbitrator or
panel of arbitrators, which, if determined adversely, could have
a Material Adverse Effect.
(d) Taxes. Borrower and each Guarantor have filed all tax
returns that are required to have been filed in any jurisdiction
and have paid all taxes shown to be due and payable on such
returns and all other taxes and assessments levied upon it or its
properties, assets, income or franchises, to the extent such
taxes and assessments have become due and payable and before they
have become delinquent, except for any taxes and assessments (i)
the amount of which is not individually or in the aggregate
material or (ii) the amount, applicability or validity of which
is currently being contested in good faith by appropriate
proceedings and with respect to which Borrower or such Guarantor
has established adequate reserves in accordance with GAAP.
Borrower knows of no basis for any other tax or assessment that
could reasonably be expected to have a Material Adverse Effect.
(e) Licenses; Permits; Intellectual Property Rights.
Borrower and each Guarantor own or possess all licenses, permits,
franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that individually
or in the aggregate are necessary to the conduct of Borrower's or
such Guarantor's business, without known conflict with the rights
of others. To the best knowledge of Borrower, no product of
Borrower or any Guarantor infringes in any material respect any
license, permit, franchise, authorization, patent, copyright,
service mark, trademark and trade name or other right owned by
any other Person. To the best knowledge of Borrower, there is no
Material violation by any Person of any right of Borrower or
Guarantor with respect to any patent, copyright, service mark,
trademark and trade name or other right owned by Borrower or any
Guarantor.
(f) Labor Matters. There are no strikes or other labor
disputes against Borrower or any Guarantor that are pending or, to
Borrower's knowledge, threatened which would have a Material
Adverse Effect. All payments due from Borrower or any Guarantor
on account of employee health and welfare insurance which would
have a Material Adverse Effect if not paid have been paid or
accrued as a liability on the books of Borrower or such
Guarantor.
(g) Investment Company Act. Neither Borrower nor any
Guarantor is an "investment company" or an "affiliated Person" of, or
"promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act
of 1940, as amended.
(h) Margin Regulations. Neither Borrower nor any Guarantor
owns any "margin security", as that term is defined in Regulations G
and U of the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board").
(i) ERISA. Each "Plan" (as defined below) is in compliance
in all material respects with the applicable provisions of ERISA and
the Internal Revenue Code ("IRC") and with respect to each Plan,
other than a Qualified Plan, all required contributions and
benefits have been paid in accordance with the provisions of each
such Plan to the extent that the failure to pay any such
contribution or benefit would have a Material Adverse Effect.
There are no pending or, to Borrower's knowledge, threatened
claims, actions or lawsuits (other than claims for benefits in
the normal course), asserted or instituted against Borrower or
any Guarantor or any Plan or its assets. Neither Borrower, any
Guarantor, nor any ERISA Affiliate of either has incurred or
reasonably expects to incur any Withdrawal Liability under
Section 4201 of ERISA as a result of a complete or partial
withdrawal from a Multiemployer Plan. Neither Borrower nor any
Guarantor has engaged in a prohibited transaction, as defined in
Section 4975 of the IRC or Section 406 of ERISA, in connection
with any Plan, which would subject Borrower or such Guarantor
(after giving effect to any exemption) to a material tax on
prohibited transactions imposed by Section 4975 of the IRC or any
other material liability. As used above, the term "Plan" shall
mean, with respect to Borrower or any Guarantor or any ERISA
Affiliate of either, at any time, an employee benefit plan, as
defined in Section 3(3) of ERISA, which Borrower maintains,
contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them. The terms
"Qualified Plan" and "Multiemployer Plan" shall have the meaning
given them in ERISA.
(j) Brokers. No broker or finder acting on behalf of
Borrower or any Guarantor brought about the obtaining, making, or closing
of the Term Loan and neither Borrower nor any Guarantor nor PCFC
have any obligation to any Person in respect of any finder's or
brokerage fees in connection with the Term Loan.
(k) Environmental Matters. Except as set forth in the
Disclosure Schedule, and except for matters that do not relate to
any of the Collateral and do not, individually or in the
aggregate, constitute a Material Adverse Effect, as of the date
of this Agreement: (i) all of Borrower's real property is free
of contamination from any Hazardous Material except for such
contamination that would not adversely impact the value or
marketability of such real property and that would not result in
Environmental Liabilities that could reasonably be expected to
exceed $100,000; (ii) Borrower has not caused or suffered to
occur any release of Hazardous Materials on, at, in, under,
above, to, from or about any of its real property; (iii) Borrower
is and has been in compliance with all Environmental Laws, except
for such noncompliance which would not result in Environmental
Liabilities which could reasonably be expected to exceed
$100,000; (iv) Borrower has obtained, and is in compliance with,
all environmental permits required by Environmental Laws for the
operations of its respective businesses as presently conducted or
as proposed to be conducted, except where the failure to so
obtain or comply with such environmental permits would not result
in Environmental Liabilities that could reasonably be expected to
exceed $100,000, and all such Environmental Permits are valid,
uncontested and in good standing; (iii) Borrower is not involved
in operations and does not know of any facts, circumstances or
conditions, including any releases of Hazardous Materials, that
are likely to result in any Environmental Liabilities of Borrower
that could reasonably be expected to exceed $100,000, and
Borrower has not permitted any current or former tenant or
occupant of any of its real property to engage in any such
operations; (iv) there is no litigation arising under or related
to any Environmental Laws, environmental permits or Hazardous
Material that seeks damages, penalties, fines, costs or expenses
in excess of $50,000 or injunctive relief against, or that
alleges criminal misconduct by, Borrower; (v) no notice has been
received by Borrower identifying it as a "potentially responsible
party" or requesting information under CERCLA or analogous state
statutes, and to the knowledge of Borrower, there are no facts,
circumstances or conditions that may result in Borrower being
identified as a "potentially responsible party" under CERCLA or
analogous state statutes; and (vi) Borrower has provided to PCFC
copies of all existing, material environmental reports, reviews
and audits and all written information pertaining to actual or
potential Environmental Liabilities, in each case relating to
Borrower.
(l) Year 2000. Borrower has completed a Year 2000
Assessment and Corrective Plan that will eliminate all limitations on the
ability of Borrower and the Subsidiaries, and any software,
hardware, microchips, peripheral interfaces, and systems used by
Borrower or any Subsidiary, to accurately accept, create,
manipulate, sort, sequence, calculate, compare, or provide
calendar date information with respect to calendar year 2000 and
any year thereafter, including exchanges of information among
data systems. Such Assessment and Corrective Plan provides for
the elimination of all such limitations on or before September
30, 1999.
11. Affirmative Covenants. Unless otherwise agreed to in
writing by PCFC, while this agreement is in effect whether or not
any indebtedness is outstanding hereunder, Borrower agrees to,
and, except with respect to the covenant contained in Section
11(a), to cause each Guarantor to:
(a) Eligibility. Maintain its status as an entity eligible
to borrow from PCFC.
(b) Corporate Existence. Preserve and keep in full force its
corporate status, existence and good standing in the jurisdiction
of its organization, its qualifications to transact business in
all places required by law, and all licenses, certificates,
permits, authorizations, approvals and the like which are
material to the conduct of its business or required by law.
(c) Compliance with Laws. Comply in all material respects
with all applicable federal, state, and local laws, rules,
regulations, ordinances, codes, and orders (collectively "Laws").
Without limiting the foregoing, Borrower agrees to comply in all
material respects, and to cause all Guarantors and all Persons
occupying or present on any properties of Borrower or any
Guarantor to so comply, with all Laws relating to environmental
protection.
(d) Property Maintenance. Maintain all of its property
that is necessary to or useful in the proper conduct of its business in
good working condition, ordinary wear and tear excepted.
(e) Books and Records. Keep adequate records and books of
account in which complete entries will be made in accordance with
past practices.
(f) Inspection. Permit PCFC or its agents, during normal
business hours or at such other times as the parties may agree,
to examine Borrower's or any Guarantor's properties, books, and
records, and to discuss Borrower's or any Guarantor's affairs,
finances, and accounts with its respective officers, directors,
employees, and independent certified public accountants.
(g) Reports and Notices. Furnish to PCFC:
(1) Annual Financial Statement. As soon as possible,
but in no event later than 90 days after the end of any Fiscal Year of
Borrower occurring during the term hereof, annual financial
statements of Borrower prepared in accordance with GAAP
consistently applied. Such financial statements shall: (i) be
audited by independent certified public accountants selected by
Borrower and acceptable to PCFC; (ii) be accompanied by a report
of such accountants containing an opinion acceptable to PCFC;
(iii) be accompanied by a compliance certificate from Borrower's
chief financial officer, in the form attached hereto as Exhibit
B, certifying that as of the date of such financial statement
there did not exist a Default or Event of Default under this
Agreement; (iv) be prepared in reasonable detail and in
comparative form; (v) include a balance sheet, a statement of
income, a statement of retained earnings, a statement of all cash
flows and all notes and schedules relating thereto;
(2) Quarterly Financial Statements. No later than 60
days after the end of each Fiscal Quarter, internally prepared quarterly
financial statements containing the same information regularly
generated by Borrower on its internal quarterly financial
statements and its quarterly filings with the Securities and
Exchange Commission on Form 10-Q, accompanied by a compliance
certificate from Borrower's chief financial officer, in the form
attached hereto as Exhibit B, certifying that as of the date of
such financial statement there did not exist a Default or Event
of Default under this Agreement;
(3) Annual Capital Expenditures Budget. No later than
November 30th of each year, Borrower's capital expenditures budget for the
forthcoming Fiscal Year;
(4) Annual Budget and Five Year Plan. No later than
30 days prior to the beginning of each Fiscal Year, Borrower's annual
budget for the forthcoming Fiscal Year and rolling five-year plan
for the forthcoming five-year period;
(5) Modifications to Annual Budget or Five-Year Plan.
No later than 60 days after the end of each Fiscal Quarter, any
modification or group of related modifications to Borrower's
capital expenditures budget, its annual budget, or its rolling
five-year plan, if such modification or group of related
modifications increases or decreases the expenditures or revenues
described therein by One Million Dollars ($1,000,000) or more;
(6) Notice of Default. Promptly after becoming aware
thereof, notice of the occurrence of a Default or Event of Default;
(7) Tax Returns. Within 30 days after filing of
such tax returns, a copy of such portions of every federal income tax
return filed by Borrower as are necessary to enable PCFC to
verify Borrower's calculations of Adjusted Gains on Asset Sales
and, if requested by PCFC, a signed copy of the entire tax
return;
(8) Notice of Non-Environmental Litigation. Promptly
after the commencement thereof, notice of the commencement of all actions,
suits, or proceedings before any court, arbitrator, or
governmental department, commission, board, bureau, agency, or
instrumentality affecting Borrower or any Guarantor which, if
determined adversely to Borrower or such Guarantor, could have a
Material Adverse Effect;
(9) Notice of Environmental Litigation, Etc. Promptly
after receipt thereof, notice of the receipt of all pleadings, orders,
complaints, indictments, or any other communication alleging a
condition that may require Borrower or Guarantor to undertake or
to contribute to a cleanup or other response under environmental
laws, or which seeks penalties, damages, injunctive relief, or
criminal sanctions related to alleged violations of such Laws, or
which claims personal injury or property damage to any Person as
a result of environmental factors or conditions, in each case to
the extent such communication relates to any of the Collateral or
to matters that could reasonably be deemed to constitute a
Material Adverse Effect; and
(10) Other Information. Such other information
regarding the condition or operations, financial or otherwise, of Borrower
or any Guarantor as PCFC may, from time to time, reasonably request.
(h) Insurance. At Borrower's sole cost and expense,
maintain, with financially sound and reputable insurers, insurance
providing for the following types of coverages in at least the
following amounts: (i) "All Risk" physical damage insurance on
all of Borrower's tangible real and personal property and assets,
including volcanic activity (but not eruption) coverage; (ii)
comprehensive general liability insurance on an "occurrence
basis" against claims for personal injury, bodily injury and
property damage with a minimum limit of One Million Dollars
($1,000,000) per occurrence and Two Million Dollars ($2,000,000)
in the aggregate, which coverage shall include
premises/operations, broad form contractual liability,
underground, explosion and collapse hazard, independent
contractors, broad form property coverage, products and completed
operations liability; (iii) with respect to worker's compensation
insurance, either self-insurance through reserves in excess of
the minimum required amounts, or commercial insurance within the
applicable statutory limits, in either case which includes
coverage for employee's occupational disease and employer's
liability within such legal amounts or limits; (iv) automobile
liability insurance for all owned, non-owned or hired automobiles
against claims for personal injury, bodily injury, and property
damage with a minimum combined single limit of One Million
Dollars ($1,000,000) per occurrence; and (v) umbrella insurance
of Fifty Million Dollars ($50,000,000) per occurrence and Fifty
Million Dollars ($50,000,000) in the aggregate.
All of such policies shall at all times remain in full
force and effect and in form and with insurers recognized as
adequate by PCFC, and provide coverage of such risks and for such
amounts as are customarily maintained for businesses of the scope
and size of Borrower's and Guarantor's and as otherwise
acceptable to PCFC. PCFC reserves the right at any time, upon a
review of Borrower's and the Guarantors' risk profile, to require
additional forms and limits of insurance. Borrower shall, if
requested by PCFC, provide PCFC with a report of Borrower's
insurance broker concerning Borrower's and the Guarantors'
insurance policies.
12. Negative Covenants. Unless otherwise agreed to in writing
by PCFC, while this Agreement is in effect, Borrower will not,
and will not permit any Guarantor to:
(a) Mergers, Acquisitions, Etc.
(1) Merge or consolidate with any other entity, or
commence operations under any other name.
(2) Without the prior, written consent of PCFC,
(i) acquire all or substantially all of the assets of any Person or entity,
(ii) form or create any new Subsidiary or Affiliate, or (iii) enter
into any business venture, including any joint venture,
partnership, or limited liability company other than in the
ordinary course of business, as conducted on the Closing Date;
provided, that PCFC's consent to any of the foregoing shall not
be unreasonably withheld.
(b) Transfer of Assets. Sell, transfer, lease, or otherwise
dispose of any of its assets, except (i) in the ordinary course
of Borrower's or such Guarantor's business (including
dispositions of real property, other than Collateral, held for
investment), (ii) transactions outside the ordinary course of
Borrower's or such Guarantor's business, but only to the extent
that the aggregate amount of all assets involved in such
transactions from and after the date of this Agreement have a
fair market value of less than Five Million Dollars ($5,000,000),
(iii) disposal of worn-out or obsolete assets, (iv) disposal of
equipment that is being replaced by equipment having a similar
value and serving a similar function, (v) transfers between
Borrower and any Guarantor or between any Guarantors of assets
other than the Collateral, but only to the extent that the
aggregate amount of all assets involved in such transfers during
any Fiscal Year have a fair marked value of less than One Million
Dollars ($1,000,000), (vi) transfers to Subsidiaries of Borrower
that are specifically identified on the Disclosure Schedule, and
(vii) other transfers, excluding transfers of Collateral, to the
extent that the greater of (x) the aggregate book value of such
transferred assets, or (y) the fair market value of such
transferred assets, is less than fifteen percent (15%) of the
total book value of Borrower's assets (net of reserves), on a
consolidated basis; provided, that any transfer of assets under
clause (vii) in excess of such fifteen percent (15%) level is
permitted if the proceeds of such sale are used, within 180 days
of such sale either (I) to acquire assets of a similar type and
of equal or greater value, or (II) to reduce Consolidated
Indebtedness; and provided, further, that each such transaction
referred to in clauses (i) through (vii) above shall be at arm's
length and for fair market value.
(c) Change in Business. Engage in any business activities or
operations substantially different from or unrelated to
Borrower's or such Guarantor's present business activities or
operations.
(d) Liens. Create or permit any Lien on any Collateral except
for Permitted Encumbrances.
(e) Capital Expenditures. Make Capital Expenditures, other than
Capital Expenditures for Borrower's "Kaahumanu Center Associates"
Subsidiary, in excess of the following amounts during the
following Fiscal Years:
Fiscal Year Amount
1999
$25,000,000
2000
$12,500,000
2001
$12,500,000
2002
$14,500,000
2003 and each Fiscal Year
thereafter $12,500,000
(f) Investments. Make any investment in or loan to any person,
other than: (i) cash and Cash Equivalents; (ii) loans to wholly-
owned Subsidiaries; (iii) loans to employees, so long as any such
loan in excess of $250,000 is disclosed to and approved by PCFC;
(iv) loans to Affiliates, subject to the limitations set forth in
Section 12(h); (v) existing investments set forth in the
Disclosure Schedule; (v) Investments in and Capital Expenditures
for Borrower's "Kaahumanu Center Associates" Subsidiary in an
aggregate, cumulative amount of up to $2,000,000; and (vi)
Investments to acquire the assets of any Person, form or create
any Subsidiary or Affiliate, or enter into any business venture,
in each case that is related to Borrower's core businesses as of
the date of this Agreement.
(g) Restricted Payments. Make any Restricted Payments unless
each and every one of the following conditions has been
fulfilled: (i) no Default or Event of Default then exists or has
occurred within the twelve (12) month period preceding the making
of such Restricted Payment, nor shall a Default or Event of
Default occur from the making of such Restricted Payment, (ii)
the amount of the Restricted Payment, together with the aggregate
amount of all other Restricted Payments made during any Fiscal
Year, shall not exceed the lesser of (x) fifty percent (50%) of
Borrower's Consolidated Net Income for the immediately preceding
Fiscal Year, or (y) seventy-five percent (75%) of Borrower's
Consolidated Net Cash Flow for such immediately preceding Fiscal
Year.
(h) Transactions with Affiliates. Enter into any
transaction or arrangement with any Affiliate, or permit any Subsidiary
to enter into any transaction or arrangement with any Affiliate of it
(including the purchase from, sale to, or exchange of property
with, or the rendering of any service by or for any Affiliate),
that is not entered into in the ordinary course of business and
upon fair and reasonable terms that are no less favorable to
Borrower or such Subsidiary than would be obtained in a
comparable arms-length transaction with a Person not an
Affiliate, other than (i) any transaction between Borrower and
any Guarantor, or (ii) any transaction between Borrower and any
Subsidiary entered into in the ordinary course of Borrower's
business for interest-free loans to Borrower as part of
Borrower's customary cash-management practices.
(i) Financial Covenants.
(1) Minimum Tangible Net Worth. Borrower shall not
permit its Consolidated Tangible Net Worth, as of the last day of each
Fiscal Quarter, commencing with the Fiscal Quarter ending June
30, 1999, to be less than the sum of (i) Fifty-Eight Million
Seven Hundred Ninety -Eight Thousand Dollars ($58,798,000), plus
(ii) fifty percent (50%) of the aggregate amount of Borrower's
Consolidated Net Income, to the extent positive, for Fiscal Year
1999 and each Fiscal Year thereafter (on a cumulative basis).
(2) Funded Debt to Capitalization. Borrower shall not
permit Consolidated Funded Debt to exceed fifty-five percent (55%) of
Consolidated Total Capitalization.
(3) Debt Coverage Ratio. Commencing with the Fiscal
Year ending December 31, 1999 and continuing for each Fiscal Year thereafter
through the Term Loan Maturity Date, Borrower shall not permit
the Consolidated Debt Coverage Ratio for such Fiscal Year to be
less than 1.25 to 1.00.
13. Events of Default. Each of the following shall constitute
an "Event of Default" hereunder:
(a) Payment Default. Failure by Borrower to make any payment of
principal or interest required to be made under this Agreement
within three (3) days of the date when due, or failure to pay any
other amount owed to PCFC hereunder on the date when due.
(b) Representations and Warranties. Any representation or
warranty made by Borrower herein or in any agreement,
certificate, or document related hereto or furnished in
connection herewith, or by any Guarantor in any Guaranty
Agreement or in any agreement, certificate, or document related
to such Guaranty Agreement, shall prove to have been false or
misleading in any material respect on or as of the date made.
(c) Other Covenants and Agreements. Borrower fails to perform
or comply with any covenant or agreement contained in this
Agreement (other than those referred to in Section 13(a)) or any
Guarantor fails to perform or comply with any covenant or
agreement contained in any Guaranty Agreement; provided, that if
such failure is by its nature capable of being cured, then such
failure shall not become an Event of Default unless such failure
remains uncured for fifteen (15) days.
(d) Other Indebtedness. Borrower or any Guarantor shall fail to
pay when due any Consolidated Indebtedness for borrowed money or
any other event occurs which, under any agreement or instrument
relating to such Consolidated Indebtedness, has the effect of
accelerating or permitting the acceleration of such Consolidated
Indebtedness, whether or not such Consolidated Indebtedness is
actually accelerated.
(e) Judgments. A judgment, decree, or order for the payment
of money in excess of One Million Dollars ($1,000,000) shall be
rendered against Borrower or any Guarantor, the amount of which
judgment, decree, or order is not subject to undisputed insurance
coverage, and either: (i) enforcement proceedings shall have
been commenced; or (ii) such judgment, decree, or order shall
continue unsatisfied and in effect for a period of twenty (20)
consecutive days without being vacated, discharged, satisfied, or
stayed pending appeal.
(f) Insolvency, Etc. Borrower or any Guarantor: (i) shall
become insolvent or shall generally not, or shall be unable to,
or shall admit in writing its inability to, pay its debts as they
come due; or (ii) shall suspend its business operations or a
material part thereof or make an assignment for the benefit of
creditors; or (iii) shall apply for, consent to, or acquiesce in
the appointment of a trustee, receiver, or custodian for it or
any of its property; or (iv) shall commence or have commenced
against it any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution, or liquidation
law or statute of any jurisdiction.
(g) Material Adverse Change. Any material adverse change
occurs, as reasonably determined by PCFC, in Borrower's ability
to perform its obligations under this Agreement.
14. Remedies Upon Events of Default. Upon the occurrence of and
during the continuance of each and every Event of Default:
(a) Termination of Rights; Acceleration. PCFC may, without
notice to Borrower, declare the entire unpaid principal balance
under this Agreement, all accrued interest thereon and all other
amounts payable under this Agreement, to be immediately due and
payable. Upon such a declaration, the unpaid principal balance
under this Agreement and all such other amounts shall become
immediately due and payable, without protest, presentment,
demand, or further notice of any kind, all of which are hereby
expressly waived by Borrower.
(b) Enforcement. PCFC may proceed to protect, exercise, and
enforce such rights and remedies against Borrower and against the
Collateral as may be provided by this Agreement, by any Guaranty
Agreement, by any Other Document, or under law, each and every
one of such rights and remedies shall be cumulative and may be
exercised from time to time, and no failure on the part of PCFC
to exercise, and no delay in exercising, any right or remedy
shall operate as a waiver thereof, or the exercise of any other
right. Without limiting the foregoing, PCFC may, as provided in
the Farm Credit Act of 1971, as amended, retire and cancel all or
any portion of Borrower's stock or other equities in PCFC and
apply the proceeds thereof against Borrower's indebtedness to
PCFC. In addition, PCFC may hold, set off, sell, and/or apply
against Borrower's indebtedness any and all cash, accounts,
securities, instruments, documents, or other property in PCFC's
possession or under its control. If, at the conclusion of any
foreclosure or collection of any Collateral, the proceeds of such
foreclosure or collection are insufficient to pay and discharge
the Obligations in full, then Borrower shall remain liable for
the full amount of the remaining Obligations, and PCFC shall have
all legal rights, remedies, and recourse against Borrower and any
remaining Collateral for such remaining Obligations.
(c) Application of Funds. All amounts received by PCFC shall be
applied to amounts owing under this Agreement in such order and
manner as PCFC may in its sole discretion elect.
15. Indemnity. Borrower shall indemnify and hold harmless each
of PCFC and its Affiliates, and each such Person's respective
officers, directors, employees, attorneys, agents and
representatives (each, an "Indemnified Person"), from and against
any and all suits, actions, proceedings, claims, damages, losses,
liabilities and expenses (including reasonable attorneys' fees
and disbursements and other costs of investigation or defense,
including those incurred upon any appeal) that may be instituted
or asserted against or incurred by any such Indemnified Person as
the result of credit having been extended, suspended or
terminated under this Agreement and the other Loan Documents and
the administration of such credit, and in connection with or
arising out of the transactions contemplated hereunder and
thereunder and any actions or failures to act in connection
therewith, including any and all Environmental Liabilities and
legal costs and expenses arising out of or incurred in connection
with disputes between or among any parties to any of the Loan
Documents (collectively, "Indemnified Liabilities"); provided,
that Borrower shall not be liable for any indemnification to an
Indemnified Person to the extent that any such suit, action,
proceeding, claim, damage, loss, liability or expense results
solely from that Indemnified Person's gross negligence or willful
misconduct, as finally determined by a court of competent
jurisdiction.
16. Complete Agreement; Amendments. This Agreement and all
documents and instruments contemplated hereby are intended by the
parties to be a complete and final expression of their agreement.
No amendment, modification, or waiver of any provision hereof or
thereof, nor any consent to any departure of Borrower herefrom or
therefrom, shall be effective unless approved by PCFC and
contained in a writing signed by or on behalf of PCFC and then
such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. This
Agreement amends and restates, in its entirety, the Bridge Loan
Agreement.
17. Counterparts; Effectiveness. This Agreement may be executed
in any number of separate counterparts, each or which shall
collectively and separately constitute one agreement. This
Agreement shall become effective upon execution by each party and
delivery to the other parties of either an executed original of
the signature pages hereof or of a facsimile of such executed
original of the signature pages hereof.
18. Applicable Law. Except to the extent governed by applicable
federal law, this Agreement shall be governed and construed in
accordance with the laws of the State of California, without
reference to choice of law doctrine.
19. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY
AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND
THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY
(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.
THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE
JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT
TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT
OR ANY OF THE OTHER LOAN DOCUMENTS, OR TO RESOLVE ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
BETWEEN THE PARTIES.
20. Notices. All notices hereunder shall be in writing and
shall be deemed to be duly given upon delivery, if personally
delivered, delivered by messenger service, or sent by telegram or
facsimile transmission, or three (3) days after mailing if sent
by express, certified or registered mail, to the parties at the
following addresses (or such other address for a party as shall
be specified by like notice):
If to PCFC as follows:
Pacific Coast Farm Credit Services, ACA
5560 South Broadway
Eureka, CA 95503
Attn: Account Officer -- Maui Land & Pineapple
Fax No.: (707) 442-1268
and to
Pacific Coast Farm Credit Services, ACA
200 Concourse Boulevard
Santa Rosa, CA 95403
P.O. Box 1330
Santa Rosa, CA 95402
Attn: Account Officer -- Maui Land & Pineapple
Fax No.: (707) 545-7200
If to Borrower, as follows;
Maui Land & Pineapple Company, Inc.
PO Box 187, Kahului, Hawaii 96732-0187
Attn: Executive Vice President-Finance
Fax No.: (808) 871-0953
21. Costs and Expenses. Borrower shall pay all costs incurred
by PCFC, including reasonable attorneys fees, in connection with
the preparation for, negotiation of, and documentation of this
Agreement, the Other Documents, and any Guaranty Agreement. If
in the future PCFC shall employ the services of legal counsel or
any other professional or any third party in connection with (i)
any request made by Borrower to PCFC for a modification,
amendment, waiver, or consent in connection with this Agreement,
any Other Document, or any Guaranty Agreement, (ii) rendering
advice or other services to PCFC regarding PCFC's rights or
obligations under this Agreement or any Other Document or any
Guaranty Agreement, whether or not an Event of Default has
occurred, (iii) representing the interests of PCFC in any
judicial or nonjudicial action, suit or proceeding instituted by
PCFC or any other Person connected with or related to or with
reference to the Term Loan or to reclaim, seek relief from a
judicial or statutory stay, sequester, protect, preserve or
enforce PCFC's interests, then in such event Borrower promises to
pay reasonable attorney's fees and reasonable costs and expenses
incurred by PCFC and/or its attorney in connection with the
above-mentioned events. Such amounts shall be payable upon
demand.
22. Effectiveness; Severability. This Agreement shall continue
in effect until all indebtedness and obligations of Borrower
hereunder shall have been repaid and all commitments of PCFC
hereunder have terminated. Any provision of this Agreement or of
any instrument or document contemplated hereby which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof or thereof.
23. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of Borrower and PCFC and their
respective successors and assigns except that Borrower may not
assign or transfer its rights or obligations hereunder without
the prior written consent of PCFC. PCFC may assign all or any
portion of its obligations under this Agreement without prior
notice to Borrower and such assignment shall relieve PCFC of any
future obligations hereunder. PCFC may grant or sell
participation interests in its interests under this Agreement
without notice to Borrower.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed by their duly authorized officers as of
the date shown above.
BORROWER:
MAUI LAND & PINEAPPLE COMPANY, INC., a Hawaii Corporation
By: /S/ GARY L. GIFFORD
Title: PRESIDENT
By: /S/ PAUL J. MEYER
Title: EXECUTIVE VICE PRESIDENT/FINANCE
PCFC:
PACIFIC COAST FARM CREDIT SERVICES, ACA
By: /S/ SEAN P. O'DAY
Sean P. O'Day, Regional Vice-President
